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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
TRITON NETWORK SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 3663 59-3434350
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(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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8529 SOUTH PARK CIRCLE
ORLANDO, FLORIDA 32819
(407) 903-0900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
KENNETH R. VINES
8529 SOUTH PARK CIRCLE
ORLANDO, FLORIDA 32819
(407) 903-0900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
MICHAEL J. DANAHER, ESQ. JOCELYN M. AREL, ESQ.
MARTIN J. WATERS, ESQ. KENNETH J. GORDON, ESQ.
DAVID B. CRAWFORD, ESQ. TESTA, HURWITZ & THIBEAULT, LLP
WILSON SONSINI GOODRICH & ROSATI 125 HIGH STREET
PROFESSIONAL CORPORATION BOSTON, MA 02110
650 PAGE MILL ROAD (617) 248-7000
PALO ALTO, CA 94304
(650) 493-9300
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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, 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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Common Stock $0.001 par value...................... $75,000,000 $19,800
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(1) Estimated pursuant to Rule 457(o) of the Securities Act of 1933 solely for
the purpose of computing the amount of the registration fee.
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 HEREAFTER 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 SUCH SECTION 8(A),
MAY DETERMINE.
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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, DATED MARCH 1, 2000
Shares
TRITON NETWORK SYSTEMS(TM) LOGO
Common Stock
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Prior to this offering, there has been no public market for our common
stock. The initial public offering price of our common stock is expected to be
between $ and $ per share. We have applied to list our common stock on The
Nasdaq Stock Market's National Market under the symbol "TNSI."
The underwriters have an option to purchase a maximum of
additional shares to cover over-allotments of shares.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 5.
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UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND TRITON
PUBLIC COMMISSIONS NETWORK SYSTEMS
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Per Share............................................ $ $ $
Total................................................ $ $ $
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Delivery of the shares of common stock will be made on or about
, 2000.
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.
CREDIT SUISSE FIRST BOSTON
DEUTSCHE BANC ALEX. BROWN
U.S. BANCORP PIPER JAFFRAY
The date of this prospectus is , 2000.
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TABLE OF CONTENTS
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PAGE
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PROSPECTUS SUMMARY.................. 1
RISK FACTORS........................ 5
SPECIAL NOTE REGARDING FORWARD-
LOOKING STATEMENTS................ 18
USE OF PROCEEDS..................... 19
DIVIDEND POLICY..................... 19
CAPITALIZATION...................... 20
DILUTION............................ 22
SELECTED CONSOLIDATED FINANCIAL
DATA.............................. 24
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS..................... 25
BUSINESS............................ 29
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PAGE
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MANAGEMENT.......................... 43
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS...................... 53
PRINCIPAL STOCKHOLDERS.............. 55
DESCRIPTION OF CAPITAL STOCK........ 58
SHARES ELIGIBLE FOR FUTURE SALE..... 62
UNDERWRITING........................ 64
NOTICE TO CANADIAN RESIDENTS........ 66
LEGAL MATTERS....................... 67
EXPERTS............................. 67
ADDITIONAL INFORMATION.............. 67
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS........................ F-1
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 2000, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS AN UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS
OR SUBSCRIPTIONS.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully.
TRITON NETWORK SYSTEMS, INC.
We provide broadband wireless equipment that enables communications service
providers to deliver high-speed, cost-effective voice, video and data services
to their business customers. Our Invisible Fiber products combine high
transmission speeds and the reliability of fiber optic networks with the
flexibility, low cost and rapid deployment of wireless technologies. Our
products feature proprietary technologies that enable service providers to
install more units in a service area than would be possible with conventional
broadband wireless technologies, permitting them to serve more users and
generate additional revenues. We have designed our Invisible Fiber products for
deployment in consecutive point networks. A consecutive point network is a
series of point-to-point links that form a ring which allows communications
traffic to flow in either direction, creating redundant transmission paths and
reducing the risk of service interruptions. Service providers may use our
products to extend existing fiber optic and wireless networks or to build new
networks.
We currently offer two product lines: our Invisible Fiber Internet Protocol
product line for Internet service providers and our Invisible Fiber SONET/SDH
product line for communications service providers. We entered into three-year
supply agreements with Advanced Radio Telecom and CenturyTel in December 1999,
and we began recognizing revenues from product sales in the first quarter of
2000. We are currently engaged in field trials with other prospective customers.
Increased business use of the Internet and other communications networks
have contributed to a growing demand for high-speed, or broadband, communication
services, including integrated voice, video and data. To meet this demand,
service providers have built high-speed backbone networks of fiber optic cable
and sophisticated routers and switches, and many businesses have built
high-speed internal networks. However, the local access network, or last mile,
that connects backbone networks to internal corporate networks typically support
slower transmission speeds, creating a bottleneck.
Our Invisible Fiber products help solve the local access bottleneck and
offer service providers the following key competitive advantages:
- High Speed Network Services. Our initial Invisible Fiber Internet
Protocol products transmit data at 100 million bits per second, or 100
Mbps, and our initial Invisible Fiber SONET/SDH products transmit data at
155 Mbps.
- High Reliability and Availability of Service. We design our products to
match fiber network reliability standards, including 99.999% availability
and error rates of under 1 errored bit per trillion bits transmitted.
This level of performance meets the stringent requirements of service
providers and is referred to as carrier class reliability.
- Rapid Deployment and Return on Investment. Our Invisible Fiber units are
easily integrated with existing network equipment and can be installed in
hours, enabling service providers to begin generating revenues rapidly.
- High Density Deployment. Our proprietary technologies minimize radio
interference enabling dense deployment of our Invisible Fiber units. This
allows service providers to serve more users with their existing licensed
radio spectrum and generate more revenues.
- Highly Scalable and Flexible. Our Invisible Fiber units enable service
providers to configure, expand and relocate their networks rapidly to
meet changing subscriber demands and to match capital outlays with
subscriber growth.
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OUR STRATEGY
Our objective is to be the leading worldwide provider of broadband wireless
equipment. The key elements of our strategy include the following:
- increase sales to existing customers and promote the use of our solutions
in additional locations and applications;
- expand our customer base, particularly through our key account management
process;
- maintain and extend our product and technology leadership through the
development of new products that support higher bandwidth data
transmission and additional frequency bands; and
- continue to pursue international market opportunities, including Canada,
Australia and Japan, where our products have gained regulatory approval.
RECENT DEVELOPMENT
On February 29, 2000, we entered into an agreement with IBM to purchase
assets and hire approximately 50 employees associated with IBM's broadband modem
product line in exchange for 5.5 million shares of our series C preferred stock.
This IBM unit developed and sold custom modems to us for use in our products.
With the completion of this transaction, we will secure intellectual property
and engineering expertise for future modem development, and we believe we will
lower the cost of manufacturing our products. The closing of the transaction is
subject to customary conditions to closing, including regulatory approval.
OUR OFFICES
We were incorporated in March 1997 in Delaware. Our principal executive
offices are located at 8529 South Park Circle, Orlando, Florida 32819 and our
telephone number is (407) 903-0900. Our web site is www.triton-network.com.
Information contained on our web site is not a part of this prospectus.
OUR TRADEMARKS
We have applied for federal trademark registration of Triton Network
Systems, Invisible Fiber, Consecutive Point and our logo. This prospectus also
contains other trademarks, service marks and trade names that are the property
of other parties.
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THE OFFERING
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Common stock offered....................... shares
Common stock to be outstanding after this
offering................................. shares
Use of proceeds............................ For general corporate purposes.
Proposed Nasdaq National Market symbol..... TNSI
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The number of shares to be outstanding after this offering is based on
51,246,280 shares outstanding as of March 1, 2000, and excludes:
- 3,238,599 shares of common stock issuable upon exercise of options
outstanding as of March 1, 2000, at a weighted average exercise price of
$2.64 per share;
- 768,031 shares of common stock available for issuance at March 1, 2000,
under our 1997 Stock Plan;
- 675,000 shares of common stock issuable upon exercise of warrants
outstanding as of March 1, 2000 at a weighted average exercise price of
$0.50 per share;
- shares of common stock, assuming an initial offering price of
$ per share, issuable upon exercise of a warrant issued to the lender
under our new capital equipment financing line;
- 5.5 million shares of series C convertible preferred stock issuable to
IBM upon completion of our acquisition of IBM's broadband modem product
line; and
- 500,000 additional shares of common stock available for issuance under
our 2000 Employee Stock Purchase Plan immediately following the offering.
Except as otherwise indicated, all information in this prospectus assumes:
- the conversion of all shares of preferred stock into 37,612,938 shares of
common stock upon completion of this offering;
- the effectiveness of our amended and restated certificate of
incorporation; and
- no exercise of the underwriters' over-allotment option.
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SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except share and per share data)
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PERIOD FROM
MARCH 5, 1997
(INCEPTION) THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------
1997 1998 1999
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CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues................................... $ -- $ -- $ --
Loss from operations....................... (2,558) (15,013) (31,205)
---------- ---------- ----------
Net loss................................... $ (2,475) $ (14,532) $ (30,293)
========== ========== ==========
Net loss per share -- basic and diluted.... $ (0.50) $ (2.14) $ (3.17)
========== ========== ==========
Shares used in per share
calculations -- basic and diluted........ 4,913,989 6,790,600 9,553,134
========== ========== ==========
Pro forma net loss per share:
Net loss per share -- basic and
diluted............................... $ (0.78)
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Shares used in per share
calculations -- basic and diluted..... 38,800,408
==========
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DECEMBER 31, 1999
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PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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(UNAUDITED) (UNAUDITED)
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CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........................ $ 46,130 $ 46,130
Working capital.................................. 44,180 44,180
Total assets..................................... 63,700 63,700
Convertible preferred stock...................... 38 --
Total stockholders' equity....................... 51,333 51,333
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See note 7 of notes to consolidated financial statements for an explanation
of the determination of the number of shares used in computing net loss per
share data.
The pro forma consolidated balance sheet data reflect the conversion into
common stock of all outstanding convertible preferred stock upon the closing of
this offering. The pro forma as adjusted data reflect our receipt of the net
proceeds from the sale of the shares of common stock offered by us at
an initial public offering price of $ per share, after deducting estimated
underwriting discounts and commissions and estimated offering expenses.
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RISK FACTORS
Any investment in our common stock involves a high degree of risk. The
risks described below are intended to highlight risks that are specific to us
and are not the only ones we face. Additional risks and uncertainties, such as
those that generally apply to our industry or to companies undertaking initial
public offerings, may also impair our business operations. You should consider
the risks described below carefully and all of the information contained in this
prospectus before deciding whether to purchase our common stock. If any of the
following risks actually occur, our business, financial condition, and results
of operations would suffer. In such case, the trading price of our common stock
could decline, and you may lose all or part of your investment in our common
stock.
RISKS RELATED TO OUR FINANCIAL RESULTS
WE ONLY RECENTLY BEGAN SELLING OUR PRODUCTS AND WE RECORDED NO REVENUES THROUGH
DECEMBER 31, 1999. AS A RESULT, YOU MAY HAVE DIFFICULTY EVALUATING OUR BUSINESS
AND ASSESSING ITS FUTURE VIABILITY.
Our company was founded in March 1997. We received orders from our first
customers in December 1999 and recorded our first revenues in the first quarter
of 2000. An investor in our common stock must consider the risks and
difficulties we may encounter as an early stage company in the new and rapidly
evolving market for broadband wireless equipment. Our limited historical
financial performance may make it difficult for you to evaluate the success of
our business to date and to assess its future viability. We cannot be certain
that our business strategy will be successful. In addition, because we have only
recently begun commercial shipment of our products, we may have limited insight
into trends that may emerge and affect our business. If we fail to respond to
such trends and execute our business strategy, our operating results will
suffer.
WE HAVE A HISTORY OF LOSSES, EXPECT TO INCUR SUBSTANTIAL LOSSES AND NEGATIVE
OPERATING CASH FLOWS AND MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY IN THE
FUTURE.
Since inception, we have incurred significant net losses, including net
losses of $2.5 million in the period from inception through December 31, 1997,
$14.5 million in 1998 and $30.3 million in 1999. As a result of ongoing
operating losses, we had an accumulated deficit of $47.3 million as of December
31, 1999. We have not achieved profitability. We expect to incur substantial
losses for the foreseeable future and may never become profitable. We also
expect to continue to incur significant capital expenditures and anticipate that
our expenses will increase substantially in the foreseeable future as we:
- increase our sales and marketing activities;
- acquire or develop new technology, expand our existing product lines and
develop and market additional broadband wireless products;
- acquire or develop manufacturing capabilities for components used in our
products or to address increased demand for our products;
- implement additional internal systems and infrastructure; and
- hire additional personnel.
We also expect to experience negative operating cash flow for the
foreseeable future as we fund our operating losses and capital expenditures. We
will need to generate significant revenues to achieve and maintain
profitability. We cannot be certain that we will achieve profitability in the
future. Our failure to achieve or maintain profitability could negatively impact
the market price of our common stock.
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BECAUSE OUR ABILITY TO FORECAST OUR QUARTERLY REVENUES IS LIMITED AND A
SIGNIFICANT PERCENTAGE OF OUR COSTS DO NOT VARY WITH REVENUES, OUR QUARTERLY
OPERATING RESULTS AND STOCK PRICE MAY FLUCTUATE.
Because of our limited operating history and because the market for
broadband wireless equipment is new and rapidly evolving, we may not be able to
forecast our quarterly shipments. Accordingly, it is difficult to predict the
quarterly revenues that we will recognize. A significant percentage of our
expenses, particularly salaries and rent, do not vary with our revenues. If we
experience a shortfall in revenues in relation to our expenses, we may be unable
to reduce our expenses quickly enough to avoid lower than anticipated quarterly
operating results. In addition, our expenses have increased, and will continue
to increase, with the anticipated growth in our business. We do not know whether
our revenues will grow rapidly enough to absorb these costs. As a result, our
quarterly operating results could fluctuate, and such fluctuation could cause
the market price of our common stock to decline. We do not believe that
period-to-period comparisons of our revenues and operating results are
necessarily meaningful. You should not rely on the results of any one quarter as
an indication of future performance.
WE EXPECT TO RELY ON SALES OF OUR INVISIBLE FIBER FAST ETHERNET AND INVISIBLE
FIBER OC-3/STM-1 PRODUCTS FOR A SIGNIFICANT PORTION OF OUR REVENUES, AND THE
FAILURE OF EITHER OF THESE PRODUCTS TO ACHIEVE MARKET ACCEPTANCE WOULD ADVERSELY
AFFECT OUR BUSINESS.
We expect to derive a significant portion of our revenues for the
foreseeable future from sales of our 38 Gigahertz and 28, 29 and 31 Gigahertz,
or Local Multipoint Distribution Service frequencies, Invisible Fiber Fast
Ethernet and OC-3/STM-1 products. Any factors adversely affecting the pricing
of, demand for or market acceptance of these products, including competition or
technological change, could negatively affect our results of operations. Factors
that may affect the market acceptance of our products, some of which are beyond
our control, include the following:
- the adoption of broadband wireless solutions over competing technologies;
- the growth and changing requirements of the market for broadband wireless
equipment;
- the successful development of our relationships with service providers;
- the ability of service providers to obtain the financing, licensed radio
spectrum and roof rights needed to deploy their networks;
- the performance, quality, price and total cost of ownership of our
products; and
- the performance, quality, price, total cost of ownership and availability
of competing products.
IF WE ARE NOT SUCCESSFUL IN DEVELOPING AND MARKETING NEW AND ENHANCED BROADBAND
WIRELESS PRODUCTS THAT KEEP PACE WITH TECHNOLOGY AND OUR CUSTOMERS' NEEDS, OUR
OPERATING RESULTS WILL SUFFER.
The market for our products is new and emerging, and is characterized by
rapid technological advances, changing customer needs and evolving industry
standards. Accordingly, to realize our expectations regarding our operating
results, we depend on our ability to:
- develop, in a timely manner, new products that keep pace with
developments in technology;
- meet evolving customer requirements; and
- enhance our current product offerings and deliver those products through
appropriate distribution channels.
We are seeking to develop new versions of our products to support
additional frequency bands and higher transmission speeds and to develop
enhancements to our existing products. Developing new products and product
enhancements requires significant additional expenditures and research and
6
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development resources. We may not be successful in developing and marketing, on
a timely and cost-effective basis, either enhancements to our products or new
products that respond to technological advances and satisfy increasingly
sophisticated customer needs. If we fail to introduce new products, or
enhancements to existing products, our operating results will suffer. In
addition, if new industry standards emerge that we do not anticipate or adapt
to, our products could be rendered obsolete and our business could be harmed.
WE DEPEND ON KEY CUSTOMERS AND THE LOSS OF ANY OF THEM COULD SIGNIFICANTLY
REDUCE OUR REVENUES.
We currently have contracts with two customers. Moreover, because we expect
to focus our sales efforts on selected service providers, we anticipate that our
operating results will continue to depend on sales to a small number of key
customers for the foreseeable future. The loss of either of our current
customers, a reduction in sales to them or the failure to sell our products to
additional service providers would significantly reduce our future revenues.
WE EXPECT THAT OUR SALES CYCLE WILL BE LONG AND UNPREDICTABLE, MAKING IT
DIFFICULT TO PREDICT THE PARTICULAR QUARTER IN WHICH SALES MAY OCCUR.
We have experienced sales cycles ranging from four to twelve months, and we
expect that our sales cycles will continue to be long and unpredictable. We
expect most potential customers will need substantial time to understand our
technology and the benefits offered by our products, including time for testing
and evaluation. In addition, we believe a typical customer is likely to
initially purchase a small number of units and then incrementally increase the
size of the installation over time. A number of factors affect the length of
time the customer needs before it selects us as a vendor or begins placing
orders for shipment. These factors include:
- the customer's ability to obtain the financing and licensed radio
spectrum needed to deploy its networks;
- the type and size of the customer and the nature of its internal decision
processes;
- the length of the customer's product testing and evaluation period;
- the time required by the customer to plan its network development;
- the time required by the customer to deploy its network, which may be
affected by the customer's ability to secure suitable roof rights;
- the size, breadth and configuration of the customer's network; and
- the customer's ability to obtain subscribers for its services.
Long and varying sales cycles make it difficult to predict the quarter in
which particular sales may occur and, therefore, to forecast revenues and budget
expenses. We do not have enough historical experience selling our products to
determine how our sales cycle will affect our revenues.
WE RELY ON THE SERVICES OF OUR KEY PERSONNEL, AND THOSE PERSONS' KNOWLEDGE OF
OUR BUSINESS AND TECHNICAL EXPERTISE WOULD BE DIFFICULT TO REPLACE.
Our ability to implement our business strategy and our future success
depends largely on the continued services of our executive officers and other
key engineering, sales, marketing and support personnel who have critical
industry or customer experience and relationships. None of our key personnel is
bound by an employment agreement. We have no key man life insurance. The loss of
the technical knowledge and management and industry expertise of any of these
key personnel could result in delays in product development, loss of customers
and sales and diversion of management resources, which could adversely affect
our operating results.
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IF WE CANNOT RAISE ADDITIONAL CAPITAL WE MAY NEED ON ACCEPTABLE TERMS, WE MAY
NOT ACHIEVE OUR BUSINESS GOALS.
If we do not have sufficient capital to fund our operations, we may be
forced to discontinue product development, reduce our sales and marketing
efforts, forego attractive business opportunities and lose the ability to
respond to competitive pressures. Although we believe that our current cash and
cash equivalents on hand, the net proceeds from this offering and availability
under our new capital equipment financing line should be sufficient to fund our
operations for at least the next 12 months, we cannot be certain that we will
not require additional financing within this time frame or that such additional
funding, if needed, will be available on terms acceptable to us, or at all. If
we raise additional funds through the issuance of equity securities, the
percentage ownership of our stockholders would be reduced. We may also require
additional capital to acquire complementary businesses, products or technologies
or obtain the right to use complementary technologies. New investors may demand
rights, preferences or privileges senior to those of existing stockholders.
RISKS RELATED TO GROWTH OF OUR INDUSTRY
THE BROADBAND WIRELESS EQUIPMENT INDUSTRY IS NEW AND ITS FUTURE IS UNCERTAIN. IF
SUFFICIENT DEMAND FOR BROADBAND WIRELESS SOLUTIONS DOES NOT DEVELOP, WE WILL NOT
BE ABLE TO GENERATE SIGNIFICANT REVENUES.
Broadband wireless technology is new and unproven. This technology may
prove unsuitable for widespread commercial deployment, in which case it is
unlikely we could generate enough revenues to achieve and sustain profitability.
Many factors will influence the success or failure of broadband wireless
technology, including:
- its capacity to handle growing demand for faster transmission of
increasing amounts of voice, video and data;
- its cost-effectiveness and performance compared to other forms of
broadband access, whose prices and performance continue to improve;
- its reliability and security;
- its availability in volumes sufficient for commercial deployment;
- the availability of sufficient frequency bands for service providers to
deploy products at commercially reasonable rates; and
- the availability of sufficient sites for service providers to install
products at commercially reasonable rates.
OUR BUSINESS WILL BE DEPENDENT ON THE RATE OF ADOPTION OF CONSECUTIVE POINT
BROADBAND WIRELESS TECHNOLOGY BY SERVICE PROVIDERS.
Substantially all of our revenues will come from sales of our consecutive
point broadband wireless products. As a result, we depend on service providers'
adoption of consecutive point broadband wireless technology to complement and
extend their existing networks or to construct new networks. If service
providers do not adopt consecutive point broadband wireless technology as we
anticipate, our sales opportunities will be limited and it will be difficult for
us to achieve profitability.
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MANY COMPETING TECHNOLOGIES MAY SERVE OUR TARGET MARKET, AND IF THE CONSECUTIVE
POINT BROADBAND WIRELESS TECHNOLOGY UPON WHICH OUR PRODUCTS IS BASED DOES NOT
SUCCEED AS A SOLUTION FOR BROADBAND ACCESS, WE WOULD NOT BE ABLE TO GROW OUR
BUSINESS.
Our consecutive point broadband wireless solutions compete with other
high-speed solutions such as digital subscriber lines, coaxial cable, fiber
optic cable, satellite and point-to-point and point-to-multipoint wireless
technologies. Many of these alternative technologies can take advantage of
existing installed infrastructure and have achieved significantly greater market
acceptance and penetration than broadband wireless technologies, including our
consecutive point broadband wireless technology. Moreover, current broadband
wireless technology, including our consecutive point broadband wireless
technology, has inherent technical limitations that may inhibit its widespread
adoption in many areas, including reduced communication distance in bad weather
and the need for line-of-sight installation. We expect broadband wireless
technologies, including our consecutive point broadband wireless technology, to
face increasing competitive pressures from both current and future alternative
technologies. In light of these factors, many service providers may be reluctant
to invest heavily in consecutive point broadband wireless solutions and,
accordingly, the market for these solutions may fail to develop or may develop
more slowly than we expect. Either outcome would limit our sales opportunities
and make it difficult for us to achieve profitability.
THE BROADBAND WIRELESS INDUSTRY IS INTENSELY COMPETITIVE, AND OUR FAILURE TO
COMPETE EFFECTIVELY COULD HURT OUR SALES.
The market for broadband wireless equipment is rapidly evolving,
fragmented, highly competitive and subject to rapid technological change. A
number of large telecommunications equipment suppliers, such as Digital
Microwave Corporation, Harris Corporation and P-Com, Inc., as well as a number
of smaller companies have developed or are developing products that compete with
ours. Some of our competitors are substantially larger than we are, have longer
operating histories and have greater financial, sales, marketing, distribution,
technical, manufacturing and other resources. Some also have greater name
recognition and a larger installed base of customers than we have. In addition,
many of our competitors have well-established relationships with our current and
potential customers and have extensive knowledge of our target markets. As a
result, our competitors may be able to respond more quickly to evolving industry
standards and changes in customer requirements, or to devote greater resources
to the development, promotion and sale of their products than we can. In
addition, current and potential competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with third parties to
increase their ability to gain market share rapidly. We also expect that
industry consolidation could increase competition. We expect to face increasing
competitive pressures from both current and future competitors. Increased
competition could result in reduced demand for our products, price reductions
and reduced gross margins for our products, any of which could seriously harm
our business.
AS OUR CUSTOMERS ENTER NEW MARKETS, WE SOMETIMES HAVE TO ADAPT OUR PRODUCTS
RAPIDLY TO THE LICENSED FREQUENCY BANDS AND REGULATORY REQUIREMENTS THAT EXIST
IN THOSE MARKETS, AND WE MAY INCUR SIGNIFICANT COSTS MAKING THE NECESSARY
MODIFICATIONS.
Each of our products is designed for a specific range of frequency bands.
Because different governments license different portions of the frequency
spectrum for the broadband wireless market, and because service providers
license specific frequency bands, we sometimes have to adapt our products
rapidly to use different frequency bands. This design process can be difficult
and time-consuming, and could therefore increase our costs and cause delays in
the delivery of products to our customers.
9
<PAGE> 13
RISKS RELATED TO OUR PRODUCT MANUFACTURING
WE WILL BE UNABLE TO SUCCESSFULLY MARKET AND SELL OUR PRODUCTS IF WE ARE UNABLE
TO MANUFACTURE SUFFICIENT QUANTITIES TO MEET CUSTOMER DEMAND.
We currently rely on third party manufacturers to produce some components
used in our products and our own manufacturing capabilities for final assembly
and testing of our products. Except for our agreement with Lockheed Martin
described below, we do not have long-term contracts with any of our third party
manufacturers. We have experienced and may in the future experience delays in
shipments from our manufacturers, which could in turn delay product shipments to
our customers. We may in the future experience other manufacturing problems,
such as inferior quality and insufficient quantities of components or finished
product. Such delays, quality problems and shortages could cause us to lose
sales and customers, and thereby harm our business and operating results. We
intend to introduce new products and product enhancements regularly, which will
require us to achieve volume production rapidly by coordinating our efforts with
those of our third party component manufacturers. We may need to find one or
more new manufacturers that can manufacture the components used in our products
in higher volumes and at lower costs. We may be unable to secure contract
manufacturers that meet our needs. Additionally, qualifying new manufacturers
and commencing volume production is expensive and time consuming. If we are
required or choose to change manufacturers, we may lose sales and our customer
relationships may suffer.
THE CURRENT MANUFACTURER OF THE TRANSMITTER AND RECEIVER, OR TRANSCEIVER MODULE,
USED IN OUR PRODUCTS IS NEARING CAPACITY, AND WE WILL BE UNABLE TO MEET CUSTOMER
DEMAND FOR OUR PRODUCTS IF WE CANNOT BEGIN VOLUME MANUFACTURING OF TRANSCEIVER
MODULES AT OUR FACILITY IN THE FIRST HALF OF 2000.
In response to our current capacity constraints, we plan to begin
manufacturing transceiver modules at our manufacturing facility in Orlando,
Florida in the first half of 2000. We may experience problems and delays in
connection with our manufacturing initiatives. If we cannot quickly achieve
volume production of transceiver modules or if we experience related
disruptions, capacity constraints or quality control problems, then product
shipments to our customers could be delayed. Such delays would negatively impact
our revenues, competitive position and reputation.
BECAUSE WE DEPEND ON SINGLE SOURCE AND LIMITED SOURCE SUPPLIERS FOR KEY
COMPONENTS, WE ARE SUSCEPTIBLE TO SUPPLY SHORTAGES THAT COULD ADVERSELY AFFECT
OUR OPERATING RESULTS.
We currently purchase several key components used in our products from
single or limited sources and depend on supply from these sources to meet our
needs. We acquire these key components through purchase orders and, other than
our agreement with Lockheed Martin, have no long-term commitments regarding
supply or price from these suppliers. We have entered into an agreement with
Lockheed Martin to provide 3,200 transceiver modules by the end of the first
half of 2001. Lockheed Martin will be our sole supplier of transceiver modules
until we begin manufacturing them at our facility in the first half of 2000, and
Verticom and Celeritek are the only suppliers of 38 Gigahertz synthesizers. In
addition, Raytheon is the sole supplier of the high-power amplifier used in our
transceiver modules, and Polese is the sole supplier of the housings used in our
products. Additional single or limited source components may be incorporated in
our products in the future. If we encounter shortages or delays in obtaining
components for our products in sufficient quantities when required, delivery of
our products could be delayed, resulting in customer dissatisfaction and
decreased revenues. In addition, our suppliers may enter into exclusive
arrangements with our competitors, stop selling their products or components to
us at commercially reasonable prices or refuse to sell their products or
components to us at any price, which could harm our results of operations.
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<PAGE> 14
EXCESS OR INSUFFICIENT COMPONENT INVENTORY COULD NEGATIVELY IMPACT OUR BUSINESS
AND OUR RESULTS OF OPERATIONS.
We use forecasts based on anticipated product orders to determine our
component requirements. We may not be able to accurately forecast demand for our
products. In addition, lead times for materials and components that we order
vary significantly and depend on factors including specific supplier
requirements, contract terms and current market demand for a component at a
given time. If we overestimate our component requirements, we may have excess
inventory, which would increase our costs and subject us to increased risk of
obsolescence. If we underestimate our component requirements, we may have
inadequate inventory, which could interrupt our manufacturing and delay delivery
of our products to our customers. Either of these occurrences would negatively
impact our business and operating results.
RISKS RELATED TO OUR PRODUCTS
OUR PRODUCTS MAY CONTAIN DEFECTS THAT COULD HARM OUR REPUTATION, BE COSTLY TO
CORRECT, EXPOSE US TO LITIGATION AND HARM OUR OPERATING RESULTS.
Despite testing by us and our customers, errors may be found in our
products after commencement of commercial shipments. We and our customers have
from time to time discovered errors in our products. In the future, there may be
additional errors and defects in our products. If errors are discovered, we may
not be able to successfully correct them in a timely manner or at all. Errors
and failures in our products could result in a loss of or delay in market
acceptance and damage to our reputation and our ability to convince service
providers of the benefits of our products. In addition, we may need to make
significant expenditures of capital resources in order to eliminate errors and
failures.
Moreover, because our products are used in critical communications
networks, we may receive significant liability claims if our products do not
work properly. Our agreements with customers typically contain provisions
intended to limit our exposure to liability claims. However, these limitations
may not preclude all potential claims. In addition, our insurance polices may
not adequately limit our exposure with respect to such claims. We warrant to our
current customers that our products will operate in accordance with specified
customer requirements. If our products fail to conform to these specifications,
customers could require us to fix defects or assert claims for damages.
Liability claims could require us to spend significant time and money in
litigation or to pay significant damages. Any such claims, whether or not
successful, would be costly and time-consuming to defend and could seriously
damage our reputation and our business.
BROADBAND WIRELESS PRODUCTS COULD MALFUNCTION DUE TO RADIO INTERFERENCE OR
ADVERSE WEATHER CONDITIONS.
Many of our customers will provide service in large, densely populated
metropolitan areas where wireless traffic is heavy. If multiple wireless systems
are operating in these service areas concurrently with our products, the radio
frequency on which our products operate could become saturated, resulting in
signal interference. If that occurred, the quality or availability of our
customers' transmissions could decrease or our products could fail, causing
service delays and interruptions. Interference caused by severe weather
conditions could lead to similar failures. The ability of our products to
provide our customers with high quality and reliable transmissions at all times
and under a variety of adverse conditions is key to our success. If our products
fail we may suffer:
- the loss of or delay in market acceptance and sales of our products;
- cancellation of orders;
11
<PAGE> 15
- diversion of development resources;
- injury to our reputation; and
- increased maintenance and warranty costs.
LINE OF SITE RESTRICTIONS INHERENT IN BROADBAND WIRELESS PRODUCTS MAY LIMIT
DEPLOYMENT OPTIONS AND HAVE AN ADVERSE AFFECT ON OUR SALES.
Broadband wireless products require a direct line of sight, potentially
limiting the ability of service providers to deploy them in a cost-effective
manner. Because of line of sight limitations, service providers will often
install broadband wireless equipment on the rooftops of buildings and on other
tall structures. Service providers must generally secure roof rights from the
owners of each building or other structure on which the equipment is to be
installed. The inability to easily and cost effectively obtain roof rights may
cause customers not to choose to install broadband wireless equipment.
WE RELY ON OUR INTELLECTUAL PROPERTY, AND ANY FAILURE BY US TO PROTECT OUR
INTELLECTUAL PROPERTY COULD ENABLE OUR COMPETITORS TO MARKET PRODUCTS WITH
SIMILAR FEATURES THAT MAY REDUCE DEMAND FOR OUR PRODUCTS.
Our success and ability to compete are substantially dependent upon our
internally developed technology and the proprietary technology we license from a
third party that is incorporated into our products. Our intellectual property
rights, and our ability to enforce those rights, may be inadequate to prevent
others from using our technology or substantially similar technology they may
independently develop. The use of that technology by others could eliminate any
competitive advantage we have, cause us to lose sales and lead to lower prices
for our products. We protect our intellectual property through a combination of
patent, copyright, trademark and trade secret laws.
We have filed twenty U.S., three Patent Cooperation Treaty and two foreign
patent applications. We cannot assure you that any of our patent applications
will result in issued patents or that any patents, if issued, will provide us
with competitive advantages. We have also applied for registration of several of
our trademarks and our logo. We also claim common law protections for other
marks we use in our business. We have received a notice from another company
with a similar name demanding that we change our name. We cannot assure you that
we will be able to continue to use our name. See "Business -- Legal
Proceedings." In addition, we cannot assure you that any of our trademark
applications will be granted. To protect our intellectual property, we also
generally limit access to our technology, treat portions of our technology as
trade secrets and obtain confidentiality or non-disclosure agreements from
persons with access to our technology. These steps may be inadequate to provide
the protection we need. A significant portion of our proprietary technology is
know-how, and employees with know-how may depart before transferring their
know-how to other employees. Moreover, the laws of some foreign countries where
we market our products and services do not protect intellectual property rights
to the same extent as do the laws of the United States. We may be required to
spend significant resources to monitor infringement of and enforce our
intellectual property rights.
Third parties could copy or otherwise obtain and use our products or
technology without our authorization. They could also independently develop
similar technology that may infringe our intellectual property rights. We may
not be able to detect infringement and may lose our competitive position in the
market before we do so. Competitors may also design around our technology or
develop competing technologies. If this occurs, our business and prospects would
be negatively impacted.
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<PAGE> 16
OUR PRODUCTS AND THE TRADE NAMES WE USE TO MARKET THEM MAY INFRINGE UPON THE
INTELLECTUAL PROPERTY RIGHTS OF OTHERS, AND ANY RESULTING CLAIMS AGAINST US
COULD BE COSTLY TO DEFEND OR SUBJECT US TO SIGNIFICANT DAMAGES.
Substantial litigation regarding intellectual property rights exists in the
telecommunications equipment and network infrastructure industries. We expect
that broadband wireless products may be increasingly subject to third-party
infringement claims as the number of competitors in our industry segment grows
and the functionality of products in different industry segments overlaps. We do
not conduct comprehensive patent searches to determine whether the technology
used in our products infringes any patents. If we were to discover that any of
our products violated the intellectual property rights of a third party, we
might be unable to redesign our product to avoid violating their rights, and we
might be unable to obtain a license on commercially reasonable terms to use
their intellectual property. We may be prevented from continuing to sell that
product, which could cause us to lose sales. We are not aware that our products
employ technology that infringes any proprietary rights of third parties.
However, third parties may claim that we infringe their intellectual property
rights. Any claims, with or without merit, could:
- be time-consuming to defend;
- result in costly litigation;
- divert our management's attention and resources;
- cause product shipment delays; and
- require us to enter into royalty or licensing agreements.
Furthermore, a party making a claim could obtain a judgement that requires
us to pay substantial damages. A judgment could also include an injunction or
other court order that could prevent us from selling our products.
RISKS RELATED TO THE EXPANSION OF OUR BUSINESS
OUR RECENT GROWTH HAS PLACED A SIGNIFICANT STRAIN ON OUR MANAGEMENT SYSTEMS AND
RESOURCES, AND OUR FAILURE TO MANAGE THIS GROWTH AND ANY FUTURE GROWTH COULD
HARM OUR BUSINESS.
We are currently experiencing a period of significant and rapid growth that
has placed, and continues to place, a significant strain on our management,
operating infrastructure and resources. Our success will depend on our ability
to:
- manage our growth effectively;
- educate customers about the competitive advantages of our products;
- meet customers' demands, specifications and volume requirements;
- complete the planned addition of in-house manufacturing capabilities for
the transceiver modules used in our products;
- complete the acquisition of IBM's broadband modem product line and
integrate these operations and the personnel responsible for them into
our overall operations;
- enhance our operational and financial control, human resources and
information systems; and
- attract, assimilate and retain additional qualified personnel.
Our failure to manage the expansion of our business and operations could
slow our development and negatively impact results of operations.
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<PAGE> 17
FUTURE EXPANSION OF OUR INTERNATIONAL OPERATIONS WILL REQUIRE SIGNIFICANT
MANAGEMENT ATTENTION AND FINANCIAL RESOURCES, AND OUR EFFORTS TO EXPAND
INTERNATIONALLY MAY NOT SUCCEED.
We plan to increase our international sales activities, but we have limited
experience in developing foreign language materials to support our products and
little direct experience marketing and distributing our products
internationally. We currently conduct limited, targeted sales activities in
Canada, Australia and Japan. To successfully expand international sales, we must
expand our international operations, recruit additional international sales and
support personnel, and expand our international distribution channels. This
expansion will require significant management attention and financial resources,
and may not be successful. Our international operations are subject to other
inherent risks, including:
- the impact of recessions in economies outside the United States;
- greater difficulty in accounts receivable collection and longer
collection periods;
- differences in local telecommunications standards;
- unexpected changes in regulatory requirements;
- difficulties and costs of staffing and managing foreign operations;
- reduced protection for intellectual property rights in some countries;
- the existence of protectionist laws and business practices that favor
local competition;
- foreign currency exchange rate fluctuations;
- import and export licensing requirements;
- seasonal reductions in business activity;
- higher personnel costs;
- potentially adverse tax consequences; and
- political and economic instability.
In international markets our success also may depend on our ability to
modify our existing products and develop new products supporting frequency bands
that are different from those used by service providers in the United States.
OUR BUSINESS COULD BE ADVERSELY AFFECTED IF WE ARE NOT ABLE TO SUCCESSFULLY
INTEGRATE OUR PENDING AND ANY FUTURE ACQUISITIONS.
On February 29, 2000, we entered into an agreement to acquire IBM's
broadband modem product line. Upon completion of the transaction, we may
encounter difficulty integrating the personnel we decide to hire, and
operations, technology and software we acquire, from IBM. In addition, one or
more of the key personnel may decide not to work for us. Any difficulties could
disrupt our ongoing business, distract our management and employees, increase
our expenses and adversely affect our results of operations.
In the future, we may acquire, or invest in, complementary businesses,
products, or technologies. Acquisitions involve numerous risks, including:
- difficulties in integrating operations, technologies, products and
personnel;
- diversion of financial and management resources from existing operations;
- risks of entering new markets;
14
<PAGE> 18
- potential loss of key employees; and
- inability to generate sufficient revenues to offset acquisition or
investment costs.
If we finance an acquisition by issuing additional equity securities, our
stockholders could experience dilution. In addition, acquisitions may involve
investment-related or other charges and amortization of acquired technology,
goodwill and other intangible assets, and may adversely affect our results of
operations.
COMPETITION FOR QUALIFIED PERSONNEL IN THE TELECOMMUNICATIONS EQUIPMENT INDUSTRY
IS INTENSE, AND IF WE ARE NOT SUCCESSFUL IN ATTRACTING AND RETAINING PERSONNEL,
OUR ABILITY TO GROW OUR BUSINESS MAY BE HARMED.
Our future performance depends on our ability to attract and retain highly
qualified sales, engineering, marketing, and customer support personnel.
Competition for qualified personnel in the telecommunications equipment industry
is intense, and we may not be successful in attracting and retaining such
personnel. We are actively searching for research and development engineers,
sales and marketing and customer service and support personnel, all of whom are
in short supply. If we do not succeed in retaining our personnel or in
attracting new employees, our business could suffer.
Competitors and others have in the past, and may in the future, attempt to
recruit our employees. We have in the past and may in the future attempt to
recruit employees from our competitors. Companies whose employees accept
positions with competitors frequently claim that the competitors have engaged in
unfair hiring practices. We have received such complaints in the past, and may
receive such complaints in the future as we seek to hire qualified personnel.
These complaints may result in material litigation and related disruption to our
operations.
RISKS RELATED TO THIS OFFERING
OUR STOCK PRICE COULD BE VOLATILE, WHICH MAY LEAD TO LOSSES BY INVESTORS.
Before the offering, there was no public market for our common stock. An
active public market for our common stock may not develop or be sustained after
the offering. The underwriters and we will determine the initial public offering
price of our common stock based on negotiations concerning the valuation of our
common stock. The public market may not agree with or accept this valuation.
After the offering, you may not be able to resell your shares at or above the
initial public offering price. The trading price of our common stock is likely
to be volatile. The stock market in general, and the market for technology
companies in particular, has experienced extreme volatility. This volatility has
often been unrelated to the operating performance of particular companies.
Volatility in the market price of our common stock may prevent investors from
being able to sell their common stock at or above the initial public offering
price.
WE ARE AT RISK OF SECURITIES CLASS ACTION LITIGATION DUE TO OUR EXPECTED STOCK
PRICE VOLATILITY.
In the past, securities class action litigation has often been brought
against companies after periods of volatility in the market price of their
securities. Securities litigation could result in substantial costs and divert
management's attention and resources from our business. Due to the potential
volatility of our stock price, we may be the target of securities litigation in
the future.
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<PAGE> 19
WE HAVE BROAD DISCRETION IN HOW WE USE THE PROCEEDS OF THIS OFFERING, AND WE MAY
NOT USE SUCH PROCEEDS EFFECTIVELY.
Our management will have broad discretion as to the application of the net
proceeds of this offering. Our management may spend these proceeds in ways with
which our stockholders may not agree. Moreover, our net proceeds may be used for
corporate purposes that do not increase our profitability, or the market value
of our common stock. Our primary purpose in conducting this offering is to
create a public market for our common stock. As of the date of this prospectus,
we plan to use the proceeds from this offering for general corporate purposes.
OUR OFFICERS, DIRECTORS AND PERSONS OR ENTITIES AFFILIATED WITH OUR DIRECTORS
WILL RETAIN SIGNIFICANT CONTROL OVER US AFTER THE OFFERING, WHICH MAY LEAD TO
CONFLICTS WITH OTHER STOCKHOLDERS OVER CORPORATE GOVERNANCE ISSUES.
We anticipate that our officers, directors and individuals or entities
affiliated with our directors will beneficially own approximately % of our
outstanding common stock as a group after this offering closes. Acting together,
these stockholders would be able to significantly influence all matters that our
stockholders vote upon, including the election of directors and the approval of
significant corporate transactions. This concentration of ownership may also
delay, deter or prevent a change in our control and may make some transactions
more difficult or impossible to complete without the support of these
stockholders.
THE PROVISIONS OF OUR CHARTER DOCUMENTS MAY INHIBIT POTENTIAL ACQUISITION BIDS
THAT A STOCKHOLDER MAY BELIEVE ARE DESIRABLE, AND THE MARKET PRICE OF OUR COMMON
STOCK MAY BE LOWER AS A RESULT.
Upon completion of this offering, our board of directors will have the
authority to issue up to 10,000,000 shares of preferred stock. The board of
directors can fix the price, rights, preferences, privileges and restrictions of
the preferred stock without any further vote or action by our stockholders. The
issuance of shares of preferred stock may delay or prevent a change in control
transaction. As a result, the market price of our common stock and the voting
and other rights of our stockholders may be adversely affected. The issuance of
preferred stock may result in the loss of voting control to other stockholders.
We have no current plans to issue any shares of preferred stock.
Our charter documents contain anti-takeover devices including:
- a classified board whereby only one of the three classes of directors is
elected each year;
- the ability of our stockholders to remove directors without cause is
limited;
- the right of stockholders to act by written consent has been eliminated;
- the right of stockholders to call a special meeting of stockholders has
been eliminated; and
- a requirement of advance notice to nominate directors or submit proposals
for consideration at stockholder meetings.
These provisions could discourage potential acquisition proposals and could
delay or prevent a change in control transaction. They could also have the
effect of discouraging others from making tender offers for our common stock. As
a result, these provisions may prevent the market price of our common stock from
increasing in response to actual or rumored takeover attempts. These provisions
may also prevent changes in our management.
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<PAGE> 20
DELAWARE LAW MAY INHIBIT POTENTIAL ACQUISITION BIDS; THIS MAY ADVERSELY AFFECT
THE MARKET PRICE OF OUR COMMON STOCK, DISCOURAGE MERGER OFFERS AND PREVENT
CHANGES IN OUR MANAGEMENT.
Section 203 of the Delaware General Corporation Law may inhibit potential
acquisition bids for our company. Upon completion of this offering, we will be
subject to the anti-takeover provisions of the Delaware General Corporation Law,
which regulate corporate acquisitions. Delaware law will prevent us from
engaging, under specified circumstances, in a "business combination" with any
"interested stockholder" for three years following the date that the interested
stockholder became an interested stockholder unless our board of directors or a
supermajority of our uninterested stockholders agrees. For purposes of Delaware
law, a "business combination" includes a merger or consolidation involving us
and the interested stockholder and the sale of more than 10% of our assets. In
general, Delaware law defines an "interested stockholder" as any holder
beneficially owning 15% or more of the outstanding voting stock of a corporation
and any entity or person affiliated with or controlling or controlled by the
holder. Under Delaware law, a corporation may opt out of the foregoing
anti-takeover provisions. We do not intend to opt out of the anti-takeover
provisions of Delaware Law.
FUTURE SALES OF COMMON STOCK BY OUR EXISTING STOCKHOLDERS COULD CAUSE OUR STOCK
PRICE TO FALL.
If our stockholders sell substantial amounts of common stock in the public
market, the market price of our common stock could fall. The perception among
investors that these sales will occur could produce the same effect. After this
offering, we will have approximately shares of common stock outstanding.
The shares we are selling in this offering will be freely tradable in the public
market. If we take into account the lock-up agreements executed by our existing
stockholders, the remaining shares of common stock outstanding after this
offering will be available for sale in the public market as follows:
<TABLE>
<CAPTION>
PERCENT OF
TOTAL SHARES
NUMBER OF SHARES OUTSTANDING DATE OF AVAILABILITY FOR SALE
---------------- ------------ --------------------------------
<S> <C> <C>
................................ % , 2000 (date of this
prospectus) to , 2000
(180 days after the date of this
prospectus)
................................ , 2000 (180 days
after the date of this
prospectus), in some cases
under Rule 144
................................ at various times after
, 2000
</TABLE>
Our underwriters could waive the selling restrictions imposed by the
lock-up agreements at any time, which could accelerate the resale of outstanding
shares of common stock. In addition, some of our securityholders have rights to
require us to register their shares for resale in the public market. For a more
detailed description, see "Description of Capital Stock -- Registration Rights,"
"Shares Eligible for Future Sale" and "Underwriting."
YOU WILL SUFFER DILUTION BECAUSE THE NET TANGIBLE BOOK VALUE OF SHARES PURCHASED
IN THIS OFFERING WILL BE SUBSTANTIALLY LOWER THAN THE INITIAL PUBLIC OFFERING
PRICE.
The initial public offering price will significantly exceed the net
tangible book value per share of our common stock. Accordingly, if you purchase
common stock in this offering, you will incur
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<PAGE> 21
immediate and substantial dilution of your investment. If outstanding options or
warrants are exercised, you will incur additional dilution.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the sections entitled "Prospectus Summary,"
"Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and "Business," contains forward-looking statements.
These statements relate to future events or our future financial performance. In
some cases, you can identify forward-looking statements by terminology such as
"may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," "continue" or the negative of these terms
or other comparable terminology. These statements involve known and unknown
risks, uncertainties and other factors that may cause our or our industry's
actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by the forward-looking statements. These risks
and other factors include those listed under "Risk Factors" and elsewhere in
this prospectus.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of these
forward-looking statements. We are under no duty to update any of the
forward-looking statements after the date of this prospectus to conform our
prior statements to actual results.
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<PAGE> 22
USE OF PROCEEDS
We will receive net proceeds from this offering of approximately
$ million, assuming an initial public offering price of $ per share
and after deducting estimated underwriting discounts and commissions and
estimated offering expenses. If the underwriters exercise their over-allotment
option in full, our net proceeds will be approximately $ million.
The principal purposes of this offering are to obtain additional capital,
to create a public market for our common stock and to facilitate future access
to public equity markets. As of the date of this prospectus, we have not
allocated the net proceeds of this offering for specific uses. We expect to use
the proceeds for general corporate purposes. We may also use a portion of the
net proceeds for acquisitions of businesses, products and technologies that
complement our business. Other than our agreement with IBM, we have no present
plans, commitments, or current negotiations with respect to any acquisitions.
Pending our use of the net proceeds of this offering, we intend to invest
the proceeds in interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have never declared or paid any dividends on our capital stock. We
intend to retain future earnings, if any, for use in the operation and expansion
of our business, and we do not anticipate paying any cash dividends in the
foreseeable future.
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<PAGE> 23
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
- on an actual basis;
- on a pro forma basis to give effect to the conversion of all shares of
preferred stock into 37,612,938 shares of common stock upon completion of
this offering; and
- on a pro forma as adjusted basis to give effect to the sale of
shares of common stock assuming an initial public offering price of
$ per share and after deducting estimated underwriting discounts and
commissions and estimated offering expenses.
You should read this table in conjunction with our consolidated financial
statements and accompanying notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C> <C>
Capital leases and notes payable, net of current
portion............................................ $ 2,155 $ 2,155 $
Stockholders' equity:
Preferred stock, $0.001 par value: no shares
authorized, issued or outstanding, actual and
pro forma; and 10,000,000 shares authorized and
no shares issued or outstanding pro forma as
adjusted........................................ -- -- --
Convertible preferred stock, $0.001 par value:
issued in series A, B and C; 37,705,000 total
shares authorized, 37,612,938 shares issued and
outstanding, actual; no shares authorized,
issued or outstanding, pro forma and pro forma
as adjusted..................................... 38 -- --
Common stock, $0.001 par value: 61,000,000 shares
authorized and 13,591,663 issued and
outstanding, actual; 61,000,000 authorized and
51,204,601 issued and outstanding, pro forma;
120,000,000 authorized and issued and
outstanding, pro forma as adjusted.............. 13 51
Additional paid-in capital......................... 99,188 99,188
Notes receivable from stockholders................. (607) (607)
Accumulated deficit................................ (47,299) (47,299)
-------- -------- --------
Total stockholders' equity...................... 51,333 51,333
-------- -------- --------
Total capitalization....................... $ 53,488 $ 53,488 $
======== ======== ========
</TABLE>
The data in the table above excludes:
- 3,238,599 shares of common stock issuable upon exercise of options
outstanding as of March 1, 2000, at a weighted average exercise price of
$2.64 per share;
- 768,031 shares of common stock available for issuance at March 1, 2000,
under our 1997 Stock Plan;
- 675,000 shares of common stock issuable upon exercise of warrants
outstanding as of March 1, 2000 at a weighted average exercise price of
$0.50 per share;
20
<PAGE> 24
- shares of common stock assuming an initial offering price of
$ per share issuable upon exercise of warrants issued to the lender
under our capital equipment financing;
- 5.5 million shares of series C convertible preferred stock issuable to
IBM upon our acquisition of IBM's broadband modem product line; and
- 500,000 additional shares of common stock available for issuance under
our 2000 Employee Stock Purchase Plan immediately following the offering.
21
<PAGE> 25
DILUTION
If you invest in our common stock, your ownership interest will be diluted
by the difference between the public offering price per share of our common
stock and the pro forma as adjusted net tangible book value per share of our
common stock immediately after this offering. Our pro forma net tangible book
value at December 31, 1999 was approximately $ , or $ per share of
common stock. Pro forma net tangible book value per share represents the amount
of our total tangible assets less total liabilities, divided by the pro forma
number of shares of common stock outstanding at December 31, 1999 and assumes
the conversion of our currently outstanding shares of preferred stock into
common stock upon the closing of this offering. Dilution in pro forma net
tangible book value per share represents the difference between the amount per
share paid by investors in this offering and the pro forma net tangible book
value per share of our common stock immediately after the completion of this
offering. After giving effect to the sale of the million shares of our
common stock in this offering assuming an initial public offering price of
$ per share and after deducting estimated underwriting discounts and
commissions and estimated offering expenses, our pro forma as adjusted net
tangible book value at December 31, 1999 would have been $ , or $
per share. This represents an immediate increase in pro forma net tangible book
value of $ per share to existing stockholders and an immediate dilution of
$ per share to new investors, or approximately % of the assumed initial
public offering price of $ per share. The following table illustrates this
per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share at December
31, 1999............................................... $
Increase per share attributable to new investors..........
--------
Pro forma as adjusted net tangible book value per share
after the offering........................................
--------
Dilution per share to new investors......................... $
========
</TABLE>
The following table shows, on a pro forma basis at December 31, 1999, after
giving effect to the conversion of all outstanding shares of preferred stock
into common stock upon the closing of this offering, the total number of shares
of common stock purchased from us, the total consideration paid to us and the
average price per share paid to us by existing stockholders and by new investors
before deducting the estimated underwriting discounts and commissions and
estimated offering expenses, at an assumed initial public offering price of
$ per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- -------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........... 51,246,280 % $ % $
New investors...................
---------- ----- -------- -----
Total......................... 100.0% $ 100.0%
========== ===== ======== =====
</TABLE>
The above tables and calculations exclude the following:
- 3,238,599 shares of common stock issuable upon exercise of options
outstanding as of March 1, 2000, at a weighted average exercise price of
$2.64 per share;
- 768,031 shares of common stock available for issuance at March 1, 2000,
under our 1997 Stock Plan;
- 675,000 shares of common stock issuable upon exercise of warrants
outstanding as of March 1, 2000 at a weighted average exercise price of
$0.50 per share;
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<PAGE> 26
- shares of common stock, assuming an initial offering price of
$ per share, issuable upon exercise of warrants issued to the lender
under our capital equipment financing line;
- 5.5 million shares of series C convertible preferred stock issuable to
IBM upon our acquisition of IBM's broadband modem product line; and
- 500,000 additional shares of common stock available for issuance under
our 2000 Employee Stock Purchase Plan immediately following the offering.
To the extent any of these options or warrants are exercised, there will be
further dilution to new investors.
23
<PAGE> 27
SELECTED CONSOLIDATED FINANCIAL DATA
You should read the following selected financial data in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and the notes included
elsewhere in this prospectus. The consolidated statement of operations data for
the period from inception to December 31, 1997 and for the years ended December
31, 1998 and 1999 and the consolidated balance sheet data as of December 31,
1998 and 1999 were derived from the consolidated financial statements that have
been audited by Ernst & Young LLP, independent auditors, which are included
elsewhere in this prospectus. The consolidated balance sheet data as of December
31, 1997 are derived from our financial statements audited by Ernst & Young LLP,
independent auditors, that are not included in this prospectus. Historical
results are not necessarily indicative of results that may be expected for any
future period.
<TABLE>
<CAPTION>
PERIOD FROM MARCH 5,
1997 (INCEPTION) YEAR ENDED DECEMBER 31,
THROUGH DECEMBER 31, -----------------------
1997 1998 1999
--------------------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues....................................... $ -- $ -- $ --
Costs and expenses:
Manufacturing and operations................. -- 2,326 7,990
Research and development..................... 1,895 8,494 12,631
Selling and marketing........................ 162 2,445 6,111
General and administrative................... 501 1,748 4,473
---------- ---------- ----------
Total costs and expenses.................. 2,558 15,013 31,205
---------- ---------- ----------
Loss from operations........................... (2,558) (15,013) (31,205)
Other income (expense):
Interest income.............................. 86 1,066 1,337
Interest expense............................. -- (160) (426)
Royalty expense.............................. -- (400) --
Other income (expense)....................... (3) (25) 1
---------- ---------- ----------
Total other income (expense).............. 83 481 912
---------- ---------- ----------
Net loss....................................... $ (2,475) $ (14,532) $ (30,293)
========== ========== ==========
Net loss per share -- basic and diluted........ $ (0.50) $ (2.14) $ (3.17)
========== ========== ==========
Shares used in per share calculations -- basic
and diluted.................................. 4,913,989 6,790,600 9,553,134
========== ========== ==========
Pro forma net loss per share:
Net loss per share -- basic and diluted...... $ (0.78)
==========
Shares used in per share calculations --
basic and diluted.......................... 38,800,408
==========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments.......... $12,476 $21,328 $46,130
Working capital............................................ 12,271 18,963 44,180
Total assets............................................... 12,794 24,440 63,700
Convertible preferred stock................................ 14 23 38
Total stockholders' equity................................. 12,506 20,424 51,333
</TABLE>
See Note 7 of notes to consolidated financial statements for an explanation
of the determination of the number of shares used in computing net loss per
share data.
24
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
our financial statements and the related notes included elsewhere in this
prospectus.
OVERVIEW
We provide broadband wireless equipment that enables communications service
providers to deliver high-speed, cost-effective voice, video and data services
to their business customers. We currently offer two product lines: our Invisible
Fiber Internet Protocol product line for Internet service providers and our
Invisible Fiber SONET/SDH product line for communications service providers.
From our inception in March 1997 through late 1999, our operations
consisted primarily of start-up activities, including raising capital,
recruiting personnel, conducting research and development, establishing the
market for our initial products and purchasing operating assets. In addition, we
developed our final product assembly and testing capabilities, entered into
manufacturing agreements with third-parties and developed our sales, marketing
and administrative organizations.
We began supplying our Invisible Fiber products for use in field trials
during the second half of 1999. Two customers placed orders with us in December
1999. We sell our products through our direct sales force to service providers
in North America who have government licenses to provide wireless services for
the Local Multipoint Distribution Service, or LMDS, and 38 Gigahertz
frequencies. In addition, we have a small direct sales force focused solely on
international customers.
Revenues. We first began recognizing revenues from sales of our products
during the first quarter of 2000. We recognize product revenues at the time of
shipment provided no significant obligations remain and collection is probable.
We have supplied products to potential customers for use in several field
trials. We have not recognized revenues from field trials since the customer can
typically return the product with no payment or further obligation to us.
Cost of Revenues. Cost of revenues consists of component and material
costs, direct labor, manufacturing, customer service and estimated warranty
costs.
Manufacturing and Operations. Historically, manufacturing and operations
consisted of procurement, assembly and support personnel, product, technical
assistance, training and documentation expenses. Concurrent with our recognition
of revenues beginning in the first quarter of 2000, we began classifying
manufacturing and operations expenses as cost of revenues.
Research and Development. Research and development expenses consist
primarily of compensation and related personnel costs, third party engineering
costs and prototype costs related to the design, development, testing and
enhancement of our products. We expense research and development costs as they
are incurred.
Selling and Marketing. Selling and marketing expenses consist primarily of
salaries and related expenses for personnel engaged in sales, marketing and
related support functions, the costs associated with customer field trials that
we fund and promotional and other marketing expenses.
General and Administrative. General and administrative expenses consist
primarily of salaries and related expenses for executive, finance, information
systems and human resources personnel, professional fees and other general
corporate expenses.
Historically, we have incurred significant losses. As of December 31, 1999,
we had an accumulated deficit of approximately $47.3 million. We expect to incur
substantial losses for the foreseeable future. We also expect to incur
significant research and development, selling, marketing and general and
administrative expenses. As a result, we will need to generate significant
revenues to achieve and maintain profitability. We may never achieve
profitability.
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<PAGE> 29
RECENT ACQUISITION
On February 29, 2000, we entered into an agreement with IBM to purchase
assets and hire approximately 50 employees associated with IBM's broadband modem
product line in exchange for 5.5 million shares of series C preferred stock.
This IBM unit developed and sold custom modems to us for use in our products.
During 1999, the majority of this unit's sales were to us, with minor sales to
one other customer. With the completion of this transaction, we will secure
intellectual property and engineering expertise for future modem development,
and we believe we will lower the cost of manufacturing our products. The closing
of the transaction is subject to customary conditions to closing, including
regulatory approval.
Assuming an initial public offering price of $ per share, the total
value of the consideration for the transaction would be $ million, with
approximately $ million being allocated to fixed assets and inventory and
approximately $ million to intangible assets. If the transaction had taken
place on January 1, 1999, our revenue and net loss for 1999 would have increased
by approximately $ million and $ million or $ per share. The
pro forma revenue and net loss does not purport to indicate what would have
occurred if the purchase had actually occurred on January 1, 1999 or to indicate
the results that may occur in the future. We plan to focus on further
development of the modem technology we acquire from IBM to improve and enhance
our products. We believe that future research and development expenses of the
broadband modem products group subsequent to our acquisition of the group will
be significantly higher than the pro forma amount for 1999.
RESULTS OF OPERATIONS -- YEARS ENDED DECEMBER 31, 1999 AND 1998 AND PERIOD MARCH
5, 1997 (INCEPTION) TO DECEMBER 31, 1997
Revenues. We recognized no revenues through December 31, 1999.
Manufacturing and Operations. Manufacturing and operations expenses
increased $5.7 million in 1999 from $2.3 million in 1998 to $8.0 million in
1999. Approximately 52% of the increase was due to higher personnel costs
related to the commencement of our final assembly and testing manufacturing
efforts and the establishment of our technical assistance center. Approximately
25% of the remaining increase was attributable to facilities, depreciation and
production costs related to our manufacturing facility and recently developed
production process. The remainder of the increase was attributable to increases
in travel, supplies and professional and other service expenses. We had no
manufacturing and operating expenses in the period from inception through 1997.
Research and Development. Research and development expenses increased $4.1
million in 1999 from $8.5 million in 1998 to $12.6 million in 1999 and increased
$6.6 million in 1998 from $1.9 million in the period from inception through
1997. These increases were due to an increase in the number of engineering
personnel and significant third party contract engineering costs during both
1999 and 1998. Personnel related costs accounted for 30% and 32% of the increase
in 1999 and 1998, respectively, while third party contract engineering expenses
represented 47% and 56% of the increase in those same periods.
Selling and Marketing. Selling and marketing expenses increased $3.7
million in 1999 from $2.4 million in 1998 to $6.1 million in 1999 and increased
$2.2 million in 1998 from $0.2 million in the period from inception through
1997. The increase was due to the establishment of a core sales and marketing
group and the increase of advertising, marketing and other costs associated with
sales and support activities. Personnel costs related to the establishment of
the sales and marketing group accounted for 43% and 56% of the expense increase
in 1999 and 1998, respectively. Advertising, marketing and other costs
associated with sales and support activities represented 41% and 21% of the
increase in the same periods.
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<PAGE> 30
General and Administrative. General and administrative expenses increased
$2.8 million in 1999 from $1.7 million in 1998 to $4.5 million in 1999 and
increased $1.2 million in 1998 from $0.5 million in the period from inception
through 1997. The increase was due to the development of the finance, human
resources and information technology groups, and, in 1999, the hiring of our
chief executive officer. Personnel related costs accounted for 57% and 65% of
the expense increase in 1999 and 1998, respectively. Depreciation and
amortization of fixed assets and legal and accounting costs represented 29% and
34% of the increase in the same periods.
Royalty Expense. In 1998, we issued a shareholder 1,600,000 shares of
common stock in satisfaction of an existing royalty agreement. As a result, we
recorded $400,000 in royalty expenses in 1998, representing the fair market
value of the common stock at that time.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through private
sales of approximately $97.7 million of convertible preferred stock as well as
through capital leases for capital equipment, furniture and software. During
1999, we raised approximately $61.0 million from private sales of convertible
preferred stock.
As of December 31, 1999, cash and cash equivalents and short-term
investments were $46.1 million, an increase of $24.8 million from cash and cash
equivalents and short-term investments of $21.3 million at the end of 1998. Cash
and cash equivalents and short-term investments increased $8.8 million in 1998
from $12.5 million at December 31, 1997. The increases were due primarily to the
private sales of convertible preferred stock.
During 1999, we used approximately $31.5 million of cash in operations
primarily due to our net loss of $30.3 million and a growth in inventory of $7.2
million. We used approximately $12.1 million of cash for operations in 1998 due
primarily to the net loss of $14.5 million, partially offset by an increase in
payables.
During 1999 and 1998, our investing activities included the purchase of
approximately $4.5 million and $1.0 million, respectively, of property and
equipment.
Cash provided by financing activities in 1999 and 1998 generated
approximately $60.8 million and $22.0 million, respectively, primarily from the
private sales of convertible preferred stock.
On February 25, 2000, we entered into an agreement with a financial
institution to borrow up to $9.0 million in 2000 for capital equipment
purchases, furniture and software. Up to $5.0 million of the borrowings are
repayable over four years and will bear interest at an annual rate of 13.16% and
up to $4.0 million is repayable over three years with an annual rate of interest
of 10.4%. The current available borrowing base under this agreement is $7.0
million. An additional $2.0 million will be available upon completion of this
offering. The agreement includes no financial covenants and the specific
equipment, furniture and software purchased with the borrowings will serve as
security for the loans. Under the agreement, we issued warrants to purchase our
common stock in the amount of 4% of the currently available borrowing base, or
$280,000. The exercise price of these warrants is 90% of the price of our
initial public offering price per share. If we do not complete an initial public
offering prior to the first anniversary of the agreement the exercise price of
these warrants will be $5.00 per share. We have also issued an additional
$80,000 worth of warrants which will become exercisable only upon completion of
this offering. The exercise price of these warrants will be 90% of the price of
our initial public offering price per share.
We are obligated to pay lease payments of approximately $9.7 million over
the lease periods of our operating leases, with $1.5 million due in 2000. We
have entered into an additional lease agreement to expand our manufacturing and
office space. We expect to occupy the new space in the first half of 2000. The
operating lease for this additional space is for seven years, and our estimated
27
<PAGE> 31
lease payments over the term of this lease are approximately $6.6 million. In
conjunction with this lease agreement, we secured a $0.8 million letter of
credit in 2000 in favor of the landlord with cash.
We expect our cash requirements will increase significantly in 2000, as we
continue our research and development efforts, hire and expand our sales,
support, marketing and product development organizations, grow our
administrative support activities, and expand our leased facilities.
Additionally as our business volumes grow we anticipate a significant cash
requirement for working capital growth and capital expenditures. The amount and
timing of cash requirements will depend on market acceptance of our products and
the resources we devote to researching and developing, marketing, selling and
supporting our products. Although we believe that our current cash and cash
equivalents on hand, the net proceeds from this offering and availability under
our new capital equipment financing line should be sufficient to fund our
operations for at least the next 12 months, we cannot be certain that we will
not require additional financing within this time frame or that such additional
funding, if needed, will be available on terms acceptable to us, or at all. If
we raise additional funds through the issuance of equity securities, the
percentage ownership of our stockholders would be reduced.
RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133). SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133, as recently amended, is effective for fiscal years beginning after
June 15, 2000. Management believes the adoption of SFAS No. 133 will not have a
material effect on our financial position or results of operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET INTEREST RATE SENSITIVITY
The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments
without significantly increasing risk. Some of the securities that we may invest
in may be subject to market risk. This means that a change in prevailing
interest rates may cause the principal amount of the investment to fluctuate.
For example, if we hold a security that was issued with a fixed interest rate at
the then-prevailing rate and the prevailing interest rate later rises, the
principal amount of our investment will probably decline. To minimize this risk
in the future, we intend to maintain our portfolio of cash equivalents and
short-term investments in a variety of securities, including commercial paper,
money market funds, government and investment grade non-government debt
securities. In general, money market funds are not subject to market risk
because the interest paid on such funds fluctuates with the prevailing interest
rate. As of December 31, 1999, all of our cash and cash equivalents were in
money market and checking funds.
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<PAGE> 32
BUSINESS
OVERVIEW
We provide broadband wireless equipment that enables communications service
providers to deliver high-speed, cost-effective voice, video and data services
to their business customers. Our Invisible Fiber products combine high
transmission speeds and the reliability of fiber optic networks with the
flexibility, low cost and rapid deployment of wireless technologies. Our
products feature proprietary technologies that enable service providers to
install more units in a service area than would be possible with conventional
broadband wireless technologies, permitting them to serve more users and
generate more revenues. We have designed our Invisible Fiber products for
deployment in consecutive point networks. A consecutive point network is a
series of point-to-point links forming a ring which allows communication traffic
to flow in either direction, creating redundant transmission paths and reducing
the risk of service interruptions. Consecutive point architecture enables
service providers to quickly configure, expand and relocate their service
coverage, enhancing network scalability and flexibility. Our products meet the
same carrier class standard of reliability used for fiber optic networks, and
can be seamlessly incorporated into existing fiber optic and wireless networks
or used to build new networks. We currently offer two product lines: our
Invisible Fiber Internet Protocol product line for Internet service providers
and our Invisible Fiber SONET/SDH product line for communications service
providers.
INDUSTRY BACKGROUND
GROWING DEMAND FOR BROADBAND COMMUNICATIONS
The amount of data being transmitted over the Internet and other
communications networks is increasing rapidly due to the growing number of users
accessing these networks and the increasing range of data-intensive activities
for which these networks are being used. Businesses are increasingly using the
Internet to extend their reach to customers and suppliers through applications
such as electronic commerce, supply chain management, web hosting, global
marketing and customer support. Businesses are also creating data networks among
corporate sites, remote offices and telecommuters in order to facilitate
employee communications, e-mail, file sharing, and research and analysis. A
growing number of businesses are using third party application service providers
to provide web hosting for mission-critical business systems. These
network-based business activities require quick and reliable transmission of
increasingly large amounts of data. As a result, broadband access is becoming
increasingly important to business customers.
DEREGULATION AND COMPETITION ARE DRIVING DEPLOYMENT OF BROADBAND ACCESS
TECHNOLOGIES
Global telecommunications deregulation is creating significant competition
among providers of advanced communications services, thereby accelerating the
deployment of broadband access technologies. In the United States, incumbent
carriers such as Ameritech, Bell Atlantic, BellSouth, GTE, Pacific Bell, SBC
Communications and US West were, until recently, the exclusive providers of the
copper wire connections between their network backbones and subscribers,
commonly known as the access portion of the network or the last mile. The
Federal Telecommunications Act of 1996 intensified the competitive environment
in the United States by requiring incumbent carriers to lease portions of their
networks, including the access portion, to competing carriers. Additionally,
telephone companies and cable operators are seeking to expand their service
offerings by entering each others' markets. Similar deregulation and competition
is occurring in many regions of the world. To compete in this environment, many
service providers seek to differentiate themselves and maximize revenue per
subscriber by offering high-speed internet access and integrated voice, video
and data services, which require broadband access.
29
<PAGE> 33
TRADITIONAL NETWORK ACCESS SOLUTIONS ARE NOT SUITABLE FOR MANY BUSINESS
SUBSCRIBERS
In order to meet increasing demand for broadband transmission, many service
providers have constructed high-speed data highways comprised of fiber optic
cable and sophisticated routers and switches. This fiber optic backbone connects
service providers' network operations centers across the nation, transmitting
data at speeds in multiples of 10 Gbps, or 10 billion bits per second. In
addition, many businesses have installed internal networks that operate at
speeds of up to 1 Gbps, or 1 billion bits per second. However, a bottleneck
exists in the access portion of the network where subscribers connect to the
backbone. Subscribers have traditionally connected to the network backbone over
standard copper telephone lines which carry data at rates of only up to 56.6
thousand bits per second, or 56.6 Kbps. At these speeds, several minutes are
often required to access a media-rich web site, and several hours may be
required to transfer or download large files. This bottleneck frustrates
subscribers, and limits the capability of service providers to satisfy demand
for high-speed data transmission.
Many business subscribers require higher speed network connections, and
have traditionally used copper-based T1 services in the United States and E1
services internationally. A T1 line is a dedicated telecommunications connection
that supports data transmission rates of up to 1.5 million bits per second, or
1.5 Mbps; an E1 line supports data transmission rates of up to 2.0 Mbps. T1 and
E1 services, however, cannot meet the increasing broadband access requirements
of many business subscribers. In addition, T1 and E1 services are costly and
cumbersome access strategies for emerging service providers, who must lease
lines from incumbent carriers and forego control over their network facilities.
EMERGING ACCESS SOLUTIONS HAVE LIMITATIONS
Because T1 and E1 services cannot satisfy the high-speed broadband access
requirements of business subscribers, a number of alternative access solutions
have been developed, including:
Digital Subscriber Line. Digital subscriber line, or DSL, technology
improves the data transmission rate of copper wire lines. Most DSL deployments
offer either high-speed asymmetrical services or slower symmetrical services.
Asymmetrical data services provide higher transmission speeds from the network
to the subscriber and lower speeds from the subscriber to the network. This is
suitable for most non-business users who typically need bandwidth to download
web pages, but not to transmit large amounts of data. Symmetrical data services
provide equal transmission speed to and from the subscriber. The speed, however,
is substantially below peak asymmetrical DSL rates and does not meet the
bandwidth requirements of most business users. Moreover, new service providers
who offer DSL services must lease existing copper lines from incumbent carriers,
increasing the cost of their DSL deployment. Service providers who choose to
install their own networks and avoid paying access charges will not install
copper wire lines.
Cable. Cable modems enable asymmetrical data services to be delivered over
a network originally designed to provide television service to residential
subscribers. Cable networks connect to the home using coaxial cable, which has
greater transmission capacity than copper lines used by telephone companies.
These networks, however, often require costly upgrades to support symmetrical
data services. In addition, cable does not currently serve as a high-speed
broadband access alternative for business subscribers.
Point-to-Multipoint Wireless. Point-to-multipoint wireless technology
enables symmetrical transmission of data between a centrally located hub and
multiple subscriber locations. This technology offers the low installation cost
and rapid deployment benefits characteristic of wireless solutions. In addition,
it provides higher-speed symmetrical access than either DSL or cable. However,
many business subscribers require more bandwidth than can be supported by
existing point-to-multipoint
30
<PAGE> 34
wireless solutions. The technological limitations of this solution also limit
the number of customers that a service provider may serve within their licensed
radio spectrum.
Point-to-Point Wireless. Point-to-point wireless technology enables
symmetrical data services using a dedicated link between a subscriber and the
service provider. Because this technology cannot easily be scaled,
point-to-point wireless technology has generally not been used as a local access
solution.
Fiber. Fiber offers the highest data transmission rate of any access
solution, but deploying fiber is slow and costly. Building a wireline network in
a major metropolitan area requires digging up miles of city streets. Such
projects often require many months to obtain the necessary permits and several
more months to complete installation, and service cannot begin until
construction is completed. Construction costs for fiber networks in metropolitan
areas are extremely high, and rights of way, if available, often carry
additional governmental tariffs. Maintenance is also costly because fiber optic
cable sometimes must be dug up to be repaired. Fiber is not a flexible solution
because fiber lines cannot be easily redeployed if the customer relocates
outside of the fiber network. These problems have generally limited the use of
fiber in access networks to those areas generating the highest levels of
communications traffic.
The chart below compares network-to-subscriber and subscriber-to-network
data transmission speeds for various technologies in the backbone, access and
corporate networks:
[Chart Comparing the Bandwidth associated with various
wireless and other telecommunication solutions]
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<PAGE> 35
As a result of the limitations of traditional broadband wireless
technologies and the costs and inefficiencies of deploying fiber networks, a
significant market opportunity exists for a cost-effective, high-speed broadband
wireless solution capable of efficiently serving business customers.
THE TRITON NETWORK SYSTEMS SOLUTION
Our Invisible Fiber solutions offer service providers high transmission
speeds, the reliability of fiber optic networks and the flexibility, low cost
and rapid deployment of wireless technologies. We have designed our solutions
for deployment in consecutive point networks comprised of a series of
point-to-point links forming a fiber-like ring that connects subscribers to the
network backbone. Each link consists of two Invisible Fiber units, both of which
transmit and receive broadband wireless traffic. We believe that our consecutive
point architecture addresses the limitations inherent in point-to-point and
point-to-multipoint technologies.
THE TRITON NETWORK SYSTEMS CONSECUTIVE POINT SOLUTION
[Chart depicting the Triton Network Systems Consecutive Point Solution]
We believe that our solution provides service providers with the following
key competitive advantages:
High Speed Network Service. Our products enable the delivery of high-speed
voice, video and data services. Our current Invisible Fiber Internet Protocol
products provide Fast Ethernet service, an industry standard for transmission
speeds of 100 Mbps, enabling business users to download in
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<PAGE> 36
seconds media-rich files that would require minutes to download using a
dedicated T1 line. Our current Invisible Fiber OC-3/STM-1 products transmit data
at 155 Mbps, and offer the capacity of 83 T1/63 E-1 lines. Such high speed
facilitates the adoption of emerging on-line business models such as the use of
application service providers.
High Reliability and Availability of Service. We design our products to
match fiber network reliability standards, including 99.999% availability and
error rates of less than one error per trillion bits transmitted. This enables
our customers to provide their subscribers the same high-reliability and
availability offered by incumbent carriers. Our consecutive point networks use
redundant transmission paths to minimize service interruptions. If a
transmission path is disrupted, signals immediately reroute in the opposite
direction around our consecutive point network and no interruption of service
occurs. Other broadband wireless products are more vulnerable to service
interruptions because they do not provide redundant data paths, and therefore
their transmissions fail if the line of sight between units is temporarily
blocked by moving objects or environmental conditions.
Rapid Deployment and Return on Investment. Service providers can deploy our
products and begin providing their subscribers with broadband access in
significantly less time and at a lower cost than they would be able to using
fiber networks or point-to-point or point-to-multipoint wireless networks.
Service providers can install Invisible Fiber units on rooftops or sides of
buildings in a matter of hours. Each of our products includes a standard fiber
data interface that enables service providers to easily integrate our products
into their networks. As a result, they can rapidly acquire subscribers and
generate revenue to offset the fixed costs associated with entering new markets.
Our solutions also use radio spectrum efficiently and maximize the reuse of a
service provider's licensed radio spectrum. This enables service providers to
reach more subscribers with their licensed radio spectrum, generating greater
revenue by spreading the fixed cost of the spectrum over a larger subscriber
base. Lifecycle costs are further reduced because carriers can easily redeploy
and reuse our products as customer needs change.
High Density Deployment. Our solutions enable service providers to maximize
the number of subscribers served within their licensed radio spectrum. Our
technology combines a wide range of variable power output with an adaptive
transmit power control algorithm. This algorithm uses our proprietary software
to automatically adjust the power output of each unit to the minimum level
necessary for reliable transmission. In addition, our antenna design ensures
that transmissions between Invisible Fiber units travel across highly focused
pathways. By controlling transmit power and focusing transmission pathways, we
are able to minimize radio interference among Invisible Fiber units, as well as
interference caused by other wireless equipment operating in a service area. By
minimizing radio interference, we enable service providers to deploy more of our
products within a service area and to support more customers with their licensed
radio spectrum.
We believe that no other broadband wireless products match our adaptive
transmit power control capability. In particular, point-to-multipoint systems
cannot do so because the base station must transmit at power levels high enough
to communicate with the most hard-to-reach subscriber unit, which, due to
geography and weather, means the signal may be broadcast further than necessary
in other directions. The excess transmission power increases interference
between wireless links and reduces the number of customers that may be served by
a service provider within its licensed radio spectrum.
Highly Scalable and Flexible. We design our products to enable service
providers to quickly configure, expand and relocate their networks. Our
consecutive point architecture is highly scalable. Service providers can deploy
Invisible Fiber units incrementally as demand for their services increases,
allowing them to match capital outlays with subscriber growth. Additionally, our
consecutive point network can take any shape, including a ring or a mesh,
allowing service providers to connect both broadly dispersed subscribers as well
as those in dense service areas. If a ring reaches
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capacity, the service provider can easily split the ring in two or add a ring by
deploying a small number of additional Invisible Fiber units without
interrupting services to existing customers.
THE TRITON NETWORK SYSTEMS STRATEGY
Our objective is to be the leading worldwide provider of broadband wireless
equipment. The key elements of our strategy include the following:
INCREASE SALES TO EXISTING CUSTOMERS
We recently entered into three-year contracts with two service providers
which we believe will result in large-scale deployments of our products. Our
sales and engineering personnel work closely with our customers to ensure that
they are using our solutions to maximum benefit, and to promote the use of our
solutions in additional locations and applications. We intend to build upon the
acceptance of our products to become the leading provider of broadband wireless
access equipment to these and other service providers. We intend to increase our
visibility as a provider of broadband wireless access equipment and believe that
our increased visibility will generate additional sales.
EXPAND OUR CUSTOMER BASE
We plan to increase sales of our products to new customers. Our products
provide capabilities not previously available from wireless vendors. We will
continue to utilize our sales force to inform potential customers about the
competitive advantages offered by consecutive point architecture and our
Invisible Fiber products. We believe it is important to take a targeted approach
to the implementation of our sales strategy and have identified a number of key
accounts as having the potential for large-scale deployment of our products. We
assign each key account to a single manager, who is responsible for managing the
overall customer relationship. Our key account managers work closely with our
current and potential customers to coordinate network design, ensure successful
installation and provide continuous customer support.
MAINTAIN AND EXTEND PRODUCT AND TECHNOLOGY LEADERSHIP
We believe that we are currently the technology leader in developing
broadband wireless solutions for consecutive point networks. We intend to
maintain and extend our technology leadership through continued research and
development and, where appropriate, acquisitions of complimentary businesses,
products and technologies, such as our recent agreement to acquire broadband
modem technology from IBM. We will continue to develop products that address the
competitive demands of service providers and enable them to deploy
differentiated, profitable services to their subscribers. In this regard, we are
enhancing the performance of our existing products and developing new products
that operate at different frequency bands and higher bandwidths.
CONTINUE TO PURSUE INTERNATIONAL MARKET OPPORTUNITIES
We believe that there is a significant market opportunity for our products
in international markets where government authorities have granted or have
indicated that they intend to grant licenses in the millimeterwave spectrum. We
employ a focused approach in our international expansion and we are currently
targeting Canada, Australia and Japan. We have obtained regulatory approval to
deploy our products in each of these markets and have formulated a sales and
marketing strategy for each market. To support our international expansion, we
may enter into strategic relationships and joint ventures with third-parties. In
this regard, in February 2000 we entered into a value-added reseller agreement
with CommVerge Solutions to market our products.
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PRODUCTS AND TECHNOLOGY
KEY TECHNICAL FEATURES
We design our products for deployment in consecutive point networks. We
currently offer two product lines: our Invisible Fiber Internet Protocol product
line for Internet service providers and our Invisible Fiber SONET/SDH product
line for communications service providers. Both product lines utilize our
proprietary technology. Key technical features common to our products include:
- 99.999% Availability at 1 Bit per Trillion Error Rate. We have designed
all of our products to operate at 99.999% link availability,
corresponding to approximately five minutes of down time per year, with
bit error rates of one bit per trillion or better, even under adverse
weather conditions. This means that only one error bit is detected for
every approximately 2.8 hours of operation of our Invisible Fiber Fast
Ethernet products, and for every approximately 1.7 hours of operation of
our Invisible Fiber OC-3/STM-1 products. Bit error rate is a measurement
of transmission quality expressed as a ratio of the average number of
bits containing errors in the total number of bits transmitted. Our bit
error rate performance is equivalent to the bit error rates typically
found in fiber optic networks. Our products also feature redundant
transmission paths, which minimize service interruptions.
- High Bandwidth Data Rate. Our current Invisible Fiber OC-3/STM-1 products
transmit data at speeds of 155 Mbps and our Invisible Fiber Fast Ethernet
products transmit data at speeds of 100 Mbps. This provides service
providers the capacity needed to support broadband applications, such as
simultaneous voice, video and data services.
- 50 Decibels Adaptive Transmit Power Control. Our proprietary adaptive
transmit power control dynamically modifies our products' transmitter
output to minimize the power employed while maintaining bit error rates
of one bit per trillion or better. Our products accomplish this through
dual feedback loops between Invisible Fiber units, compensating for
adverse weather conditions and interference from radio frequency sources.
This automatically reduces the power level to the minimum amount needed
for reliable transmission, enabling dense urban deployments of our
products and maximizing reuse of licensed frequency spectrum. Our
products feature 50 decibels of power control range, which means the
maximum power strength is 100,000 times the minimum power strength. This
power control range is up to 1,000 times greater than is typically found
in traditional broadband wireless equipment.
- Narrow Beam Transmission Technology. Our products utilize our adaptive
transmit power control together with advanced antennas to transmit
signals along extremely narrow, direct pathways. By so confining
transmissions, we minimize interference among Invisible Fiber units and
are able to deliver a high quality, reliable and secure signal, while
significantly extending the distance between transmitters and receivers.
This further enables dense urban deployments and flexible network
configurations.
- High System Gain. All of our products have a linear radio frequency
output power range of up to two watts with minimal system noise,
typically less than 5 decibels. These capabilities yield a system gain
for our products of between 162 and 177 decibels. System gain refers to
the sum of transmit power, receiver sensitivity and antenna gains, as
expressed in decibels. Higher system gain means a better ability to
maintain transmission quality. Our high system gain preserves link
availability in adverse weather conditions, such as rain, snow and ice,
and overcomes interference caused by other wireless systems operating in
a common service area.
- Java-Based Simple Network Management Protocol Software. We support our
products with a full suite of network management tools designed to be
easily integrated with our customers' overall network platforms. Our tool
suite supports the Simple Network Management Protocol, or SNMP, and is
designed to be operated with SNMP-based network management software
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such as HP OpenView. This allows customers to monitor network performance
and troubleshoot difficulties remotely from multiple locations using
different industry standard computing platforms.
- Single Outdoor Unit. Each of our products is a single outdoor unit, not
separate indoor and outdoor units connected via coaxial cable, a
configuration that is typical of other broadband wireless systems.
Because our products do not have an indoor unit, service providers avoid
the expense of leasing equipment space inside the buildings they use to
deploy our products. Within a building, fiber optic cable connects our
products directly to a customer's network. Fiber is more flexible and can
be pulled and operated over longer distances than coaxial cable, making
network connections easier and more cost-effective and enabling corporate
campuses to use our products to complement existing fiber networks. The
use of fiber also eliminates the possibility that a voltage surge caused
by lightning striking one of our units will damage a customer's equipment
or interrupt service.
- Standard Fiber Data Interface. A standard fiber data interface is
imbedded in each of our products. This interface enables customers to
connect industry-standard add/drop multiplexers, switches or routers
directly to our products using standard fiber optic cable and any
SONET/SDH or Internet Protocol network equipment. This capability allows
service providers to easily integrate our equipment into their networks
and eliminates the need for expensive interface equipment at each point
in a network.
- Superior External Packaging and Ease of Installation. Our products are
designed to blend with the architectural design of the sites to which
they are fixed. The antenna and all other components of the radio are
packaged inside the unit's compact, streamlined, paint-ready housing. Our
patent-pending mounting hardware permits direct mounting of units to a
pole or the wall of a building. These design features provide advantages
to operators when they pursue roof rights and make installation and
maintenance quick and inexpensive.
INVISIBLE FIBER INTERNET PROTOCOL PRODUCT LINE
Our current Invisible Fiber Internet Protocol product line consists of our
Invisible Fiber Fast Ethernet products which enable service providers to offer
their subscribers redundant Internet access at higher speeds than all other
technologies except dedicated fiber and at cost levels comparable to or better
than those associated with other technologies. We have designed these products
to support low-latency, high-bandwidth data applications over the Internet, such
as large file transfers, video conferencing, live video streaming and electronic
commerce, as well as business networking among local area networks, metropolitan
area networks and wide area networks. We currently offer Invisible Fiber Fast
Ethernet products for the LMDS and 38 Gigahertz frequencies, and we are
developing additional products for other frequency bands above 20 Gigahertz.
We have designed our Invisible Fiber Internet Protocol products for dense
deployment in consecutive point networks comprised of a series of point-to-point
links forming a fiber-like ring. Each link consists of two Invisible Fiber
Internet Protocol units, both of which transmit and receive broadband wireless
traffic. Each Invisible Fiber Internet Protocol unit contains a transmitter, a
receiver, a modem and our proprietary network interface card. Each Invisible
Fiber Internet Protocol unit forwards data without regard to content. Our
Invisible Fiber Internet Protocol units are able to examine incoming Fast
Ethernet packets from the network to determine if data is addressed to customers
at that location. The unit delivers traffic to the local customers and inserts
traffic from these customers into the transmission stream. Non-local traffic is
switched through the unit and forwarded across the consecutive point network
bypassing the local building where the unit is located. This switching
functionality ensures that only data destined for a specific location will be
transmitted
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to that location's local network, thereby reducing bandwidth consumption on the
local network and improving response times.
Our current Invisible Fiber Fast Ethernet products use a 100 Megahertz
channel pair consisting of a 50 Megahertz transmit channel and a 50 Megahertz
receive channel, to carry data at a rate of approximately 120 Mbps in each
direction over a link. The user's traffic accounts for 100 Mbps of the total
data rate. Error correction and our proprietary adaptive transmit power control
account for the remaining 20 Mbps. This is a differentiating feature of our
Invisible Fiber Fast Ethernet products, as we deliver a full 100 Mbps dedicated
to service providers' customer traffic.
INVISIBLE FIBER SONET/SDH PRODUCT LINE
Our current Invisible Fiber SONET/SDH product line consists of our
Invisible Fiber OC-3/STM-1 products, which enable service providers to build and
extend networks more quickly and cost-effectively than they would be able to
using fiber. We have designed our products so that they can be connected
directly and transparently to standard SONET/SDH equipment, such as add/drop
multiplexers. This enables rapid integration of our products into existing
networks. We currently offer Invisible Fiber OC-3/STM-1 products for the LMDS
and 38 Gigahertz frequencies. In addition, we are developing additional products
for other frequency bands above 20 Gigahertz.
As in the case of our Internet Protocol products, each Invisible Fiber
SONET/SDH unit consists of a transmitter, a receiver, a modem and our
proprietary network interface card. Each Invisible Fiber SONET/SDH unit forwards
data without regard to content. Our Invisible Fiber SONET/SDH units utilize
proprietary technology to maintain high-quality synchronization timing signals.
Synchronization ensures lower bit error rates and high availability. Our high
quality synchronization enables more efficient deployment of a large network.
Because our synchronization capabilities are imbedded in our Invisible Fiber
SONET/SDH units, our customers do not have to rely on costly external
synchronization solutions such as global positioning systems or stratum clocks.
Our current Invisible Fiber OC-3/STM-1 products use a 100 Megahertz channel
pair consisting of a 50 Megahertz transmit channel and a 50 Megahertz receive
channel, to carry data at a rate of approximately 190 Mbps in each link. The
core network traffic accounts for 155 Mbps of the total data rate. Error
correction and our proprietary adaptive transmit power control and radio network
management account for the remaining 35 Mbps. This is a differentiating feature
of our Invisible Fiber SONET/SDH products, as we deliver a fully dedicated 155
Mbps for use by service providers.
CUSTOMERS AND MARKETS
We target service providers worldwide that have rights to wireless spectrum
suitable for high-speed services or are planning to acquire rights to deliver
high-speed services to subscribers.
Our targeted customers are typically planning to commence large scale
deployments of wireless broadband equipment during the next two years. In
December 1999, we entered into contracts with Advanced Radio Telecom for our 38
Gigahertz Invisible Fiber Fast Ethernet and OC-3/STM-1 products and with
CenturyTel for our LMDS Invisible Fiber Fast Ethernet and OC-3/STM-1 products.
In addition, we are currently conducting evaluation trials with potential new
customers.
Advanced Radio Telecom. Advanced Radio Telecom (NASDAQ: ARTT), a provider
of broadband Internet services to businesses not served by fiber-optic networks,
holds an estimated 333 licenses in the 38 Gigahertz frequency band for 194
markets in the United States, including 49 of the 50 largest markets. In
December 1999, we entered into a three-year agreement with Advanced Radio
Telecom. Under this agreement, Advanced Radio Telecom has agreed to purchase
2000 38 Gigahertz Invisible Fiber Fast Ethernet units for delivery before
December 31, 2000.
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CenturyTel. CenturyTel (NYSE: CTL) is a large regional diversified
communications company engaged primarily in providing local exchange telephone
services and cellular telephone services to an estimated 2 million customers in
twenty states. CenturyTel holds approximately 36 licenses for the LMDS
frequencies. In December 1999, we entered into a three-year agreement with
CenturyTel. Under this agreement, CenturyTel has agreed to purchase 1,000 of our
LMDS Invisible Fiber Fast Ethernet or OC-3/STM-1 units over a three-year period.
CenturyTel is obligated to purchase 500 of these units by December 31, 2000.
SALES AND MARKETING
Direct Sales. We currently utilize a direct sales force to serve customers
in the U.S. As of March 1, 2000, our U.S. sales force consisted of 13 employees
each of whom has significant experience in the telecommunications industry. Our
sales personnel have extensive contacts with existing and potential customers.
We sell our products directly to international customers. As of March 1,
2000, our international sales team consisted of 4 employees each of whom has
significant international telecommunications industry experience. We intend to
expand our international direct selling efforts principally in Canada, Australia
and Japan. We have already received regulatory approval to market our products
in each of these markets. We are currently developing products for additional
markets and expect to increase our sales force as we gain regulatory approvals
in these markets. In addition, we recently entered into an agreement with
CommVerge Solutions a value added reseller of communications solutions, under
which CommVerge Solutions will resell our products.
Key Account Management. We rely on key account management teams to drive
sales to those domestic and international customers who have the greatest
potential for large-scale network deployments of our products. Once we identify
a key account, we organize a key account management team to oversee and
coordinate all aspects of our relationship with the customer. Each key account
management team consists of a vice president who reports directly to our chief
executive officer, an account manager, technical support personnel, including
engineers, and a program manager. The account manager focuses on understanding
the customer's business needs and positioning our products as solutions for
those needs, and is responsible for coordinating order flow, revenue, new
market/product penetration and management of competitive risks. The account
manager ensures that technical support personnel are available as necessary to
address the customer's technical questions and to assist with product
evaluations and demonstrations and the integration of our products into the
customer's network. The technical support personnel are available to assist the
customer in the design, architecture, planning and deployment of the customer's
network. The program manager is responsible for executing contracts with the
customer, developing appropriate project schedules and working with
manufacturing to ensure that our products are shipped to the customer on time
and to the correct locations.
As the number of our key accounts increases, we intend to deploy key
account teams to customer locations. We believe that this will enable our key
account teams to build closer relationships with their key accounts and capture
additional sales of our products by positioning themselves to assist customers
in the design, planning and deployment of the customer's network. We believe
that this focused sales approach will enable us to maximize new market and new
product sales to service providers, generating higher sales with lower
corresponding costs.
Marketing Efforts. The principal goal of our marketing program is to inform
existing and potential customers about the capabilities and benefits of our
products and consecutive point networks. We are also committed to developing and
enhancing brand awareness of our company and products. Our marketing efforts
include advertising, public relations, participation in and organization of
industry trade shows and conferences, and our web site.
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CUSTOMER SERVICE AND SUPPORT
We are committed to providing our customers with high levels of service and
support. We support our products with documentation and training courses
tailored to our customers' various needs and operate a technical assistance
center located in Orlando, Florida. Our sales and network field engineering
services personnel work closely with customers, third party contractors and
others to coordinate network design, ensure successful installation and provide
continuous customer support. As of March 1, 2000, our customer service and
support team consisted of 10 full-time and 6 part-time employees, who provide
technical assistance and customer support 24 hours a day, 7 days a week.
Our network operations control center gives us and our customers the
capability to remotely monitor the in-network performance of our products and
diagnose and address problems that may arise. We assist our customers in
utilizing our network operations control software within their own internal
network operations control centers.
MANUFACTURING AND OPERATIONS
We currently purchase the majority of the components used in our products
from third parties, who manufacture the components based on our proprietary
designs and specifications. We assemble these components at our manufacturing
facility in Orlando, Florida and conduct extensive testing of the finished
products. Our proprietary test procedures require skilled technicians and
customized equipment.
The technology underlying our transceiver module was developed by Lockheed
Martin for use in advanced radar systems. We currently purchase transceiver
modules from Lockheed Martin on a cost-plus basis. We have decided to develop an
internal manufacturing capability for transceiver modules in order to meet
anticipated demand for our products. We have commenced construction of a new
manufacturing facility adjacent to our current facility, and we expect
production of transceiver modules to begin in the first half of 2000. However,
we will continue to rely on Lockheed Martin as an additional source of
transceiver modules even after our manufacturing operations achieve volume
production. In addition, Raytheon is the sole supplier of the high-power
amplifier used in our transceiver modules, and Polese is the sole supplier of
the housings used in our products. Additional single or limited source
components may be incorporated in our products in the future.
We are working with additional vendors to establish multiple sources for
each component. We seek to outsource manufacturing whenever it is cost effective
to do so and there is no risk of compromising our proprietary technologies and
processes.
RESEARCH AND DEVELOPMENT
We have organized the components used in our products into proprietary
modules that are designed to incorporate the flexibility we will need to develop
future generations of products without significant design changes. Our
proprietary software, which is common to all our products, can be used, with
minor modification, to extend our product lines. We are pursuing several
development projects, including:
- adapting our products to additional frequency bands;
- increasing data transmission speeds;
- continuing to improve our adaptive transmit power control technology;
- continuing to improve the ease of deployment of our products;
- minimizing production cost; and
- developing additional software functionality.
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As of March 1, 2000, our multi-disciplinary research and development team
consisted of 43 employees with an average fifteen years of experience, including
engineers and scientists whose specialties include microwave engineering,
millimeter-wave engineering, electrical engineering, mechanical engineering,
systems engineering, computer science and materials science. Upon completion of
our pending acquisition of IBM's broadband modem product line, we expect to add
additional engineers. We extend our research and development capabilities
through relationships with the third party contractors that manufacture
components used in our products.
COMPETITION
The market for broadband wireless equipment is rapidly evolving,
fragmented, highly competitive and subject to rapid technological change. A
number of large telecommunications equipment suppliers, such as Digital
Microwave Corporation, Harris Corporation and P-Com Inc., as well as a number of
smaller companies have developed or are developing products that compete with
ours. Some of our competitors are substantially larger than we are, have longer
operating histories and have greater financial, sales, marketing, distribution,
technical, manufacturing and other resources. Some also have greater name
recognition and a larger installed base of customers than we have. In addition,
many of our competitors have well-established relationships with our current and
potential customers and have extensive knowledge of our target markets. As a
result, our competitors may be able to respond more quickly to evolving industry
standards and changes in customer requirements, or to devote greater resources
to the development, promotion and sale of their products than we can. In
addition, current and potential competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with third parties to
increase their ability to gain market share rapidly. We also expect that
industry consolidation could increase competition. We expect to face increasing
competitive pressures from both current and future competitors. Increased
competition could result in reduced demand for our products, price reductions
and reduced gross margins for our products, any of which could seriously harm
our business.
The rapid technological developments within the broadband wireless
equipment industry result in frequent changes to our group of competitors. The
principal competitive factors in our market include:
- product availability;
- relationships with network service providers;
- product performance, features and inter-operability;
- product development and enhancement;
- price;
- ability to manufacture and distribute products; and
- technical support and customer service.
Although we believe that our products compete favorably on these factors, our
market is relatively new and is developing rapidly. We may not be able to
maintain our competitive position against current and potential competitors,
especially those with significantly greater financial, marketing, services,
technical and other resources.
Our broadband wireless solutions also compete with other high-speed
solutions such as digital subscriber lines, coaxial cable, fiber optic cable,
satellite and point-to-multipoint and point-to-point wireless technologies. Many
of these alternative technologies utilize existing installed infrastructure and
have achieved significantly greater market acceptance and penetration than
broadband wireless
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access technologies. We expect to face increasing competitive pressures from
both current and future technologies in the broadband access market.
INTELLECTUAL PROPERTY
Our success and ability to compete are substantially dependent upon our
internally developed technology and the proprietary technology we license from
Lockheed Martin. To protect our proprietary technology, we generally limit
access to our technology, treat portions of our technology as trade secrets and
obtain confidentiality or non-disclosure agreements from persons with access to
our technology. All of our employees have signed our standard confidentiality
agreement. This agreement prohibits the employees from disclosing our
confidential information, technology developments, and business practices and
from disclosing any confidential information entrusted to us by other parties.
All of our consultants who have access to our confidential information have
signed an agreement requiring them to keep confidential and not disclose our
non-public, confidential information.
To date, we have filed twenty U.S., three Patent Cooperation Treaty and two
foreign patent applications. We cannot assure you that any of our patent
applications will result in issued patents or that any patents, if issued, will
provide us with competitive advantages. We have also applied for registration of
several of our trademarks and our logo. We also claim common law protections for
other marks we use in our business. We have received a notice from another
company with a similar name demanding that we change our name. We cannot assure
you that we will be able to continue to use our name. See "Business -- Legal
Proceedings." In addition, we cannot assure you that any of our trademark
applications will be granted.
Our intellectual property rights, and our ability to enforce those rights,
may be inadequate to prevent others from using our technology or substantially
similar technology they may independently develop. The use of that technology by
others could eliminate any competitive advantage we have, cause us to lose sales
and otherwise harm our business. A significant portion of our proprietary
technology is know-how, and employees with know-how may depart before
transferring their know-how to other employees. Moreover, the laws of other
countries where we market our products may afford even less protection for our
intellectual property. If we resort to legal proceedings to enforce our
intellectual property rights, the proceedings could be burdensome and costly,
even if we were to prevail.
Our industry is characterized by the existence of a large number of patents
and frequent claims and related litigation regarding patent and other
intellectual property rights. In particular, leading companies in the broadband
access market have extensive patent portfolios with respect to
telecommunications technology. Disputes in this area are frequent and subject to
inherent uncertainties. We cannot assure you that we will not be involved in
such a dispute, nor can we assure you that such a dispute will not result in
litigation or that an adverse result or judgment will not adversely affect our
financial condition.
From time to time, other third parties, including leading companies, have
asserted against others and may assert against us exclusive patent, copyright,
trademark and other intellectual property rights to technologies and related
standards that are important to us. Third parties may assert claims or initiate
litigation against us or our manufacturers, suppliers or customers alleging
infringement of their proprietary rights with respect to our existing or future
products. Any of these claims, with or without merit, could be time-consuming,
result in costly litigation and diversion of technical and management personnel,
or require us to develop non-infringing technology or enter into royalty or
license agreements. These royalty or license agreements, if required, may not be
available on acceptable terms, if at all. If there is a successful claim of
infringement or if we fail to develop non-infringing technology or license the
proprietary rights on a timely basis, our business would be harmed.
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EMPLOYEES
As of March 1, 2000 we had a total of 182 employees in our operations, all
of whom were based in the United States, including 43 in research and
development, 32 in selling and marketing, 76 in manufacturing and operations and
31 in finance and administration. We are not party to any collective bargaining
agreement. We believe that our relations with our employees are good.
FACILITIES
Our corporate headquarters are located in Orlando, Florida and comprise
approximately 37,000 square feet. The lease for our headquarters expires in
February 2007. We currently lease approximately 23,000 square feet of
manufacturing space located in Orlando, Florida. The lease for this facility
expires in March 2000. We plan to move our manufacturing and engineering
functions into a new approximately 75,000 square-foot leased facility, also in
Orlando, Florida, in the first quarter of 2000. The new lease expires in
February 2007. Upon completion of our acquisition of IBM's broadband modem
product line we will sublease approximately 17,000 square feet of engineering
space located near San Diego. We believe that our existing facilities are
adequate to meet our current requirements and that suitable additional space
will be available as needed.
LEGAL PROCEEDINGS
We have received notice from Triton International, Inc. demanding that we
change our name because the similarity in the names of our respective companies
will likely cause confusion in the telecommunications marketplace. We have
responded to the notice by indicating that given the differences between their
and our product offerings and customer base, we do not perceive that the name
similarity would present confusion. In August 1999, we brought a cause of action
in the United States District Court for the Middle District of Florida, Orlando
Division, establishing jurisdiction in Florida and seeking a declaratory
judgment that our use of our name does not infringe the trademark rights of
Triton International, Inc. In September 1999, Triton International, Inc.
responded by filing a counterclaim alleging that our use of our name and related
service marks constitute service mark infringement, false designation of origin,
unfair competition and deceptive practices.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information with respect to our executive
officers and directors as of March 1, 2000.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Howard "Skip" Speaks................. 52 President, Chief Executive Officer and Director
Kenneth R. Vines..................... 55 Senior Vice President and Chief Financial Officer
Michael A. Clark..................... 39 Vice President of Engineering
Douglas R.B. Campbell................ 43 Vice President of Sales and Marketing
Philip C. Gulliford 41 Vice President of Advanced Technology
Robert P. Goodman.................... 39 Chairman of the Board
Brian J. Andrew...................... 42 Director
Joseph D. Antinucci.................. 59 Director
Bandel L. Carano..................... 38 Director
James F. Gibbons..................... 68 Director
Arjun Gupta.......................... 39 Director
James Wei............................ 32 Director
</TABLE>
Howard "Skip" Speaks has served as our President and Chief Executive
Officer and as a member of our board of directors since September 1999. Prior to
joining us he held various positions at Ericsson, a telecommunications company,
from August 1986 through September 1999, most recently as Executive Vice
President and General Manager of the network operators group. Mr. Speaks
received his B.S. degree in civil engineering from the West Virginia Institute
of Technology.
Kenneth R. Vines has served as our Senior Vice President and Chief
Financial Officer since October 1998. Prior to joining us he was Vice President
of Finance for DSC Communications, a telecommunications equipment and software
development company, from July 1986 through September 1998. Mr. Vines received
his B.B.A. degree from the University of Texas at Arlington and his M.B.A.
degree from North Texas State University.
Michael A. Clark, one of our founders, has served as our Vice President of
Engineering since April 1997. Prior to joining us he was a Hardware Engineering
Manager at Texas Instruments, a semiconductor company, from June 1983 through
March 1997. Mr. Clark received his B.S. degree in electrical engineering from
the Lawrence Institute of Technology and his M.S. degree in electrical
engineering from the University of Texas at Arlington.
Douglas R.B. Campbell has served as our Vice President of Sales and
Marketing since March 1999. Prior to joining us he was employed at Nortel
Networks, a provider of communications products and services, as Vice President,
Account Management (Asia) from April 1997 through March 1999 and as Assistant
Vice President, Broadband Networks Business from December 1994 through April
1997. Mr. Campbell received his Bachelor of Engineering Physics degree from the
Royal Military College of Canada and his M.B.A. degree from the University of
Lausanne.
Philip C. Gulliford, one of our founders, has served as Vice President of
Advanced Technology since April 1997. Prior to joining us he was Director of
Engineering at Phoenix Wireless Group, a wireless local loop company, from April
1993 through February 1997. Mr. Gulliford received his B.S. degree in physics
and electronics from Brunel University in London.
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<PAGE> 47
Robert P. Goodman is Chairman of the board of directors and has served as a
director since January 1998. He is a general partner at Bessemer Venture
Partners, a venture capital firm. Prior to joining Bessemer he was a managing
member of Cove Road Associates, a venture capital firm, from March 1998 through
December 1999. Prior to that, he was Chairman and Chief Executive Officer of
Celcore, a developer and supplier of cellular telephone switching and
infrastructure equipment, from June 1993 through December 1997. Mr. Goodman
received his B.A. degree in Latin American studies from Brown University and his
M.B.A. degree from Columbia University.
Brian J. Andrew, one of our founders, has served on our board of directors
since April 1997 and currently serves as a consultant to us. He has been
President and Chief Executive Officer of CAVU, a broadband wireless service
provider, since December 1999. He served as our President and Chief Executive
Officer from March 1997 to September 1999. Prior to that, Mr. Andrew was Vice
President of Engineering at Phoenix Wireless Group, a wireless local loop
company, from August 1995 through January 1997. Mr. Andrew received his B.S.
degree in electronics and electrical engineering from Auckland University in New
Zealand.
Joseph D. Antinucci has served on our board of directors since November
1998. He has been President of Lockheed Martin Naval Electronics & Surveillance
Systems, a defense contractor, since December 1998. Prior to that, Mr. Antinucci
was President of Lockheed Martin Electronics & Missiles, a defense contractor,
from May 1993 through December 1998. Mr. Antinucci received his B.S. degree in
electrical engineering from the University of Rhode Island, his M.S. degree in
aeronautical engineering from the Massachusetts Institute of Technology and
completed the Advanced Management Program at the Harvard Business School.
Bandel L. Carano has served on our board of directors since November 1997.
He has been a general partner of Oak Investment Partners, a venture capital
firm, since 1985. Mr. Carano serves as a member of the investment advisory board
of the Stanford University Engineering Venture Fund. Mr. Carano received his
B.S. and M.S. degrees from Stanford University. Mr. Carano also serves as a
director of Advanced Radio Telecom, Netopia, Polycom, Pulsepoint Communications
and WFI.
James F. Gibbons, Ph.D. has served on our board of directors since November
1997. He has been a professor of electrical engineering since 1957 and Special
Counsel to the President for Industry Relations at Stanford University since
July 1996. Dr. Gibbons was Dean of the School of Engineering at Stanford
University from September 1984 to June 1996. Dr. Gibbons received his B.S.
degree in electrical engineering from Northwestern University and his M.S. and
Ph.D. degrees in electrical engineering from Stanford University. He currently
serves as a director of Cisco Systems, Lockheed Martin and El Paso Energy.
Arjun Gupta has served on our board of directors since May 1998. He has
been the managing partner of TeleSoft Partners, a venture capital firm, since
January 1997. From August 1994 to December 1996 Mr. Gupta was a Vice President
of The Chatterjee Group, an investment advisory company. Mr. Gupta received his
B.A. degree in economics from St. Stephen's College, Delhi University, his B.S.
and M.S. degrees in computer science from Washington State University and an
M.B.A. degree from Stanford University. Mr. Gupta currently serves as a director
of Omnipoint.
James Wei has served on our board of directors since November 1997. He has
been a general partner at Worldview Technology Partners, a venture capital firm,
since April 1996. Prior to that, Mr. Wei was a Fund Manager at JAFCO Co., Ltd.,
a venture capital firm, from October 1991 through April 1996. Mr. Wei received
his B.S. degree in systems design engineering from the University of Waterloo in
Ontario, Canada.
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BOARD OF DIRECTORS
Our board of directors currently consists of eight members. Each director
holds office until his or her term expires or until his or her successor is duly
elected and qualified. Upon completion of this offering, our amended and
restated certificate of incorporation and amended and restated bylaws will
provide for a classified board of directors. In accordance with the terms of our
amended and restated certificate, our board of directors will be divided into
three classes whose terms will expire at different times. The three classes will
be comprised of the following directors:
- Class I consists of directors Andrew, Antinucci and Speaks, who will
serve until the annual meeting of stockholders to be held in 2001;
- Class II consists of directors Gibbons, Gupta and Wei, who will serve
until the annual meeting of stockholders to be held in 2002; and
- Class III consists of directors Carano and Goodman, who will serve until
the annual meeting of stockholders to be held in 2003.
At each annual meeting of stockholders beginning with the 2001 annual
meeting, the successors to directors whose terms will then expire will be
elected to serve from the time of election and qualification until the third
annual meeting following election and until their successors have been duly
elected and qualified. Any additional directorships resulting from an increase
in the number of directors will be distributed among the three classes so that,
as nearly as possible, each class will consist of an equal number of directors.
COMMITTEES
Our board of directors has an executive committee, an audit committee and a
compensation committee. The executive committee consists of directors Carano,
Goodman and Speaks. The executive committee may act on behalf of the board of
directors between meetings. The audit committee consists of directors Antinucci,
Gupta and Wei. The audit committee reviews our internal accounting procedures,
consults with and reviews the services provided by our independent accountants
and makes recommendations to the board of directors regarding the selection of
independent accountants. The compensation committee consists of directors
Carano, Goodman and Gupta. The compensation committee reviews and recommends to
the board of directors the salaries, incentive compensation and benefits of our
officers and employees and administers our stock plans and employee benefit
plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to establishing the compensation committee, the executive committee
of our board of directors performed the functions now delegated to the
compensation committee. No member of our compensation committee has served as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of our board of directors
or compensation committee.
DIRECTOR COMPENSATION
In September 1999, we granted options to purchase 100,000 shares of common
stock to Mr. Goodman in consideration of his services as a member of our board
of directors. In October 1999, our stockholders approved grants of options to
purchase 20,000 shares of common stock vesting annually in equal installments
over four years to each of our non-employee directors, other than Mr. Goodman.
In October 1999, the stockholders also approved guidelines for future grants of
stock
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<PAGE> 49
options under our 1997 Stock Plan to non-employee directors. These guidelines
provide that non-employee directors will receive the following option grants:
- 20,000 shares vesting annually in equal installments over four years
which are to be granted as of the effective date of this offering; and
- 10,000 shares vesting annually in equal installments over four years
which are to be granted on the date of each annual meeting of
stockholders meeting following the effective date of this offering.
EXECUTIVE OFFICERS
Our executive officers are appointed by our board of directors and serve
until their successors are elected or appointed.
COMPENSATION
The following table sets forth all compensation accrued during the year
ended December 31, 1999 to our President and Chief Executive Officer, our former
President and Chief Executive Officer, and each of our four other most highly
compensated officers whose compensation exceeded $100,000 for the period. In
accordance with the rules of the Securities and Exchange Commission, the
compensation described in this table does not include perquisites and other
personal benefits received by the executive officers named in the table below
which do not exceed the lesser of $50,000 or 10% of the total salary and bonus
reported for these officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION($) SECURITIES
------------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS SALARY BONUS OTHER OPTIONS(#) COMPENSATION
---------------------------- -------- -------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Howard "Skip" Speaks(1).......... $ 92,273 $ 60,000 $ 274,050 1,250,000 --
President and Chief Executive
Officer
Brian J. Andrew(2)............... 150,517 -- -- 100,000 --
Former President and Chief
Executive Officer
Kenneth R. Vines................. 150,000 6,000 72,951(3) 100,000 --
Senior Vice President and Chief
Financial Officer
Douglas R.B. Campbell(4)......... 106,250 5,000 39,855(3) 300,000 --
Vice President of Sales and
Marketing
Michael A. Clark(5).............. 140,625 5,000 -- 100,000 --
Vice President of Engineering
Philip C. Gulliford.............. 130,000 5,000 -- -- --
Vice President of Advanced
Technology
</TABLE>
- -------------------------
(1) Mr. Speaks joined us in September 1999. His annual salary is $290,000. Other
annual compensation listed includes a signing bonus Mr. Speaks earned in
1999 in the amount of
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<PAGE> 50
$250,000, reimbursement for relocation expenses and temporary housing
expenses for which we reimbursed Mr. Speaks in 1999.
(2) Mr. Andrew served as our President and Chief Executive Officer during 1999.
Presently, Mr. Andrew is a consultant to us and continues to serve on our
board of directors.
(3) Represents reimbursement for relocation expenses.
(4) Mr. Campbell joined us in March 1999. His annual salary in 1999 was
$150,000.
(5) In June 1999, Mr. Clark's annual salary increased to $150,000.
OPTION GRANTS IN 1999
The following table sets forth information concerning grants of stock
options to each of the executive officers named in the table above during 1999.
All options granted to these executive officers in 1999 were granted under our
1997 Stock Plan. Except as otherwise noted, one-quarter of the shares subject to
each option vest and become exercisable on the first anniversary of the vesting
commencement date, and an additional one-forty-eighth of the shares subject to
each option vest each month thereafter. In addition, options granted to these
executive officers may be exercised prior to vesting if the individual
exercising options enters into a restricted stock purchase agreement providing
that the shares acquired may be repurchased by us in the event that the
individual ceases to be employed by us. We will pay a per share repurchase price
equal to the exercise price per share paid by the individual. Shares shall be
released from our repurchase option at the same times and in the same amounts as
shares would have become vested and exercisable under the provisions of the
individual's option agreement with us. The percent of the total options granted
figures set forth below are based on an aggregate of 2,783,149 options granted
to employees during 1999. All options were granted at a fair market value as
determined by our board of directors on the date of grant.
Potential realizable value represents hypothetical gains that could be
achieved for the options if exercised at the end of the option term assuming
that the initial public offering price of our common stock appreciates at a rate
of 5% and 10% over the option term. The assumed 5% and 10% rates of stock price
appreciation are provided in accordance with rules of the Securities and
Exchange Commission and do not represent our estimate or projection of our
future common stock price.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM($)
OPTIONS EMPLOYEES PRICE EXPIRATION ---------------------
NAME GRANTED DURING PERIOD(%) PER SHARE DATE 5% 10%
---- ---------- ---------------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Howard "Skip" Speaks.... 1,000,000(1) 35.9% $2.50 8/15/09
250,000(1)(2) 9.0 2.50 8/15/09
Brian J. Andrew......... 100,000(3) 3.6 2.50 7/1/09
Kenneth R. Vines........ 100,000(1) 3.6 5.00 12/17/09
Douglas R.B. Campbell... 250,000(1) 9.0 0.50 3/16/09
50,000(1) 1.8 1.00 4/29/09
Michael A. Clark........ 100,000(1) 3.6 2.50 7/1/09
Philip C. Gulliford..... -- -- -- -- -- --
</TABLE>
- -------------------------
(1) These options are subject to acceleration provisions more fully described in
the section "Employment Agreements and Change of Control Provisions" below.
(2) These options shall vest in full on September 7, 2005 but are subject to
accelerated vesting in the event that specified corporate financial targets
are achieved.
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<PAGE> 51
(3) These options vest fully on August 1, 2001 and are subject to acceleration
provisions more fully described in the section "Employment Agreements and
Change of Control Provisions" below.
AGGREGATED OPTION EXERCISES IN 1999 AND VALUES AT DECEMBER 31, 1999
The following table sets forth information concerning stock options held by
the executive officers named in the summary compensation table at December 31,
1999. All stock options have been reported as exercisable because our 1997 Stock
Plan allows options to be exercised prior to vesting if the individual
exercising options enters into a restricted stock purchase agreement. The value
realized upon exercise and the value of unexercised in-the-money options is
based on an assumed initial offering price of $ per share minus the actual
exercise prices. All options were granted under our 1997 Stock Plan. Except as
otherwise noted, these options vest over four years and otherwise generally
conform to the terms of our 1997 Stock Plan. The shares acquired by Mr. Campbell
remain subject to a right of repurchase in favor of us which is more fully
described in the section "Option Grants in 1999" above.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1999
AT DECEMBER 31, 1999(#) ($)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
ON EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Howard "Skip" Speaks... -- $ 1,250,000 -- $ $ --
Brian J. Andrew........ -- 100,000 -- --
Kenneth R. Vines....... -- 100,000 -- --
Douglas R.B.
Campbell............. 300,000 -- -- --
Michael A. Clark....... -- 225,000 -- --
Philip C. Gulliford.... -- -- -- --
</TABLE>
SEVERANCE AGREEMENTS AND CHANGE OF CONTROL PROVISIONS
In August 1999, we issued an employment offer letter to Mr. Speaks that
provides that if he is terminated without cause or involuntarily terminated by
us he will receive twelve months salary and benefits and six months of
accelerated vesting of his stock options. These severance benefits will cease if
Mr. Speaks is employed by another company within twelve months of his
termination. Additionally, if Mr. Speaks is terminated without cause or
involuntarily terminated by us, dies or becomes disabled within six months of
the commencement of his employment, a total of 100,000 options shall become
immediately vested.
Also, we have entered into a stock option agreement under our 1997 Stock
Plan with Mr. Speaks that includes a provision providing that all options and
shares of restricted stock granted thereunder will accelerate and become fully
vested in the event of our merger with or into another corporation or a sale of
substantially all of our assets, a change of control. Mr. Speaks has agreed that
for one year after a change of control he will not directly or indirectly engage
in the financing, operation, management or control of any business that competes
with us.
In September 1999, we entered into an agreement with Mr. Andrew that
provided that he would be an employee of ours through the earlier to occur of
May 1, 2000 or the effective date of our initial public offering and that
thereafter he would be retained by us as a consultant. By agreement with us in
January 2000, Mr. Andrew resigned from his position as an employee to become
Chief Executive Officer of CAVU. Mr. Andrew is currently a consultant to us and
serves on our board of directors. If we terminate Mr. Andrew's services as a
consultant, all options and shares of restricted stock held by him will be
immediately vested and exercisable. In addition, if there is a change of control
within six
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months of Mr. Andrew becoming a consultant to us, he will continue to receive a
consulting fee for the balance of this six month period.
In September 1998, we issued an employment offer letter to Mr. Vines that
provides that in the event that he is terminated without cause he will receive
six months salary and 25% of his annual bonus. Mr. Vines' options and shares of
restricted stock will continue to vest during this six month period. These
severance benefits will cease if Mr. Vines is employed by another company within
six months of his termination. Also, Mr. Vines would receive six months salary,
benefits and bonus in the event that he is terminated without cause within one
year of a change in control. We have entered into stock option agreements under
our 1997 Stock Plan with Mr. Vines that include a provision providing that the
options and shares of restricted stock granted thereunder, excluding 100,000
shares subject to an option granted in 1999, will accelerate and become fully
vested upon a change in control.
We have entered into stock option agreements under our 1997 Stock Plan with
each of Mr. Vines, Mr. Campbell and Mr. Clark that include a provision providing
that options and shares of restricted stock granted thereunder will accelerate
and become fully vested upon a change in control, unless the successor
corporation assumes the options or restricted stock or substitutes equivalent
securities for them. Additionally, these agreements provide that if an optionee
is terminated within twelve months of a change of control all assumed or
substituted options and shares of restricted stock will accelerate and become
fully vested. These provisions apply only to the options granted to Mr. Vines in
1999.
In July 1999, we entered into an amendment to the original employment offer
letters of Mr. Campbell and Mr. Clark. These amendments provide that in the
event of their termination without cause they will receive six months salary and
25% of their annual bonus. The options and shares of restricted stock held by
Mr. Campbell and Mr. Clark will continue to vest during this six month period.
These severance benefits will cease if they are employed by another company
within six months of their termination. Also, Mr. Campbell and Mr. Clark would
receive six months salary, benefits and bonus in the event that they are
terminated without cause within one year of a change in control.
LIMITATIONS ON DIRECTORS' AND OFFICERS' LIABILITY AND INDEMNIFICATION
Our amended and restated certificate of incorporation to be filed upon
completion of this offering limits the liability of our directors to the maximum
extent permitted by Delaware law. Delaware law provides that directors of a
corporation will not be personally liable for monetary damages for breach of
their fiduciary duties as directors, except liability associated with any of the
following:
- any breach of their duty of loyalty to the corporation or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which the director derived an improper personal
benefit.
The limitation of our director's liability does not apply to liabilities
arising under the federal securities laws and does not affect the availability
of equitable remedies such as injunctive relief or rescission.
Our amended and restated certificate of incorporation and amended and
restated bylaws also provide that we shall indemnify our directors and executive
officers and may indemnify our other officers, employees and agents to the
fullest extent permitted by law. We believe that indemnification under our
amended and restated bylaws covers at least negligence and gross negligence on
the part of
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indemnified parties. Our amended and restated bylaws also permit us to secure
insurance on behalf of any officer, director, employee or other agent for any
liability arising out of his or her actions in such capacity, regardless of
whether our amended and restated bylaws would permit indemnification.
We intend to enter into indemnification agreements with each of our
officers and directors containing provisions that require us to, among other
things, indemnify such officers and directors against liabilities that may arise
by reason of their status or service as directors or officers (other than
liabilities arising from willful misconduct of a culpable nature), to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, and to cover our directors and officers under any of
our liability insurance policies applicable to our directors and officers. We
believe that these provisions and agreements are necessary to attract and retain
qualified persons as directors and executive officers.
STOCK PLANS
1997 STOCK PLAN
Our 1997 Stock Plan was approved by our board of directors and stockholders
in 1997 and was subsequently amended in October 1997, April 1998, September 1998
and February 2000. As of March 1, 2000, we had authorized a total of 10,540,000
shares of our common stock for issuance under the plan. The 1997 Stock Plan
provides for the granting to our employees of incentive stock options within the
meaning of Section 422 of the United States tax code, and for the granting to
employees, non-employee directors and consultants of non-statutory stock options
and stock purchase rights. Unless terminated sooner, the 1997 Stock Plan will
terminate automatically in 2007.
Our 1997 Stock Plan is administered by the compensation committee of our
board of directors. Our board of directors determines the terms of the options
or stock purchase rights granted, including the exercise price, the number of
shares subject to each option or stock purchase right, the vesting and the form
of consideration payable upon such exercise. In addition, the board of directors
has the authority to amend, suspend or terminate the plan, provided that no such
action may affect any share of common stock previously issued and sold or any
option previously granted and then outstanding under the plan. The board of
directors has the exclusive authority to interpret and apply the provisions of
the 1997 Stock Plan.
Options and stock purchase rights granted under our 1997 Stock Plan are not
generally transferable by the optionee, and each option and stock purchase right
is exercisable during the lifetime of the optionee only by the optionee. Options
granted under the 1997 Stock Plan must generally be exercised within three
months of the end of the optionee's status as our employee or consultant, or
within twelve months after his or her termination by death or disability, but in
no event later than the expiration of the option's ten year term. In the case of
stock purchase rights, unless the board of directors determines otherwise, the
agreement evidencing the grant shall provide that we have a repurchase option
exercisable upon the voluntary or involuntary termination of his or her
employment for any reason (including death or disability). In this event, the
purchase price per share will be equal to the original price paid per share and
may be paid by cancellation of his or her outstanding indebtedness to us, if
any. Our repurchase option shall lapse at a rate determined by the board of
directors. The exercise price of any incentive stock options granted under the
1997 Stock Plan and any non-statutory stock options intended to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
United States tax code, must be at least equal to the fair market value of our
common stock on the date of grant. With respect to any participant who owns
stock possessing more than 10% of the voting power of all classes of our
outstanding capital stock, the exercise price of any incentive stock option
granted must equal at least 110% of the fair market value on the grant date and
the term of such incentive stock option must not exceed five years. The term of
all other options granted under the 1997 Stock Plan may not exceed ten years.
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Our 1997 Stock Plan provides that in the event of our merger with or into
another corporation or a sale of substantially all of our assets, each option or
right will accelerate and become vested unless the successor corporation assumes
or substitutes an equivalent option in its place. If the outstanding options or
rights are not assumed or substituted, the option or stock purchase right will
vest in full. Following the assumption or substitution of the options or stock
purchase rights, our 1997 Stock Plan provides for full acceleration of vesting
in the event that the successor corporation in a "Change of Control Merger,"
defined below, terminates a holder of an option or stock purchase right as a
result of an "Involuntary Termination," defined below, in the twelve month
period following a Change of Control Merger.
A Change in Control Merger is defined as our merger with or into another
corporation or sale of substantially all of our assets in which our shareholders
immediately prior to such transaction hold less than 50% of the outstanding
equity securities of the successor corporation (or a parent or subsidiary of the
successor corporation) subsequent to the completion of the transaction. An
Involuntary Termination is defined as a termination not effected for disability
or for Cause. Cause is defined as any act of personal dishonesty taken by the
holder in connection with his or her responsibilities as a service provider and
intended to result in substantial personal enrichment to the holder, the
holder's conviction of a felony, a willful act by the holder which constitutes
gross misconduct and which is injurious to the successor corporation, or
continued violations by the holder of the holder's obligations to the successor
corporation which are demonstrably willful and deliberate on the holder's part,
following delivery to the holder of a written demand for performance from the
successor corporation which describes the basis for the successor corporation's
belief that the holder has not substantially performed his duties.
2000 EMPLOYEE STOCK PURCHASE PLAN
Our 2000 Employee Stock Purchase Plan was adopted by our board of directors
in February 2000. A total of 500,000 shares of common stock have been reserved
for issuance under our 2000 Employee Stock Purchase Plan.
Our 2000 Employee Stock Purchase Plan, which is intended to qualify under
Section 423 of the United States tax code, contains consecutive six month
offering and purchase periods. The offering periods generally start on the first
trading day on or after May 1, and November 1, of each year, except for the
first offering period which commences on the first trading day on or after the
effective date of this offering and ends on the last trading day on or before
November 30, 2000.
Employees are eligible to participate if they are customarily employed by
us or any participating subsidiary for at least 20 hours per week and more than
five months in any calendar year. However, any employee who immediately after
grant owns stock possessing 5% or more of the total combined voting power or
value of all classes of our capital stock may not be granted an option to
purchase stock under this plan. Employees' participation in this plan and any
other stock purchase plans may not exceed an aggregate $25,000 per calendar
year. The 2000 Employee Stock Purchase Plan permits participants to purchase
common stock through payroll deductions of up to 10% of the participant's
"compensation." Compensation is defined as the participant's base straight time
gross earnings and commissions but is exclusive of payments for overtime, shift
premium payments, incentive compensation, incentive payments, bonuses and other
compensation. The maximum number of shares a participant may purchase during a
single purchase period is 1,250 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each purchase period. The price of stock
purchased under the 2000 Employee Stock Purchase Plan is generally 85% of the
lower of the fair market value of the common stock (i) at the beginning of the
offering period or (ii) at the end of the offering period. Participants may
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end their participation at any time during an offering period, and they will be
paid their payroll deductions to date. Participation ends automatically upon
termination of employment with us.
Rights granted under the 2000 Employee Stock Purchase Plan are not
transferable by a participant other than by will, the laws of descent and
distribution, or as otherwise provided under the plan. The 2000 Employee Stock
Purchase Plan provides that, in the event of our merger with or into another
corporation or a sale of substantially all our assets, each outstanding option
may be assumed or substituted for by the successor corporation. If the successor
corporation refuses to assume or substitute for the outstanding options, the
offering period then in progress will be shortened and a new exercise date will
be set. The 2000 Employee Stock Purchase Plan will terminate automatically in
2010, unless terminated earlier. The board of directors has the authority to
amend or terminate the purchase plan, except that no such action may adversely
affect any outstanding rights to purchase stock under the purchase plan. The
board of directors has the exclusive authority to interpret and apply the
provisions of the purchase plan.
401(K) PLAN
In October 1998, we adopted the Triton Network Systems 401(k) Savings Plan.
The Triton Network Systems 401(k) Savings Plan is intended to qualify under
Section 401(k) of the United States tax code, so that contributions to the
Triton Network Systems 401(k) Savings Plan by employees or by us and the
investment earnings thereon are not taxable to employees until withdrawn. If the
Triton Network Systems 401(k) Savings Plan qualifies under Section 401(k) of the
United States tax code, our contributions will be deductible by us when made.
Our employees may elect to reduce their current compensation by up to the
statutorily prescribed annual limit of $10,500 in 2000 and to have those funds
contributed to the Triton Network Systems 401(k) Savings Plan. The Triton
Network Systems 401(k) Savings Plan permits us, but does not require us, to make
additional matching contributions on behalf of all participants. To date, we
have not made any contributions to the Triton Network Systems 401(k) Savings
Plan.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PREFERRED STOCK
In November 1997, we sold an aggregate 14,400,000 shares of our series A
preferred stock at a price of $1.00 per share. In May 1998, July 1998 and
January 1999 we sold an aggregate 13,107,938 shares of our series B preferred
stock at a price of $2.50 per share. In October 1999 and November 1999, we sold
an aggregate 10,105,000 shares of our series C preferred stock at a price of
$5.00 per share. The following officers, directors and 5% stockholders purchased
shares in these financings:
<TABLE>
<CAPTION>
SHARES OF SHARES OF SHARES OF
PURCHASER SERIES A STOCK SERIES B STOCK SERIES C STOCK
--------- -------------- -------------- --------------
<S> <C> <C> <C>
OFFICERS AND DIRECTORS
Robert P. Goodman............................. 100,000 160,000 --
Kenneth R. Vines.............................. -- 10,000 3,000
FIVE PERCENT STOCKHOLDERS
Entities affiliated with Oak Investment
Partners.................................... 5,000,000 1,860,570 1,000,000
Entities affiliated with Worldview Technology
Partners.................................... 3,000,000 1,116,342 900,000
Entities affiliated with Bessemer Venture
Partners.................................... 2,355,000 940,000 600,000
Lockheed Martin Corporation................... -- 2,400,000 --
Entities affiliated with TeleSoft Partners.... -- 1,770,470 560,957
Entities affiliated with MeriTech Capital
Partners.................................... -- -- 3,893,925
</TABLE>
OTHER MATERIAL TRANSACTIONS
In June 1997, we entered into a license agreement with Lockheed Martin
pursuant to which we received an exclusive, perpetual license for the use of
Lockheed Martin's monolithic millimeterwave integrated circuit, or MMIC,
technology in our products. In exchange, we agreed to make royalty payments to
Lockheed Martin and to issue 50,000 shares of our common stock to the Central
Florida Innovation Corporation, a business development entity that helped
facilitate our relationship with Lockheed Martin. Our agreement with Lockheed
Martin may be terminated by either party upon a material breach or following a
party's filing of bankruptcy, its making of an assignment for the benefit of
creditors or its seeking legal protection from creditors' claims. In July 1998,
Lockheed Martin relinquished its rights to royalty payments under this agreement
in exchange for 1,600,000 shares of our common stock.
We have entered into agreements with Lockheed Martin relating to the design
and development of the MMIC technology and transceiver module in our products.
Under these agreements we will pay Lockheed Martin on a cost reimbursable basis,
including its fee, for production services performed thereunder. Additionally,
we will pay Lockheed Martin for specified costs related to the continued
development of our products. In 1999, the value of these payments to Lockheed
Martin was approximately $5,500,000. Lockheed Martin is a holder of more than 5%
of our capital stock. James Gibbons, one of our directors is a director of
Lockheed Martin. Joseph Antinucci, one of our directors, is an officer of
Lockheed Martin Naval Electronics & Surveillance Systems, a division of Lockheed
Martin.
In December 1999, we entered into a supply agreement with Advanced Radio
Telecom under which Advanced Radio Telecom is obligated to purchase and we are
obligated to supply our products under the terms and conditions described in the
agreement. Entities associated with Oak Investment Partners, of which Bandel
Carano, one of our directors, is a general partner, Worldview Technology
Partners, of which James Wei, one of our directors, is a general partner, and
other stockholders of
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<PAGE> 57
ours have invested in Advanced Radio Telecom. Mr. Carano, one of our directors,
is a director of Advanced Radio Telecom.
In 1999, we paid an aggregate of approximately $70,000 to Brian Andrew and
Mr. Andrew's wife pursuant to consulting agreements with us. Mr. Andrew is one
of our directors.
In February 2000, we entered into a value added reseller agreement with
CommVerge Solutions. Entities associated with Oak Investment Partners, of which
Bandel Carano, one of our directors, is a general partner and Worldview
Technology Partners, of which James Wei, one of our directors, is a general
partner and other stockholders of ours have invested in CommVerge Solutions. Mr.
Wei, one of our directors, is a director of CommVerge Solutions.
INVESTOR RIGHTS AGREEMENT
We have entered into an agreement with our preferred stockholders pursuant
to which these and other preferred stockholders will have registration rights
with respect to their shares of common stock following this offering. For a
description of these registration rights, see "Description of Capital Stock."
Upon the completion of this offering, all shares of our outstanding preferred
stock will be automatically converted into an equal number of shares of common
stock.
INDEBTEDNESS OF MANAGEMENT
In October 1999, we made an interest free loan in the principal amount of
$300,000 to Mr. Speaks, our President and Chief Executive Officer, which is
secured by Mr. Speaks' options and specified real estate. The loan is payable on
September 30, 2004 or within one year of the termination of his employment with
us, and is to be payable prior to this date on a dollar for dollar basis out of
any proceeds received by Mr. Speaks as a result of sale of shares of common
stock by him.
In November 1997, we made a loan in the principal amount of $89,984 to Mr.
Andrew, one of our directors, which accrues interest at a rate equal to 5.81%
per annum compounded annually. Each loan is secured by shares of our restricted
stock purchased by Mr. Andrew using the proceeds of the loan. The loan is
payable on December 31, 2000, or, at our option, within thirty days of the
termination of his employment with us. Upon Mr. Andrew's termination of his
employment, we did not exercise this option.
In June 1999, we made two separate loans in the principal amounts of
$62,500 and $25,000, respectively, to Mr. Campbell, one of our executive
officers, each of which accrues interest at a rate equal to 5.1% per annum
compounded annually. Each loan is secured by shares of our restricted stock
purchased by Mr. Campbell using the proceeds of the loans. The loans are payable
on June 30, 2004, or, at our option, within thirty days of the termination of
his employment with us.
In January 1999, we made a loan in the principal amount of $18,750 to Mr.
Goodman, the Chairman of our board of directors. In December 1999, we made a
second loan to Mr. Goodman in the principal amount of $150,000. Both loans
accrue interest at a rate equal to 5.1% per annum compounded annually and each
of which is secured by shares of our restricted stock purchased by Mr. Goodman
using the proceeds of the loans. The loan made in January 1999 is payable on
January 31, 2004, or, at our option, within thirty days of his ceasing to be
Chairman of our board of directors. The loan made in December 1999 is payable in
December 31, 2004, or, at our option, within thirty days of his ceasing to
provide services to us.
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<PAGE> 58
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of March 1, 2000, and as adjusted to
reflect the sale of common stock offered hereby, by the following:
- each stockholder known by us to own beneficially more than 5% of our
common stock;
- each of our executive officers named in the compensation table above;
- each of our directors; and
- all directors and executive officers as a group.
As of March 1, 2000, there would have been 51,246,280 shares of our common
stock outstanding, assuming that all outstanding preferred stock had been
converted into common stock. Except as otherwise indicated, we believe that the
beneficial owners of the common stock listed below, on the information furnished
by such owners, have sole voting power and investment power with respect to such
shares. 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 percent ownership of that person, shares
of common stock subject to options or warrants held by that person that are
currently exercisable or that will become exercisable within 60 days after March
1, 2000 are deemed outstanding, while such shares are not deemed outstanding for
purposes of computing percent ownership of any other person. 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. The address for
those individuals for which an address is not otherwise indicated is c/o Triton
Network Systems, Inc., 8529 South Park Circle, Orlando, Florida 32819.
<TABLE>
<CAPTION>
PERCENT OF SHARES
OUTSTANDING
SHARES BENEFICIALLY --------------------
OWNED PRIOR PRIOR TO AFTER
NAME OR GROUP OF BENEFICIAL OWNERS TO OFFERING OFFERING OFFERING
---------------------------------- ------------------- -------- --------
<S> <C> <C> <C>
Bandel L. Carano(1)............................... 7,880,570 15.4%
Entities affiliated with Oak Investment
Partners(2)..................................... 7,860,570 15.3
525 University Avenue, Suite 1300
Palo Alto, CA 94301
James Wei(3)...................................... 5,036,342 9.8
Entities affiliated with Worldview Technology
Partners(4)..................................... 5,016,342 9.8
435 Tasso Street, Suite 120
Palo Alto, CA 94301
James F. Gibbons(5)............................... 4,220,000 8.2
Lockheed Martin Corporation....................... 4,000,000 7.8
5600 Sand Lake Road
Orlando, FL 32819
Entities affiliated with MeriTech Capital
Partners(6)..................................... 3,893,925 7.6
90 Middlefield Road, Suite 201
Menlo Park, CA 94025
Entities affiliated with Bessemer Venture
Partners(7)..................................... 3,859,313 7.5
83 Walnut Street
Wellesley Hills, MA 02481
Arjun K. Gupta(8)................................. 3,151,427 6.1
</TABLE>
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<PAGE> 59
<TABLE>
<CAPTION>
PERCENT OF SHARES
OUTSTANDING
SHARES BENEFICIALLY --------------------
OWNED PRIOR PRIOR TO AFTER
NAME OR GROUP OF BENEFICIAL OWNERS TO OFFERING OFFERING OFFERING
---------------------------------- ------------------- -------- --------
<S> <C> <C> <C>
Entities affiliated with TeleSoft Partners(9)..... 3,131,427 6.1
1450 Fashion Island Boulevard, Suite 610
San Mateo, CA 94404
Brian J. Andrew(10)............................... 1,387,432 2.7
Howard "Skip" Speaks(11).......................... 1,250,000 2.4
Robert P. Goodman(12)............................. 860,000 1.7
Michael A. Clark(13).............................. 604,994 1.2
Kenneth R. Vines(14).............................. 413,000 *
Philip C. Gulliford(15)........................... 379,994 *
Douglas R.B. Campbell(16)......................... 300,000 *
Joseph D. Antinucci(17)........................... 20,000 *
All directors and executive officers as a group
(12 persons).................................... 25,503,759 48.1
</TABLE>
- -------------------------
(1) Includes 7,860,570 shares held by the entities listed in note 2 below. Mr.
Carano is a general partner of the entities listed in note 2 below. Mr.
Carano disclaims beneficial ownership of the shares held by the entities
listed in note 2 below except to the extent of his direct pecuniary
interest in these shares. Includes 20,000 shares issuable upon the
exercise of options exercisable within sixty days of March 1, 2000; all of
which are subject to our right of repurchase which lapses over time.
(2) Includes 7,667,986 shares held by Oak Investment Partners VII, Limited
Partnership and 192,584 shares held by Oak VII Affiliates Fund, Limited
Partnership.
(3) Includes 5,016,342 shares held by the entities listed in note 4 below. Mr.
Wei is a general partner of the general partner of the entities listed in
note 4 below. Mr. Wei disclaims beneficial ownership of the shares held by
the entities listed in note 4 below except to the extent of his direct
pecuniary interest in these shares. Includes 20,000 shares issuable upon
the exercise of options exercisable within sixty days of March 1, 2000;
all of which are subject to our right of repurchase which lapses over
time.
(4) Includes 2,789,056 shares held by Worldview Technology Partners I, L.P.,
1,087,048 shares held by Worldview Technology International I, L.P.,
240,238 shares held by Worldview Strategic Partners I, L.P., 667,373
shares held by Worldview Technology Partners II, L.P., 204,298 shares held
by Worldview Technology International II, L.P. and 28,329 shares held by
Worldview Strategic Partners II, L.P.
(5) Includes 4,000,000 shares held by Lockheed Martin Corporation, of which
Mr. Gibbons is a director. Mr. Gibbons disclaims beneficial ownership of
the shares held by Lockheed Martin Corporation. Includes 20,000 shares
issuable upon the exercise of options exercisable within sixty days of
March 1, 2000; all of which are subject to our right of repurchase which
lapses over time.
(6) Includes 62,303 shares held by MeriTech Capital Affiliates L.P. and
3,831,622 shares held by MeriTech Capital Partners L.P.
(7) Includes 329,500 shares held by Bessemer Venture Investors L.P., 1,400,532
shares held by Bessemer Venture Partners IV, L.P., 1,400,535 shares held
by Bessec Ventures IV L.P. and 131,097 shares held by BVP IV Special
Situations L.P. Also includes 597,649 shares beneficially held by
individuals, or entities affiliated with these individuals, that are
affiliated
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<PAGE> 60
with Bessemer. In specified circumstances, Bessemer can direct the voting
of these 597,649 shares.
(8) Includes 3,131,427 shares held by the entities listed in note 9 below. Mr.
Gupta is a general partner of TeleSoft Partners, which is affiliated with
TeleSoft Partners IA, L.P. The shares held by BT Holdings (New York), Inc.
and the Goel Family Partnership are held pursuant to a management
agreement with TeleSoft Management, L.L.C. Mr. Gupta is the executive
manager of TeleSoft Management, L.L.C. Mr. Gupta disclaims beneficial
ownership of the shares held by the entities listed in note 9 below except
to the extent of his direct pecuniary interest in these shares. Includes
20,000 shares issuable upon the exercise of options exercisable within
sixty days of March 1, 2000; all of which are subject to our right of
repurchase which lapses over time.
(9) Includes 2,731,427 shares held by TeleSoft Partners IA, L.P., 107,000
shares held by BT Holdings (New York), Inc., 133,000 shares held by
TeleSoft Coinvestments, L.P. and 160,000 shares held by Goel Family
Partnership.
(10) Includes 349,528 shares held by affiliates of Mr. Andrew. Includes 460,928
shares subject to our right of repurchase which lapses upon the completion
of this offering. Includes 100,000 shares of common stock issuable upon
the exercise of options exercisable within sixty days of March 1, 2000;
all of these shares are subject to our right of repurchase which lapses
over time.
(11) Includes 1,250,000 shares issuable upon the exercise of options
exercisable within sixty days of March 1, 2000; all of which are subject
to our right of repurchase which lapses over time.
(12) Mr. Goodman is a member of the management company that manages the
entities listed in note 7 above. However, Mr. Goodman is not listed as the
beneficial owner of the shares held by the entities listed in note 7 above
because he has no pecuniary or voting interest in the shares as they are
held by entities established prior to his becoming affiliated with
Bessemer. Includes 100,000 shares held by trust entities established for
the benefit of Mr. Goodman's children. Mr. Goodman disclaims beneficial
ownership of these shares. 389,584 of these shares are subject to our
right of repurchase which lapses over time.
(13) Includes 122,910 shares subject to our right of repurchase which lapses
upon the completion of this offering. Includes 225,000 shares of common
stock issuable upon the exercise of options exercisable within 60 days of
March 1, 2000; 188,542 of these shares are subject to our right of
repurchase which lapses over time.
(14) Includes 88,000 shares held by entities affiliated with Mr. Vines.
Includes 200,000 shares subject to our right of repurchase which lapses
over time. Includes 100,000 shares of common stock issuable upon the
exercise of options exercisable within sixty days of March 1, 2000; all of
these shares are subject to our right of repurchase which lapses over
time.
(15) Includes 122,910 shares subject to our right of repurchase which lapses
upon the completion of this offering.
(16) All of these shares are subject to our right of repurchase which lapses
over time.
(17) Includes 20,000 shares issuable upon the exercise of options exercisable
within sixty days of March 1, 2000; all of which are subject to our right
of repurchase which lapses over time.
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<PAGE> 61
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, we will be authorized to issue
130,000,000 shares, $0.001 par value per share, to be divided into two classes
to be designated common stock and preferred stock. Of the shares authorized,
120,000,000 shares will be designated as common stock and 10,000,000 shares will
be designated as preferred stock. The following description of our capital stock
is only a summary. You should refer to our amended and restated certificate of
incorporation and amended and restated bylaws as in effect upon the completion
of this offering, which are included as exhibits to the registration statement
of which this prospectus forms a part, and the provisions of applicable Delaware
law.
COMMON STOCK
As of March 1, 2000, assuming the conversion of all outstanding shares of
preferred stock into common stock, there were 51,246,280 shares of common stock
outstanding which were held by approximately 371 stockholders. Assuming no
exercise of the underwriters' over-allotment option and no exercise of
outstanding options after March 1, 2000, there will be shares of
common stock outstanding after giving effect to the sale of our common stock in
this offering. There are a total of 768,031 shares reserved for issuance, and
3,238,599 shares issuable upon exercise of outstanding options, under our 1997
Stock Plan. There are an aggregate of 500,000 shares reserved for issuance under
our 2000 Employee Stock Purchase Plan. See "Management -- Stock Plans" for a
description of our stock plans.
The holders of our common stock are entitled to one vote per share held of
record on all matters submitted to a vote of the stockholders. Our amended and
restated certificate of incorporation, to be filed concurrently with completion
of this offering, does not provide for cumulative voting in the election of
directors. 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 our board of
directors out of funds legally available for that purpose. In the event of our
liquidation, dissolution or winding up, holders of our common stock are entitled
to share ratably in all assets remaining after payment of liabilities, subject
to prior distribution rights of preferred stock, if any, then outstanding.
Holders of our common stock have no preemptive or other subscription or
conversion rights. There are no redemption or sinking fund provisions applicable
to our common stock. All outstanding shares of common stock are fully paid and
non-assessable, and the shares of common stock to be issued upon the completion
of this offering will be fully paid and non-assessable.
PREFERRED STOCK
Upon the completion of this offering and filing of our amended and restated
certificate of incorporation, our board of directors will be authorized, without
action by the stockholders, to issue 10,000,000 shares of preferred stock in one
or more series and to fix the rights, preferences, privileges and restrictions
thereof. These rights, preferences and privileges may include dividend rights,
conversion rights, voting rights, terms of redemption, liquidation preferences,
sinking fund terms and the number of shares constituting any series or the
designation of any series, all or any of which may be greater than the rights of
the common stock.
The issuance of preferred stock could adversely affect the voting power of
holders of common stock and the likelihood that the holders of common stock will
receive dividend payments and payments upon liquidation. In addition, the
issuance of preferred stock could have the effect of delaying or preventing a
change in our control without further action by the stockholders. We have no
present plans to issue any shares of preferred stock.
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<PAGE> 62
WARRANTS TO PURCHASE COMMON STOCK
As of March 1, 2000, we had the following warrants outstanding to purchase
a total of 675,000 shares of our common stock:
- An aggregate 500,000 shares pursuant to three separate warrants, each at
an exercise price of $0.50 per share, and each terminating November 14,
2004.
- 45,000 shares at an exercise price of $0.50 per share, terminating on the
later of January 20, 2005 or three years following the effective date of
our initial public offering.
- 100,000 shares at an exercise price of $0.50 per share, terminating
January 31, 2003.
- 30,000 shares at an exercise price of $0.50 per share, terminating March
25, 2003.
On February 25, 2000, we entered into an agreement with a financial
institution to borrow up to $9.0 million in 2000 for capital equipment
purchases, furniture and software. Up to $5.0 million of the borrowings are
repayable over four years and will bear interest at an annual rate of 13.16% and
up to $4.0 million is repayable over three years with an annual rate of interest
of 10.4%. The current available borrowing base under this agreement is $7.0
million. An additional $2.0 million will be available upon completion of this
offering. The agreement includes no financial covenants and the specific
equipment, furniture and software purchased with the borrowings will serve as
security for the loans. Under the agreement, we issued warrants to purchase our
common stock in the amount of 4% of the currently available borrowing base, or
$280,000. The exercise price of these warrants is 90% of the price of our
initial public offering price per share. If we do not complete an initial public
offering prior to the first anniversary of the agreement the exercise price of
these warrants will be $5.00 per share. We have also issued an additional
$80,000 worth of warrants which will become exercisable only upon completion of
this offering. The exercise price of these warrants will be 90% of the price of
our initial public offering price per share.
REGISTRATION RIGHTS
Pursuant to a registration rights agreement we entered into with holders of
43,294,828 shares of our common stock, assuming conversion of all outstanding
shares of preferred stock, and the holders of all outstanding warrants, the
holders of these shares are entitled to registration rights regarding these
shares. The registration rights provide that if we propose to register any
securities under the Securities Act, either for our own account or for the
account of other security holders exercising registration rights, they are
entitled to notice of the registration and are entitled to include shares of
their common stock in the registration. This right is subject to conditions and
limitations, including the right of the underwriters in an offering to limit the
number of shares included in the registration. The holders of these shares may
also require us to file up to two registration statements under the Securities
Act at our expense with respect to their shares of common stock. We are required
to use our best efforts to effect this registration, subject to conditions and
limitations. Furthermore, the holders of these shares may require us to file
additional registration statements on Form S-3, subject to conditions and
limitations. These rights terminate on the earlier of five years after the
effective date of this offering, the date on which all securities holding
registration rights have been sold, or when a holder is able to sell all its
shares pursuant to Rule 144 under the Securities Act in any 90-day period.
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<PAGE> 63
DELAWARE ANTI-TAKEOVER LAW AND CHARTER AND BYLAW PROVISIONS
Provisions of Delaware law and our amended and restated certificate of
incorporation and amended and restated bylaws could make the following
transactions more difficult:
- the acquisition of us by means of a tender offer;
- the acquisition of us by means of a proxy contest or other; and
- the removal of our incumbent officers and directors.
These provisions, summarized below, are expected to discourage coercive
takeover practices and inadequate takeover bids and to encourage persons seeking
to acquire control of us to first negotiate with us. We believe that the
benefits of increased protection of our potential ability to negotiate with the
proponent of an unfriendly or unsolicited proposal to acquire or restructure us
outweighs the disadvantages of discouraging such proposals because, among other
things, negotiation of such proposals could result in an improvement of their
terms. The amendment of any of the following provisions would require approval
by holders of at least 66 2/3% of our outstanding common stock.
Election and Removal of Directors. Effective with the first annual meeting
of stockholders following completion of this offering, our amended and restated
bylaws provide for the division of our board of directors into three classes, as
nearly equal in number as possible, with the directors in each class serving for
a three-year term, and one class being elected each year by our stockholders.
This system of electing and removing directors may tend to discourage a third
party from making a tender offer or otherwise attempting to obtain control of us
and may maintain the incumbency of the board of directors, as it generally makes
it more difficult for stockholders to replace a majority of the directors.
Further, our amended and restated certificate of incorporation filed in
connection with this offering and restated bylaws do not provide for cumulative
voting in the election of directors.
Stockholder Meetings. Under our amended and restated certificate of
incorporation and amended and restated bylaws, only our board of directors,
Chairman of the Board or Chief Executive Officer may call special meetings of
stockholders. Our amended and restated bylaws establish advance notice
procedures with respect to stockholder proposals and the nomination of
candidates for election as directors, other than nominations made by or at the
direction of the board of directors or a committee thereof. In addition, our
amended and restated certificate of incorporation eliminates the right of
stockholders to act by written consent without a meeting, eliminates the right
of stockholders to call a special meeting and eliminates cumulative voting.
Undesignated Preferred Stock. The authorization of undesignated preferred
stock makes it possible for the board of directors to issue preferred stock with
voting or other rights or preferences that could impede the success of any
attempt to change control of us. These and other provisions may have the effect
of deferring hostile takeovers or delaying changes in control or management.
Section 203. We are subject to Section 203 of the Delaware General
Corporation Law. In general, the statute prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that the stockholder became an
interested stockholder unless:
- prior to the date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
- upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding those shares owned
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<PAGE> 64
by persons who are directors and also officers, and employee stock plans
in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered
in a tender or exchange offer; or
- on or subsequent to the date, the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least two-thirds of the outstanding voting stock that is not owned by the
interested stockholder.
Section 203 defines business combination to include:
- any merger or consolidation involving the corporation and the interested
stockholder;
- any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
- subject to exceptions, any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the
interested stockholder; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by the entity or person.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is .
THE NASDAQ STOCK MARKET'S NATIONAL MARKET LISTING
We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the symbol "TNSI."
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<PAGE> 65
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our stock.
Future sales of substantial amounts of our common stock in the public market
following this offering or the possibility of such sales occurring could
adversely affect market prices for our common stock or could impair our ability
to raise capital through an offering of equity securities. Furthermore, since no
shares will be available for sale shortly after this offering because of
contractual and legal restrictions on resale as described below, sales of
substantial amounts of our common stock in the public after these restrictions
lapse could adversely affect the prevailing market price and our ability to
raise equity capital in the future.
After the offering, shares of our common stock will be
outstanding, assuming that the underwriters do not exercise the over-allotment
option. Of these shares, all of the shares sold in this offering will
be freely tradable without restriction or further registration under the
Securities Act, unless these shares are purchased by "affiliates" as that term
is defined in Rule 144 under the Securities Act. The remaining shares of common
stock held by existing shareholders are "restricted securities" as that term is
defined in Rule 144 under the Securities Act. Restricted securities may be sold
in the public market only if registered or if they qualify for an exemption from
registration under Rules 144 or 701 under the Securities Act, which rules are
summarized below.
All of our executive officers, directors, stockholders and option holders
have entered into lock-up agreements in which they have agreed that, for a
period of 180 days after the date of this prospectus, they will not offer, sell,
contract to sell, pledge or otherwise dispose of any shares of our common stock
or any securities convertible into or exchangeable or exercisable for any shares
of our common stock, or publicly disclose their intention to make any offer,
sale, contract, pledge or disposal, without the prior written consent of Credit
Suisse First Boston Corporation. In addition, we have agreed in the underwriting
agreement that, for a period of 180 days after the date of this prospectus, we
will not offer, sell, contract to sell, pledge or otherwise dispose of any
shares of our common stock, or any securities convertible into or exchangeable
or exercisable for any shares of our common stock, or publicly disclose our
intention to make any offer, sale, contract, pledge or disposal, without the
prior written consent of Credit Suisse First Boston Corporation, unless the
transaction is specifically permitted in the underwriting agreement. We have
similarly agreed that, with limited exceptions, we will not file a registration
statement with the Securities and Exchange Commission or publicly disclose our
intention to do so. Credit Suisse First Boston Corporation may, at any time and
without notice, waive any of the terms of these lock-up agreements.
Under these lock-up agreements, our outstanding shares of common stock will
be available for sale in the public market as follows:
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL SHARES
SHARES OUTSTANDING DATE OF AVAILABILITY FOR SALE
--------- ------------ -----------------------------
<C> <C> <S>
% , 2000 (date of this prospectus) to ,
2000 (180 days after the date of this prospectus)
, 2000 (180 days after the date of this
prospectus), in some cases under Rule 144
at various times after , 2000
</TABLE>
Stock Options. Immediately after this offering we intend to file a
registration statement under the Securities Act covering 10,540,000 shares of
common stock reserved for issuance under our stock option plans and 500,000
shares of common stock under our 2000 Employee Stock Purchase Plan. Each year as
the number of shares reserved for issuance under our 1997 Stock Plan increases,
we will file an amendment to the registration statement covering the additional
shares. As of March 1, 2000, options to purchase 3,238,599 shares of common
stock were issued and outstanding. This registration
62
<PAGE> 66
statement is expected to be filed and become effective as soon as practicable
after the effective date of this offering. Accordingly, shares registered under
that registration statement will, subject to vesting provisions and Rule 144
volume limitations applicable to our affiliates, be available for sale in the
open market immediately after the 180 day lock-up agreements expire.
Resale of most of the restricted shares that will become available for sale
in the public market starting 181 days after the effective date will be limited
by volume and other resale restrictions under Rule 144 because the holders are
our affiliates.
Rule 144. In general, under Rule 144 as currently in effect, beginning 90
days after the date of this prospectus, a person who has beneficially owned
shares of our common stock for at least one year is entitled to sell, within any
three-month period, a number of shares that is not more than the greater of:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this offering; or
- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks before a notice of the
sale on Form 144 is filed.
Sales under Rule 144 are also subject to manner of sale provisions, notice
requirements and the availability of current public information about us.
Rule 144(k). Under Rule 144(k), a person who has not been one of our
affiliates at any time during the 90 days before a sale, and who has
beneficially owned the restricted shares for at least two years, is entitled to
sell the shares without complying with the manner of sale, public information,
volume limitation or notice provisions of Rule 144.
Rule 701. In general, under Rule 701 of the Securities Act as currently in
effect, any of our employees, consultants or advisors who purchase shares from
us under a stock option plan or other written agreement can resell those shares
90 days after the effective date of this offering in reliance on Rule 144, but
without complying with some of the restrictions, including the holding period,
contained in Rule 144.
Registration Rights. Upon completion of this offering, the holders of
43,294,828 shares of our common stock and the holders of all outstanding
warrants will be entitled to rights with respect to the registration of their
shares under the Securities Act. See "Description of Capital Stock --
Registration Rights" for a more detailed description of these registration
rights. After registration, these shares will become freely tradable without
restriction under the Securities Act. Any sales of securities by these
shareholders could have a material adverse effect on the trading price of our
common stock.
63
<PAGE> 67
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, Deutsche Bank
Securities Inc. and U.S. Bancorp Piper Jaffray Inc. are acting as
representatives, the following respective numbers of shares of common stock:
<TABLE>
<CAPTION>
Number
Underwriters of Shares
------------ ---------
<S> <C>
Credit Suisse First Boston Corporation......................
Deutsche Bank Securities Inc. ..............................
U.S. Bancorp Piper Jaffray Inc. ............................
-------
Total.....................................................
=======
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that, if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares at the initial public offering
price less the underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.
The following table summarizes the compensation and estimated expenses we
will pay:
<TABLE>
<CAPTION>
Per Share Total
--------------------------------- -------------------------------
Without With Without With
Over-Allotment Over-Allotment Over-allotment Over-allotment
--------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting Discounts and
Commissions paid by us.......... $ $ $ $
Expenses payable by us............ $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities
Exchange Commission a registration statement under the Securities Act relating
to, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing, without the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus except
issuances pursuant to the exercise of employee stock options outstanding on the
date hereof.
Our officers, directors and other stockholders have agreed that they will
not offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, enter into a
transaction which would have the same effect, or enter into any swap, hedge or
other arrangement that transfers, in whole or in part, any of the economic
consequences of ownership or our common stock, whether any such aforementioned
transaction is to be settled by delivery of our
64
<PAGE> 68
common stock or such other securities, in cash or otherwise, or publicly
disclose the intention to make any such offer, sale, pledge or disposition, or
to enter into any such transaction, swap, hedge or other arrangement, without,
in each case, the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock for some of our employees, directors and
certain other persons associated with us who have expressed an interest in
purchasing common stock in the offering. The number of shares available for sale
to the general public in the offering will be reduced to the extent these
persons purchase the reserved shares. Any reserved shares not so purchased will
be offered by the underwriters to the general public on the same terms as the
other shares.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in that respect.
The shares of common stock have been approved for listing on The Nasdaq
Stock Market's National Market under the symbol "TNSI."
Deutsche Bank Securities Inc. and its affiliates beneficially own an
aggregate of 440,000 shares of our preferred stock which will automatically
convert into 440,000 shares of common stock upon the closing of this offering.
Deutsche Bank Securities Inc. holds a 5.97% interest in Telesoft Partners IA,
L.P. which holds 2,731,427 shares of our preferred stock which will
automatically convert into 2,731,427 shares of common stock upon the closing of
this offering.
Prior to this offering, there has been no public market for the common
stock. The initial public offering price has been determined by negotiation
between us and the representatives. The principal factors considered in
determining the public offering price included:
- the information set forth in this prospectus and otherwise available to
the representatives;
- the history and the prospects for the industry in which we will compete;
- the ability of our management;
- the prospects for our future earnings;
- the present state of our development and our current financial condition;
- the general condition of the securities markets at the time of this
offering; and
- the recent market prices of, and the demand for, publicly-traded common
stock of generally comparable companies.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934, as amended.
- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by such
syndicate member is purchased in a syndicate covering transaction to
cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on The Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
65
<PAGE> 69
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the common stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom the
purchase confirmation is received that (i) the purchaser is entitled under
applicable provincial securities laws to purchase the common stock without the
benefit of a prospectus qualified under the securities laws, (ii) where required
by law, that the purchaser is purchasing as principal and not as agent, and
(iii) the purchaser has reviewed the text above under "Resale Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or these persons. All or a substantial portion of the assets of the
issuer and such persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the issuer or such persons in
Canada or to enforce a judgment obtained in Canadian courts against the issuer
or these persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser in this offering. Such report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from us. Only one report must be filed
in respect of common stock acquired on the same date and under the same
prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of common stock should consult with their own legal and
tax advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
66
<PAGE> 70
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California. Legal matters will be passed upon for the underwriters by Testa,
Hurwitz & Thibeault, LLP. As of the date of this prospectus, investment
partnerships composed of members of and persons associated with Wilson Sonsini
Goodrich & Rosati, Professional Corporation, in addition to current and former
individual members of and persons associated with Wilson Sonsini Goodrich &
Rosati, Professional Corporation, beneficially own an aggregate of 130,426
shares of Triton Network Systems, Inc. preferred and common stock.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1999 and 1998, and for each of the two
years in the period ended December 31, 1999 and for the period March 5, 1997
through December 31, 1997, as set forth in their report. We have included our
financial statements in the prospectus and elsewhere in the registration
statement in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission, Washington,
D.C., a registration statement on Form S-1 under the Securities Act with respect
to the shares of common stock offered hereby. This prospectus does not contain
all the information set forth in the registration statement and the exhibits and
schedules thereto. For further information with respect to us and our common
stock, reference is made to the registration statement and to the exhibits and
schedules filed therewith. Statements contained in this prospectus as to the
contents of any contract or other document referred to are not necessarily
complete, and in each instance reference is made to the copy of the contract or
other document filed as an exhibit to the registration statement, each statement
being qualified in all respects by this reference. A copy of the registration
statement may be inspected by anyone without charge at the Public Reference
Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of all or any portion of the registration
statement may be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of prescribed fees.
The Commission maintains a Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission.
67
<PAGE> 71
TRITON NETWORK SYSTEMS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets at December 31, 1998 and 1999... F-3
Consolidated Statements of Operations for the period from
March 5, 1997 (date of inception) through December 31,
1997 and for the years ended December 31, 1998 and 1999... F-4
Consolidated Statements of Stockholders' Equity for the
period from March 5, 1997 (date of inception) through
December 31, 1997 and for the years ended December 31,
1998 and 1999............................................. F-5
Consolidated Statements of Cash Flows for the period from
March 5, 1997 (date of inception) through December 31,
1997 and for the years ended December 31, 1998 and 1999... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 72
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Triton Network Systems, Inc.
We have audited the accompanying consolidated balance sheets of Triton
Network Systems, Inc. as of December 31, 1998 and 1999, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the period March 5, 1997 (date of inception) through December 31, 1997 and, for
each of the two 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 misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Triton Network
Systems, Inc. at December 31, 1998 and 1999, and the consolidated results of
their operations and their cash flows for the period from March 5, 1997 (date of
inception) through December 31, 1997 and for each of the two years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.
Ernst & Young LLP
Orlando, Florida
February 11, 2000, except for Note 10, as to
which the date is February 29, 2000
F-2
<PAGE> 73
TRITON NETWORK SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 10,323,758 $ 46,130,279
Short-term investments.................................... 11,003,876 --
Inventory................................................. -- 7,244,874
Other current assets...................................... 194,221 1,017,565
------------ ------------
Total current assets................................. 21,521,855 54,392,718
Property and equipment, net................................. 2,754,230 7,970,374
Restricted cash............................................. -- 650,000
Other non-current assets.................................... 163,844 687,353
------------ ------------
Total assets......................................... $ 24,439,929 $ 63,700,445
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,140,397 $ 5,207,524
Accrued compensation...................................... 830,757 1,338,156
Other accrued expenses.................................... 145,436 2,227,802
Current portion of capital leases......................... 442,080 1,279,862
Current portion of notes payable.......................... -- 159,140
------------ ------------
Total current liabilities............................ 2,558,670 10,212,484
Capital leases, net of current portion.................... 1,457,073 1,967,690
Notes payable, net of current portion..................... -- 187,440
Commitments and contingencies
Stockholders' equity:
Series A, voting, convertible preferred stock, $.001 par
value; 14,400,000 shares authorized, issued and
outstanding at December 31, 1998 and 1999.............. 14,400 14,400
Series B, voting, convertible preferred stock, $.001 par
value; 13,200,000 shares authorized, 8,926,000 issued
and outstanding at December 31, 1998 and 13,107,938
issued and outstanding at December 31, 1999............ 8,926 13,108
Series C, voting, convertible preferred stock, $.001 par
value; 10,105,000 shares authorized, issued and
outstanding at December 31, 1999....................... -- 10,105
Common stock, $.001 par value; 61,000,000 shares
authorized, 12,482,097 shares issued and outstanding at
December 31, 1998 and 13,591,663 shares issued and
outstanding at December 31, 1999....................... 12,482 13,592
Additional paid-in capital................................ 37,595,268 99,187,726
Notes receivable from stockholders........................ (200,474) (606,624)
Accumulated deficit....................................... (17,006,416) (47,299,476)
------------ ------------
Total stockholders' equity........................... 20,424,186 51,332,831
------------ ------------
Total liabilities and stockholders' equity........... $ 24,439,929 $ 63,700,445
============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE> 74
TRITON NETWORK SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 5, 1997
(INCEPTION)
THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, ---------------------------
1997 1998 1999
------------- ------------ ------------
<S> <C> <C> <C>
Revenues......................................... $ -- $ -- $ --
Costs and expenses:
Manufacturing and operations................... -- 2,325,681 7,989,575
Research and development....................... 1,894,644 8,494,207 12,631,231
Selling and marketing.......................... 162,475 2,444,802 6,111,074
General and administrative..................... 500,911 1,747,956 4,473,094
----------- ------------ ------------
2,558,030 15,012,646 31,204,974
----------- ------------ ------------
Loss from operations............................. 2,558,030 15,012,646 31,204,974
Other income (expenses):
Interest income................................ 85,934 1,065,805 1,336,744
Interest expense............................... (310) (160,363) (425,905)
Royalty expense................................ -- (400,000) --
Other income (expenses)........................ (2,295) (24,511) 1,075
----------- ------------ ------------
83,329 480,931 911,914
----------- ------------ ------------
Net loss......................................... $(2,474,701) $(14,531,715) $(30,293,060)
=========== ============ ============
Net loss per share -- basic and diluted.......... $ (0.50) $ (2.14) $ (3.17)
=========== ============ ============
Shares used in per share calculations -- basic
and diluted.................................... 4,913,989 6,790,600 9,553,134
=========== ============ ============
Pro forma net loss per common share (unaudited):
Net loss per share -- basic and diluted........ $ (0.78)
============
Shares used in per share calculations -- basic
and diluted................................. 38,800,408
============
</TABLE>
See accompanying notes.
F-4
<PAGE> 75
TRITON NETWORK SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK NOTES
--------------------- --------------------- ADDITIONAL RECEIVABLE
SHARES PAR SHARES PAR PAID-IN FROM ACCUMULATED
OUTSTANDING VALUE OUTSTANDING VALUE CAPITAL STOCKHOLDERS DEFICIT TOTAL
----------- ------- ----------- ------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of Series A
preferred stock, net
of expenses.......... 14,400,000 $14,400 -- $ $13,555,236 $ -- $ -- $ 13,569,636
Issuance of common
stock................ -- -- 8,499,972 8,500 136,594 (137,974) -- 7,120
Forgiveness of debt by
stockholder.......... -- -- -- -- 1,403,973 -- -- 1,403,973
Net loss............... -- -- -- -- -- -- (2,474,701) (2,474,701)
---------- ------- ---------- ------- ----------- --------- ------------ ------------
Balances at December 31,
1997................... 14,400,000 14,400 8,499,972 8,500 15,095,803 (137,974) (2,474,701) 12,506,028
Issuance of Series B
preferred stock, net
of expenses.......... 8,926,000 8,926 -- -- 21,726,116 -- -- 21,735,042
Issuance of common
stock................ -- -- 1,600,000 1,600 398,400 -- -- 400,000
Issuance of common
stock upon exercise
of stock options..... -- -- 2,382,125 2,382 374,949 (62,500) -- 314,831
Net loss............... -- -- -- -- -- -- (14,531,715) (14,531,715)
---------- ------- ---------- ------- ----------- --------- ------------ ------------
Balances at December 31,
1998................... 23,326,000 23,326 12,482,097 12,482 37,595,268 (200,474) (17,006,416) 20,424,186
Issuance of Series B
preferred stock, net
of expenses.......... 4,181,938 4,182 -- -- 10,427,407 -- -- 10,431,589
Issuance of Series C
preferred stock, net
of expenses.......... 10,105,000 10,105 -- -- 50,464,895 -- -- 50,475,000
Issuance of common
stock upon exercise
of stock options..... -- -- 1,365,150 1,365 764,947 (441,150) -- 325,162
Repurchase of common
stock................ -- -- (255,584) (255) (64,791) 35,000 -- (30,046)
Net loss............... -- -- -- -- -- -- (30,293,060) (30,293,060)
---------- ------- ---------- ------- ----------- --------- ------------ ------------
Balances at December 31,
1999................... 37,612,938 $37,613 13,591,663 $13,592 $99,187,726 $(606,624) $(47,299,476) $ 51,332,831
========== ======= ========== ======= =========== ========= ============ ============
</TABLE>
See accompanying notes.
F-5
<PAGE> 76
TRITON NETWORK SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 5, 1997
(INCEPTION)
THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, ----------------------------
1997 1998 1999
------------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss................................................. $(2,474,701) $(14,531,715) $(30,293,060)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................ 16,019 454,733 1,444,608
Extinguishment of royalty agreement...................... -- 400,000 --
Changes in operating assets and liabilities:
Increase in inventory.................................. -- -- (7,244,874)
Increase in other current assets....................... (83,037) (111,184) (823,344)
Increase in restricted cash............................ -- -- (650,000)
Increase in other non-current assets................... -- (163,844) (565,266)
Increase in accounts payable, accrued compensation and
other accrued expenses............................... 1,367,961 1,828,155 6,656,892
----------- ------------ ------------
Net cash used in operating activities................ (1,173,758) (12,123,855) (31,475,044)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment........................ (175,464) (1,042,529) (4,501,112)
Sales (purchases) of short-term investments................ -- (11,003,876) 11,003,876
----------- ------------ ------------
Net cash provided by (used in) investing activities........ (175,464) (12,046,405) 6,502,764
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of preferred and common stock... 13,576,756 22,049,873 61,201,706
Proceeds from notes payable................................ -- -- 461,789
Borrowings from stockholder................................ 248,501 -- --
Payments on capital leases and notes payable............... -- (31,890) (884,694)
----------- ------------ ------------
Net cash provided by financing activities.................. 13,825,257 22,017,983 60,778,801
Net increase (decrease) in cash and cash equivalents....... 12,476,035 (2,152,277) 35,806,521
Cash and cash equivalents at beginning of period........... -- 12,476,035 10,323,758
----------- ------------ ------------
Cash and cash equivalents at end of period................. $12,476,035 $ 10,323,758 $ 46,130,279
=========== ============ ============
SUPPLEMENTAL CASH FLOWS INFORMATION
Interest paid.............................................. $ -- $ 160,363 $ 425,905
=========== ============ ============
NON-CASH FINANCING AND INVESTING ACTIVITIES
Fixed assets acquired under capital lease obligations...... $ 3,706 $ 1,931,043 $ 2,117,842
=========== ============ ============
Common stock issued in connection with extinguishment of
royalty agreement........................................ $ -- $ 400,000 $ --
=========== ============ ============
Common stock issued for notes receivable from
stockholders............................................. $ 137,974 $ 62,500 $ 441,150
=========== ============ ============
Common stock warrants issued in connection with lease and
credit agreements........................................ $ -- $ 87,500 $ --
=========== ============ ============
Common stock warrants issued for services in connection
with Series A offering................................... $ 250,000 $ -- $ --
=========== ============ ============
Forgiveness of accounts payable for expenses paid by
stockholder.............................................. $ 1,079,526 $ -- $ --
=========== ============ ============
Forgiveness of accounts payable for purchase of property
and equipment by stockholder............................. $ 75,946 $ -- $ --
=========== ============ ============
Forgiveness of accounts payable for borrowings from
stockholder.............................................. $ 248,501 $ -- $ --
=========== ============ ============
</TABLE>
See accompanying notes.
F-6
<PAGE> 77
TRITON NETWORK SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Triton Network Systems, Inc., a Delaware corporation (the Company), was
incorporated on March 5, 1997 and is based in Orlando, Florida. The Company
operates in one business segment as defined by Statement of Financial Accounting
Standards No. 131, Disclosures about Segments of an Enterprise, and provides
broadband wireless equipment that enables communications service providers to
deliver voice, video and data services to their business customers. Through
December 31, 1998, the Company was in the development stage. As of December 31,
1998, the Company had an accumulated deficit of $17,006,416. The Company emerged
from the development stage in 1999 when it began to produce its products for
commercial sales.
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, TNS Finance Company, Inc. All intercompany
transactions have been eliminated.
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid instruments with a maturity of
three months or less at the date of purchase to be cash equivalents. Short-term
investments generally mature between 3 - 12 months from the purchase date. All
cash equivalents and short-term investments are classified as held to maturity
and are recorded at amortized cost, which approximates market. Restricted cash
exclusively secures letters of credit obtained by the Company.
The cost of debt securities is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization is included in interest
income.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated on a
straight-line basis over their estimated useful lives as follows:
<TABLE>
<S> <C>
Manufacturing, development, and test equipment.............. 3 - 7 years
Computer equipment and software............................. 3 - 5 years
Leasehold improvements...................................... 5 years
Office furniture and other.................................. 3 - 7 years
</TABLE>
REVENUE RECOGNITION
The Company will recognize revenue upon shipment, provided no significant
obligations remain and collection is probable. The Company will not recognize
revenue on the shipment of product for field trials where the customer has the
option of returning the equipment at no cost. Revenue from service and support
arrangements will be recognized ratably over the service period.
F-7
<PAGE> 78
TRITON NETWORK SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
1. SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
WARRANTY COSTS
The Company will provide for estimated future warranty costs at the time
revenue is recognized.
INVENTORY
Inventory is stated at the lower of cost, determined based on an average
cost basis, or market. The inventory balance at December 31, 1999 consists of
the following:
<TABLE>
<S> <C>
Raw materials............................................... $3,347,540
Work in process............................................. 1,535,916
Finished goods.............................................. 2,361,418
----------
$7,244,874
==========
</TABLE>
RESEARCH AND DEVELOPMENT EXPENDITURES
Expenditures for research and development are expensed as incurred.
INCOME TAXES
Deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
LONG-LIVED ASSETS
The Company periodically evaluates the recoverability of its long-lived
assets based on expected undiscounted cash flows and will recognize impairment
of the carrying value of long-lived assets, if any is indicated, based on the
fair value of such assets.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's cash and cash equivalents, accounts payable
and accrued expenses approximate their carrying values due to their short-term
nature. The fair value of the Company's capital lease and note payable
obligations approximates their carrying value based on interest rates currently
available for instruments with similar terms.
EMPLOYEE STOCK-BASED COMPENSATION
The Company accounts for employee stock-based compensation under the
provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25) and complies with the disclosure provisions of
Statement of Financial Accounting Standards No. 123, Accounting for Stock Based
Compensation (FAS 123). Accounting for the issuance of stock options under the
provisions of APB 25 does not result in compensation expense for the Company
when the exercise price of options granted equals the fair value of the
Company's common stock on the date of award.
F-8
<PAGE> 79
TRITON NETWORK SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
1. SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE
Basic income (loss) per share is computed by dividing net income (loss)
available to common stockholders by the weighted average common shares
outstanding for the period. Diluted income (loss) per share is computed giving
effect to all potentially dilutive common shares. Potentially dilutive common
shares may consist of incremental shares issuable upon the exercise of stock
options, adjusted for the assumed repurchase of the Company's common stock, at
the average market price, from the exercise proceeds and also may include
incremental shares issuable in connection with convertible securities. In
periods in which a net loss has been incurred, all potentially dilutive common
shares are considered antidilutive and thus are excluded from the calculation.
DERIVATIVES
The Financial Accounting Standards Board Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities (FAS 133), as amended, is
effective for financial statements for all fiscal years beginning after June 15,
2000. FAS 133 requires the recognition of all derivatives in the consolidated
balance sheet as either assets or liabilities measured at fair value. Management
does not anticipate the adoption of FAS 133 will have a material impact on
results of operations, cash flows, or financial position of the Company.
COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Financial Accounting Standards
Board Statement No. 130, Reporting Comprehensive Income (FAS 130). FAS 130
establishes new rules for the reporting and display of comprehensive income and
its components; however, the adoption of this Statement had no impact on the
Company's net loss or stockholders' equity.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
2. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company's financial instruments that are exposed to concentrations of
credit risk consist of cash, cash equivalents and short-term securities. The
Company places its cash, cash equivalents and short-term securities with high
credit quality institutions. Securities held at these institutions may exceed
the amount of insurance provided for such securities.
F-9
<PAGE> 80
TRITON NETWORK SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
2. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS (CONTINUED)
Cash, cash equivalents and short-term investments are composed of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1998 1999
----------- -----------
<S> <C> <C>
Cash and cash equivalents:
Cash................................................. $ 4,351,380 $ 543,690
Money market funds................................... -- 45,586,589
Commercial paper and government securities 90 days or
less.............................................. 5,972,378 --
----------- -----------
$10,323,758 $46,130,279
=========== ===========
Short-term investments:
Commercial paper..................................... $ 5,992,114 $ --
Government securities................................ 5,011,762 --
----------- -----------
$11,003,876 $ --
=========== ===========
</TABLE>
3. PROPERTY AND EQUIPMENT
The Company's property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1998 1999
---------- -----------
<S> <C> <C>
Manufacturing, development, and test equipment........ $ 717,510 $ 4,997,206
Computer equipment and software....................... 936,339 2,439,256
Leasehold improvements................................ 362,332 473,078
Office furniture and other............................ 1,205,075 1,929,745
---------- -----------
3,221,256 9,839,285
Less accumulated depreciation and amortization........ (467,026) (1,868,911)
---------- -----------
$2,754,230 $ 7,970,374
========== ===========
</TABLE>
Depreciation of capital lease assets is included in depreciation expense.
The total cost and accumulated depreciation related to capital lease purchases
were $1,931,043 and $238,632, respectively for 1998 and $4,048,885 and
$1,060,125, respectively for 1999.
4. DEBT
During 1998, the Company entered into four lease agreements which provide
up to $8,000,000 to finance manufacturing, development, and test equipment and
furniture purchases during 1998 and 1999. At December 31, 1998 and 1999,
$1,899,153 and $3,247,552, respectively, was outstanding under the lease
agreements. In connection with the 1998 leases, the Company issued warrants to
the lessors, entitling them to purchase an aggregate of 145,000 shares of common
stock at an exercise price of $0.50 per share. The warrants are exercisable at
any time up to their expiration date. The expiration date of 100,000 of the
warrants is January 2003, and the balance of the warrants expires in January
2005 or three years after the effective date of a "Qualified Initial Public
Offering," whichever is longer.
F-10
<PAGE> 81
TRITON NETWORK SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
4. DEBT (CONTINUED)
Future minimum lease payments under capital leases at December 31, 1999
were as follows:
<TABLE>
<S> <C>
Year ending December 31:
2000....................................................... $ 1,621,118
2001....................................................... 1,594,519
2002....................................................... 559,954
-----------
Total minimum lease payments............................... 3,775,591
Less imputed interest...................................... (528,039)
-----------
Present value of lease payments............................ 3,247,552
Less current portion....................................... (1,279,862)
-----------
Long-term capital lease obligations........................ $ 1,967,690
===========
</TABLE>
In 1999, the Company entered into a note payable with a third party in the
amount of $379,500. The note bears interest at 11% per annum and is payable over
36 months. As of December 31, 1999, remaining principal payments on all notes
payable of $159,140 and $187,440 are due in 2000 and 2001, respectively.
The Company had an unsecured $1.0 million revolving credit agreement with a
bank which expired in September 1999. There were no borrowings under this
agreement. The bank issued a letter of credit for $650,000 under this agreement
which remains outstanding as of December 31, 1999, as a security deposit for the
Company's facilities. The Company collateralized the letter of credit with a
$650,000 certificate of deposit, which is held in escrow. In connection with
this credit agreement, the Company issued warrants to the lessor, entitling them
to purchase an aggregate of 30,000 shares of common stock at an exercise price
of $0.50 per share. In accordance with the agreement, the warrants are
exercisable at any time up to March 2003.
5. INCOME TAXES
In accordance with Statement of Financial Accounting Standards Board
Statement No. 109, Accounting for Income Taxes, a valuation allowance has been
recorded to reduce the deferred tax assets to zero, as the Company is presently
not able to conclude that it is probable that the deferred taxes will be
realized. At December 31, 1999, the Company has available net operating loss
carryforwards of $1,427,000 which expire in 2012, $8,097,000 which expire in
2018, and $11,869,000 which expire in 2019. As a result of equity transactions
that have occurred since the Company's inception, an "ownership change" as
defined under Section 382 of the Internal Revenue Code may have occurred which
may limit the use of the Company's net operating loss carryforwards and
deductions for capitalized start-up costs in the future. Management has not
completed the complex analysis to determine the amounts subject to limitation
and the amount of the limitation.
F-11
<PAGE> 82
TRITON NETWORK SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
5. INCOME TAXES (CONTINUED)
A reconciliation of income tax computed at the U.S. federal statutory rates
to income tax benefit is as follows:
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 5, 1997
(INCEPTION)
THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, ---------------------------
1997 1998 1999
------------- ----------- ------------
<S> <C> <C> <C>
Income tax benefits computed at the federal
statutory rate of 34%....................... $(841,398) $(4,940,783) $(10,296,240)
State income tax benefits, net of federal
benefit..................................... (89,832) (525,947) (1,094,393)
Nondeductible items........................... 1,969 14,561 45,723
Increase in valuation allowance............... 929,261 5,452,169 11,344,910
--------- ----------- ------------
Total......................................... $ -- $ -- $ --
========= =========== ============
</TABLE>
The components of the deferred tax balances are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1998 1999
----------- ------------
<S> <C> <C>
Deferred tax assets:
Capitalized start-up costs.......................... $ 3,005,011 $ 9,675,875
Net operating loss carryforwards.................... 3,376,419 8,050,066
----------- ------------
Total deferred tax assets......................... 6,381,430 17,725,941
Valuation allowance............................... (6,381,430) (17,725,941)
----------- ------------
Total net deferred taxes.......................... $ -- $ --
=========== ============
</TABLE>
6. STOCKHOLDERS' EQUITY
COMMON AND PREFERRED STOCK
The Company has been authorized, by approval of the Board of Directors in
October 1999, to issue 61,000,000 shares of common stock, $0.001 par value, and
37,705,000 shares of preferred stock, $0.001 par value. Since inception, the
Company has not declared or paid a cash dividend.
The holders of the Company's Series A preferred stock are entitled to
receive dividends at the rate of $0.08 per share, noncumulative, if declared by
the Board of Directors. Each share of Series A preferred stock is convertible at
any time into one share of common stock (subject to adjustment in the event of
future dilution). The liquidation value of each share of Series A preferred
stock is $1.00 plus an amount equal to all declared but unpaid dividends.
The holders of the Company's Series B preferred stock are entitled to
receive dividends at the rate of $0.20 per share, noncumulative, if declared by
the Board of Directors. Each share of Series B preferred stock is convertible at
any time into one share of common stock (subject to adjustment in the event of
future dilution). The liquidation value of each share of Series B preferred
stock is $2.50 plus an amount equal to all declared but unpaid dividends.
F-12
<PAGE> 83
TRITON NETWORK SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
6. STOCKHOLDERS' EQUITY (CONTINUED)
The holders of the Company's Series C preferred stock are entitled to
receive dividends at the rate of $0.40 per share, noncumulative, if declared by
the Board of Directors. Each share of Series C preferred stock is convertible at
any time into one share of common stock (subject to adjustment in the event of
future dilution). The conversion rate increases to 1.43 shares of common stock
for every share of Series C preferred stock if the Company does not recognize
net revenues of at least $50 million for the year ending December 31, 2000. The
liquidation value of each share of Series C preferred stock is $5.00 plus an
amount equal to all declared but unpaid dividends.
Holders of each share of Series A, B, and C preferred stock have voting
rights and powers equal to the voting rights and powers of the common stock. The
holder of each share of Series A, B, and C preferred stock is entitled to the
number of votes equal to the largest number of full shares of common stock into
which each share of preferred stock can be converted. In the event the Company
completes an initial public offering, each share of Series A, B, and C preferred
stock automatically converts to common stock on a one for one basis.
In April and November 1997, the Company issued 805,264 and 1,379,736
shares, respectively, of common stock to certain members of management at $0.01
and $0.10 per share, respectively, for aggregate proceeds of $138,779. The
amount paid per share was determined by the Board of Directors to be fair market
value of the stock at the date of issuance. The shares issued in November 1997
were to three members of management who issued promissory notes for the
aggregate purchase price of $137,974. The notes bear interest at 5.81% per annum
and are due from December 31, 2000 to December 31, 2002 or within 30 days of
termination of employment from the Company. The shares issued to these
individuals are subject to the Company's right to repurchase at the original
purchase price. The Company's right to repurchase expires over a four year
period with 25% expiring one year from the grant date, and 1/48 each month
thereafter.
In November 1997, the Company sold 14,400,000 shares of Series A
convertible preferred stock at a price of $1.00 per share for an aggregate of
$14,400,000. In May and July 1998, the Company sold 8,926,000 shares of Series B
convertible preferred stock at a price of $2.50 per share for an aggregate of
$22,315,000. In January 1999, the Company sold 4,181,938 shares of Series B
convertible preferred stock at a price of $2.50 per share for an aggregate of
$10,455,000. In October 1999, the Company sold 10,105,000 shares of Series C
convertible preferred stock at a price of $5.00 per share for an aggregate of
$50,525,000.
STOCK OPTIONS
The Company has a stock option plan (Plan), as amended, that provides for
the issuance of up to 7,540,000 shares of common stock to employees and
directors. The Company's Plan provides for the issuance of both incentive stock
options and nonqualified stock options exercisable for a period of 10 years. The
exercise prices of stock options which have been granted were at amounts which
management determined to approximate the fair value of the Company's common
stock at the date of grant. The options vest over a four-year period with 25%
vesting one year from the date of grant or issuance, and 1/48 vesting monthly
thereafter. The Plan provides for the issue of restricted stock if options are
exercised prior to their vesting date. In the event of discontinuation of
service by option holders, the Company has a right, at its option, to repurchase
any unvested restricted shares at their original purchase price. During 1999,
the Company repurchased 255,584 shares of restricted common
F-13
<PAGE> 84
TRITON NETWORK SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
6. STOCKHOLDERS' EQUITY (CONTINUED)
stock. At December 31, 1997, 1998, and 1999 the Company had the right to
repurchase 2,248,531, 5,168,491 and 3,107,245 shares of outstanding common
stock, respectively.
In 1998, two members of management exercised stock options to purchase
500,000 restricted shares of the Company's common stock at the exercise price of
$0.25 per share, for an aggregate purchase price of $125,000 which was paid by
cash of $62,500 and delivery of promissory notes for $62,500. The notes, along
with accrued interest (5.1% per annum), are due the earlier of December 31, 2003
or within 30 days of termination of employment from the Company.
In 1999, three members of management exercised stock options to purchase
830,000 restricted shares of the Company's common stock at exercise prices
ranging from $0.25 to $3.00 per share, for an aggregate purchase price of
$582,500 which was paid by cash of $141,350 and delivery of promissory notes of
$441,150. The notes, along with accrued interest (5.1% per annum), are due at
various dates in 2004 or within 30 days of termination of employment from the
Company. A promissory note in the amount of $35,000 was repaid in conjunction
with the repurchase by the Company of 255,584 shares of restricted common stock
associated with a management resignation.
Outstanding options are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED-
NUMBER OF AVERAGE
OPTIONS EXERCISE PRICE
---------- --------------
<S> <C> <C>
Balance at March 5, 1997 (date of inception).......... -- --
Granted............................................. 515,000 $0.10
----------
Balance at December 31, 1997.......................... 515,000 0.10
Granted............................................. 3,666,875 0.20
Forfeited........................................... (23,000) 0.25
Exercised........................................... (2,382,125) 0.16
----------
Balance at December 31, 1998.......................... 1,776,750 0.24
Granted............................................. 2,983,149 2.56
Cancelled........................................... (251,225) 0.26
Exercised........................................... (1,365,150) 0.56
----------
Balance at December 31, 1999.......................... 3,143,524 $2.29
==========
</TABLE>
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1999:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
RANGE OF REMAINING CONTRACTUAL WEIGHTED-AVERAGE
EXERCISE PRICES NUMBER OUTSTANDING LIFE IN YEARS EXERCISE PRICE
--------------- ------------------ --------------------- ----------------
<S> <C> <C> <C>
0$.10 - 0.50 713,000 8.7 $0.25
1$.00 - 2.50 1,627,174 9.6 $2.40
3$.00 - 5.00 803,350 9.8 $3.90
</TABLE>
FAS 123 requires disclosure of pro forma information which provides the
effects on net loss and loss per share as if the Company had accounted for its
employee stock awards under the fair value method. The fair value of the
Company's employee stock awards was estimated using a Black-
F-14
<PAGE> 85
TRITON NETWORK SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
6. STOCKHOLDERS' EQUITY (CONTINUED)
Scholes option pricing model with the following weighted-average assumptions for
1997, 1998 and 1999: risk-free interest rates of 4.68% - 5.89%; stock price
volatility factors of 69% - 100%, and expected option lives of 3 - 10 years. The
Company does not have a history of paying dividends, and none have been assumed
in estimating the fair value of the options. The weighted-average fair value per
share of options granted in 1997, 1998 and 1999 was $0.10, $0.20 and $1.65,
respectively. The pro forma effect on net loss is as follows:
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 5, 1997
(INCEPTION)
THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, ----------------------------
1997 1998 1999
------------- ------------ ------------
<S> <C> <C> <C>
Net Loss:
As reported................................ $(2,474,701) $(14,531,715) $(30,293,060)
Pro forma.................................. $(2,476,977) $(14,573,398) $(30,998,099)
Net loss per share:
As reported -- basic and diluted........... $ (0.50) $ (2.14) $ (3.17)
Pro forma -- basic and diluted............. $ (0.50) $ (2.15) $ (3.24)
</TABLE>
Because the fair value of accounting for options applies only to options
granted subsequent to March 5, 1997, the pro forma effect will not be fully
reflected until 2001.
In connection with services as placement agent for the Series A preferred
stock offering, in November 1997, the Company granted warrants to the agent to
purchase an aggregate of 500,000 shares of common stock, subject to adjustment
for anti-dilution, at a price of $0.50 per share. The warrants are exercisable
at any time before the earlier of a "Qualified Initial Public Offering" of the
Company or October 2004.
During 1998, the Company issued, in connection with the implementation of
its leasing facilities and credit agreements, 175,000 warrants at an exercise
per share of $0.50. See Note 4 for further information.
RESERVED STOCK
Common stock has been reserved for the following purposes:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Number of warrants outstanding....................... 500,000 675,000 675,000
Number of options outstanding........................ 515,000 1,776,750 3,143,524
Number of options available for grant under the stock
option plans....................................... 3,485,000 1,881,125 904,785
--------- --------- ---------
4,500,000 4,332,875 4,723,309
========= ========= =========
</TABLE>
F-15
<PAGE> 86
TRITON NETWORK SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
7. LOSS PER COMMON SHARE
The following table sets forth the computation of basic and diluted loss
per common share:
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 5, 1997
(INCEPTION)
THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, ----------------------------
1997 1998 1999
------------- ------------ ------------
<S> <C> <C> <C>
Numerator:
Net loss..................................... $(2,474,701) $(14,531,715) $(30,293,060)
Denominator for basic and diluted loss per
common share:
Weighted-average shares outstanding.......... 4,913,989 6,790,600 9,553,134
----------- ------------ ------------
Net loss per common share.................... $ (0.50) $ (2.14) $ (3.17)
=========== ============ ============
</TABLE>
The weighted-average shares outstanding include all common stock issued.
Restricted shares issued are not included in basic or diluted loss per share in
accordance with Statement of Financial Accounting Standards Board Statement No.
128, Earnings Per Share. In computing diluted loss per share, outstanding stock
options and common stock warrants were excluded from the diluted loss per share
computation because their effects would have been dilutive for the period March
5, 1997 through December 31, 1997 and for the years ended December 31, 1998 and
1999.
PRO FORMA NET LOSS PER SHARE (UNAUDITED)
Pro forma net loss per share for the year ended December 31, 1999 is
computed using the weighted-average number of common shares outstanding,
including the pro forma effects of the automatic conversion of the Company's
Series A, B and C preferred stock into shares of the Company's common stock
effective upon the closing of the Company's initial public offering as if such
conversion occurred on January 1, 1999, or at date of original issuance, if
later. The resulting pro forma adjustment includes an increase in the
weighted-average shares used to compute basic and diluted net loss per share of
29,247,274 for the year ended December 31, 1999.
8. RELATED PARTY TRANSACTIONS
The Company has entered into multiple contracts with a minority corporate
stockholder (Stockholder). In May 1997, the Company entered into a purchase
order with the Stockholder to provide engineering resources to execute the
design, fabrication, test and integration of a communications link for their
wireless network system. Under this purchase order, which serves as a
contractual agreement, the Company will pay the Stockholder on a cost
reimbursable basis, including their fee. Through December 31, 1997, 1998 and
1999, the Company has expensed approximately $1,490,000, $3,628,000 and
$1,675,000, respectively, under this agreement as research and development
expenses. During 1998 and 1999, the Company entered into production contracts
with the Stockholder for component parts. The Company incurred approximately
$185,000 and $1,500,000 in additional development expenses under this agreement
in 1998 and 1999, respectively. In addition, the Company purchased approximately
$2,311,000 in component parts under these production contracts during 1999.
Amounts payable to the Stockholder at December 31, 1998 and 1999 were
approximately $169,000 and $1,122,000, respectively. At December 31, 1999, the
Company had a
F-16
<PAGE> 87
TRITON NETWORK SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
8. RELATED PARTY TRANSACTIONS (CONTINUED)
firm purchase commitment with the Stockholder in the amount of approximately
$12,000,000 for component parts.
In 1997, the Company entered into a royalty agreement with the Stockholder,
which provided for payments of royalty for a five-year period starting at the
date of the first sale. In 1998, the Company issued 1,600,000 shares of common
stock to the Stockholder in satisfaction of the existing royalty agreement,
whereby the Stockholder relinquished all rights to future income streams. The
Company expensed $400,000 or $0.25 per share in 1998 based on the termination of
the royalty agreement.
During 1997, a stockholder of the Company paid approximately $1,080,000 in
expenses, purchased approximately $76,000 of equipment and furniture, and
advanced approximately $250,000 in cash on behalf of the Company. The Company
recorded expenses, equipment and furniture purchases, cash, and a payable due to
the stockholder as these payments and advances were made on its behalf. In
November 1997, the stockholder forgave the debt and the Company reclassified the
approximately $1,400,000 payable to the stockholder to additional paid-in
capital.
During 1997 and 1998, the Company had consulting agreements with two
stockholders and a member of the Board of Directors. Approximately $36,000 and
$181,000 and were expensed in 1997 and 1998, respectively, under these
agreements which are no longer in place.
During 1999, the Company had consulting agreements with a stockholder, a
member of the Board of Directors, and an immediate relative of a member of the
Board of Directors. Approximately $170,000 was expensed in 1999 under these
agreements.
During 1999, the Company loaned a member of management $300,000 in exchange
for a promissory note payable, which is secured by certain real estate. The note
is payable on September 30, 2004, or earlier if certain events occur.
9. COMMITMENTS
The Company leases certain facilities and equipment under operating leases,
which require future rental payments. These rental arrangements do not impose
any financing or dividend restrictions on the Company or contain contingent
rental provisions. Certain of these leases have renewal and purchase options
generally at the fair value at the renewal or purchase option date. Rent expense
under operating leases was $61,550, $406,348 and $1,005,359 during 1997, 1998
and 1999, respectively.
Future minimum lease payments under operating leases at December 31, 1999
were as follows:
<TABLE>
<CAPTION>
<S> <C>
YEAR ENDING DECEMBER 31
2000........................................................ $1,522,753
2001........................................................ 1,784,603
2002........................................................ 1,799,644
2003........................................................ 1,396,934
2004........................................................ 999,737
Thereafter.................................................. 2,174,308
----------
$9,677,979
==========
</TABLE>
F-17
<PAGE> 88
TRITON NETWORK SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
10. SUBSEQUENT EVENTS
ACQUISITION
On February 29, 2000, the Company signed a definitive agreement to purchase
the broadband modem product line from International Business Machines for
approximately 5.5 million shares of series C preferred stock.
CREDIT AGREEMENT
On February 25, 2000, the Company entered into an agreement with a
financial institution to borrow up to $9.0 million in 2000 for capital equipment
purchases, furniture and software. Up to $5.0 million of the borrowings are
repayable over four years and will bear interest at an annual rate of 13.16% and
up to $4.0 million is repayable over three years with an annual rate of interest
of 10.4%. The current available borrowing base under this agreement is $7.0
million. An additional $2.0 million will be available upon completion of an
initial public offering. The agreement includes no financial covenants and the
specific equipment, furniture and software purchased with the borrowings will
serve as security for the loans. Under the agreement, the Company issued
warrants to purchase our common stock in the amount of 4% of the currently
available borrowing base, or $280,000. The exercise price of these warrants is
90% of the price of the Company's initial public offering price per share. If
the Company does not complete an initial public offering prior to the first
anniversary of the agreement the exercise price of these warrants will be $5.00
per share. The Company has also issued an additional $80,000 worth of warrants
which will become exercisable only upon completion of an initial public
offering. The exercise price of these warrants will be 90% of the price of our
initial public offering price per share.
INITIAL PUBLIC OFFERING
In February 2000, the Company's Board of Directors authorized the Company
to file a Registration Statement with the Securities and Exchange Commission to
permit the Company to proceed with an initial public offering of its common
stock. Upon consummation of this offering, all of the outstanding series A, B,
and C preferred stock will be converted into 37,612,938 shares of common stock.
F-18
<PAGE> 89
Description of Artwork:
[Front Inside Cover and Gatefold]
A depiction of a city with the Triton Network Systems Consecutive Point network
deployed.
[Inside Back Cover]
A picture of an Invisible Fiber unit attached to a building.
<PAGE> 90
TRITON NETWORK SYSTEMS(TM) LOGO
<PAGE> 91
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 Triton Network Systems, Inc.
in connection with the sale of common stock being registered. All amounts are
estimates except the Securities and Exchange Commission registration fee and the
NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $
NASD filing fee.............................................
Nasdaq National Market listing fee..........................
Printing and engraving costs................................
Legal fees and expenses.....................................
Accounting fees and expenses................................
Blue Sky fees and expenses..................................
Transfer Agent and Registrar fees...........................
Miscellaneous expenses......................................
----------
Total............................................. $
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
Article Eight of the Registrant's amended and restated Certificate of
Incorporation provides for the indemnification of directors to the fullest
extent permissible under Delaware law.
Article Six of the Registrant's amended and restated Bylaws provides for
the indemnification of officers, directors and third parties acting on behalf of
the Registrant if such person acted in good faith and in a manner reasonably
believed to be in and not opposed to the best interest of the Registrant, and,
with respect to any criminal action or proceeding, the indemnified party had no
reason to believe his or her conduct was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for in
the Registrant's amended and restated Bylaws, and intends to enter into
indemnification agreements with any new directors and executive officers in the
future.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since inception, we have issued unregistered securities to a limited number
of persons as described below:
Common Stock:
(1) In March 1997, we sold 80,000 shares of our common stock at a price of
$0.001 per share to an investor for $80.
(2) In April 1997, we sold an aggregate of 3,580,873 shares of our common
stock at a price of $0.001 per share to investors for an aggregate
purchase price of $3,580.87.
II-1
<PAGE> 92
(3) In May 1997, we sold an aggregate of 1,475,057 shares of our common
stock at a price of $0.001 per share to investors for an aggregate
purchase price of $1,475.06.
(4) In June 1997, we sold an aggregate of 695,878 shares of our common
stock at a price of $0.001 per share to investors for an aggregate
purchase price of $695.88.
(5) In July 1997, we sold 8,335 shares of our common stock at a price of
$0.001 per share to investors for an aggregate purchase price of
$8.34.
(6) In August 1997, we sold an aggregate of 160,935 shares of our common
stock at a price of $0.001 per share to investors for an aggregate
purchase price of $160.94.
(7) In October 1997, we sold 100,000 shares of our common stock at a price
of $0.001 per share to investors for a purchase price of $100.
(8) In November 1997, we issued an aggregate of 999,058 shares of our
common stock to our existing stockholders pursuant to a stock split.
(10) In November 1997, we sold an aggregate of 1,379,736 shares of our
common stock at a price of $0.10 per share to investors for an
aggregate purchase price of $137,973.60.
(11) In November 1997, we sold an aggregate of 10,050 shares of our common
stock at a price of $0.10 per share to investors for an aggregate
purchase price of $1,005.
(12) In December 1997, we sold an aggregate of 10,050 shares of our common
stock at a price of $0.10 per share to investors for an aggregate
purchase price of $1,005.
Preferred Stock:
(1) In November 1997, we sold 14,400,000 shares of our series A preferred
stock at a price of $1.00 per share to a group of investors for an
aggregate purchase price of $14,400,000.
(2) In May 1998, July 1998 and January 1999, we sold an aggregate of
13,107,938 shares of our series B preferred stock at a price of $2.50
per share to a group of investors for an aggregate purchase price of
$32,769,845.
(3) In October 1999 and November 1999, we sold an aggregate of 10,105,000
shares of our series C preferred stock at a price of $5.00 per share to
a group of investors for an aggregate purchase price of $50,525,000.
Stock Options:
(1) From inception through February 2000, we granted stock options to
acquire an aggregate of 7,315,549 shares of our common stock at prices
ranging from $0.10 to $9.00 per share to employees, consultants and
directors pursuant to our 1997 Stock Plan.
(2) From inception through February 2000, we issued an aggregate of
3,795,225 shares of our common stock to employees, consultants and
directors pursuant to the exercise of stock options granted under our
1997 Stock Plan, for aggregate consideration of $1,167,244.
Common Stock Warrants:
(1) In November 1997, we issued warrants to acquire an aggregate of 500,000
shares of our common stock at an exercise price of $0.50 per share to
consultants.
(2) In January 1998, we issued a warrant to acquire 45,000 shares of our
common stock at an exercise price of $0.50 per share to an equipment
lessor.
II-2
<PAGE> 93
(3) In February 1998, we issued a warrant to acquire 100,000 shares of our
common stock at an exercise price of $0.50 per share to an equipment
lessor.
(4)In April 1998, we issued a warrant to acquire 30,000 shares of our
common stock at an exercise price of $0.50 per share to a lender.
(5)In February 2000, we issued a warrant to acquire our common stock in the
amount of $280,000 at an exercise price to be determined at the time of
our initial public offering.
(6)In February 2000, we issued a warrant to acquire our common stock in the
amount of $80,000 at an exercise price to be determined at the time of
our initial public offering.
For additional information concerning these equity investment transactions,
reference is made to the information contained under the caption "Certain
Relationships and Related Transactions" in the form of prospectus included
herein. The sales of the above securities were deemed to be exempt from
registration in reliance on Rule 701 promulgated under Section 3(b) under the
Securities Act as transactions pursuant to a compensatory benefit plan or a
written contract relating to compensation, or in reliance on Section 4(2) of the
Securities Act or Regulation D promulgated thereunder as transactions by an
issuer not involving any public offering. The recipients of securities in each
such transaction represented their intention 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 were affixed to the share
certificates and other instruments issued in such transactions. All recipients
either received adequate information about us or had access, through employment
or other relationships, to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<S> <C>
1.1* Form of Underwriting Agreement
3.1* Amended and Restated Certificate of Incorporation of the
Registrant
3.2* Amended and Restated Bylaws of the Registrant
4.1* Form of stock certificates
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
10.1* 1997 Stock Plan and form of Stock Option Agreement
thereunder
10.2* 2000 Employee Stock Purchase Plan
10.3* Restated Investor Rights Agreement, dated October 18, 1999,
between the Registrant and certain stockholders
10.4* Lease by and between Gran Central Corporation and Triton
Network Systems, dated March 26, 1998
10.5* Lease by and between Gran Central Corporation and Triton
Network Systems, dated May 5, 1998
10.5.1* Lease by and between Gran Central Corporation and Triton
Network Systems, dated September 16, 1999
10.6+ License Agreement with Lockheed Martin Corporation dated
June 12, 1997
10.6.1 Agreement to Purchase Additional Shares with Lockheed Martin
Corporation
10.7 Acquisition and License Agreement between International
Business Machines Corporation and Triton Network Systems,
Inc. dated as of February 29, 2000
10.8* Form of Indemnification Agreement between the Registrant and
each of its directors and officers
</TABLE>
II-3
<PAGE> 94
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<S> <C>
10.9+ Supply Agreement with CenturyTel dated December 7, 1999
10.10+ Supply Agreement with Advanced Radio Telecom dated December
23, 1999
10.11 Employment offer letter for Skip Speaks dated August 16,
1999
10.12 Employment offer letter for Brian Andrew dated September 9,
1999
10.13 Employment offer letter for Ken Vines dated September 22,
1998
10.14 Employment offer letter for Doug Campbell dated December 18,
1998
10.14.1 Amended Employment offer letter for Doug Campbell dated July
20, 1999
10.15 Employment offer letter for Mike Clark dated February 27,
1997
10.15.1 Amended Employment offer letter for Mike Clark dated July
20, 1999
10.16 Employment offer letter for Philip Gulliford dated March 20,
1997
10.17 Common Stock Purchase Warrant Agreement with FINOVA Capital
Corporation dated February 25, 2000
10.18 Common Stock Purchase Warrant Agreement with FINOVA Capital
Corporation dated February 25, 2000
10.19* Loan and Lease Commitment Letter with FINOVA Capital
Corporation dated January 14, 2000
10.20* Master Lease Agreement with FINOVA Capital Corporation dated
January 27, 2000
10.21* Master Loan and Security Agreement with FINOVA Capital
Corporation dated January 27, 2000
21.1 List of Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP, Independent Certified Public
Accountants
23.2* Consent of Counsel (see Exhibit 5.1)
24.1 Power of Attorney (see page II-6)
27.1 Financial Data Schedules (for SEC use only)
</TABLE>
- -------------------------
+ Confidential treatment requested for portions of these agreements. The omitted
portions have been separately filed with the Securities and Exchange
Commission.
* To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable or the information
is contained in the Consolidated Financial Statements and related Notes and
therefore have been omitted.
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 by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement 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 Securities 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 a director,
officer or controlling person in connection with the securities being registered
hereunder, the Registrant will, unless in the opinion of its counsel
II-4
<PAGE> 95
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 Securities 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 Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 96
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Orlando,
State of Florida, on the 1st day of March, 2000.
Triton Network Systems, Inc.
By: /s/ HOWARD "SKIP" SPEAKS
------------------------------------
Howard "Skip" Speaks
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Howard "Skip" Speaks and Kenneth R. Vines
and each of them, his attorneys-in-fact, each with the power of substitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to sign any registration statement for the same offering covered
by this Registration Statement that is to be effective upon filing pursuant to
Rule 462(b) promulgated under the Securities Act of 1933, as amended, and all
post-effective amendments thereto, and to file the same, with all exhibits
thereto and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ HOWARD "SKIP" SPEAKS President, Chief Executive March 1, 2000
- ----------------------------------------------------- Officer and Director
Howard "Skip" Speaks (Principal Executive Officer)
/s/ KENNETH R. VINES Senior Vice President, Finance March 1, 2000
- ----------------------------------------------------- and Chief Financial Officer
Kenneth R. Vines (Principal Financial and
Accounting Officer)
/s/ BRIAN J. ANDREW Director March 1, 2000
- -----------------------------------------------------
Brian J. Andrew
/s/ JOSEPH ANTINUCCI Director March 1, 2000
- -----------------------------------------------------
Joseph Antinucci
/s/ BANDEL L. CARANO Director March 1, 2000
- -----------------------------------------------------
Bandel L. Carano
</TABLE>
II-6
<PAGE> 97
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JAMES F. GIBBONS Director March 1, 2000
- -----------------------------------------------------
James F. Gibbons
/s/ ROBERT P. GOODMAN Director March 1, 2000
- -----------------------------------------------------
Robert P. Goodman
/s/ ARJUN GUPTA Director March 1, 2000
- -----------------------------------------------------
Arjun Gupta
/s/ JAMES WEI Director March 1, 2000
- -----------------------------------------------------
James Wei
</TABLE>
II-7
<PAGE> 98
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<S> <C>
1.1* Form of Underwriting Agreement
3.1* Amended and Restated Certificate of Incorporation of the
Registrant
3.2* Amended and Restated Bylaws of the Registrant
4.1* Form of stock certificates
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
10.1* 1997 Stock Plan and form of Stock Option Agreement
thereunder
10.2* 2000 Employee Stock Purchase Plan
10.3* Restated Investor Rights Agreement, dated October 18, 1999,
between the Registrant and certain stockholders
10.4* Lease by and between Gran Central Corporation and Triton
Network Systems, dated March 26, 1998
10.5* Lease by and between Gran Central Corporation and Triton
Network Systems, dated May 5, 1998
10.5.1* Lease by and between Gran Central Corporation and Triton
Network Systems, dated September 16, 1999
10.6+ License Agreement with Lockheed Martin Corporation dated
June 12, 1997
10.6.1 Agreement to Purchase Additional Shares with Lockheed Martin
Corporation
10.7 Acquisition and License Agreement between International
Business Machines Corporation and Triton Network Systems,
Inc. dated as of February 29, 2000
10.8* Form of Indemnification Agreement between the Registrant and
each of its directors and officers
10.9+ Supply Agreement with CenturyTel dated December 7, 1999
10.10+ Supply Agreement with Advanced Radio Telecom dated December
23, 1999
10.11 Employment offer letter for Skip Speaks dated August 16,
1999
10.12 Employment offer letter for Brian Andrew dated September 9,
1999
10.13 Employment offer letter for Ken Vines dated September 22,
1998
10.14 Employment offer letter for Doug Campbell dated December 18,
1998
10.14.1 Amended Employment offer letter for Doug Campbell dated July
20, 1999
10.15 Employment offer letter for Mike Clark dated February 27,
1997
10.15.1 Amended Employment offer letter for Mike Clark dated July
20, 1999
10.16 Employment offer letter for Philip Gulliford dated March 20,
1997
10.17 Common Stock Purchase Warrant Agreement with FINOVA Capital
Corporation dated February 25, 2000
10.18 Common Stock Purchase Warrant Agreement with FINOVA Capital
Corporation dated February 25, 2000
10.19* Loan and Lease Commitment Letter with FINOVA Capital
Corporation dated January 14, 2000
10.20* Master Lease Agreement with FINOVA Capital Corporation dated
January 27, 2000
10.21* Master Loan and Security Agreement with FINOVA Capital
Corporation dated January 27, 2000
21.1 List of Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP, Independent Certified Public
Accountants
23.2* Consent of Counsel (see Exhibit 5.1)
24.1 Power of Attorney (see page II-6)
27.1 Financial Data Schedules (for SEC use only)
</TABLE>
- -------------------------
+ Confidential treatment requested for portions of these agreements. The omitted
portions have been separately filed with the Securities and Exchange
Commission.
* To be filed by amendment.
<PAGE> 1
Exhibit 10.6
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (as hereinafter defined, this "Agreement), made
and entered into as of the Effective Date (as hereinafter defined), by and
between LOCKHEED MARTIN CORPORATION, a Maryland corporation acting through its
Electronics and Missiles operating unit in Orlando, Florida (as hereinafter
defined, "LMC"), and TRITON NETWORK SYSTEMS, INC., a Delaware corporation with
an office in Orlando, Florida (as hereinafter defined "Triton").
WITNESSETH:
WHEREAS, capitalized terms used in these recitals and not otherwise
defined shall have the respective meanings specified in Section 1 of this
Agreement; and
WHEREAS, Triton has marketing and technical expertise in commercial
wireless communications and wishes to engage in the development and production
of Commercial Systems, with a particular view toward its eventual offering for
sale of a production Microwave External Device (MED); and
WHEREAS, Triton will need certain licensed technology, certain
development efforts, and certain technical assistance if it is to achieve the
goals set forth in the preceding recital; and
WHEREAS, LMC has developed and owns certain Millimeter Wave MMIC Design
Technology primarily intended for military-specification-designed products;
WHEREAS, LMC would like to assist Triton in Triton's efforts to make,
have made, use, sell, offer to sell, service, and improve a production MED, all
on the terms set forth in
<PAGE> 2
this Agreement; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, LMC and Triton agree as follows:
1. DEFINITIONS. In addition to the other terms defined elsewhere in this
Agreement, each of the following capitalized terms used in this Agreement shall
have the respective meaning as follows:
"Agreement" shall mean this License Agreement and all subsequent
amendments hereto executed and delivered by the parties in the manner
contemplated hereby.
"Commercial System" shall mean non-military-specification packaged
MEDs.
"Effective Date" shall mean the date when this Agreement shall become
effective, which shall be the date when the Party who later signs and dates this
Agreement does so at the signature pages of this Agreement.
"Field of Use" shall mean any Commercial System that is used for
wireless communications.
"Improvement" shall mean any modification or update to Millimeter Wave
MMIC Design Technology, which modifies or relates to a manufacturing, servicing,
performance, or other characteristic of Millimeter Wave MMIC Design Technology.
2
<PAGE> 3
"LMC" shall mean Lockheed Martin Corporation, a Maryland corporation
acting through its Electronics and Missiles operating unit in Orlando, Florida,
together with its successors and assigns.
"LMC Intellectual Property" shall mean the inventions, discoveries,
methods, techniques, data and other information set forth in Exhibit A that are
useful or necessary in the design, development, manufacture, servicing or
operation of Commercial Systems.
"LMC Intellectual Property Rights" shall include any legally
enforceable right owned by LMC in LMC Intellectual Property, including but not
limited to a right in a patent, a patent application, copyright, know-how, mask
work, trademark or trade secret.
"LME&M" shall mean the Lockheed Martin Electronics and Missiles
operating unit of LMC that is headquartered in Orlando, Florida.
"MED" shall mean a millimeter wave external device, and components
thereof, consisting of a transmitter, receiver, frequency synthesizer, antenna,
digital modem, CPU controller and power supply, and characterized by having an
operating frequency range of 18.0 to 41.0 GHz, a transmitter CW output power
between 0.5 to 5.0 watts, a receiver noise figure of less than 9 dB, a
modulation of m-PSK or other suitable equivalent and a full duplex interface. By
way of example, and not limitation, Exhibit B comprises a detailed specification
for an MED within the scope of this Agreement.
"Millimeter Wave MMIC Design Technology" shall mean LMC developed
patents, know-how and trade secrets related to the design, development and
production of
3
<PAGE> 4
monolithic millimeter wave integrated circuit (MMIC) components,
modules, and systems as further defined in Exhibit A hereto.
"Party" shall mean either LMC or Triton, and "Parties" shall mean both
of them.
"Territory" shall mean the United States of America and all
international markets for which export licenses have been obtained by Triton.
"Triton" shall mean Triton, Network Systems, Inc., a Delaware
corporation, together with its successors and assigns.
"Triton Intellectual Property" shall mean the inventions, discoveries,
methods, techniques, data and other information known to Triton and Improvements
by Triton that are useful or necessary in the design, development, manufacture,
servicing, or operation of wireless communications systems.
"Triton Intellectual Property Rights" shall mean a legally enforceable
right owned by Triton in Triton Intellectual Property, including but not limited
to a right in a patent, a patent application, copyright, know-how, mask work,
trademark or trade secret.
2. GRANT OF LICENSE; ROYALTY.
2.1 LMC hereby grants Triton for the term of this Agreement an
exclusive, nontransferable (except as otherwise provided in Section 2.5 hereof)
license under LMC Intellectual Property Rights to make, have made, improve, have
improved, use, sell, and offer to sell throughout the Territory, Commercial
Systems incorporating Millimeter Wave
4
<PAGE> 5
MMIC Design Technology and related LMC Intellectual Property, provided, however
that LMC expressly reserves whatever rights in the Millimeter Wave MMIC Design
Technology and related LMC Intellectual Property as may be necessary or useful
to enable LMC to continue in existing pursuits and to pursue future business in
natural areas of expansion. The reservation expressed herein shall not be deemed
or interpreted to limit Triton's right to make, have made, improve, have
improved, use, sell and offer to sell Commercial Systems as aforesaid. Moreover,
LME&M shall extend to Triton a right of first refusal to supply to LME&M MEDs
then being manufactured by or for Triton, or variations on an MED which could be
produced by Triton within a competitive timeframe, and supplied by Triton to
others. This extension to Triton of a right of first refusal is limited to those
instances where LME&M's activities pursuant to the reservation expressed herein
would otherwise be inconsistent with the aforesaid exclusive grant of rights to
Triton.
2.2 The scope of the license granted in Section 2-1 above is
limited to the design, manufacture, use, sale, offer for sale, and importation
of Commercial Systems. No other right or license under the Millimeter Wave MMIC
Design Technology and related LMC Intellectual Property is herein granted.
2.3 From the Effective Date hereof, Triton agrees to pay LMC a
royalty on each MED utilizing Millimeter Wave MMIC Design Technology that Triton
sells or otherwise disposes of, all in accordance with the following rules:
(a) The amount payable as a royalty to LMC shall be
determined in accordance with this Section 23 and the royalty schedule set forth
in Exhibit C hereto.
(b) For the purposes of this Section, an MED utilizing
Millimeter Wave
5
<PAGE> 6
MMIC Design Technology that has not been sold shall be deemed "otherwise
disposed of" whenever in return for valuable consideration such system is
delivered by Triton to a third party or put into use by Triton either on behalf
of a third party or for any purpose other than demonstration and/or routine
testing. The sales price deemed to apply to any system "otherwise disposed of"
for the purposes of computing the royalty shall be the sales price at which
Triton or any of its subsidiaries or affiliates at the time is offering products
of similar kind and quality, less any customary discount that Triton is offering
on such system.
(c) For Purposes of this Section and Exhibit C, the gross
sales price for the purposes of computing LMC's royalty shall be only the fair
gross sales price of the MED included in the system, it being specifically
acknowledged that Triton shall on its own develop or purchase from others
certain software for the MED and certain hardware and software for related items
that ultimately will constitute a majority of the selling price of each system.
LMC shall not be entitled to a royalty on any portions of any system sold by
Triton other than in respect of the gross sales price of the portion of the MED
which LMC developed.
(d) The parties should mutually agree on the value. If
the parties are unable to agree on what portion of the selling price of an
integrated system is fairly allocable to the hardware of the MED (and therefore
constitutes the gross sales price of the MED) and what portion of such selling
price is fairly allocable to the balance of the system (including both software
for the MED and hardware and software for the related items), they shall submit
that question to binding arbitration in Orlando, Florida through the American
Arbitration Association.
(e) If Triton pays LMC all sums required for five years
after the date
6
<PAGE> 7
Triton first sells or otherwise disposes of an MED, then the license granted in
Section 2.1 above shall be deemed to be fully paid up.
2.4 Triton agrees to furnish to LMC, within thirty days of the end
of each calendar quarter, a written royalty report setting forth the number of
MED's sold or otherwise disposed of, or, where the Millimeter Wave MMIC Design
Technology is incorporated into a higher assembly, the number of such higher
assemblies sold or otherwise disposed of, the sales price of such products, the
royalties due thereon, and the manner in which Triton calculated said royalties.
With each quarterly royalty report, Triton shall also submit financial
statements of Triton that break out in detail LMC designed Millimeter Wave MMIC
Design Technology sales and royalty payment checks, with such financial
statements to be certified as to accuracy and completeness by Triton's chief
financial officer. LMC shall have the right to cause an audit of Triton's books
and records to be performed at LMC's expense by an independent auditor
reasonably acceptable to Triton. The sole objective of that audit shall be to
verify reported LMC designed Millimeter Wave MMIC Design Technology sales.
Triton shall cooperate with the audit by affording the auditor access to the
names and addresses of Triton customers for systems involving Millimeter Wave
MMIC Design Technology.
2.5 The license granted to Triton in this Section shall be
assignable to new commercial ventures that are owned in whole or in part by
Triton providing that Triton notifies LMC of such assignment and that the new
commercial venture accepts in writing all terms of this Agreement. Nothing in
this Agreement shall be construed to preclude the license from going with Triton
in connection with any change in control of Triton or any sale of substantially
all of the assets or business of Triton to a third party.
3. DUTIES OF LMC
7
<PAGE> 8
3.1 LMC specifically agrees, in accordance with its exclusive
license to Triton, the following:
(a) LME&M will not while this Agreement is in force
directly or indirectly compete with Triton within the scope of the exclusive
license granted in Section 2.1 above.
(b) LME&M will not make its Millimeter Wave MMIC Design
Technology available to any other company or LMC Division that will make, have
made, use, sell, and offer to sell Commercial Systems in the Field of Use. LME&M
cannot transfer Triton proprietary or contract data to other LMC divisions
without prior written approval from Triton.
3.2 During the term of this Agreement, LMC will not initiate
contact with any Triton employee supporting Millimeter Wave MMIC Design
Technology development for the purpose of recruiting such employee to join LMC
in the Millimeter Wave MMIC Design Technology development area. LMC will,
however, have the right to use standard advertising methods and job postings
when searching for individuals to support its Millimeter Wave MMC Design
Technology development activities. It shall not be a violation of this Section
for LMC to hire any Triton employee who approaches LMC, either as a consequence
of such standard advertising methods and job postings or otherwise as long as
LMC shall not have initiated the contact for the purpose of recruitment.
4. DUTES OF TRITON.
8
<PAGE> 9
4.1 Except with the consent of LMC, in no event may Triton, its
affiliates or subsidiaries hire any current or former employee of LME&M who
performs or performed significant duties for LME&M relating to the design and
development of millimeter wave products, methods and components. As used in this
Section:
(a) the term "former employee" shall refer to a person
who has been employed by LME&M at any time within the four month period
immediately preceding the start of such person's employment with
Triton; and
(b) the term "significant duties" shall mean that such
current or former employee charged half or more of his or her time to
activities relating to the design and development of millimeter wave
products, methods and components.
4.2 Triton will submit to Lockheed Martin Electronics and Missiles
(Ocala) commercial manufacturing facility requests for quotes on the
manufacturing of MED products. Triton will be under no obligation to make awards
if Triton in good faith determines that Ocala is non-competitive.
4.3 For so long as the Agreement is in effect, LMC shall have the
right of first negotiation with respect to any product development work that
Triton intends to have performed by a third party with respect to millimeter
wavelength communications products. Whenever Triton has determined that it will
seek a third party to perform such work, Triton will issue a
request-for-proposal (RFP) to LMC with the RFP containing that level of detail
that Triton intends to present to third parties for such work. This RFP shall be
issued to LMC prior to any discussion or negotiations with third parties with
respect to
9
<PAGE> 10
performing such work. LMC shall have 30 days within which to submit a proposal
to Triton per the RFP. LMC may elect not to make a proposal with respect to such
work, in which case it will notify Triton of this decision as soon as such
decision is reached.
4.4 Upon receipt of the LMC proposal by Triton within the 30-day
period, LMC and Triton agree to negotiate in good faith, on an exclusive basis,
towards a contract for such work. In the event that Triton and LMC cannot reach
agreement on the contract within 30 days after the delivery of the LMC proposal
to Triton, Triton shall have the right to discuss and negotiate with third
parties and enter into such contract with a third party provided that Triton
first certifies in writing to LMC that the terms of such contract are materially
better than the terms last offered by LMC in respect to such contract.
4.5 Triton, upon consummation and as a requirement of this Agreement,
and in accordance with its covenants, agrees to provide the Central Florida
Innovation Corporation with 1% equity in Triton.
4.6 LMC has the right at its sole discretion to participate in any
future sales of equities by Triton after its initial financing, at the agreed
valuation not exceeding 10% total ownership. Triton shall provide LMC with prior
written notification of any such sales of equities, such written notification to
be timely and in no event less than sixty (60) days prior to such sales of
equities.
4.7 At any time during the period beginning 28 months from the
Effective Date of this Agreement and ending 34 months from the Effective Date of
this Agreement LMC may, at its sole option, convert the right to receive
royalties set forth in this Agreement (the "Royalty Right") into a stock option
(the "Stock Option"), the terms of which are set forth below. Such conversion
shall take place on the date LMC
10
<PAGE> 11
notifies Triton in writing (the "Conversion Date") that it has exercised its
right to convert the Royalty Right into the Stock Option. All royalties due to
LMC arising out of royalty bearing sales or other dispositions which have
occurred prior to the Conversion Date shall be paid to LMC according to the
terms for such payment contained in this Agreement. The payment by Triton to LMC
of the lump sum payment specified in Exhibit C at any time prior to LMC
notifying Triton of LMC's election to convert the Royalty Right into the Stock
Option shall be deemed to terminate LMC's right to convert.
Upon conversion, LMC shall have a 5-year option to acquire, at no cost capital
stock in Triton having a fair market value Of $4,000,000 as of the Conversion
Date. If Preferred Stock has been issued by Triton, LMC will receive Preferred
Shares, convertible one-for-one into Common Shares, with rights equivalent to
the rights associated with existing Preferred Stock. If no shares of Preferred
Stock have been issued before the Conversion Date, or if all preferred shares
have been issued but have been converted to Common Stock, the option stock shall
be shares of Common Stock having the same rights as shares of Common Stock last
sold to investors prior to the conversion date. The fair market value of capital
stock shall be determined in good faith by the Triton Board of Directors,
subject to determination by appraisal in the event that LMC disagrees with this
valuation. In the event that determination by appraisal is necessary, LMC and
Triton shall mutually agree upon a qualified appraiser. The appraiser shall
determine the fair market value of the capital stock using traditional methods
of appraisal and will attribute relative value to the various classes of capital
stock. Such determination by the appraiser shall be final. The Stock Option and
the shares underlying the Stock Option shall be fully assignable by the holder
thereof and its assignees, subject only to compliance by the holder with
applicable securities laws.
11
<PAGE> 12
5. WARRANTIES.
5.1 LMC warrants that it has the right to grant to Triton this license
and the rights set forth herein. LMC further warrants that it is not aware of
any third party claim that the Millimeter Wave MMIC Design Technology products
licensed hereunder infringes the intellectual property rights held by such third
party. LMC makes no further warranties either express or implied.
5.2 Triton warrants to LMC that it has developed a business plan and
commensurate resources that provide a reasonable basis for the commercial
exploitation of Millimeter Wave MMIC Design Technology in accordance with the
terms and intent of this Agreement. Triton makes no further warranties either
express or implied.
5.3 None of the information which may be transmitted or exchanged by
the Parties shall constitute any representation, warranty, assurance, guarantee,
or inducement by any Party to the other Party with respect to the validity of
any patents or other intellectual property rights or non-infringement of
patents or other intellectual property rights held by third parties.
6. COMPLIANCE WITH LAWS AND REGULATIONS.
6.1 Both parties shall comply with the applicable provisions of all
federal, state, and local laws and ordinances and all lawful orders, rules, and
regulations thereunder.
12
<PAGE> 13
6.2 Triton shall be responsible for obtaining all licenses and
approvals and complying with all applicable laws, rules and regulations,
including but not limited to, the regulations of the United States Department
of Commerce relating to the export of its commercial products containing
Millimeter Wave MMIC Design Technology. LMC will initially provide all
Millimeter Wave MMIC Design Technology technical and background information
needed to expedite the export licensing process.
7. TERM AND TERMINATI0N.
7.1 This Agreement may be terminated by either Party under the
following conditions:
(a) After notice to either party due to a material breach in
performance of any of the terms of this Agreement, which breach is not
cured as provided for in Section 12.
(b) Immediately following notice in the event of the filing of
petition in bankruptcy by or against either Party, its making an
assignment for the benefit of its creditors or seeking protection under
any law designed to protect debtors from creditor's claims.
If this Agreement is terminated then LMC shall permit Triton a wind down period
in which Triton may continue to make and sell MEDs to meet any contractual
obligations which Triton may have at the time of such termination, such wind
down period not to exceed twelve (12) months after termination, provided that
during such wind down period Triton continues to pay royalties according to the
schedule set forth in Exhibit C.
13
<PAGE> 14
8. LIMITS OF AGREEMENT.
8.1 Neither Party shall have the right to make commitments of any kind
for or on behalf of the other Party without the prior written consent of the
other Party.
8.2 Triton and LMC are allowed to disclose to the general public the
nature of the relationship that exists between LMC and Triton.
9. EXCUSABLE DELAYS. Neither Party hereto shall be in default by reason
of any failure to perform in accordance with any terms herein, if such failure
is due to conditions beyond the control of such Party, including but not limited
to, acts of God or the public enemy, acts of government in either its sovereign
or contractual capacity unless induced by such Party to do so, strikes, fires,
floods, epidemics, quarantine restrictions, freight embargoes, civil commotion's
and the like.
10. INTELLECTUAL PROPERTY.
10.1 All Intellectual Property Rights for Millimeter Wave MMIC Design
Technology at the time of execution of this Agreement are and shall continue to
be the property of LMC and may be used by Triton only as provided in this
Agreement and may not be assigned to any third party by Triton except as
provided in section 2.5 or as authorized in writing by LMC.
10.2 Subject to any third party restrictions on disclosure, the Parties
agree that they shall meet at least semiannually during the term of this
Agreement to disclose to one another and discuss any Improvements made related
to Millimeter Wave MMIC Design
14
<PAGE> 15
Technology that the developing party believes may be beneficially employed in
the Millimeter Wave MMIC Design Technology products of the other party. In the
event that a Party desires to obtain rights to an Improvement so disclosed, the
Parties agree to negotiate in good faith the terms and conditions of a license
pertaining to such Improvements.
11. LIMITATION OF LIABILITY. In no event shall LMC be liable for any
special, indirect, incidental or consequential damages, whether in contract, in
tort, or strict liability, caused by an act or omission of Triton, and Triton
shall defend, indemnify and hold harmless LMC from and against any and all
liability, injury, damage, claim or legal action resulting from any act or
omission of Triton in the manufacture, use, sale or import of Triton products or
systems incorporating Millimeter Wave MMIC Design Technology or trademarks.
12. EACH PARTY'S RIGHTS UPON BREACH BY THE OTHER PARTY. If one Party
determines that the other Party has breached the Agreement, it shall promptly so
notify the other in writing. The breaching Party shall then have thirty days to
cure the breach.
13. NOTICES. All notices relating hereto shall be sent by certified mail or
registered mail, return receipt requested with postage prepaid, in the USA mail,
to LMC or Triton at its respective address shown below or at any later address
of which written notice is given, and shall become effective when actually
received.
For LMC:
Lockheed Martin Electronics and Missiles
Attention: R&T Contracts, Mail Point 090
5600 Sand Lake Road
Orlando, Fl 32819-8907
15
<PAGE> 16
For Triton:
Triton Network Systems, Inc.
Attention: President
7547 Commerce Center Drive
Orlando, F1 32819
14. APPLICABLE LAW. The validity, performance and construction of this
Agreement shall be governed by the laws of the State of Florida, USA, excluding
its choice of law provisions. The parties agree that any disputes between them
shall be resolved before a court of competent jurisdiction located in Orange
County, Florida.
15. INCORPORATION OF EXHIBITS. All Exhibits to this Agreement shall be
deemed incorporated herein by reference and made a part hereof.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the Parties as to the subject matter hereof, and supersedes any and all prior
oral or written understandings and agreements.
17. MODIFICATION. This agreement may be modified only by a written
agreement signed by both Parties. In the event of conflict between the terms of
the Agreement and any other contracts, documents and/or agreements relating to
this effort, the terms of this Agreement shall control.
16
<PAGE> 17
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized representatives as of the day, month and year
of later signature hereto.
"LMC"
LOCKHEED MARTIN CORPORATION,
acting through its Electronics
and Missiles Operating Unit
By: /s/ James A. Borders
-------------------------------
James A. Borders
Director of Contracts
Electronics & Missiles
Date: June 12, 1997
"TRITON"
TRITON NETWORK SYSTEMS, INC.
By: /s/ Robert Francis
-------------------------------
Robert Francis
Chairman
Date: June 12, 1997
17
<PAGE> 18
EXHIBIT LIST FOR LICENSE
AGREEMENT
Exhibit A Millimeter Wave MMIC Design Technology
Exhibit B Product Specifications
Exhibit C Royalty Schedule
18
<PAGE> 19
EXHIBIT A - MILLIMETER WAVE MMIC DESIGN TECHNOLOGY
The following items constitute current or anticipated technology which
will be utilized in the design of the MED:
1) MMW TRANSCEIVER FOR DIGITAL COMMUNICATIONS.
The object of this proprietary design is to obtain a MMW transceiver which
provides at least 1 Watt CW of power over a frequency range of 38.6 to 40.0 GHz
while operating as a continuous-duty, full-duplex transceiver. The design
incorporates [*] LO/2 (1/2 Local Oscillator) [*] for [*] transmit and
receive functions. This is accomplished by matching the [*]. The exciter
section, of this design, uses [*], 50 MHz ultra-low-phase-noise oscillator [*]
for [*]-duplex channels. The [*] LO/2 frequencies are generated from a [*]
within this design. A [*] precise sampling frequency [*] is locked with the 50
MHz reference. The result of this design allows the two ends of the link to be
[*]-locked thus obtaining Zero Frequency Error between MMW link and Datum
carriers. A disclosure filing is planned for this design.
2) MMW MMIC CIRCUITS.
LME&M are currently evaluating MMIC circuits for both the prototype and
production designs. It is probable that the prototype will primarily use
non-proprietary circuitry. For improved performance, however, the final design
may use proprietary circuitry using trade secrets developed by LME&M.
Disclosures will be filed at the discretion of the parties.
[*] Confidential Treatment Requested
19
<PAGE> 20
3) RADOME TECHNOLOGY.
There are 3 LMC patents that cover the following technologies that will be
evaluated for use in the MED antenna/radome system:
The first patent covers an absorptive/transmissive structure which can be used
to fabricate [*] without disrupting the electromagnetic waves generated by the
antenna. [*] This technology maybe useful in minimizing EMI emissions from the
MED (which will help meet FCC regulations) and to minimize outside EMI
emissions from getting into the MED.
The second patent relates to a method for fabricating a substantially nonplanar
substrate having a predetermined pattern. More particularly, the present
invention relates to a method for fabricating a [*] surface on to a radome by
ablating the [*] into a resist layer and removing [*] metallized layer or by
ablating the [*] into a metallized layer. This patent also maybe used to
fabricate radomes with band pass characteristics.
The third patent is an anti-ice radome having a [*] plurality of resistive
heating elements. The [*] surface prevents the resistive heating elements from
disturbing the electromagnetic waves generated by the antenna within the radome.
Thus, ice formation on the radome can be prevented without sacrificing the
transmission characteristics of the radome.
These technologies will be evaluated in conjunction with the design of the MED
antenna/radome assemblies.
[*] Confidential Treatment Requested
20
<PAGE> 21
EXHIBIT B
PRODUCT SPECIFICATIONS
21
<PAGE> 22
CANDIDATE PRODUCT SPECIFICATION
Wireless Coaxial Link
April 17, 1997
Key Features:
High-Power, (2 to 3 Watt) MMW Transmitter(1)
Low Noise Receiver, (5dB Noise Figure)(2)
Digital Modulation for accommodation of repeaters
Compliance (Goals):
MMW Link Receivers and Signal
Processors: US CFR Title 47, Part 15
MMW Link Transmitters: US CFR Title 47, Parts 21 and 101
FCC MMW Link Frequency pairs in accordance with US CFR Title 47, Part
101.147 (u)
<TABLE>
<CAPTION>
Forward Path GHz Reverse Path, GHz
1st Segment Group A Group B
<S> <C> <C>
Chan 1 38.60 to 38.65 39.30 to 39.35
Chan 2 38.65 to 38.70 39.35 to 39.40
Chan 3 38.70 to 38.75 39.40 to 39.45
Chan 4 38.75 to 38.80 39.45 to 39.50
Chan 5 38.80 to 38.85 39.50 to 39.55
Chan 6 38.85 to 38.90 39.55 to 39.60
Chan 7 38.90 to 38.95 39.60 to 39.65
2nd Segment
Chan 8 38.95 to 39.00 39.65 to 39.70
Chan 9 39.00 to 39.05 39.70 to 39.75
Chan 10 39.05 to 39.10 39.75 to 39.80
Chan 11 39.10 to 39.15 39.80 to 39.85
Chan 12 39.15 to 39.20 39.85 to 39.90
Chan 13 39.20 to 39.25 39.90 to 39.95
Chan 14 39.25 to 39.30 39.95 to 40.00
</TABLE>
<TABLE>
<CAPTION>
Link Transmitter:
<S> <C>
Channel Spacing 50 MHz
Transmitter RF Output(1) 2-3 Watts
Maximum EIRP, 1-meter diameter antennas(3) 50 dBW
Maximum Occupied Bandwidth 40 MHz
Modulation(4) DPSK
Link Receiver:
Channel Spacing 50 MHz
Noise Figure(2) 5 dB
3 dB Bandwith 40 MHz
Input Dynamic Range -20 to -90 dBm
</TABLE>
21-1
<PAGE> 23
<TABLE>
<CAPTION>
Antenna Configuration:
<S> <C>
Number of Antennas/Site One 1-foot antenna std.,
Two 1-foot antennas or
other antennas as req'd
for special circumstances
Host/Controller-to-MMW RF Link Interfaces:
Signal Interface Type Dedicated Coaxial Cable
Signal Interface Definition Serial, Digital, Full-duplex
Signal Serial Bite Rate(4) 30.72 MHz + 1 PPM
-
Control Interface Type Dedicated Differential Pair
Control Interface Definition EIA RSS 485
Control Interface Bit Rate 14400 bit/second
Precise Reference Output:
Low Phase Noise RF Reference 50.00 MHz +0.1 PPM
-
System Clock Reference 30.72 MHz +1PPM
-
Diagnostic & Management Interface:
Controls Channel Select
Tx/Rx Enable
RF parameter settings
Modem settings
Built-in Test Power sources
Status of LRUs
</TABLE>
Packaging:
The MMW RF link group is packaged in an environmentally resistant
outdoor case and will operate over an ambient temperature range of -30
to +55 degrees Celsius.
Primary Power:
Standard operating voltage is 115 VAC or 230 VAC
Power input is applied to both Host and Link groups.
Notes:
1: Rated Transmitter Power is measured at the transmitter module output
WG interface with [*], and specifically not at the antenna flange when
a [*] to accommodate a single antenna.
2: Rated Receiver Noise Figure is measured at the receiver module
output WG interface with either an antenna [*], and specifically not at
the antenna flange when [*] to accommodate a single antenna.
3: Maximum EIRP under FCC rules; CFR Title 47, Part 101.113 to 55 dBW
4: As a goal, a data rate of more than > 45 Mbit/sec, and a
corresponding modulation type will be evaluated for implementation.
[*] Confidential Treatment Requested
21-2
<PAGE> 24
CANDIDATE PRODUCT DESCRIPTION
WIRELESS COAXIAL LINK
April 17, 1997
The Wireless Coaxial Link is a millimeter wave, full-duplex radio system that
provides the equivalent of a coaxial link, between two points without wires.
The Wireless Coaxial Link operates over [*] full-duplex pair of [*] MMW channels
which are defined in [*] segments [*].
The MMW RP Link side of the Wireless Coaxial Link provides Client Interfaces of
high-speed signals via a coaxial cable and controls via a differential pair.
The extended air side of the Wireless Coaxial Link is packaged in an
environmentally resistant outdoor case and will operate over an ambient
temperature range or -30 to +55 degrees Celsius.
Standard operating voltage is 115 VAC or 230 VAC.
Antennas supporting each end of the Wireless Coaxial Link can be as small as
1 foot in diameter for short distances in rain-free locations or can be as
large as 1 meter in diameter for more margin. The standard product features a
single 1-foot diameter antenna. Dual 1-foot antennas or larger antennas are
optional for special circumstances.
[*] Confidential Treatment Requested
21-3
<PAGE> 25
EXHIBIT C - ROYALTY SCHEDULE
Triton shall provide royalty payments to LMC for a five-year period
starting at the date of first sale or other disposition of an MED (the "first
sale" date) based on a percentage of the MED gross sales price. As used herein,
the "MED gross sales price" shall exclude discounts allowed, transportation
charges assessed by third party carriers, insurance in transit, and applicable
sales taxes, if any, incident to delivery of Triton products to the purchaser of
such products.
The amount of royalty payments will be computed according to the
following schedule:
<TABLE>
<CAPTION>
Cumulative MED Gross Sales Level Royalty as Percent
For Five Years (US Dollars) of Gross MED Sales Price
-------------------------------- ------------------------
<S> <C>
0.00 through 999,999.99 [*]
1,000,000.00 through 5,999,999.99 [*]
6,000,000.00 through 11,999,999.99 [*]
12,000,000.00 and above [*]
</TABLE>
Triton has the option at anytime prior to termination of the Agreement
of having the license being deemed paid-up and so relieving it of any obligation
to pay future royalties under the Agreement by paying LMC a lump sum payment of
[*], the lump sum being in addition to any royalties due under the Agreement at
the time Triton exercises the option.
If the royalties paid under the above schedule in a royalty year
between the first sale date and the first anniversary of the first sale date, or
between successive anniversaries of
[*] Confidential Treatment Requested
22
<PAGE> 26
the first sale date, are less than $25,000, then Triton shall make a payment to
LMC within (30) days of the anniversary ending the royalty year equal to the
difference between the royalties paid during the royalty year and $25,000.
23
<PAGE> 1
Exhibit 10.6.1
AGREEMENT TO PURCHASE ADDITIONAL SHARES
This share purchase agreement (the "Agreement"), dated July 13, 1998,
is entered into between Lockheed Martin Corporation, a Maryland corporation,
having offices at 5600 Sand Lake Road, Orlando, Florida 32819 ("Lockheed") and
Triton Network Systems, Inc., a Delaware corporation, having offices at 7547
Commerce Center Drive, Orlando, Florida 32819 ("Triton").
Whereas Lockheed has purchased 800,000 shares of the Series B
Preferred Stock of Triton at a purchase price of $2.50 per share and has
received 1,600,000 shares of Triton Common Stock in exchange for termination of
Lockheed's royalty rights under the license agreement between Lockheed and
Triton dated June 12, 1997.
Whereas Triton has indicated that the issuance of the 1,600,000 shares
of Common Stock to Lockheed is contingent on the purchase of an additional
1,600,000 shares of Triton Series B Preferred Stock by Lockheed at a purchase
price of $2.50 per share.
The parties agree as follows:
1. Purchase of Additional Shares. On or before January 31, 1999,
Lockheed will have purchased an additional 1,600,000 shares of Triton Series B
Preferred Stock at a purchase price of $2.50 per share. The purchase and sale
of such shares shall be accomplished by a Series B Preferred Stock purchase
agreement substantially similar to that entered into by Triton and Lockheed on
July 31, 1998.
2. Failure to Purchase Additional Shares. In the event Triton and
Lockheed do not consummate the sale of the Triton Series B Preferred Stock on
or before January 31, 1999, then the royalty payments due to Lockheed from
Triton under the License Agreement dated June 12, 1997 shall be treated as
having been fully paid up and Lockheed shall forfeit any right to receive any
royalty payments.
3. Miscellaneous. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument. This Agreement shall be governed by
and construed under the laws of the State of Delaware, made and to be performed
entirely within the State of Delaware.
LOCKHEED MARTIN CORPORATION TRITON NETWORK SYSTEMS, INC.
By: /s/ Janet L. McGregor By: /s/ Brian J. Andrew
- ------------------------------ -----------------------------
Janet L. McGregor Brian J. Andrew
Title: Vice President Title: President
----------------------- ----------------------
<PAGE> 1
EXHIBIT 10.7
ACQUISITION AND LICENSE AGREEMENT
BETWEEN
INTERNATIONAL BUSINESS MACHINES CORPORATION
AND
TRITON NETWORK SYSTEMS, INC.
DATED AS OF
FEBRUARY 29, 2000
1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION TITLE
<S> <C>
SECTION 1 DEFINITIONS
SECTION 2 PURCHASE AND SALE
SECTION 3 PERSONNEL
SECTION 4 PAYMENT
SECTION 5 TAX MATTERS
SECTION 6 RESPONSIBILITIES OF IBM
SECTION 7 RESPONSIBILITIES OF TRITON
SECTION 8 LICENSES
SECTION 9 REPRESENTATIONS AND WARRANTIES OF IBM
SECTION 10 Reserved
SECTION 11 REPRESENTATIONS AND WARRANTIES OF TRITON
SECTION 12 RESTRICTIONS ON TRANSFERABILITY OF SHARES
SECTION 13 CONSENTS AND SUBROGATED WORK
SECTION 14 CONDITIONS OF EFFECTIVENESS OF SALE AND LICENSES;
POST CLOSING COVENANTS
SECTION 15 LIMITATION OF LIABILITY
SECTION 16 COMMUNICATIONS
SECTION 17 GENERAL PROVISIONS
</TABLE>
2
<PAGE> 3
TABLE OF SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
SCHEDULE TITLE
<S> <C>
SCHEDULE 1A Furniture, Fixtures and Equipment
SCHEDULE 1B Acquired Contracts
SCHEDULE 1C IBM Knowledge employees
SCHEDULE 1D Identified Employees
SCHEDULE 1E Identified Products
SCHEDULE 1F Disclosures
SCHEDULE 1G Patents
SCHEDULE 1H Inventory
SCHEDULE 1I IBM Licensed Software
SCHEDULE 1J IBM Workstation Software
SCHEDULE 1K Documentation
SCHEDULE 1L reserved
SCHEDULE 1M Vendor Agreements
SCHEDULE 1N Other Acquired Software Assets
SCHEDULE 1O Affected Employees
SCHEDULE 1P Third Party Workstation Software
SCHEDULE 1Q Acquired Software Assets
SCHEDULE 1R reserved
SCHEDULE 1S Masks
SCHEDULE 1T Holder Agreements
SCHEDULE 3.1 Summary of TRITON's Terms of Employment
SCHEDULE 3.3 Support Employees
SCHEDULE 4.5 Accounts Payable
SCHEDULE 5.1 Allocation of Purchase Price
SCHEDULE 8.2 IBM Workstation Software Licenses
SCHEDULE 9.17 Contract Status
SCHEDULE 9.27 Tangible Assets
SCHEDULE 9.28 Software
SCHEDULE 9.6 Claims
SCHEDULE 9.18 Contractual Commitments
SCHEDULE 14.3(c) Consents
SCHEDULE 17.4 Press Release
EXHIBIT TITLE
EXHIBIT I Reserved
EXHIBIT II Sublease Agreement
EXHIBIT III Reserved
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C>
EXHIBIT IV Amended and Restated Certificate of Incorporation
EXHIBIT V Investor Rights Agreement
EXHIBIT VI Bill of Sale
EXHIBIT VII Assignment and Assumption Agreement
EXHIBIT VIII EDA Program Agreement
EXHIBIT IX Letter Agreement
</TABLE>
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Agreement Reference Number L003806
ACQUISITION AND LICENSE AGREEMENT
THIS ACQUISITION AND LICENSE AGREEMENT (this "Agreement") is dated as
of the 29th day of February, 2000, by and between International Business
Machines Corporation, a New York corporation, ("IBM"), and Triton Network
Systems, Inc., a corporation of Delaware ("TRITON") (each a "Party,"
collectively the "Parties").
WHEREAS, IBM possesses certain intellectual property rights and
tangible assets useful for the manufacture and sale of Broadband Products
(defined below); and
WHEREAS, TRITON now wishes to acquire and IBM wishes to sell, assign,
delegate or license, as the case may be, certain of such rights and assets, and
certain contracts and liabilities related thereto.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, IBM and TRITON agree as follows:
SECTION 1. DEFINITIONS
The following words shall have the following meanings when used in this
Agreement:
"Acquired Assets" shall mean the Acquired Contracts, the Acquired
Software Assets, the Other Acquired Software Assets, the Invention Disclosures,
the Vendor Contracts, Inventory, and the Furniture, Fixtures and Equipment, the
Masks, the Board Design, the Deliverable Documentation and the Holder
Agreements.
"Acquired Contracts" shall mean the contracts between IBM and its
customers to be transferred to TRITON as set forth on Schedule 1B hereto.
"Acquired Software Assets" shall mean the software in Source Code and
Object Code form that is identified in Schedule 1Q.
"Affected Employees" shall mean the individuals identified as such on
Schedule 10 hereto.
"Amended and Restated Certificate of Incorporation" shall mean the
instrument attached as Exhibit IV.
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"Assignment and Assumption Agreement" shall mean the agreement
attached as Exhibit VII.
"Assumed Liabilities" shall have the meaning set forth in Section
2.3(a).
"Bill of Sale" shall mean the agreement attached as Exhibit VI.
"Board Design" shall mean the schematics and other documentation for
the digital modem module card using CQT8010 as specifically set forth in
Schedule 1K, and IBM's non-patent intellectual property therein.
"Broadband Product" shall mean a product designed to provide
quadrature amplitude modulation and/or phase shift keying modulation for use in
point-to-point fixed wireless or point-to-multipoint fixed wireless
communications applications at a rate of 1.5 Mbps or greater.
"Closing" shall have the meaning set forth in Section 4.2.
"Closing Date" shall have the meaning set forth in Section 4.2.
"Code" shall mean computer programming code. If not otherwise
specified, Code shall include Object Code and Source Code as well as associated
procedural code (such as job control language and build scripts).
"Deliverable Documentation" shall mean the Documentation listed on
Schedule 1K hereto.
"Deliverables" shall mean the Acquired Assets, the Third Party
Workstation Software, the IBM Workstation Software, the IBM Licensed Software
and the Deliverable Documentation.
"Derivative Work" shall mean a work which is based on one or more
preexisting works, such as a revision, Enhancement, modification, translation,
abridgment, condensation, expansion or any other form in which such preexisting
work may be recast, transformed or adapted and which, if prepared without
authorization of the owner of the preexisting work, would constitute copyright
infringement or other infringement of proprietary rights of the owner thereof.
For purposes hereof, a Derivative Work shall also include any compilation that
incorporates such preexisting work.
"Documentation" shall mean manuals, specifications, module
descriptions, logic descriptions, flow charts, principles of operation and
other written materials or diagrams used in, or that relate to the design,
development, modification or use of software either in hard copy (paper form)
or stored or recorded on magnetic media as machine readable text or graphic
files subject to display or printout. "Documentation" includes "User
Documentation."
"EDA Program Agreement" shall mean the agreement attached as Exhibit
VIII.
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"Effective Date" shall mean the later of the third business day
following the date on which all of the conditions set forth in Section 14 have
been satisfied or waived, or such other date as may be agreed upon by IBM and
TRITON, when the Closing shall occur.
"Enhancement" shall mean any change of or addition to software,
including, but not limited to, translations, new releases and versions or
additional programs that improve functions, add new related functions or
improve performance by changes in system design or coding or by the addition of
new Code and Documentation.
"Furniture, Fixtures and Equipment" shall mean those tangible assets
listed on Schedule 1A hereto.
"Governmental Authority" shall mean any federal, state, or local court
of the United States or foreign court, or any governmental or administrative
agency or commission or other governmental authority, instrumentality or
regulatory body.
"Governmental Rule" shall mean any statute, law, treaty, rule, code,
ordinance, regulation or order of any Governmental Authority or any judgment,
decree, injunction, writ, order or like action of any federal, state, or local
court of the United States or foreign court, arbitrator or other judicial
tribunal of competent jurisdiction.
"Holder Agreements" shall mean those agreements listed in Schedule 1T
that restrain or restrict any person from directly or indirectly competing with
the manufacture and sale of the Identified Products or from disclosing
information relating to the intellectual property or other confidential
information relating primarily to the Acquired Contracts.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"IBM Licensed Software" shall mean the items listed on Schedule 1I
hereto.
"IBM Workstation Software" shall mean the software listed on Schedule
1J hereto.
"Identified Employees" shall mean those employees of IBM identified as
such in Schedule 1D.
"Identified Products" shall mean the IBM products specified in
Schedule 1E.
"Invention Disclosures" shall mean those documents listed in Schedule
1F hereto.
"Inventory" shall mean those tangible assets listed in Schedule 1H
hereto.
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"Investor Rights Agreement" shall mean the agreement attached as
Exhibit V.
"Knowledge of IBM" means actual knowledge of the IBM employees listed
on Schedule 1C.
"Letter Agreement" shall mean the agreement attached as Exhibit IX.
"Licensed Patents" shall mean (i) those patents listed in Schedule 1G
hereto, patents issuing from the applications listed in Schedule 1G hereto and
foreign counterparts to such patents, and (ii) any patent licensable by IBM
(where such license would not require payment by IBM to any third party) that
would be infringed by the manufacture, use, sale, offer for sale, import, lease
or other transfer of the Identified Products as they exist on the Effective
Date.
"Masks" shall mean those items listed in Attachment 1S hereto and all
of IBM's mask work rights therein.
"Object Code" shall mean machine readable forms of Code.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"Other Acquired Software Assets" shall mean the software in Source
Code and Object Code form that is identified in Schedule 1N.
"Other Technology" shall mean that IBM technical information, data,
formulas, knowledge, processes and/or trade secrets developed or acquired by IBM
which is described in the Acquired Software Assets, Other Acquired Software
Assets, Deliverable Documentation or the Invention Disclosures.
"Permitted Liens" shall mean: (i) liens for Taxes, assessments and
governmental charges due and being contested in good faith by IBM; (ii) any
liens upon any of the Acquired Assets, provided that the same are not of such a
nature that would individually or in the aggregate materially adversely affect
the value of the Acquired Assets; (iii) liens for Taxes either not due and
payable or due but for which notice of assessment has not been given, or which
may thereafter be paid without penalty; (iv) undetermined or inchoate liens,
charges and privileges incidental to current operations or the ordinary course
of business; (v) any statutory liens, charges, adverse claims, security
interests or encumbrances of any nature whatsoever claimed or held by any
Governmental Authority that have not at the time been filed or registered
against title to the Acquired Assets or that relate to obligations that are not
due or delinquent; (vi) security given in the ordinary course of business to
any public utility, Governmental Authority or to any statutory or public
authority in connection with the Acquired Assets; and (vii) other imperfections
of title or encumbrances, if any, which imperfections of title or other
encumbrances do not materially impair the use of the assets to which they
relate.
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"Person" shall mean any individual firm, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization, government or agency (or subdivision thereof), or any other legal
entity.
"Purchase Price" shall mean the fair market value on the Effective
Date of the consideration referred to in Section 4.1.
"Security Interest" shall mean any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanics, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business
and not incurred in connection with the borrowing of money.
"Software" shall mean computer programs (instructions) that cause
computer hardware to do work.
"Source Code" shall mean human readable forms of Code and related
Documentation, including all comments and any procedural codes such as job
control language.
"Sublease Agreement" shall mean the agreement attached hereto as
Exhibit II.
"Subsidiary" of a party hereto or of a third party shall mean a
corporation, company or other entity:
(a) more than fifty percent (50%) of whose outstanding shares or
securities (representing the right to vote for the election of directors or
other managing authority) are now, or hereafter, owned or controlled, directly
or indirectly, by a Party hereto or such third party, but such corporation,
company or other entity shall be deemed to be a Subsidiary only so long as such
ownership or control exists; or
(b) which does not have outstanding shares or securities, as may be
the case in a partnership, joint venture or unincorporated association, but
more than fifty percent (50%) of the ownership interest representing the right
to make the decisions for such corporation, company or other entity is now or
hereafter, owned or controlled, directly or indirectly, by a party hereto or
such third party, but such corporation, company or other entity shall be deemed
to be a Subsidiary only so long as such ownership or control exists.
"Tax" or "Taxes" shall mean all taxes, imposts, duties, withholdings,
charges, fees, levies, or other assessments imposed by any governmental or
taxing authority, whether domestic or foreign, including but not limited to,
income, gross receipts, excise, property, sales, use, transfer, conveyance,
payroll or other employment related, license, ad valorem, value added,
withholding, social security, national insurance (or other similar
contributions or payments), franchise, estimated severance, stamp taxes, taxes
based upon capital stock or net worth and other taxes (including interest,
fines, penalties, or additions attributable to or imposed on or with
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respect to respect to such amounts and any obligations under any agreement or
arrangements with any Person with respect to such amounts).
"Tax Return" shall have the meaning set forth in Section 5.3.
"Third Party Workstation Software" shall mean that Software (and the
user documentation supplied by its vendor therefor) which is owned by entities
other than IBM, or its Subsidiaries, as listed on Schedule 1P hereto.
"Unassigned Third Party Software" shall mean that Software (and the
user documentation supplied by its vendor therefor) owned by entities other
than IBM, or its Subsidiaries.
"User Documentation" shall mean Documentation which consists of
manuals, brochures and machine readable instructional text or graphic files
subject to display or printout, provided to users of a computer program and
intended primarily to aid in productive use of such program rather than design,
development or modification thereof.
"Vendor Contracts" shall mean those contracts for vendors listed on
Schedule 1M.
SECTION 2. PURCHASE AND SALE
2.1 Upon the terms and subject to the conditions set forth in this Agreement,
IBM hereby sells, transfers, delegates and assigns to TRITON as of the
Effective Date and TRITON hereby purchases or otherwise acquires and accepts
full responsibility for, as of the Effective Date, all of IBM's rights, title
and interest in and to:
(a) the Acquired Contracts;
(b) the Vendor Contracts;
(c) the Inventory;
(d) to the extent they may be transferred, any express or implied
warranties from the suppliers of IBM, manufacturers or others with respect to
the Deliverables;
(e) the Acquired Software Assets and Other Acquired Software Assets;
(f) any rights and obligations of IBM accruing from and after the
Effective Date to any invoice, purchase or sales order, or service order issued
pursuant to the Acquired Contracts; provided, however, that IBM retains the
right to invoice, collect and retain for itself the proceeds from all sales
made and services performed by IBM prior to the Effective Date; and
(g) the Holder Agreements;
(h) the Masks;
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(i) [intentionally blank];
(j) to the extent it has the legal right to do so and subject to the
applicable license agreement with the licensors, its royalty-free usage rights
to the Third Party Workstation Software;
(k) the Furniture, Fixtures and Equipment;
(l) the Board Design; and
(m) the Invention Disclosures, subject to the provisions of Section 8.9.
2.2 TRITON shall be responsible for all accounts payable which accrue on or
after the Effective Date with respect to the Deliverables and that are either
(i) listed on Schedule 2.2 or (ii) that relate to goods and services purchased
prior to the Effective Date in the ordinary course of business and delivered or
performed after the Effective Date. IBM shall remain responsible for any other
accounts payable incurred by it prior to the Effective Date.
2.3 (a) TRITON shall not assume any liabilities or obligations of IBM except
for those liabilities which TRITON expressly assumes pursuant to this
Agreement. On the Effective Date, TRITON will assume the following rights,
obligations and liabilities of IBM (collectively, the "Assumed Liabilities")
and thereafter shall fully perform and discharge on a timely basis, and in
accordance with their respective terms: (i) all rights and obligations under
the Acquired Contracts, the Vendor Contracts, the Holder Agreements and the
Deliverables to the extent that such contracts are actually assigned to TRITON
and only with respect to obligations under those contracts to be performed
after the Effective Date, and (ii) accounts payable to the extent provided in
Section 2.2. Without limiting the generality of the foregoing, except for the
Assumed Liabilities, TRITON is not assuming any liability, obligation or
commitment of any nature of IBM related to IBM's operations prior to the
Effective Date. TRITON agrees to discharge its Assumed Liabilities in
accordance with their terms and conditions and TRITON agrees that IBM shall
have no liability for any failure of TRITON to discharge its Assumed
Liabilities in accordance with their terms and conditions.
(b) The Parties will each use reasonable efforts to obtain written
consents to the transfer and assignment of the Acquired Assets and Assumed
Liabilities to TRITON, and the novation of IBM, where the approval or other
consent of any other Person may be required for these actions. TRITON shall
cooperate with IBM (including, where necessary, entering into appropriate
instruments of assumption as shall be agreed upon) to have IBM released from
all liability to third parties with respect to the Assumed Liabilities, and the
Parties will each solicit such releases concurrently in a manner acceptable to
both Parties, with the solicitation of consents from third parties to the
transfer, assignment and novation of the Assumed Liabilities;
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provided, that, neither Party shall be required to grant any additional
consideration to any third party in order to obtain any such consent, novation,
assumption or release.
2.4 On the Effective Date, IBM shall deliver to TRITON one copy each of the
Deliverable Documentation.
2.5 On the Effective Date, IBM and TRITON shall enter into the Sublease
Agreement and the EDA Program Agreement.
2.6 Unless otherwise mutually agreed by the Parties, the Parties agree to enter
a foundry agreement no later than December 31, 2000, under which IBM will
manufacture products for TRITON under IBM's then-standard commercial terms and
conditions, including pricing.
2.7 For a period of 18 months following the Effective Date, IBM agrees to
provide to Triton, without charge and upon the receipt of appropriate orders,
SiGe services (prototype wafer runs and development services) having an
aggregate value of up to $1,850,000 (one million, eight hundred fifty thousand
dollars), based upon IBM's standard commercial terms and conditions, including
pricing and delivery. Any taxes on such services shall be the responsibility of
Triton. Any contracts entered into under this Section 2.7 may be completed
beyond the 18 month period.
SECTION 3. PERSONNEL
3.1 (a) TRITON agrees that it will make written offers of employment, subject
to the closing of this transaction, to all Affected Employees within four days
of the date of this agreement and employ, subject to the closing of this
transaction, those who accept employment within four days of receiving those
written offers. TRITON will employ such persons at the same salaries and
initially at the same or substantially similar positions as their current
positions, provided that TRITON's ability to reassign and redeploy employees
will not be limited. TRITON will provide all Affected Employees who accept
employment the benefits described in Schedule 3.1 and similar terms and
conditions, including a benefit plan as outlined in Schedule 3.1. Prior periods
of employment with IBM will be considered as employment with the TRITON for the
calculation of severance pay. During the first year after the Effective Date,
TRITON shall implement the following severance pay practice for the Affected
Employees: if an Affected Employee is involuntarily severed without cause from
full-time employment with TRITON, such Affected Employee shall receive one (1)
week of severance pay for each six (6) months of service fully or partially
completed with TRITON or with IBM, with a minimum of eight (8) weeks and a
maximum of twenty-six (26) weeks. Each week of severance pay will be an amount
equal to one week of such Affected Employee's total cash employment
compensation from TRITON for full-time employment. For one year from the
Effective Date, TRITON agrees that it will not change this severance pay
practice as applied to the Affected Employees.
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(b) TRITON shall offer the Affected Employees three weeks of paid
vacation per year. Upon separation from IBM, Affected Employees shall be paid
by IBM for vacation accrued, plus previously deferred vacation, less vacation
taken.
(c) As of the Effective Date, TRITON shall be responsible for all
employer obligations incurred by TRITON in accordance with Section 3.1(a) or
otherwise in accordance with law for the post-Effective Date period for all
Affected Employees who accept employment with TRITON. Such obligations include,
without limitation, COBRA obligations and damages or settlements arising out of
any claims of wrongful termination by TRITON. IBM will remain responsible for
all employer obligations for the Affected Employees incurred by IBM prior to
the Effective Date. IBM will remain responsible for the Affected Employees who
do not accept employment with TRITON.
3.2 In the event that IBM effects a reduction or cessation of the operations
or workforce that exists to service or support the Acquired Assets prior to the
Effective Date, IBM shall perform and undertake all acts as may be necessary to
comply with the applicable provisions of the WARN Act and any analogous state
laws. In the event that TRITON effects a reduction or cessation of the
operations or workforce that exist to service or support the Acquired Assets
subsequent to the Effective Date, TRITON shall perform and undertake all acts
as may be necessary to comply with the applicable provisions of the WARN Act
and analogous state laws.
3.3 IBM is a party to three (3) government-related contracts (the "Government
Contracts"), which are not being assigned or transferred to TRITON, but which
are being performed, in whole or in part, by the Affected Employees identified
in Schedule 3.3 (collectively, the "Support Employees"). In the event that any
Support Employee accepts employment with Triton on or after the Effective Date,
the Parties agree that IBM may, at any time thereafter, hire and use any such
Support Employee to work on the Government Contracts in accordance with the
terms and conditions set forth in the Letter Agreement, which will be signed by
the Parties at Closing.
SECTION 4. CLOSING
4.1 In consideration for the assets, licenses and other rights to be
transferred to TRITON, TRITON shall issue to IBM five million five hundred
thousand (5,500,000) shares of TRITON's Series C Preferred Stock (the
"Shares"), which will represent, after the issuance of these shares at Closing,
approximately 8.8% of the ownership of TRITON on a fully diluted basis, subject
to Section 11.23, and IBM shall become party to TRITON's existing Investor
Rights Agreement.
4.2 The closing of the transactions contemplated by this Agreement (the
Closing") shall be held at the offices of IBM, at 10:00 a.m. on the date which
is two business days following satisfaction or waiver of the last condition to
effectiveness of sale and license set forth in Section 14 hereof, or such other
time and place as the parties may agree (the "Closing Date").
4.3 At the Closing:
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(a) the Parties shall execute and deliver the Bill of Sale;
(b) TRITON shall deliver a certificate for the Shares;
(c) The parties shall execute and deliver the Investor Rights Agreement;
(d) The Parties shall execute and deliver the Assignment and Assumption
Agreement; and
(e) The Parties shall execute and deliver the Letter Agreement.
SECTION 5. TAX MATTERS
5.1 TRITON and IBM hereby agree to the tax-basis allocation of the Purchase
Price set forth in Schedule 5.1 (the "Allocation Statement"), allocating the
total of the Purchase Price (and other payments properly treated as additional
Purchase Price for Tax purposes) to the different transferred assets pursuant
to Section 1060 of the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder.
5.2 TRITON and IBM shall each file all income, franchise and other Tax
Returns (as defined below) in a manner consistent with the Allocation
Statement. TRITON shall prepare Form 8594 under Section 1060 of the Internal
Revenue Code based on Schedule 5.1 and deliver such Form and all documentation
used in the preparation and support of such Form to IBM within 90 days after
the Effective Date.
5.3 IBM shall prepare and file, or cause to be prepared and filed, with the
appropriate authorities all Tax returns, reports and forms (herein "Tax
Returns") and shall pay, or cause to be paid, when due all Taxes relating to
the Deliverables and the ownership of the Acquired Assets attributable to any
taxable period which ends on or prior to the Effective Date (herein
"Pre-Closing Tax Period"). TRITON shall prepare and file, or cause to be
prepared and filed, with the appropriate authorities all Tax Returns, and shall
pay, or cause to be paid, when due all Taxes relating to the Deliverables
attributable to any taxable period which is not part of the Pre-Closing Tax
Period. If, in order to properly prepare its Tax Returns or other documents
required to be filed with Governmental Authorities or in connection with any
audit by any taxing authority or other examination by any taxing authority or
any judicial or administrative proceeding relating to any liability for Taxes,
it is necessary that a party be furnished with additional information,
documents or records relating to the Deliverables, both IBM and TRITON agree to
use reasonable efforts to furnish or make available such nonprivileged
information at the other's request, cost and expense; provided, however, that
neither party shall be entitled to review or examine the Tax Returns of the
other party.
For purposes of this Section 5.3, in the case of any taxable period that
includes (but does not end on) the Effective Date (a "Straddle Period"), the
Taxes for the portion of the Straddle Period prior to and including the
Effective Date (the "Pre-Effective Date Tax Period") shall be computed as if
the Pre-Effective Date Tax Period ended as of the close of business on the
Effective Date and the amount of Taxes for the portion of the Straddle Period
following the Effective Date shall be the excess, if any, of (x) the Taxes for
the Straddle Period over (y) the Taxes for the Pre-Effective Date Tax Period.
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5.4 Any refunds and credits attributable to the Pre-Closing Tax Period shall
be for the account of IBM and any refunds and credits attributable to the
period which is not part of the Pre-Closing Tax Period shall be for the account
of TRITON.
5.5 All transfer, documentary, sales, use, registration, value-added and any
other similar Taxes (including real estate transfer taxes, conveyance, capital
gains or similar taxes) and related fees incurred in connection with this
Agreement, the Sublease Agreement and the transaction contemplated hereby shall
be borne equally by the Parties. To the extent legally able to do so, TRITON
and IBM shall cooperate with each other to obtain exemptions from such Taxes,
provided that neither party shall be obligated to seek any exemption that would
require any audit by a Governmental Authority of its books and records.
SECTION 6. RESPONSIBILITIES OF IBM
6.1 Within ten (10) days after the Effective Date, IBM shall deliver to
TRITON one copy of the Object Code for the IBM Licensed Software.
6.2 IBM shall establish a single point of contact to facilitate the
assignment process set forth herein.
6.3 IBM shall take such additional actions as TRITON may reasonably request
to effect the delivery of the Acquired Assets. IBM shall execute such documents
and, at TRITON's expense, take such other actions as TRITON may reasonably be
requested to assist TRITON in preserving or perfecting its rights in the
Deliverables or to perfect or evidence the assignment or sale to TRITON of the
Acquired Assets.
6.4 IBM shall file any Notification and Report Forms and related material
that may be required to file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice under the HSR
Act, will use all reasonable efforts to obtain an early termination of the
applicable waiting period, and will make any further filings pursuant thereto
that may be necessary, proper, or advisable in connection therewith.
SECTION 7. RESPONSIBILITIES OF TRITON
7.1 TRITON shall establish a single point of contact to facilitate the
assignment process set forth herein.
7.2 TRITON shall make offers of employment to the Identified Employees and
the Affected Employees within four days after the date of this Agreement under
the condition that such offers must be accepted, contingent upon the
satisfaction of the other conditions to effectiveness of the
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sale and license hereunder as set forth in Section 14, within four days after
such offer or be deemed rejected.
7.3 TRITON shall cause all IBM trademarks, service marks, trade names and
logos, including design variations thereof, to be removed promptly (and no
later than 30 days after the Effective Date) from all facilities and materials
provided to TRITON hereunder which TRITON provides to the public.
7.4 Except with respect to the Third Party Workstation Software, TRITON shall
be responsible for deleting any and all existing third party software from the
Acquired Assets or notifying the owners of the software or obtaining necessary
licenses for such software.
7.5 TRITON shall be responsible for obtaining necessary licenses from the
owners of Unassigned Third Party Software and for any fees associated
therewith.
7.6 TRITON shall file any Notification and Report Forms and related material
that may be required to file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice under the HSR
Act, will use all reasonable efforts to obtain an early termination of the
applicable waiting period, and will make any further filings pursuant thereto
that may be necessary, proper, or advisable in connection therewith.
SECTION 8. LICENSES
8.1 Subject to IBM's receipt of the consideration set forth in Section 4, and
as of the Effective Date, IBM agrees to grant and hereby grants to TRITON a
fully paid-up, worldwide, irrevocable and nonexclusive license to the IBM
Licensed Software to use, reproduce, execute, display, or perform the IBM
Licensed Software, to prepare Derivative Works of the IBM Licensed Software
(subject to IBM's patent rights) and to distribute internally the IBM Licensed
Software and Derivative Works thereof (subject to IBM's patent rights). The
foregoing license does not grant TRITON the right to sublicense the IBM
Licensed Software. Any such Derivative Works shall be owned by TRITON.
8.2 Subject to IBM's receipt of the consideration set forth in Section 4, IBM
agrees to grant and hereby grants to TRITON a fully paid-up and nonexclusive
end-user license to the IBM Workstation Software under IBM's standard terms and
conditions for such Software. Such standard terms and conditions are attached
here as Exhibit 8.2.
8.3 Subject to IBM's receipt of the consideration set forth in Section 4, and
as of the Effective Date, IBM agrees to grant and hereby grants to TRITON a
fully paid-up, worldwide, irrevocable and nonexclusive license, with right of
sublicense (but without any express or implied license under any IBM patent),
to the Other Technology for the purpose of making, using, selling, and
otherwise transferring Broadband Products.
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8.4 IBM hereby reserves, for itself and its Subsidiaries, the right to use the
Residuals of information included in the Deliverable Documentation for any
purpose. The "Residuals" of the information in the Deliverable Documentation
means information of general application or nature, in non-tangible form,
retained in the memories of persons who have had access to it, without further
reference to any material that is written, stored in magnetic, electronic or
physical form, or that is otherwise fixed.
8.5 Subject to IBM's receipt of the consideration set forth in Section 4, and
as of the Effective Date, IBM agrees to grant and hereby grants to TRITON a
fully paid-up, worldwide, irrevocable and non-exclusive license under the
Licensed Patents to make, have made (subject to Section 8.7) for sale by
TRITON, use, sell, offer for sale, import, lease, and otherwise transfer
Broadband Products, provided, however, that no license, express or implied, is
granted to TRITON under the Licensed Patents or any other patent licensable by
IBM, to practice any manufacturing process, including but not limited to
semiconductor manufacturing processes. The license granted under this Section
8.5 does not include the right to sublicense third parties.
8.6 Except as expressly set forth in this Agreement, nothing contained herein
shall be construed as conferring either directly or by implication, estoppel,
or otherwise upon either Party hereunder any license or other right with
respect to any patents or patent applications, trademarks, copyrights, trade
secrets, mask works or other similar intellectual property rights of the other
Party.
8.7 The license granted in Section 8.5 to TRITON to have Broadband Products
made by another manufacturer:
(a) shall only apply when the specifications for such products (other than
the Identified Products) were created by TRITON, either solely or jointly with
one or more third parties; and
(b) shall only be under claims of the Licensed Patents, the infringement of
which would be necessitated by compliance with such specifications.
8.8 In the event that TRITON engages in or suffers any of the following
events:
(a) becomes insolvent, is dissolved or liquidated, files or has filed
against it a petition in bankruptcy, reorganization, dissolution or liquidation
or similar action filed by or against it, is adjudicated as bankrupt, or a
receiver is appointed for its business; or
(b) has all or a substantial portion of its capital stock or assets
expropriated or attached by any government entity;
then TRITON shall offer, on a right of first offer basis, to sell to IBM all
TRITON's ownership interest in and to TRITON's statutory patent rights acquired
from IBM in the patent applications and any issued patents, resulting from the
Invention Disclosures.
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8.9 IBM reserves for itself and its Subsidiaries, a license under the
Invention Disclosures, and all patent applications filed thereon, and patents
issuing therefrom, in any country of the world, a nonexclusive, fully paid-up,
worldwide license to make, have made, use, sell, offer for sale, import, lease,
and otherwise transfer any information handling system product, and to
sublicense those licensees of IBM as of the Effective Date that would have been
required to be licensed under patent applications (and patents issuing
therefrom) filed on the Invention Disclosures if such applications had been
filed by IBM or its Subsidiaries on or before the Effective Date.
8.10 The licenses granted to TRITON hereunder shall be assignable to a
successor in interest to TRITON's Broadband modem business. In such event:
(a) TRITON shall promptly give notice of such acquisition to IBM; and
(b) the license granted to TRITON under Section 8.5 shall not apply to
any products manufactured or sold by such third party following its acquisition
of TRITON that are substantially similar to products it manufactured and sold
prior to acquiring TRITON.
8.11 (a) IBM hereby reserves, for itself and its Subsidiaries, a worldwide,
irrevocable, nonexclusive, and fully paid-up right and license to use,
reproduce, execute, display, perform, create Derivative Works of (subject to
TRITON's patent rights), and distribute the Acquired Software Assets for any
purpose other than the manufacture and sale of Broadband Products.
(b) IBM hereby reserves, for itself and its Subsidiaries, a worldwide,
irrevocable, nonexclusive, and fully paid-up right and license, including the
right to sublicense others, to use, reproduce, execute, display, perform,
create Derivative Works of (subject to TRITON's patent rights), and distribute
the Other Acquired Software Assets for any purpose other than the manufacture
and sale of Broadband Products.
SECTION 9. REPRESENTATIONS AND WARRANTIES OF IBM
Except as otherwise set forth on the Schedule of Disclosures and Exceptions
attached hereto:
9.1 IBM represents and warrants that it has the full right, power, legal
capacity and authority to enter into this Agreement, to perform the
transactions contemplated hereunder and to grant the rights and licenses
granted hereunder and all such actions have been duly authorized by all
necessary corporate proceedings on its part. This Agreement has been duly and
validly executed and delivered by IBM and constitutes the legal, valid and
binding obligation of it and is enforceable against IBM in accordance with its
terms and conditions.
9.2 IBM is a duly incorporated and validly existing corporation in good
standing under the laws of the State of New York, with all requisite corporate
power and authority to own its properties and conduct its business.
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9.3 The execution and delivery by IBM of this Agreement does not, and the
performance by IBM of its obligations hereunder will not:
(a) conflict with, or result in a breach of, any of the provisions of
IBM's Articles of Incorporation or By-laws;
(b) on IBM's part, breach, violate or contravene any Governmental
Rule, or create any right of termination or acceleration or encumbrance against
IBM, that, singly or in the aggregate, would have a material adverse effect on
IBM's authority or ability to perform its obligations under this Agreement; and
(c) on IBM's part, conflict in any respect with, or result in a breach
of or default under, any contract, license, franchise, permit or any other
agreement or instrument to which IBM is a party or by which IBM or any of the
Deliverables may be bound that, singly or in the aggregate, would have a
material adverse effect on the Deliverables or IBM's authority or ability to
perform its obligations under this Agreement (except for agreements and
instruments that require the consent or approval of a third party for the
transactions contemplated by this Agreement).
9.4 Other than compliance with the HSR Act pre-notification requirements, no
material consent, approval or authorization of, or designation, declaration or
filing with, any Governmental Authority on the part of IBM is required in
connection with the execution or delivery by IBM of this Agreement or the
consummation by IBM of the transactions contemplated herein.
9.5 IBM has and will convey good and marketable title to all Acquired
Assets, free and clear of any liens and encumbrances other than Permitted Liens
and other than the Assumed Liabilities, provided however that IBM will remain
responsible for costs associated with Permitted Liens that are not otherwise
included within the Assumed Liabilities. Provided, however, that IBM is not
currently the owner of the Teradyne Tester that appears on the schedules to
this Agreement. This tester is currently owned by a third party and leased to
IBM. Immediately prior to closing, IBM will buy out the remaining period of
that lease and obtain title to that tester.
9.6 Except as set forth on Schedule 9.6, there are no actions, suits,
proceedings or investigations pending or, to the Knowledge of IBM, threatened
in a writing to IBM against or directly affecting the Acquired Assets, at law
or in equity, including any administrative proceedings or condemnation actions
with any Governmental Authority. IBM has not received any written claim made by
a third party prior to the date of this Agreement that IBM's marketing and sale
of the Identified Products infringed any patent, copyright, trade secret, or
trademark of such third party, except as identified in Section 9.6. The
manufacture, use and sale of the Identified Products by TRITON after the
closing, in substantially the same manner as conducted by IBM prior to the
closing, does not violate any third party non-patent intellectual property
right (but not including any third party non-patent intellectual property right
in the Unassigned Third
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Party Software) and, to the Knowledge of IBM, does not violate any third party
patent rights, except as identified in Schedule 9.6.
9.7 IBM has performed or is performing all material obligations required to
be performed by it under the Acquired Contracts and is not, (with or without
notice, lapse of time or both) in breach or default in any material respect
thereunder.
9.8 To the Knowledge of IBM, no representation petition has been filed with
the National Labor Relations Board and, to the Knowledge of IBM, no union card
signing campaign is in progress at any IBM facility concerning the Affected
Employees. There is not any, and during the past 12 months there has not been
any, labor strike, work stoppage or lockout with respect to the Affected
Employees.
9.9 IBM has provided Triton with an accurate statement of IBM's book value of
the Inventory, Furniture, Fixtures and Equipment that existed on IBM's books,
as of January 31, 2000, of the Inventory, Furniture, Fixtures and Equipment.
9.10 Except for the express representations and warranties made by IBM in
this Section 9, the Deliverables are sold, licensed or otherwise transferred
hereunder "as is" without warranty of any kind, express or implied, including,
but not limited to the implied warranties of merchantability and fitness for a
particular purpose, and IBM shall not have any liability in respect of any
infringement of any intellectual property rights of third parties due to
TRITON's use of the Acquired Contracts, Identified Products, Acquired Software
Assets, Other Acquired Software Assets, Invention Disclosures or the IBM
Technology or operation under the rights and licenses herein granted. Without
limiting the foregoing, IBM makes no representations or warranties concerning
the ability of the IBM Licensed Software, IBM Workstation Software, Acquired
Software Assets, Other Acquired Software Assets, or Third Party Workstation
Software to process, provide or represent date data in and between the
twentieth and twenty-first centuries.
9.15 IBM has good and marketable title to the Acquired Assets, free and clear
of all Security Interests or restriction on transfer.
9.16 To the Knowledge of IBM, IBM and its Subsidiaries have complied with all
applicable laws in connection with the Acquired Assets.
9.17 IBM has delivered to TRITON a correct and complete copy of each written
agreement, including any amendments, modifications or extensions, listed in
Schedule 1B and Schedule 1M. With respect to each such agreement, to the
Knowledge of IBM: (a) the agreement is legal, valid, binding, enforceable, and
in full force and effect; (b) no party is in breach or default, and no event
has occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under the
agreement; and (c) no party has repudiated any provision of the agreement.
9.18 To the Knowledge of IBM, each Identified Product has been in conformity
with all applicable contractual commitments and all express and implied
warranties, except as set forth in
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Schedule 9.18, there are no pending or, to the Knowledge of IBM, threatened
claims for the breach of any express or implied warranty made with respect to
the Identified Products.
9.19 IBM has provided to TRITON the names and location of employment of all
employees employed in connection with the Identified Products as of the date of
this Agreement (the "Affected Employees"), including all Affected Employees on
leave for any reason, and their current annual compensation, including variable
elements such as long term incentive plans, stock option (including vesting
schedules and exercise prices); date of birth; sex; date of employment;
positions and rate of vacation accrual as of the date of this Agreement; and
accrued vacation as of the payroll date immediately preceding the date of this
Agreement.
9.20 IBM does not have any Employee Benefit Plan as that term is defined in
the Employee Retirement Income Security Act of 1974, that will result in any
liability to TRITON for such Employee Benefit Plan.
9.21 To the Knowledge of IBM, IBM is not a party to or bound by any
collective bargaining agreement, nor has any of them experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes relating to the Affected Employees. To the Knowledge of IBM, there is
no organizational effort presently being made by or on behalf of any labor
union with respect to the Affected Employees.
9.22 The tangible assets included within the Acquired Assets have been
maintained in accordance with IBM's normal maintenance procedures and, as a
whole, are substantially in good working order and condition, subject to normal
wear and tear. The Teradyne Catalyst tester identified in Schedule 1A is in
good working order and condition, subject to normal wear and tear, and has been
maintained in accordance with the manufacturer's warranty requirements.
9.23 The intellectual property rights included within the Deliverables and
the licenses set forth in this Agreement and the EDA Program Agreement include
all intellectual property rights owned by IBM that would be infringed by the
design, manufacture, use or sale of the Identified Products as they exist on
the Effective Date other than integrated circuit manufacturing processes.
9.24 Binding Obligation. The Investors Rights Agreement, when executed and
delivered by IBM, will constitute a valid and legally binding obligation of
IBM, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, or other laws of general
application relating to or affecting enforcement of creditors' rights and to
the availability of the remedy of specific performance.
9.25 Investment Intent. IBM is acquiring the Shares and the Common Stock
issuable on conversion of the Shares (the "Conversion Shares") for investment
for its own account, not as a nominee or agent, and not with the view to, or
for resale in connection with, any distribution thereof. IBM understands that
the Shares and the Conversion Shares have not been, and will not be, registered
under the Act by reason of a specific exemption from the registration
provisions of
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the Securities Act of 1933, the availability of which depends upon, among other
things, the bona fide nature of the investment intent and the accuracy of the
IBM's representations.
9.26 Discussion. IBM has had an opportunity to discuss TRITON's business,
management and financial affairs with TRITON's management and has also had an
opportunity to ask questions of TRITON's officers, which questions were
answered to IBM's satisfaction.
9.27 Assets. To the Knowledge of IBM, the Acquired Assets transferred under
this Agreement include all of the material tangible assets that IBM currently
uses to carry on the operations acquired from IBM under this Agreement, other
than foundry and other services covered in separate agreements.
9.28 To the Knowledge of IBM, the software being transferred or licensed to
Triton includes the material software that IBM currently uses directly in the
development and manufacturing of the Identified Products, other than the
Unassigned Third Party Software.
9.29 To the Knowledge of IBM, the Comquest Confidential Information and
Invention Assignment Agreement or the IBM Agreement Regarding Confidential
Information, Intellectual Property, and Other Matters has been signed by all
IBM employees who developed IBM's intellectual property in the Invention
Disclosures, Acquired Software Assets, Other Acquired Software Assets, Board
Design, Deliverable Documentation, and the Masks, and IBM has provided copies
of such agreements for Triton's review.
9.30 Schedule 1H includes an accurate list of the inventory owned by IBM and
used in the operations being acquired by TRITON, as of January 31, 2000. Since
January 31, 2000, items have been added to and withdrawn from Inventory only in
the ordinary course of business.
SECTION 10 Reserved
SECTION 11 REPRESENTATIONS AND WARRANTIES OF TRITON
11.1 Organization and Standing; Certificate and Bylaws. TRITON is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. TRITON has all requisite corporate power and
authority to own and operate its properties and assets and to carry on its
business as presently conducted and as proposed to be conducted. TRITON is
qualified to do business and is in good standing as a foreign corporation in
every jurisdiction in which the failure to be so qualified would have a
material adverse effect on TRITON's business as now conducted or as proposed to
be conducted.
11.2 Corporate Power; Conflict. TRITON has all requisite legal and corporate
power to execute and deliver this Agreement and the Investors Rights Agreement,
to sell and issue the Shares hereunder, to issue the Common Stock and other
securities issuable upon conversion of the Shares, and to carry out and perform
its obligations under the terms of this Agreement and
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the Investors Rights Agreement. The execution and delivery by TRITON of this
Agreement does not, and the performance by TRITON of its obligations hereunder
will not: (i) conflict with, or result in a breach of, any of the provisions of
its Amended and Restated Certificate of Incorporation or By-laws; (ii) breach,
violate or contravene any Governmental Rule, or create any right of termination
or acceleration or encumbrance, that, singly or in the aggregate, would have a
material adverse effect on its authority or ability to perform its obligations
under this Agreement; or (iii) conflict in any respect with, or result in a
breach of or default under, any contract, license, franchise, permit or any
other agreement or instrument to which it is a party or by which it or any of
its properties may be affected or bound that, singly or in the aggregate, would
have a material adverse effect on its authority or ability to perform its
obligations under this Agreement
11.3 Capitalization. As of February 28, 2000, the authorized capital stock of
TRITON consists of 66,500,000 shares of Common Stock and 43,205,000 shares of
Preferred Stock, 14,400,000 which are designated as Series A Preferred Stock,
13,200,000 of which are designated Series B Preferred Stock and 15,605,000 of
which are designated Series C Preferred Stock. Triton is currently soliciting a
consent from its' shareholders approving the increase in Triton's authorized
shares of Common and Preferred Stock by 53,500,000 and 10,000,000 shares,
respectively. Triton's audited financial statements for the year ended December
31, 1999 accurately state Triton's capitalization, including shares, options
and warrants, as of December 31, 1999.
11.4 Subsidiaries. Other than a wholly-owned subsidiary incorporated in
Nevada, TRITON has no subsidiaries or affiliated companies and does not
otherwise own or control, directly or indirectly, any equity interest in any
corporation, association or business entity. TRITON is not a participant in any
joint venture, partnership or similar arrangement.
11.5 Authorization. All corporate action on the part of TRITON, its officers,
directors and stockholders necessary for the authorization, execution, delivery
and performance by TRITON of this Agreement and the Investors Rights Agreement,
the authorization, issuance, sale and delivery of the Shares and the Common
Stock issuable on conversion of the Shares , and the performance of all of
TRITON's obligations under this Agreement and the Investors Rights Agreement
has been taken or will be taken prior to the Closing. This Agreement and the
Investors Rights Agreement, when executed and delivered by TRITON, shall
constitute valid and legally binding obligations of TRITON enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general application
relating to or affecting enforcement of creditors' rights and to the
availability of the remedy of specific performance. The Shares, when issued in
compliance with the provisions of this Agreement, and the Common Stock issuable
on conversion of the Shares will be validly issued, fully paid and
nonassessable, and will have the rights, preferences and privileges described
in the Restated Certificate; and the Shares and the Conversion Stock will be
free of any restrictions on transfer, liens or encumbrances, other than any
liens or encumbrances created by or imposed upon the holders; provided,
however, that the Shares and the Conversion Stock may be subject to
restrictions on transfer under applicable securities laws as set forth
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herein. The Shares are not subject to any preemptive rights or rights of first
refusal that have not been duly waived.
11.7 Title to Properties and Assets. TRITON owns its properties and assets,
and has good title to all its leasehold interests, in each case subject to no
mortgage, pledge, lien, lease (or sublease), loan, encumbrance or charge,
except (i) the lien of current taxes not yet due and payable, and (ii) possible
minor liens and encumbrances which do not in any case or in the aggregate
materially detract from the value of the property subject thereto or materially
impair TRITON's operations, and which have not arisen otherwise than in the
ordinary course of business. Substantially all of TRITON's fixed assets are
subject to equipment lease arrangements. With respect to property it leases,
TRITON is in compliance with such leases, and, holds a valid leasehold
interest, free of any liens, claims or encumbrances, subject to (i) and (ii)
above.
11.8 Patents, Trademarks. To the knowledge of TRITON, TRITON owns or
possesses all legal right, title to, and ownership of all patents, patent
applications, licenses, trademarks, service marks, trade names, inventions,
franchises, copyrights, trade secrets, information and other proprietary rights
necessary for the operation of its business as now conducted and that, after
reasonable investigation, it believes are necessary for the operation of its
business as proposed to be conducted. Triton's business, as currently
conducted, does not infringe or conflict with the non-patent rights of others
and, to Triton's knowledge, there is no infringement or conflict with the
patent rights of others. TRITON has not violated, or by conducting its business
as proposed, would not violate any of the trademarks, service marks, trade
names, copyrights, trade secrets or other proprietary rights or processes of
any other person or entity. TRITON has disclosed, as an exception to the
representations in this paragraph and paragraph 11.10, the existing dispute
over trademark rights to the TRITON trademark.
11.9 Compliance with Other Instruments, None Burdensome. TRITON is not in
violation or default of any term of (i) its Certificate of Incorporation or
Bylaws, (ii) in any material respect of any material contract, agreement,
mortgage, indebtedness, indenture or instrument of TRITON or (iii) any
judgment, decree, order or, to the best of TRITON's knowledge, after reasonable
investigation, any statute, rule or regulation applicable to TRITON.
11.10 Litigation. There is no action, suit, proceeding or investigation
pending or currently threatened against TRITON that questions the validity of
this Agreement or the Investors Rights Agreement or the right of TRITON to
enter into such agreements, or to consummate the transactions contemplated
hereby or thereby, or that might result, either individually or in the
aggregate, in any material adverse change in the assets, business, properties,
prospects, or financial condition of TRITON, or in any change in the current
equity ownership of TRITON. The foregoing includes, without limitation, any
action, suit, proceeding, or investigation pending or currently threatened
involving the prior employment any of TRITON's employees, their use in
connection with TRITON's business of any information or techniques allegedly
proprietary to any of their former employees, their obligations under any
agreements with prior employers, or negotiations by TRITON with potential
backers of, or investors in, TRITON or its proposed business. TRITON is not a
party to or named in or subject to any order, writ, injunction, judgment, or
decree of any court, government agency, or instrumentality. There is no action,
suit,
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proceeding or investigation by TRITON currently pending or that TRITON
currently intends to initiate.
11.11 Tax Returns. As of the date hereof, TRITON has accurately and timely
filed or obtained extensions for all federal, state and other tax returns and
reports (federal, state and local) which are required to be filed and has paid
all taxes and assessments which have become due and payable in connection
therewith. These returns and reports are true and correct in all material
respects. None of its returns, federal, state or other, have been or are being
audited as of the date thereof. TRITON has never had any tax deficiency
proposed or assessed against it and has not executed any waiver of any statute
of limitations on the assessment or collection of any tax or governmental
charge. Since the date of the Financial Statements (as defined below), TRITON
has made adequate provisions on its books of account for all taxes,
assessments, and governmental charges with respect to its business, properties,
and operations for such period. TRITON has withheld or collected from each
payment made to each of its employees, the amount of all taxes, including but
not limited to, federal income taxes, Federal Insurance Contribution Act taxes
and Federal Unemployment Tax Act taxes required to be withheld or collected
therefrom, and has paid the same to the proper tax receiving officers or
authorized depositories.
11.12 Employees. TRITON has no collective bargaining agreements with any of
its employees and there is no labor union organizing activity pending or
threatened with respect to TRITON. None of TRITON's employees belongs to any
union or collective bargaining unit. Triton does have an incentive compensation
plan for officers and certain other key employees, and has a sales commission
plan for sales personnel. Triton has an employee 401(k) plan. TRITON has
complied with all applicable state and federal equal opportunity and, to the
best of TRITON's knowledge, other laws related to employment. To TRITON's
knowledge, no employee of TRITON is or will be in violation of any judgment,
decree, or order, or any term of any employment contract, patent disclosure
agreement or other contract or agreement relating to the relationship of any
such employee with TRITON or any other party because of the nature of the
business conducted or to be conducted by TRITON or to the use by the employee
of his best efforts with respect to such business. TRITON is not aware that any
officer or key employee, or that any group of key employees, intends to
terminate their employment with TRITON. Triton's Vice President of Operations
has resigned and will be leaving Triton in the near future. Subject to general
principles related to wrongful termination of employees, the employment of each
officer and employee of TRITON is terminable at the will of TRITON. All
employees and consultants of TRITON have entered into a standard employee
proprietary information agreement with TRITON, and TRITON is not aware that any
of such employees is in violation thereof.
11.13 Employee Benefit Plans. TRITON does not have any Employee Benefit Plan
as defined in the Employee Retirement Income Security Act of 1974.
11.14 Securities Law Exemption. Subject to the accuracy of IBM's
representations in this Agreement, the offer, sale and issuance of the Shares
and the issuance of the Conversion Stock constitute transactions exempt from
registration under the Securities Act of 1933, as amended
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(the "Act"), and have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws and neither TRITON nor any
authorized agent acting on its behalf will take any action hereafter that would
cause the loss of such exemption.
11.15 Brokers or Finders. TRITON has not incurred, and will not incur, directly
or indirectly, as a result of any action taken by or on behalf of TRITON, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or the Investors Rights Agreement or
the transactions contemplated herein or therein.
11.16 Disclosure. To TRITON's knowledge, there are no facts which (individually
or in the aggregate) materially adversely affect the business, assets,
liabilities, financial condition, prospects or operations of TRITON that have
not been set forth in this Agreement, the Exhibits hereto or the Investors
Rights Agreement or in the other documents delivered to IBM or its attorneys or
agents in connection herewith.
11.17 Financial Statements. TRITON has delivered to IBM its audited financial
statements as of December 31, 1999 and the twelve months then ended (the
"Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated and with each other The
Financial Statements fairly present the financial condition and operating
results of TRITON as of the dates, and for the periods, indicated therein.
11.18 Permits. TRITON has all franchises, permits, licenses, and any similar
authority necessary for the conduct of its business as now being conducted by
it, and TRITON believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
TRITON is not in default under any such franchises, permits, licenses or other
similar authority.
11.19 Environmental Compliance. TRITON's business as currently conducted and as
proposed to be conducted does not violate, and will not result in any violation
of, any applicable statute, law, or regulation relating to the environment or
occupational health and safety. To its knowledge, no material expenditures are
or will be required in order to comply with such existing statute, law or
regulation.
11.20 Insurance. TRITON has in full force and effect fire and casualty
insurance policies, with extended coverage, sufficient in amount (subject to
reasonable deductibles) to allow it to replace any of its properties that might
be damaged or destroyed.
11.21 Changes. Since December 31, 1999, there has not been any event or
condition of any type that has had or is expected to have a material adverse
effect on the business, properties, prospects, or financial conditions of
TRITON.
11.22 Other than compliance with the HSR Act pre-notification requirements, no
material consent, approval or authorization of, or designation, declaration or
filing with, any
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Governmental Authority on the part of TRITON is required in connection with the
execution or delivery by TRITON of this Agreement or the consummation by TRITON
of the transactions contemplated herein.
11.23 Triton represents and warrants that it is not engaged in any discussions
regarding a possible private equity financing (including convertible debt) or
acquisition or other issuance of its equity, other than the issuance of stock
options to employees in the ordinary course of business and other than the
possibility of a potential initial public stock offering. Except for the
acquisition of assets from IBM and as stated above, Triton has no current plans
to issue more of its equity prior to the Closing of this transaction. If,
however, circumstances change and, prior to the Effective Date of this
Agreement, Triton does enter into an agreement providing for an equity
financing or an acquisition in which Triton issues shares of its common stock
or securities exercisable for or convertible into common stock, or otherwise
issues such securities, and if the purchase price of such securities is less
than $12 (twelve dollars) per common stock equivalent, then Triton will, at the
Closing, issue without additional consideration from IBM an additional number
of shares to IBM equal to approximately 8.8% of the "Dilutive Shares" issued or
issuable in such event (excluding stock options to employees in the ordinary
course of business). For this purpose, "Dilutive Shares" will equal the amount
by which the total number of common stock equivalents issued or issuable in
such events exceed a number equal to the total consideration paid or payable
for such shares by the receiving parties to such events, divided by $12 (twelve
dollars); if no consideration is paid or payable then all of such common stock
equivalents will be considered to be "Dilutive Shares". In the event of a stock
split or a reverse stock split of Triton's Series C preferred stock prior to
Closing, there will be a proportional adjustment in the number of shares issued
to IBM.
SECTION 12 RESTRICTIONS ON TRANSFERABILITY OF SHARES
12.1 Restrictions on Transferability. The Shares and the Conversion Shares
shall not be sold, assigned, transferred or pledged except upon the conditions
specified in this Section 12, which conditions are intended to ensure
compliance with the provisions of the Securities Act of 1933.
12.2 Restrictive Legend. Each certificate representing (i) the Shares, (ii) the
Conversion Shares and (iii) any other securities issued in respect of the
Shares or the Conversion Shares upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event (hereinafter
collectively referred to as the "Restricted Securities"), shall (unless
otherwise permitted by the provisions of Section 12.3 below) be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED
UNDER THE LAWS OF ANY STATE. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR SUCH
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QUALIFICATION UNLESS THE TRANSFER IS IN ACCORDANCE WITH RULE 144 OR SIMILAR
RULE OR UNLESS TRITON RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO
IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES
AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
IBM and each subsequent transferee (hereinafter collectively referred to as a
"Holder") consents to TRITON making a notation on its records and giving
instructions to any transfer agent of the Shares or the Conversion Shares in
order to implement the restrictions on transfer established in this Section 12.
12.3 Notice of Proposed Transfers. Each Holder of a certificate representing
Restricted Securities by acceptance thereof agrees to comply in all respects
with the provisions of this Section 12.3. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities (other than (i) a
transfer not involving a change in beneficial ownership, (ii) in transactions
involving the distribution without consideration of Restricted Securities by a
Holder to any of its partners, or retired partners, or to the estate of any of
its partners or retired partners, (iii) a transfer to an affiliated fund,
partnership or TRITON, subject to compliance with applicable securities laws or
(iv) transfers in compliance with Rule 144, so long as TRITON is furnished with
reasonably satisfactory evidence of compliance with such Rule), unless there is
in effect a registration statement under the Act covering the proposed
transfer, the Holder thereof shall give written notice to TRITON of such
Holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied, at the reasonable request of TRITON at such Holder's expense by
either (i) an opinion of counsel (who shall, and whose opinion shall be,
addressed to TRITON and reasonably satisfactory to TRITON) to the effect that
the proposed transfer of the Restricted Securities may be effected without
registration under the Act or (ii) a "no action" letter from the Securities and
Exchange Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the Holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by such Holder to TRITON.
Each certificate evidencing the Restricted Securities transferred as above
provided shall bear, except if such transfer is made pursuant to Rule 144, the
appropriate restrictive legend set forth in Section 12.2 above, except that
such certificate shall not bear such restrictive legend if in the opinion of
counsel for such Holder and in the opinion of counsel for TRITON such legend is
not required in order to establish compliance with any provision of the Act.
12.4 Removal of Restrictions on Transfer of Securities. Any legend referred to
in Section 12.2 hereof stamped on a certificate evidencing (i) the Shares, (ii)
the Conversion Shares or (iii) any other securities issued in respect of the
Shares or the Conversion Shares upon any stock split,
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stock dividend, recapitalization, merger, consolidation or similar event and
the stock transfer instructions and record notations with respect to such
security shall be removed and TRITON shall issue a certificate without such
legend to the Holder of such security if such security is registered under the
Act, or if such Holder provides TRITON with an opinion of counsel (which may be
counsel for TRITON) reasonably satisfactory to TRITON to the effect that a
public sale or transfer of such security may be made without registration under
the Act or such Holder provides TRITON with reasonable assurances, which may,
at the option of TRITON, include an opinion of counsel (which may be counsel
for TRITON) reasonably satisfactory to TRITON, that such security can be sold
pursuant to Rule 144(k) (or any successor provision) under the Act.
SECTION 13 CONSENTS AND SUBROGATED WORK
TRITON and IBM shall use reasonable efforts to obtain, between the date of
signing of this Agreement and the Effective Date, all requisite consents to
assignments of all of the Assumed Liabilities. For any Assumed Liabilities for
which IBM has any secondary liability to third parties, TRITON shall provide
IBM reasonable access and information in order for IBM to ascertain continuing
compliance by TRITON with all such contract terms and conditions. If any such
required consents cannot be secured without the incurring of any significant
additional costs, where additional action is deemed necessary by either Party,
the Parties agree to enter into such other arrangements with respect to the
underlying rights and obligations as shall permit TRITON to perform the
obligations of IBM thereunder, as a subcontractor or otherwise, and TRITON to
obtain the benefit thereof (the "Subrogated Work"); and until the requisite
consents are obtained, such obligations will not be deemed to be included in
the Assumed Liabilities and nothing contained herein will be deemed to create
an obligation or relationship that would constitute a breach of the contract
underlying such rights and obligations. TRITON agrees to diligently perform and
discharge the obligations of IBM in connection with the Subrogated Work
directly, or indirectly through IBM, as applicable; and to the extent that
consents to assignment are obtained after the Effective Date, the Parties agree
that such obligations will no longer be considered to be Subrogated Work at
such time, but will instead be deemed to be Assumed Liabilities for all
purposes of this Agreement.
SECTION 14. CONDITIONS TO EFFECTIVENESS OF SALE AND LICENSES; POST CLOSING
COVENANTS
14.1 The respective obligation of each Party to consummate the transactions
contemplated hereby shall be subject to the fulfillment on or prior to the
Effective Date of the following conditions:
(a) all applicable HSR Act waiting periods shall have expired or been
terminated or appropriate approval granted;
(b) all other consents or approvals, orders, licenses, permits and
authorizations of, and registrations, declarations and filings with, any
Governmental Authority, if any, that are required
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by applicable law to be obtained by the parties prior to consummation of the
transactions contemplated hereby shall have been obtained and be in full force
and effect; and
(c) neither of the parties hereto shall be subject to any order or
injunction of a Governmental Authority which prohibits the consummation of the
transactions contemplated by this Agreement.
14.2 The obligations of IBM to consummate the transactions contemplated hereby
shall be subject to the fulfillment on or prior to the Effective Date of the
following additional conditions:
(a) the payment by TRITON of the consideration referred to in Section
4.1;
(b) TRITON shall have performed in all material respects its agreements
and covenants contained in this Agreement required to be performed on or prior
to the Effective Date; and
(c) the representations and warranties of TRITON contained in this
Agreement shall be true and correct in all material respects as of the date
made and (unless made as of specified date) as of the Effective Date.
(d) the consents set forth on Schedule 14.3(c) shall have been
obtained;
14.3 The obligations of TRITON to consummate the transactions contemplated
hereby shall be subject to the fulfillment on or prior to the Effective Date of
the following additional conditions:
(a) IBM shall have performed in all material respects its agreements
and covenants contained in this Agreement required to be performed on or prior
to the Effective Date;
(b) the representations and warranties of IBM contained in this
Agreement shall be true and correct in all material respects as of the date
made and (unless made as of specified date) as of the Effective Date; and
(c) the consents set forth on Schedule 14.3(c) shall have been
obtained;
14.4 The required number of the Identified Employees, as set forth on Schedule
1D, shall have continued to be IBM employees and shall have accepted Triton's
offer of employment made pursuant to Section 7, and eighty percent (80%) of the
Affected Employees shall have continued to be IBM employees and shall have
accepted Triton's offer of employment made pursuant to Section 7.
14.5 During the period between signing of the Agreement and the Effective
Date, (i) IBM will not, and will not cause or permit any director or officer
to, engage in any practice, take any action, or enter into any transaction with
respect to the Acquired Assets that is outside the Ordinary Course of Business,
(ii) IBM will make commercially reasonable efforts to preserve intact the base
of Affected Employees and the Acquired Assets, and (iii) IBM will continue
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performing the Acquired Contracts and, including the building of products and
the replenishing of inventory in the ordinary course of business for such
Acquired Contracts.
14.6 IBM agrees to execute documents, render such assistance, and take such
other actions as TRITON may reasonably request, to assist TRITON to apply for,
register, perfect, confirm and protect TRITON's rights in the intellectual
property rights acquired by TRITON under this Agreement.
14.7 During the period extending for two (2) years from the date of this
Agreement, neither party shall solicit for employment purposes those employees
of the other Party who have been associated with the discussions relating to
this Agreement or the Affected Employees. This Agreement does not in any manner
restrict general solicitations for employment or hiring as a result thereof,
nor the right of any employee of either Party on his or her own initiative or
in response to general solicitations to seek employment from the other Party.
SECTION 15. LIMITATION OF LIABILITY
15.1 IBM shall not be liable for any amounts with respect to the breach of a
representation or warranty hereunder unless and until such amounts shall exceed
in the aggregate one hundred thousand dollars ($100,000) (the "Limitation
Amount") (in which case IBM shall only be liable with respect to the excess
over the Limitation Amount). There shall be no IBM liability with respect to
any such matter for individual amounts of less than seven thousand five hundred
dollars ($7,500) and such amounts shall not be taken into account in
determining whether the Limitation Amount has been exceeded. In no event shall
IBM's liability with respect to the breach of representations, warranties and
covenants hereunder exceed ten million ($10,000,000) dollars in the aggregate.
Neither IBM nor TRITON shall be responsible for any indirect, incidental,
punitive, special or consequential damages whatsoever, including loss of
profits or goodwill, even if advised of the possibility of such damages.
Notwithstanding the foregoing, nothing shall limit IBM's liability for breaches
of Section 5 hereof.
15.2 Indemnification. (a) IBM shall indemnify and hold TRITON harmless from and
against all losses, liabilities, claims and damages (including reasonable
attorney's fees) (collectively "Damages") resulting from the ownership or
conduct prior to the Closing of the Acquired Assets or the operations being
acquired by Triton, including warranty obligations for products shipped prior
to the Closing, but excluding the Assumed Liabilities.
(b) Triton shall indemnify and hold IBM harmless from and against all
Damages resulting from (i) the ownership or conduct after the Closing of the
Acquired Assets or the operations being acquired by Triton or (ii) the Assumed
Liabilities.
(c) In the event of a third party claim, the party seeking
indemnification under this Section (the "Indemnitee") shall give prompt written
notice to the party from whom indemnification is sought (the "Indemnitor") but
no later than thirty days after service of process in the event of litigation
or sixty days after written assertion of a claim is received by the Indemnitee.
The Indemnitor shall (with, if necessary, reservation of rights) defend such
action or proceeding at its
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own expense with counsel of its choosing. The Indemnitor shall keep the
Indemnitee fully appraised at all times of the status of the defense, shall
consult with the Indemnitee prior to settlement of any indemnified matter, and
shall not, without the Indemnitee's consent, which shall not be unreasonably
withheld, enter any settlement of the indemnified matter that does not include
a full release of the Indemnitee.
SECTION 16. COMMUNICATIONS
16.1 Notices and other communications shall be sent by receipted facsimile or
by registered or certified mail to the following addresses and shall be
effective (i) on the third day after mailing, by United States mail, first
class, postage prepaid, by certified or registered mail, return receipt
requested, addressed in each case as follows (or to such other address as may
be specified by like notice) or (ii) if and when received by facsimile at the
phone number listed below (or to such other phone number as may be specified by
like notice):
<TABLE>
<S> <C>
For IBM: For TRITON:
Director of Licensing Senior VP and CFO
IBM Corporation Triton Network Systems, Inc.
North Castle Drive 8529 South Park Circle
Armonk, New York 10504-1785 Orlando, FL 32819
Facsimile: (914) 765-1785 Facsimile: (407) 903-0994
</TABLE>
16.2 All correspondence shall reference the Agreement Reference No. set forth
above.
SECTION 17. GENERAL PROVISIONS
17.1 All representations, warranties or covenants made by the Parties in this
Agreement or in any schedule, document, certificate or other instrument
delivered by or on behalf of the Parties pursuant to this Agreement shall
survive for a period of twelve (12) months following the Effective Date, other
than Section 9.6, which shall survive for a period of twenty four months (24),
and other than Section 9.23, which shall survive as long as the intellectual
property rights referred in Section 9.23 remain enforceable.
17.2 Neither Party will provide to the other Party any confidential
information of any third party unless authorized by the third party.
17.3 Nothing in this Agreement shall be construed as conferring any right to
use in advertising, publicity or promotional or other external activities any
name, trade name, trademark or other designation of either Party hereto
(including any contraction, abbreviation or simulation of any of the
foregoing).
17.4 TRITON and IBM agree to issue the press release attached as Schedule
17.4 as soon as practicable after execution of the this Agreement announcing
this transaction. No other public announcement, press releases or similar
publicity or advertising of any nature relating to this
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Agreement or the transactions hereunder shall be issued by either Party without
the prior written consent of both Parties, except as required by law such as
any filings required by the Securities and Exchange Commission, provided that
the other Party is provided with prior notice of and a right to object to the
content of such public announcement, press release or similar publicity or
advertising.
17.5 Nothing in this Agreement shall be construed to limit the right of
either Party, alone or with others, to design, develop, make, procure, market,
maintain or otherwise deal in products or services, now or in the future, which
may constitute competitive alternatives to the technology and products
contemplated by this Agreement.
17.6 Each Party is an independent contractor. Neither Party is, nor shall
claim to be, a legal representative, partner, franchisee, joint venturer, agent
or employee of the other. Neither Party will assume or create obligations for
the other. Each Party is responsible for the direction and compensation of its
employees.
17.7 This Agreement shall in all respects be governed by and construed
exclusively in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State without regard
to any conflict of laws principles of such State. The United Nations'
Convention on International Sale of Goods shall not apply to this Agreement.
17.8 Each Party waives, to the fullest extent permitted by applicable law,
any right it may have to a trial by jury in respect of any action, suit or
proceeding arising out of or relating to this Agreement.
17.9 Each Party hereby irrevocably and unconditionally, in any action, suit,
or proceeding:
(a) submits, for itself and its property, to the exclusive jurisdiction
of any Delaware State court sitting in the State of Delaware or any
federal court of the United States of America sitting in the State of
Delaware and any appellate court from any such court, in any suit,
action or proceeding arising out of or relating to this Agreement, or
for recognition or enforcement of any judgment, and each Party hereby
irrevocably and unconditionally agrees that all claims in respect of any
such suit, action or proceeding may be heard and determined in such
Delaware State court or, to the extent permitted by law, in such federal
court.
(b) waives, to the fullest extent it may legally and effectively do so,
any objection which it may now or hereafter have to the laying of venue
of any suit, action or proceeding arising out of or relating to this
Agreement in any Delaware court sitting in the State of Delaware or any
federal court sitting in the State of Delaware.
(c) waives, to the fullest extent permitted by law, the defense of any
inconvenient forum to the maintenance of such suit, action or proceeding
in any such court and further waives
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the right to object, with respect to such suit, action or proceeding,
that such court does not have jurisdiction over such Party.
(d) consents to service of process in the manner provided for the giving
of notices pursuant to this Agreement. Nothing in this Agreement shall
affect the right of any Party to this Agreement to serve process in any
other manner permitted by law.
17.10 Neither Party will bring a legal action relating to the subject matter
of this Agreement more than two (2) years after the cause of action
arose.
17.11 Any failure or delay on the part of either Party in the exercise of any
right or privilege hereunder shall not operate as a waiver thereof, nor
shall any single or partial exercise of any such right or privilege
preclude other or further exercise thereof or of any other right or
privilege. All waivers and consents, if any, given hereunder shall be in
writing.
17.12 Except as expressly provided herein, neither Party shall assign this
Agreement nor any of its rights, interests, privileges, licenses or
obligations hereunder without the other Party's prior written
permission. TRITON may assign this Agreement to a successor in interest
to its Broadband Products modem business subject to the limitations set
forth in Section 8.10. Any act in derogation of the foregoing shall be
null and void.
17.13 The headings of Sections in this Agreement are inserted for convenience
of reference only and are not intended to be a part of, or to affect the
meaning or interpretation of, this Agreement.
17.14 In the event that any provision of this Agreement is found to be
invalid, voidable or unenforceable by any court of law with competent
jurisdiction, the Parties agree that unless it materially affects the
entire intent and purpose of this Agreement, such invalidity,
voidability or unenforceability shall not affect either the validity of
this Agreement or the remaining provisions herein, and the provision in
question shall be deemed to be replaced with a valid and enforceable
provision most closely reflecting the intent and purpose of the original
provision.
17.15 This Agreement shall not be binding upon the Parties until it has been
signed hereinbelow by an authorized representative of each Party, in
which event it shall be effective according to its terms. No amendment
or modification of this Agreement shall be valid or binding upon the
Parties unless made in writing and signed by an authorized
representative of each Party.
17.16 Each Party shall, at its own expense, comply with any Governmental Rule
relating to its duties, obligations and performance under this Agreement
and shall procure all licenses and pay all fees and other charges
required thereby. Each Party agrees to comply with all applicable
federal, state and local laws, regulations and ordinances, including the
Regulations of the U.S. Department of Commerce or the U.S. State
Department in respect of the export of technical data and commodities.
TRITON hereby gives written assurance that, unless authorized by
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appropriate U.S. Government license or regulations, neither software nor
technical data provided by IBM under this Agreement, nor the direct
product thereof, shall be exported, directly or indirectly, to
prohibited countries or nationals thereof. TRITON agrees that it is
responsible for obtaining required government documents and approvals
prior to export of any commodity, machine, software or technical data.
17.17 TRITON and IBM hereby waive compliance with any applicable bulk sales or
similar laws in the United States or other jurisdictions.
17.18 As promptly as practicable after the execution of this Agreement, each
party shall, in cooperation with the other, file any reports or
notifications that may be required to be filed by it regarding this
transaction under applicable law. IBM and TRITON will cooperate to
obtain any consents or approvals or assist in any filings required in
connection with the transactions contemplated hereby and that have not
been previously obtained or made.
17.19 This Agreement may be signed in one or more counterparts, each of which
will be considered an original, but all of which together form one and
the same instrument. Once signed, both Parties agree any reproduction of
this Agreement made by reliable means (for example, photocopy or
facsimile) shall be considered an original unless prohibited by law.
17.20 Neither Party relies on any promises, inducements or representations
made by the other or expectations of more business dealings in addition
to this transaction. This Agreement accurately expresses the business
agreement of the Parties.
17.21 TRITON and IBM shall pay their own respective expenses, including the
fees and disbursements of their respective counsel in connection with
the negotiation, preparation and execution of this Agreement and the
consummation of the transactions contemplated herein.
This Agreement, including its Schedules and Exhibits, embodies the
entire understanding of the Parties with respect to the subject matter
hereof and merges all prior oral or written understandings, discussions
or communications between them.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their respective authorized representatives.
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ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
INTERNATIONAL BUSINESS MACHINES TRITON NETWORK SYSTEMS, INC.
CORPORATION
BY: BY:
------------------------------- --------------------------
NAME: NAME:
------------------------------- --------------------------
TITLE: TITLE:
------------------------------- --------------------------
36
<PAGE> 1
Exhibit 10.9
TRITON NETWORK SYSTEMS, INC.
SUPPLY AGREEMENT
This Supply Agreement (the "Agreement") is made as of
December 7, 1999 (the "Effective Date")
between Triton Network Systems, Inc. ("Seller", also referred to as "Triton"),
a Delaware corporation with principal place of business at:
8529 South Park Circle
Orlando, FL; USA 32819
and
CenturyTel Supply Group, Inc. ("Buyer")
a Louisiana corporation with principal place of business at:
100 Century Park Drive
Monroe, LA 71203
In consideration of the mutual covenants contained herein, the Parties agree as
follows:
Page 1 of 37
<PAGE> 2
ARTICLE 1. DEFINITIONS
As used in this Agreement, the following terms have the following meanings:
1.01 "AFFILIATE" means any entity listed in Exhibit 1 or any entity which is
a parent or subsidiary of a Party or which is controlled by or under
common ownership or control of a Party.
1.02 "AGREEMENT" means this Supply Agreement, and the Exhibits attached
hereto, as they may be amended from time to time.
1.03 "ACCEPTANCE" means with respect to deliveries of the Equipment to
Buyer, that the shipment has been inspected by Buyer, the paperwork,
including packing list, accurately matches the shipment and the
shipment matches the Buyer's Purchase Order or other written delivery
instructions. Acceptance shall be deemed to have occurred within 10
days of Seller's delivery hereunder.
1.04 "ANNUAL SUPPORT FEE" shall mean the fees for annual software support
by Seller as reflect in Exhibit 2.
1.05 "APPLICATIONS" means any Software program, Product, or invention
developed by Buyer.
1.06 "BACKWARDS COMPATIBLE" means (i) with respect to Software, the ability
of newer or more advanced versions to function seamlessly with older or
less advanced version of Software and Products, including without
limitation, all existing Software and Products purchased by Buyer and
(ii) with respect to Equipment the interoperability and compatibility
of such Equipment with existing Products purchased by Buyer and Buyer's
Network infrastructure, in each case resulting in no reduction in the
existing level of functionality of the existing Products or Buyer's
Network infrastructure. Software and Equipment shall be compatible with
the current Software Release and at least two (2) immediately preceding
Major Software Releases.
1.07 "CHANGE ORDER" shall have the meaning set forth in Section 5.03(d).
1.08 "CONFIDENTIALITY AGREEMENT" has the meaning set forth in Section 10.01.
1.09 "DELIVERY DATE" means the date on which Products ordered by Buyer are
to be delivered to the location(s) specified in Purchase Orders (such
date shall be subject to Seller's Standard Intervals).
1.10 "DOCUMENTATION" means the system standard documentation provided to
Buyer, in written or electronic form, as described in this Agreement.
All Documentation shall be subject to applicable copyright and
confidentiality restrictions.
1.11 "EFFECTIVE DATE" shall mean December 7, 1999.
1.12 "EQUIPMENT" means the hardware Products provided to Buyer as defined in
this Agreement. In addition to hardware developed by Seller, Equipment
generally includes Third Party Equipment, except as otherwise provided
in this Agreement.
1.13 "IFU" refers to Seller's Invisible Fiber(TM) unit.
1.14 "INITIAL PURCHASE CANCELLATION FEE" has the meaning set forth in
Section 4.05.
1.15 "LATE DELIVERY" has the meaning set forth in Section 5.04.
1.16 "LIST PRICE" means the Seller's standard price before any discount, as
maybe available in price lists from time to time.
1.17 "MAJOR SOFTWARE RELEASE" means a Software Release which contains
significantly new features
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<PAGE> 3
and functionality and does not include maintenance releases, updates or
bug fixes.
1.18 "MINIMUM PURCHASE CANCELLATION FEE" has the meaning set forth in
Section 4.04.
1.19 "NET PRICE" means the price the Buyer will pay after Seller's discount.
1.20 "PARTY" means either Buyer or Seller.
1.21 "PRODUCT" means, individually and collectively, the Equipment,
Software, and Documentation specified in Exhibit 2. In addition, any
item Seller adds to its generally available standard Product price list
or so identifies to Buyer in a Quotation shall be deemed incorporated
into this Agreement upon the mutual agreement of the Buyer and Seller,
subject to additional terms and conditions specified in the applicable
Product Exhibit, if any.
1.22 "PURCHASE ORDER" means a written, numerically controlled and dated
purchase authorization document issued by Buyer or Buyer Affiliate to
Seller or Seller Affiliate, specifying the types and quantities of
Products to be furnished by Seller.
1.23 "QUOTATION" means a written budgetary or firm price quotation, as
specified in this Agreement, issued by Seller to Buyer for the supply
of any Products pursuant to this Agreement.
1.24 "SHIP DATE" means the date on which a Product ordered by Buyer is to be
shipped as agreed to by the Parties, or in the case of Software, the
date upon which such Software is either available for download by Buyer
or physically shipped to Buyer.
1.25 "SOFTWARE" means the Seller's proprietary and/or Third Party Software
computer programs provided to Buyer (consisting of firmware and logic
instructions in machine readable code residing in, or intended to be
loaded in computer memories which provide basic logic, operating
instructions and Seller-related application instructions, but excluding
customer data) as well as the Documentation used to describe, maintain
and use the programs. Any reference herein to Software being "sold,"
"Purchased" or the like is understood to be a reference in fact to the
program being licensed.
1.26 "SOFTWARE LICENSE" shall mean the license to use Software granted to
Buyer by Seller pursuant to this Agreement.
1.27 "SOFTWARE LICENSE FEE" shall mean the fee to be paid by Buyer to
Seller for the right to use the Software pursuant to this Agreement.
1.28 "SOFTWARE RELEASE" means revisions to Software or new Software
containing new features, and/or enhancements, and/or certain problem
fixes that may be supplied by Seller to Buyer from time to time.
1.29 "STANDARD INTERVAL" means the standard time prior to the shipment of a
Product following acceptance of a Purchase Order by Seller. Seller's
Standard Interval is ninety (90) days for forecasted quantities.
1.30 "TAC" means Seller's Technical Assistance Center.
1.31 "TERM" means the duration of this Agreement.
1.32 "THIRD PARTY" means any individual or legal entity not including Buyer
and Seller and their respective Affiliates.
1.33 "THIRD PARTY EQUIPMENT" means any Equipment not of Seller's
manufacture. In addition, any Equipment Seller adds to its generally
available standard Third Party Equipment price list or so identifies to
Buyer in a
Page 3 of 37
<PAGE> 4
Quotation shall be subject to the terms and conditions of this
Agreement and any mutually acceptable additional terms and conditions
specified in writing. Seller may also recommend Third Party Equipment
that is not included in the Exhibits or provided by the Seller. Any
Third Party Equipment recommended by but not sold by the Seller is
not covered under the terms and conditions set forth in this
Agreement.
1.34 "THIRD PARTY SOFTWARE" means any Software not owned by Seller which is
included within Licensed Software.
ARTICLE 2. SCOPE OF AGREEMENT
2.01 This Agreement sets forth the terms and conditions under which Buyer
and its Affiliates may order Products from Seller and its Affiliates
and Seller and its Affiliates will supply Products to Buyer and its
Affiliates. Unless otherwise set forth herein, any reference in this
Agreement to Seller or Buyer shall be deemed to include their
respective Affiliates. Buyer may use the Products itself, or may use
the Products to provide services to others, or sell the Products
subject to the terms and conditions of this Agreement.
2.02 Unless specifically stated otherwise, all references to money or
currency shall be in U.S. dollars and all documentation,
correspondence, and communication shall be in the English language.
2.03 Seller shall meet all Buyer supply requirements set forth in Purchase
Orders in a timely manner irrespective of Purchase Orders for Equipment
from other parties; provided, however, such Buyer requirements are
reasonably consistent with Forecasts submitted by Buyer to Seller in
the manner set forth herein.
ARTICLE 3. TERM
3.01 The term of this Agreement is three (3) years from the Effective Date.
Buyer, if it fails to take delivery of a minimum of [*] or 1,000 units
during the term of this Agreement, may extend this Agreement for a
subsequent one (1) year term in order to take delivery of the minimum
Purchase commitment, by providing Seller with written notice of such
extension at least ninety (90) days prior to the end of the then
current Term.
ARTICLE 4. PURCHASE RIGHTS AND COMMITMENTS
4.01 Subject to the terms and conditions of this Agreement Seller agrees to
sell and Buyer agrees to buy Products in accordance with the pricing
and benefits set forth in Exhibit 2 of this Agreement.
4.02 Buyer agrees to place Purchase Orders for IFU's an amount totaling
[*] or 1,000 IFUs (the "Minimum Purchase Commitment") to be delivered
by December 31, 2002. In addition to the "Minimum Purchase
Commitment", Buyer also commits to an "Initial Purchase Commitment"
for an amount totaling [*] or 500 IFUs for delivery by December 31,
2000. In consideration for the Buyers Initial Purchase Commitment for
the amount of [*] or 500 IFUs for delivery by December 31, 2000,
Seller will provide an additional [*] discount ([*] per IFU) for the
first 500 IFUs. Buyer will issue confirming Purchase Orders with
specific delivery information such as Ship Date and location. The
remaining amounts of the Minimum Purchase Commitment are to be
delivered by December 31, 2002 pursuant to Purchase Orders issued by
Buyer.
[*] Confidential Treatment Requested
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<PAGE> 5
4.03 Purchases of IFUs by Affiliates of Buyer count towards Buyer's Minimum
and Initial Purchase Commitments. Buyer may, without any further
liability to Seller, cancel its Minimum and Initial Purchase Commitment
upon the occurrence of any of the following events, in which case Buyer
has no obligations to pay any Initial Purchase Cancellation Fee or
otherwise:
(a) Seller materially breaches this Agreement and such breach
recurs, continues or remains uncured after thirty (30) days
written notice.
(b) Seller files a voluntary petition in bankruptcy or has an
involuntary petition in bankruptcy filed against it that is
not dismissed within forty-five (45) days of such involuntary
filing; Seller admits the material allegations of any petition
in bankruptcy filed against it; Seller is adjudged bankrupt;
Seller makes a general assignment for the benefit of its
creditors; if a receiver is appointed for all or a
substantial portion of its assets and is not discharged within
sixty (60) days after his appointment; or Seller commences any
proceeding for relief from its creditors in any court under
any state insolvency statutes;
(c) Seller fails to deliver to Buyer the quantity of Products
conforming with Product Specifications for which Buyer has
placed Purchase Orders;
(d) Buyer is enjoined from using any Products and Seller is unable
to cure the effects of such injunction pursuant to 9.02(a) or
(b) within thirty (30) days.
4.04 If during the term of this agreement or any extensions described in
Article 3.01, The Buyer does not take delivery totaling [*] or 1,000
IFUs, Buyer will pay to Seller a penalty (the "Minimum Purchase
Cancellation Fee") equal to [*] of the purchase price of the
undelivered IFUs (e.g., 1,000 IFUs minus the number of IFUs delivered,
multiplied by the applicable purchase price, multiplied by [*]).
4.05 If buyer does not take delivery totaling [*] or 500 IFU Initial
Purchase Commitment by December 31, 2000, Buyer will pay seller a
penalty (the Initial Purchase cancellation fee) equal to the [*]
discount offered in consideration for the Initial Purchase Commitment
for each IFU delivered through December 31, 2000.
ARTICLE 5. TERMS OF PURCHASE
5.01 PRICING
(a) The pricing of the Products shall be as specified in the
attached Exhibit 2 plus applicable taxes unless otherwise
agreed to between the Parties in writing or in the case of
regulatory change as specified in this section 5.01 (a). The
prices set forth in the attached Exhibit 2 for
Seller-manufactured Equipment are based on Seller's design,
manufacture, and delivery pursuant to its design criteria and
manufacturing processes and procedures in effect on the
Effective Date. If, solely as a result of the imposition of
requirements by any Federal, State or local government during
the Term, there is a change in such criteria, processes or
procedures or any material change in the Equipment caused by
such governmental requirements, the prices may be adjusted by
Seller. Any OEM Equipment or other Third Party Equipment which
have been so identified in the attached Exhibit 2 shall be
furnished subject to the applicable vendor's then-current
terms, conditions and specifications subject to Buyer's
written acceptance of such terms, conditions and
[*] Confidential Treatment Requested
Page 5 of 37
<PAGE> 6
specifications.
(b) All prices listed in the Exhibit 2 and in any and all
Quotations, unless otherwise noted, are FOB Seller and are
exclusive of all freight, insurance, duties, taxes (more
specifically including but not limited to excise, sales, value
added, goods & services, and usage taxes), and any and all
other levies as might be incurred after the FOB point.
5.02 PAYMENT
(a) Equipment, Documentation and Software License Fee Payment -
Payment for Equipment, Documentation and Software License Fee
shall be due within thirty (30) days following shipment by
Seller.
(b) Annual Support Fees - Payment for Annual Support Fees shall be
due within thirty (30) days of receipt of Seller's invoice.
(c) Timely Payment - Past due amounts shall bear interest from the
expiration of such period at the rate of one and one-half
percent (1-1/2%) per month (or such lesser rate as may be
the maximum permissible rate under applicable law).
(d) Security Interest - Until the total amount due for Products
under each Purchase Order is paid in full, Seller may retain a
security interest in the Products delivered to Buyer pursuant
to such Purchase Order. Buyer agrees to promptly execute
reasonable, mutually acceptable documents which are necessary
for Seller to perfect and protect such security interest. In
addition, prior to payment in full of the total amount due
under each Purchase Order, Buyer agrees that it shall not,
without the prior written consent of Seller,
(i) sell or lease the Products (or license the Software)
subject to such Purchase Order; or
(ii) allow any liens or encumbrances to attach to the
Products subject to such Purchaser Order.
(e) Release of Security Interest - Upon payment of the amounts due
for any Product, Seller shall immediately release its security
interest in such Products and promptly file all documents
required to relieve such security interest.
(f) Taxes - Buyers price for Products as reflected in this
Agreement does not include any taxes, duties or charges of any
kind imposed by any federal, state or local governmental
entity, excluding only those taxes based solely on Seller's
net income. When Seller has the legal obligation to collect
such taxes, the appropriate amount shall be added to Buyees
invoice and shall be paid by Buyer unless Buyer provides
Seller with a valid tax exemption certificate authorized by
the appropriate taxing authority.
5.03 PURCHASE ORDERS
(a) During a quarter, Buyer will submit firm Purchase Orders to
purchase Products and Seller will deliver Products in
accordance with such Purchase Orders
(b) Products to be procured hereunder, as well as the Delivery
Date, shall be listed in a Purchase Order issued by Buyer
pursuant to this Agreement. Each Purchase Order shall
specifically reference this Agreement, and time is of the
essence in connection with the performance of each Purchase
Order. Any Purchase Order issued by Buyer to Seller for
Products shall be governed in all respects by the terms and
conditions of this Agreement. A form of Purchase Order is
attached hereto as Exhibit 6. Buyer and Seller agree that,
except for non-conflicting administrative terms as provided
below, any additional or preprinted terms or conditions on a
Purchase Order shall be null, void and of no effect.
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<PAGE> 7
Each Purchase Order shall specify, in addition to other
appropriate information as may be mutually agreed upon:
i. name and address of Buyer, or Buyer Affiliate;
ii. Buyer Purchase Order number and Purchase Order date
of issuance;
iii. name and address of Seller, or as appropriate, Seller
Affiliate, which shall be an Affiliate set forth in
the Exhibit 1, that will be providing Product being
ordered;
iv. incorporation within, by reference, to this
Agreement;
v. types and quantities of Product to be furnished by
Seller as set forth in Exhibit 2 or as provided in a
Quotation;
vi. applicable prices, charges, and fees with respect to
such Product as set forth in Exhibit 2 or as provided
in a Quotation;
vii. location or facility to which Product is to be
delivered;
viii. Delivery Date of Product;
ix. billing address of the Party responsible for the
payment whether it is the Buyer, or Buyer Affiliate
to which Buyer intends to resell the Product, if any,
other information required under this Agreement to be
included in a Purchase Order;
x. proper authorization of Buyer or Buyer's Agent.
(c) Seller is obligated to accept all Purchase Orders issued by
Purchaser under this Agreement except those Purchase Orders
which are missing the material terms required by this Article
to be contained in a Purchase Order. A Purchase Order
submitted pursuant to the terms and conditions of this
Agreement, and which Seller has accepted, shall constitute an
Agreement between Buyer and the Seller. Any Purchase Order for
which Seller gives timely notice of non-acceptance if
non-acceptance is permitted under this section shall be deemed
void. The Product quantities listed on any Purchase Order
which conforms to the terms and conditions of this Agreement,
which are consistent with Forecasts including any permitted
variance to such Forecasts and which are not accepted by
Seller shall be deducted from the Initial Purchase
Commitments.
(d) Buyer may at any time request additions, alterations,
deductions, or deviations to a Purchase Order subject to the
condition that such changes and any adjustments resulting from
such changes, including but not limited to schedules and
prices, shall be mutually agreed upon, and if so agreed,
subsequently detailed in a written revision to the applicable
Purchase Order ("Change Order") signed by a designated Buyer
representative and Seller representative. Change Orders which
are processed outside of Seller's customary processing cycle
or which require additional work by Seller to comply with such
changes may be subject to a change fee provided Seller has
given Buyer a written quote for such change fee and Buyer and
Seller have mutually agreed to such change fee in writing
prior to or concurrent with execution of the Change Order. If
Buyer fails to accept the change fee, Seller has no obligation
to accept or comply with the Change Order.
(e) Purchase Orders may be issued either electronically, such as
through electronic data interchange, or via traditional manual
methods, as mutually agreed to by the Parties.
5.04 Delivery - Delivery of Products under this Agreement shall be F.O.B.
Seller's specified facilities.
All shipments are subject to the following conditions:
Page 7 of 37
<PAGE> 8
(a) Partial shipments or early shipments may only be sent by
Seller if Buyer has approved such partial or early shipments
in writing and in advance;
(b) Seller shall notify Buyer, via e-mail as directed by Buyer,
when orders are shipped;
(c) Packing slips shall accompany shipment and shall include
serial numbers, when applicable, in barcode and human readable
format and shall reference Buyer's Purchase Order number;
(d) Shipment sent via truck load or less than truck load shall be
stretch wrapped on pallets with markings facing outwards; and
(e) Buyer may, at its discretion, (i) reject shipments that do not
comply with the preceding shipping requirements or (ii) apply
as a credit against amounts due to Seller, Buyer's reasonable
labor costs arising from Seller's failure to comply with the
preceding shipping requirements.
(f) Seller shall not deliver Products more than 10 days prior to
the requested and accepted Delivery Date in the Purchase Order
without the consent of the Buyer.
(g) In the absence of specific shipping instructions from Buyer,
Seller may ship-by the method it deems most advantageous;
provided however that Buyer shall not reimburse Seller for the
costs of overnight courier or other expedited shipping unless
Buyer has agreed in advance to pay such costs for such
Purchase Order in writing.
(h) Title to the Product (excluding Software) shall pass to Buyer
upon delivery to carrier subject to the Seller's security
interest in the Product, and risk of loss shall pass to Buyer
upon shipment to Buyer.
(i) Buyer shall inspect the Product upon delivery and shall advise
Seller in writing of any obvious physical defects,
discrepancies, and/or shortages observed between the Product
physically inspected and the corresponding Product shipment
packing list provided by the Seller. Buyer shall issue to
Seller a defect/discrepancy written report within ten (10)
business days of receipt of Product. If no such report is
issued to Seller within ten (10) business days the Buyer shall
be deemed to have accepted the Products as delivered.
(j) Buyer shall store all Products at the proper temperature and
other environmental conditions, as specified in the Product
Specifications, to maintain Product quality. In the event of
damage to any Product, for reason of improper storage, thereby
rendering Product unfit for intended use, Buyer shall promptly
notify Seller in writing of the facts, and shall not use such
Product except as directed by Seller.
5.05 CANCELLATION
(a) Upon written notice to Seller, Buyer may cancel all or any
part of a Purchase Order without cost to Buyer if Seller
receives written and dated Purchase Order cancellation notices
more than sixty (60) days before the requested Delivery Date.
(b) If a cancellation of a Purchase Order by Buyer does not meet
the conditions specified in Section 5.05(a) above, Seller
shall be entitled to cancellation charges, and shall make such
a claim in writing to Buyer within thirty (30) days after
receipt of a Purchase Order cancellation notice from Buyer.
Buyer shall pay cancellation charges based on the date a
Page 8 of 37
<PAGE> 9
Purchase Order cancellation notice is received by the Seller,
and such cancellation charges shall not exceed the schedule
as shown below:
<TABLE>
<CAPTION>
DAYS PRIOR NOTICE OF PO CANCELLATION ORDER CANCELLATION CHARGE
------------------------------------ -------------------------
<S> <C>
Greater than 60 days before Delivery Date None
Greater than 30 and less than 60 days before Delivery Date 20% of the Purchase Price
Less than 30 days before Delivery Date 50% of Purchase Price
</TABLE>
5.06 Invoicing. Each invoice shall include (a) Buyer's Purchase Order
number, (b) Seller's invoice number, (c) quantity and price of each
item shipped or services rendered, (d) applicable sales or other tax,
(e) freight charges (if applicable) and (f) final total cost.
ARTICLE 6. EQUIPMENT CHANGES
With respect to any Purchase Order issued under this Agreement,
notwithstanding any other provisions contained herein, Seller reserves the right
to make changes in the Products in whole or in part, or to substitute Products
of later design at any time prior to delivery thereof, provided that such
changes do not adversely affect performance or function or increase the cost to
Buyer and further provided that the changed or substituted Products meet or
exceed Product Specifications. Such changes do not obligate Seller to make any
changes in items of the Products previously delivered unless such changes affect
the interoperability of Products including Software in Buyer's network in which
case such changes to previously delivered Products, including Software, as are
required to maintain the interoperability and functionality of such Products
will be made at Seller's expense.
ARTICLE 7. SOFTWARE LICENSING
7.01 Buyer is granted no title or ownership rights to the Software or
Documentation, which rights shall remain with Seller or Seller's
suppliers, as appropriate. This Agreement does not entitle Buyer to the
receipt or use of, or access to, Software source code or any right to
reproduce the Software or Documentation, and Buyer agrees that it shall
not decompile, reverse engineer or otherwise attempt to gain access to
the Software source code. The obligations of Buyer under this section
shall survive the expiration or termination of this Agreement.
Notwithstanding the foregoing, Buyer may reproduce or copy Software or
Documentation for installation, back-up or archival and test purposes
and may provide such copies to Third Parties who provide installation
or maintenance services for Buyer. Buyer will notify Seller in the
event it provides copies of Software to Third Parties.
7.02 Upon Buyees payment of the applicable Software License Fee as described
in Exhibit 2.03, Buyer shall be granted a perpetual, non-exclusive,
transferable (as limited by the provisions of this Agreement),
non-assessable, unlimited-user, paid-up license to:
(a) use such features contained in the release of the Software
furnished;
(b) use and make adaptations of the Software (or any part
thereof), subject to the provisions of this Agreement,
provided that any such adaptations are created as an integral
step in the use of the Software in conjunction with a Product
and that it is not used in any other manner;
(c) make as many copies of the Software and any related
Documentation as Buyer deems
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<PAGE> 10
necessary for its use, archival purposes, or test purposes
including use by Third Parties who are acting under the
control and direction of Buyer; and
(d) use the associated Software Documentation.
Buyer agrees that the license to use the Software is subject to its
continued use of and ownership of the Equipment upon which such
Software is installed and that Buyer shall have the right to sell,
pledge as security, or otherwise transfer the Equipment upon which the
Software resides and the related Software. Transferee shall be granted
a license to use the Software but no title or ownership rights to the
Software, which rights shall remain in Seller or its suppliers, as
appropriate and upon sale or transfer the terms of this Software
License shall apply to Transferee.
7.03 As a condition precedent to this Software License and to the supply of
Software by Seller pursuant to this Agreement, Seller requires Buyer to
give proper assurances to Seller for the protection of the Software.
Accordingly, all Software supplied by Seller under or in implementation
of the Agreement shall be treated by Buyer as the exclusive property,
and to the extent not publicly available, as proprietary and a trade
secret, of Seller and/or its suppliers, as appropriate.
7.04 Seller may, from time to time, issue new Software Releases, including
Major Software Releases, which shall be made available to Buyer as part
of the Annual Support Fee and without additional cost or expense to
Buyer.
7.05 The Software Releases shall be updated periodically throughout the Term
of the Agreement. Once an updated Software Release is available, it
shall be made available to Buyer subject to the terms of this
Agreement.
7.06 All standard Software must be Backwards Compatible with annual software
upgrade (which will be provided as part of the Annual Support Fee) and
with Seller Equipment in the Buyer's network.
7.07 Repair and return of Equipment is same for same based on serial number
with thirty (30) day turnaround from receipt at factory to return
shipment.
ARTICLE 8. WARRANTIES
8.01 Seller Supplied Equipment
(a) Seller warrants for a period ending fifteen (15) months from
the Ship Date, that under normal use and service the Equipment
subject to this Agreement will be free from material defects
or faulty workmanship, and shall operate in compliance with
the applicable Product Specifications. The foregoing warranty
shall not apply to items normally consumed during operation
such as, but not limited to, lamps and fuses. If Equipment is
not free from material defects or faulty workmanship or fails
to comply with the applicable Product Specification during the
warranty period, Seller will, at its option, repair, replace,
or modify the Equipment so that it is free from defects and
does comply with the applicable Product Specification. The
warranty service shall be performed at Seller's facility. If
Seller is unable to repair or modify the Equipment within a
reasonable period of time so that the Equipment conform to the
applicable Product Specification, Seller shall replace the
Equipment with Equipment that conforms to such Product
Specification. In such cases Seller does not guarantee that
equipment with like serial numbers will be returned to the
Buyer but such replacement Equipment shall meet all Product
Specifications and provide the same function as the Equipment
it replaces. Seller's sole obligation and Buyer's exclusive
remedy under the warranty provisions of this Article with
respect to Equipment shall be limited to repair, modification,
or replacement of the
Page 10 of 37
<PAGE> 11
defective or non functioning Equipment or refund if Equipment
cannot be provided which complies with Product Specifications.
(b) The warranties set forth in this Article shall not apply to
any Products where the defect or non-conformance is due to:
(i) accident, alteration, abuse, misuse, or repair not
performed by Seller or Seller qualified technician,
provided that Seller will approve agreed upon
employees of Buyer and its agents as qualified
technicians;
(ii) storage other than as set forth in the Product
Specification;
(iii) failure to comply with all applicable environmental
requirements for Product as set forth in the Product
Specification, including but not limited to
temperature or humidity ranges;
(iv) performance of Product installation, maintenance,
operation, repair, relocation, or other service not
in compliance with Product Specifications, unless
such noncomplying service was performed by Seller or
on Seller's behalf;
(v) breakage, damage, alteration, or removal of any
Seller affixed seal or label located on the IFU
without the Seller's written approval. The IFU
contain no Buyer serviceable parts;
(vi) use in conjunction with a product specified by Seller
as incompatible with such Products;
(vii) any error, act, omission, vandalism, mishandling or
misuse by anyone other than Seller or Seller's
agents, employees, and subcontractors; or
(viii) where written notice of the defect has not been given
to Seller within the applicable warranty period.
(c) Buyer shall be responsible for de-installation and
re-installation of any warranty repair or replacement
Equipment. Buyer shall use qualified technicians to perform
any maintenance and/or repair to the Product during the
warranty period, where such maintenance and/or repair shall be
confined to tasks performed in accordance with Seller provided
Documentation.
(d) A return material authorization (RMA) must be obtained by
Buyer from the Seller prior to the return of any Product.
(e) Warranty replacement Equipment may be new or reconditioned to
perform as new, at Seller's option. Notwithstanding the
foregoing, the warranty period of Equipment which has been
subject to repair or replacement by Seller shall commence upon
the Delivery Date of the repaired or replacement Equipment to
Buyer and shall expire on the later of one hundred twenty
(120) days from the Delivery Date or the last day of the
original warranty period with respect to the Equipment which
was repaired or replaced.
(f) All Equipment to be repaired or replaced, whether in or out of
warranty, shall be packed by Buyer in accordance with Seller's
reasonable instructions and shall follow Seller's reasonable
repair and return policy and procedures. Buyer shall bear risk
of loss and shall pay for all transportation charges for
Equipment returned to Seller and Seller shall bear such risk
and pay for transportation charges for repaired or
replacement Equipment shipped to Buyer. Seller shall use
reasonable efforts to ship repaired or replacement Equipment
within thirty (30) days of receipt of the defective Equipment
for routine warranty repair or replacement. Seller shall
return the repaired or replaced Equipment to
Page 11 of 37
<PAGE> 12
the Buyer by the same transport method in which the Buyer sent
the Equipment to the Seller.
(g) if the Equipment that is returned to Seller is determined by
Seller to be beyond repair and is outside the warranty period,
Seller shall notify Buyer and Seller shall upon request from
Buyer sell Buyer replacement Equipment at the then current
Agreement price between the Parties for such Equipment, or if
no such Agreement exists, at the last price paid for such
Product.
(h) Seller shall maintain an adequate inventory of spare parts to
repair and replace all Products for a period of 5 years or as
otherwise provided by law.
8.02 Third Party Equipment
(a) With respect to any Third Party Equipment furnished by Seller
to Buyer, Seller shall secure from the applicable
manufacturers such warranties and indemnities as maybe
available with respect to such Third Party Equipment, and
assign and pass through to Buyer all available warranties and
indemnities for such Third Party Equipment to the extent
legally assignable. In the event such warranties and
indemnities are not assignable to Buyer, Seller shall enforce,
if necessary, such warranties and indemnities on Buyer's
behalf. In addition to the above, Seller shall, at Buyer's
request, register Buyer with any and all Third Party Equipment
vendors (for Third Party Equipment that constitutes systems as
opposed to individual components) such that Buyer is
acknowledged as a support obligation of the Third Party
Equipment vendors and Buyer can receive and obtain product
notices directly from the Third Party Product vendors. Seller
shall produce evidence of such registration within sixty (60)
calendar days from the date Buyer requests that Seller obtain
such registration.
(b) All Third Party Equipment unless otherwise stated in this
Agreement, or in the Third Party warranties, will follow the
same repair and return procedures as noted in Article 7.01.
8.03 Software
(a) Seller warrants for a period ending fifteen (15) months from
the Ship Date, that under normal use and service the Software
shall (i) perform the necessary functionality to operate
radios in accordance with Product Specifications; (ii) shall
provide the full functionality described in the Documentation
and Product Specifications. Seller represents and warrants
that, to the best of its knowledge, any Software provided by
Seller hereunder does not contain and will not receive from
any Seller data transmission via modem or other Seller medium,
any virus, worm, trap door, back door, timer, clock, counter,
or other limiting routine, instruction, or design that would
erase data or programming or otherwise cause the Software or
Equipment to become inoperable or incapable of being used in
the full manner for which it was designed and created (but
specifically excluding locking mechanisms designed to prevent
Buyer from using those Software features or functions not
licensed to Buyer under the terms of this Agreement, referred
to as 'disabling code') including, without limitation, any
limitations that are triggered by:
(i) the Software being used or copied a certain number of
times, or after the lapse of a certain period of
time;
(ii) the Software being installed on or moved to a central
processing unit that has a serial number, model
number, or other identification different from the
central processing unit on which the Software was
originally installed; or
Page 12 of 37
<PAGE> 13
(iii) the occurrence or lapse of any similar triggering
factor or event.
(b) In the event Seller introduces a disabling code into the
Software, Seller shall:
(i) take all steps necessary at Seller's sole cost to
test a new copy of the Software for the presence of
disabling codes;
(ii) furnish to Buyer a new copy of the Software without
the presence of disabling codes;
(iii) install and implement such new copy of the Software
at no additional cost to Buyer; and
(iv) take all steps necessary, at Seller's sole cost, to
restore any and all data or programming lost by Buyer
as a result of such disabling code. In the event
disabling codes are identified by Buyer or Seller in
the Software, Seller shall furnish to Buyer a new
copy of the Software without the presence of
disabling codes.
(c) Seller warrants all Software is Y2K compliant as set forth in
Exhibit 3.
8.04 All Products. For all Products to be sold to Buyer under this
Agreement, Seller represents and warrants that the Products and Buyer's
ownership and use of such Products will not infringe upon or
misappropriate the intellectual property rights of any party and no
party shall have the right to seek damages from Buyer or enjoin Buyer's
right to use such Products.
8.05 THE WARRANTIES SET FORTH ABOVE CONSTITUTE THE ONLY WARRANTIES WITH
RESPECT TO THE PRODUCTS PROVIDED. THEY ARE IN LIEU OF ALL OTHER
WARRANTIES WRITTEN OR ORAL, STATUTORY, EXPRESS. IMPLIED OR OTHERWISE,
INCLUDING WITHOUT LIMITATION THE WARRANTY OF MERCHANTABILITY AND THE
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.
8.06 The terms of this Article shall survive any expiration or termination
of this Agreement.
ARTICLE 9. PATENT AND COPYRIGHT INFRINGEMENT INDEMNITY
9.01 Indemnification - Seller agrees to indemnify Buyer, as set forth
herein, with respect to any suit, claim, or proceeding brought against
Buyer alleging that Buyer's use of the Equipment or Software
constitutes an infringement of any United States or foreign patent or
copyright. Seller agrees to defend Buyer, at Seller's expense, against
any such claims and to pay all settlement payments, costs and legal
expenses, including reasonable attorneys' fees, and any damages awarded
in any final judgment arising from such suit, claim or proceeding;
provided, however, that Buyer shall promptly advise Seller of any such
suit, claim, or proceeding and shall reasonably cooperate with Seller
in the defense or settlement of such suit, claim or proceeding;
provided further that Seller shall have sole control thereof; and
provided further that in those circumstances where Seller's control of
the defense may materially affect Buyer's network and operations,
Seller agrees to consult with Buyer in good faith to obtain Buyer's
input into appropriate defense methods. The obligation of Seller
hereunder with respect to any infringement claim shall not apply to
infringement claims based on:
(a) use of Product by Buyer in a manner, including combinations
with other products not provided by Seller, not contemplated
nor suggested by the Agreement or by Seller's product
documentation existing as of the Effective Date of the
Agreement;
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<PAGE> 14
(b) use of Product by Buyer in any other combination with other
products not provided by Seller, unless Seller would otherwise
normally be liable for such a combination as a direct (or on
the basis of contribution or inducement) infringement, or
unless the products not provided by Seller are those products
normally used in connection with providing communication
services over Buyer's network, and provided that but for the
existence of such combination by Buyer, there would be no
infringement claim;
(c) use of Product in a Territory other than that for which it has
been specified in Exhibit 4 to this Agreement;
(d) modifications made by Buyer without Seller's consent;
(e) Buyer's use of Equipment supplied by Third Parties;
(f) Seller's use of specifications or designs (except
specifications or designs which are or become industry
standards or are used by Seller in a Product that is supplied
to other customers) which are supplied by Buyer to Seller for
use in Seller Products to be purchased under this Agreement
provided that but for such use by Seller there would be no
infringement claim and further provided that the Seller team
providing the custom development and the Seller employees
assigned to the Buyer account team shall use all commercially
reasonable best efforts, without violating any Third Party
confidentiality obligations, to determine whether the
requested specification or design would violate any Third
Party patent, copyright, trademark, or other intellectual
property right and provide notice to Buyer of such knowledge
as soon as reasonably possible; and
(g) The foregoing exclusions shall not apply to use of Products,
Equipment or Software in Buyer's data communications network
if Buyer and Seller have discussed the use and implementation
of Seller's Product with other products not provided by Seller
and Buyer has purchased Products for use in its network in a
manner consistent with such discussions.
9.02 Injunction - In the event that an injunction is obtained against
Buyer's use of Equipment or Software arising from such patent or
copyright suit, claim or proceeding, in whole or in part, Seller shall,
at its option, either:
(a) procure for Buyer the right to continue using the portion of
the system enjoined from use; or
(b) replace or modify the same so that Buyer's use is not subject
to any such injunction.
If, after using commercially reasonable best efforts, Seller is not able to
achieve any of the above remedies, Seller shall refund the purchase price of
Equipment upon return of the equipment from Buyer. Thereupon, neither Party
shall have any further liabilities or obligations under this Agreement.
9.03 Limitation of Liability - THE FOREGOING STATES THE ENTIRE LIABILITY OF
SELLER FOR PATENT OR COPYRIGHT INFRINGEMENT BY THE EQUIPMENT OR
SOFTWARE. THE REMEDIES CONTAINED HEREIN ARE BUYER'S SOLE REMEDY FOR ANY
CLAIM OF INFRINGEMENT OF THIRD PARTY PATENT, COPYRIGHT, TRADEMARK,
TRADE SECRET OR OTHER INTELLECTUAL PROPERTY RIGHTS.
9.04 The terms of this Article 9 shall survive any expiration or
termination of this Agreement.
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<PAGE> 15
ARTICLE 10. CONFIDENTIALITY
10.01 Confidentiality - All terms and conditions of this Agreement between
Buyer and Seller are confidential and may not be disclosed to any third
party.
10.02 Release of Information - Neither Party shall, without the express
written consent of the other Party, publicly announce the existence or
terms of this Agreement or advertise or release any publicity or press
release regarding this Agreement except such disclosures that may be
required to comply with securities laws, court order or similar order
of an administrative or regulatory agency provided each Party shall use
reasonable best efforts to seek confidential treatment or other
protective orders which are available to limit such disclosures and
provide the other Party with advanced notice of such disclosures.
Notwithstanding the foregoing, either Party shall be entitled to
disclose this Agreement and its specific terms and conditions to its
financing sources, including prospective financing sources and to its
auditors, attorneys and other agents in the normal course of its
business; provided that such financing sources, auditors, attorneys and
other agents keep such information confidential.
ARTICLE 11. LIMITATION OF LIABILITY
11.01 General - THE TOTAL LIABILITY OF SELLER FOR ALL CLAIMS OF ANY KIND FOR
ANY LOSS OR DAMAGE, WHETHER IN AGREEMENT, WARRANTY, TORT (INCLUDING
NEGLIGENCE), STRICT LIABILITY OR OTHERWISE, OR CLAIMS FOR
INDEMNIFICATION ARISING OUT OF, CONNECTED WITH, OR RESULTING FROM THE
PERFORMANCE OR NON-PERFORMANCE OF THIS AGREEMENT EXCEPT FOR SELLER'S
OBLIGATION TO INDEMNIFY BUYER FOR INFRINGEMENT CLAIMS SHALL IN NO CASE
EXCEED THE TOTAL PRICE OF ALL PURCHASE ORDERS ACCEPTED UNDER THIS
AGREEMENT. NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT, NEITHER
PARTY SHALL BE LIABLE FOR LOST PROFITS, LOSS OF DATA OR COSTS OF
PROCUREMENT OF SUBSTITUTE GOODS EXCEPT AS SET FORTH IN SECTION 9.03, OR
FOR ANY INCIDENTAL, INDIRECT, CONSEQUENTIAL, OR SPECIAL DAMAGES OF ANY
NATURE WHATSOEVER FOR ANY ACTION ARISING UNDER THIS AGREEMENT,
INCLUDING, WITHOUT LIMITATION, THOSE RESULTING FROM THE USE OF
EQUIPMENT PURCHASED HEREUNDER, OR THE FAILURE OF THE EQUIPMENT TO
PERFORM, OR FOR ANY OTHER REASON. THESE LIMITATIONS SHALL APPLY
NOTWITHSTANDING THE FAILURE OF THE ESSENTIAL PURPOSE OF ANY LIMITED
REMEDY.
11.02 Specific Exclusions - Seller shall not be responsible for any failures
or inadequacies of performance resulting from products not supplied by
Seller. Seller shall not be responsible for interference or disruption
of service caused by operation of other radio systems, lightning, motor
ignition or other similar interference. In the event Buyer utilizes
facilities or services supplied by others such as common carrier
circuits, antennas or towers, Buyer shall have the total responsibility
for the availability or adequacy of such services or facilities. Seller
shall have no liability as a result of non-performance, failures or
poor performance of the Product caused by, resulting from or
attributable to Buyer provided designs, specifications or Product
configuration requirements that have not been discussed with and
approved by Seller or failures caused by improper installation by
Buyer.
11.03 The terms of this Article shall survive any expiration or termination
of this Agreement.
ARTICLE 12. MISCELLANEOUS
Page 15 of 37
<PAGE> 16
12.01 Applicable Law - The validity, construction, and performance of this
Agreement shall be governed by and interpreted in accordance with the
laws of the State of Florida, without giving effect to the principles
of conflict of laws thereof except to the extent that any mandatory
provisions of local laws in any country take precedence over the
provisions of this Agreement and Florida State law. Jurisdiction will
reside in the federal courts in Orange County, FL. Notwithstanding the
above, neither Party shall institute a proceeding in any court or
administrative agency to resolve a dispute between the Parties before
that Party has sought to resolve the dispute through direct negotiation
with the other Party. If the dispute is not resolved after three (3)
weeks of direct negotiation, the Parties shall attempt to resolve the
dispute through mediation. If the Parties do not promptly agree upon a
mediator, either Party may request the then chief judge of the circuit
court in Orange County, Florida appoint a Circuit Mediator. If the
mediator is unable to facilitate a settlement of the dispute within a
reasonable period of time, as determined by the mediator, the mediator
shall issue a written statement to the Parties to that effect and the
aggrieved Party may then seek resolution by arbitration under
conditions and procedures provided below in section 12.02. The fees and
expenses of the mediator shall be paid one-half each by Sellers and
Buyer.
12.02 Arbitration - The parties desire to resolve disputes arising out of
this agreement without litigation. If the parties are unable to resolve
any disputes arising out of this Agreement pursuant to the provisions
of section 12.01 above, then the dispute shall be submitted to binding
arbitration in Orlando, Florida by a panel of three arbitrators
pursuant to the Commercial Arbitration Rules of the American
Arbitration Association. A Party may demand such arbitration in
accordance with the procedures set out in those rules.
12.03 Assignment - Other than as explicitly stated in this Agreement, neither
Party may assign or transfer this Agreement, or any of its rights
hereunder, without the prior written consent of the other which consent
shall not be unreasonably withheld. Buyer's consent shall not be
required for any assignment or transfer by Seller to any Third Party
for all or a part of Seller's right to receive any monies
("Receivables") which may become due to Seller pursuant to this
Agreement. Consent shall also not be required for the following
transactions if the transactions do not involve a direct competitor of
the non-assigning Party: (a) a reorganization, merger, consolidation
or other form of corporate transaction or series of transactions, (b)
the sale of all or substantially all of the assets of the Buyer or the
Seller, or (c) the acquisition of all or substantially all the
outstanding equity of the Buyer or the Seller.
Any assignment or transfer in violation of this Agreement shall be
void. Seller reserves the right to refuse to honor any assignment or
sublicense which, in the opinion of its legal counsel, would require it
to violate any United States export restriction, other law, or
regulation.
12.04 Consents - Each Party hereto represents and warrants that:
(a) it has obtained all necessary approvals, consents, and
authorizations of Third Parties and governmental authorities
to enter into this Agreement and to perform and carry out its
obligations hereunder,
(b) the persons executing this Agreement on its behalf have
express authority to do so, and, in so doing, to bind the
Party thereto;
(c) the execution, delivery, and performance of this Agreement has
been duly authorized by all necessary partnership or corporate
action and this Agreement is a valid and binding obligation of
such Party, enforceable in accordance with its terms;
(d) in the case of Buyer, that Buyer has obtained the required
licenses to use the relevant radio spectrum; and
Page 16 of 37
<PAGE> 17
(e) In the case of Seller, that Seller has obtained all necessary
government approvals for manufacture and sale of Equipment.
12.05 Counterparts and Facsimile Signatures - 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. Facsimile signatures shall have the same effect as original
signatures, but any Party transmitting a signature by facsimile shall
promptly follow up with a copy of the same document bearing the
original signature of that Party.
12.06 Entire Agreement - This Agreement, including the Exhibits which are
attached hereto and incorporated herein, comprises all the terms,
conditions, and agreements of the Parties hereto with respect to the
subject matter hereof and supersedes all previous negotiations,
proposals, commitments, writings, publications, and understandings of
any nature whatsoever. No agent, employee, or representative of Seller
has any authority to bind Seller to any affirmation, representation, or
warranty, except as stated in this Agreement and unless such
affirmation, representation, or warranty is specifically included
within this Agreement it shall not be enforceable by Buyer or any
assignee or sub-licensee of Buyer. Buyer hereby acknowledges and agrees
that it has not relied on any representations or warranties other than
those expressly set forth in this Agreement.
12.07 Export - Buyer shall not export any Product or technical data received
from Seller pursuant to this Agreement, or release any such Product or
technical data with the knowledge or intent that such Product or
technical data will be exported or transmitted to any country or to
foreign nationals of any country, except in accordance with applicable
laws or regulations concerning the exporting of such items arising in
the U.S. or other such jurisdiction affecting the Product. Buyer shall
obtain all authorizations from the appropriate government in accordance
with applicable law prior to exporting or transmitting any such
Products or technical data as specified above. Seller will provide such
assistance as Buyer reasonably requests to obtain such authorizations.
Buyer acknowledges that the transfer of Equipment or components
thereof, and Documentation outside of Canada or the United States, may
be subject to the specific approval of the applicable Software
suppliers and other suppliers. All such approvals, if applicable, shall
be conditions precedent to any of the obligations of Seller hereunder
respecting such Equipment or component thereof and Documentation.
12.08 Factoring - Seller may, upon notice to Buyer and subject to Buyer's
consent which may not be unreasonably withheld, sell receivables to a
Third Party or Affiliate.
12.09 Force Majeure - If the performance by a Party of any of its obligations
under this Agreement shall be prevented, restricted, or interfered with
by reason of any circumstances beyond the reasonable control of that
Party, including without limitation, fire, explosion, embargoes,
government ordinances or requirements, civil or military authorities,
acts of God or of the public enemy, war, revolution, civil commotion,
acts or omissions of carriers, loss of sources of energy, power
failure, breakdown of machinery, or labor difficulties of third
parties, including without limitation, strikes, slowdowns, picketing,
or boycotts, or other causes beyond the reasonable control of the party
whose performance is affected, then the Party affected, upon giving
prompt notice to the other Party, shall be excused from such
performance on a day-for-day basis to the extent of such prevention,
restriction, or interference (and the other Party shall likewise be
excused from performance of its obligations on a day-for-day basis to
the extent such Party's obligations relate to the performance so
prevented, restricted or interfered with), provided that the Party so
affected shall use reasonable efforts to avoid or remove such causes of
non-performance and both parties shall proceed to perform their
obligations with dispatch whenever such causes are removed or cease.
With respect to labor difficulties as specified above, a Party shall
not be obligated to accede
Page 17 of 37
<PAGE> 18
to any demands being made by employees or other personnel.
12.10 Headings - All headings used herein are for index and reference
purposes only, and shall not be given any substantive effect. This
Agreement has been created jointly by the Parties and no rule of
construction requiring interpretation against the drafter of this
Agreement shall apply in its interpretation.
12.11 Litigation Expense - The Party prevailing in arbitration, at trial, or
on appeal shall be entitled, in addition to such other relief as may be
granted, to a sum the court or arbitration may fix as reasonable
attorneys' fees, plus any associated costs.
12.12 Modification of Agreement - No addition to or modification of this
Agreement shall be effective or binding on either of the Parties hereto
unless reduced to writing and executed by the respective duly
authorized representatives of each of the Parties hereto.
12.13 [*]
12.14 Non-Waiver - The failure by either Party hereto at any time to require
performance by the other Party or to claim a breach of any provision of
this Agreement shall not be construed as affecting any subsequent
breach or the right to require the performance with respect thereto or
to claim a breach with respect thereto.
12.15 Notice - All notices required or permitted to be given hereunder shall
be in writing and shall be delivered to the address listed on the
signature page of this Agreement by (i) certified mail, return receipt
requested, (ii) nationally recognized overnight courier, or (iii) by
hand. Any notice given pursuant to this Section shall be effective five
(5) days after the day it is mailed or upon receipt as evidenced by the
Postal Service return receipt card, or courier or hand delivery written
confirmation, whichever is earlier. Either Party hereto may change its
address by a notice given to the other Party hereto in the manner set
forth above. All Purchase Orders and invoices to be delivered pursuant
to this Agreement shall be delivered via a delivery provider that
provides proof of delivery, such as certified mail, overnight mail, or
private courier company.
12.16 Registration - Product furnished under this Agreement for installation
within the United States shall, at the time of installation, comply to
the extent applicable, with the requirements of the Federal
Communications Commission's Rules and Regulations including, without
limitation, all labeling and customer instruction requirements. Product
furnished under this Agreement for installation outside the United
States shall comply with local governmental regulations, as applicable.
12.17 Relationship of the Parties - The provisions of this Agreement shall
not be construed to establish any form of partnership, agency, or other
joint venture of any kind between Seller and Buyer, nor to constitute
either Party as the agent, employee, or legal representative of the
other. All persons provided by either Party to accomplish the intent of
this Agreement shall be considered solely as the providing Party's
employees or agents and the furnishing Party shall be solely
responsible for compliance with all laws, rules, and regulations
involving, but not limited to, employment of labor, hours of labor,
working conditions, workers' compensation, payment of wages, and
withholding and payment of applicable taxes, including, but not limited
to income taxes, unemployment taxes, and social security taxes.
12.18 Severability - If any of the provisions of this Agreement shall be
declared or determined to be
[*] Confidential Treatment Requested
Page 18 of 37
<PAGE> 19
invalid or unenforceable under applicable law and a Party deems such
provisions to be material, that Party may terminate this Agreement
upon written notice to the other Party. Otherwise such invalidity in
whole or in part, of any term, covenant, condition, or provision of
this Agreement shall not affect the validity of the remainder of such
term, covenant, condition or provision or the Agreement or render this
Agreement unenforceable, but this Agreement shall be construed as if
not containing the particular invalid or unenforceable provision and
the rights and obligations of the Parties shall be construed and
enforced accordingly.
12.19 Third Patty Beneficiaries Disallowed - All covenants and agreements of
the Parties hereto are solely and exclusively for the benefit of the
Parties to this Agreement and no other person or entity shall have
standing to require performance of any such covenants and agreements,
and no person or entity shall, under any circumstances, be deemed to be
a beneficiary of such obligations.
12.20 Waiver of Breach - Failure by either Party at any time to require
performance by the other Party or to claim a breach of any provision of
this Agreement shall not be construed as affecting any subsequent
breach or the right to require performance with respect thereto or to
claim a breach with respect thereto.
Page 19 of 37
<PAGE> 20
SIGNATURES
IN WITNESS WHEREOF, the Parties hereto have executed this "Agreement" as of the
"Effective Date" shown above, by their representative(s) being duly authorized
and having signed accordingly.
TRITON NETWORK SYSTEMS INC. CENTURYTEL SUPPLY GROUP, INC.
- ------------------------------------- --------------------------------------
Signed: /s/ Ken Vines Signed: /s/ Robert J. Mirabito
------------------------------ -------------------------------
Name: Ken Vines Name: Robert J. Mirabito
------------------------------ -------------------------------
Title: CFO Title: Vice President
------------------------------ -------------------------------
Date: 12/7/99 Date: 12/7/99
------------------------------ -------------------------------
Addresses for Notice:
Triton Network Systems, Inc.: CenturyTel Supply Group, Inc.:
8529 South Park Circle 100 Century Park Drive
Orlando, Florida 32819 Monroe, LA 71203
Attention: Ken Vines Attention: Bob Mirabito
---------------------------
With a copy to:
Holland & Knight LLP Boles, Boles & Ryan
200 South Orange, Suite 2600 1805 Tower Drive
Orlando, Florida 32801 Monroe, LA 71201
Attention: Louis T. M. Conti, Esquire Attention: L. Scott Patton, Esquire
Page 20 of 37
<PAGE> 21
EXHIBITS
EXHIBIT 1. AFFILIATES
CENTURYTEL, INC.
LIST OF SUBSIDIARIES
(EACH 100% OWNED UNLESS NOTED OTHERWISE)
STATE OR
JURISDICTION OF
SUBSIDIARY INCORPORATION
- ---------- --------------
Actel Corporation Louisiana
Bloomingdale Telephone Company, Inc. (20%) Michigan
Century Cellunet of Mississippi RSA #6, Inc. Mississippi
Century Interactive Fax, Inc. Louisiana
Pivotal Communications, LLC (19.5%) Georgia
Century Telephone of West Virginia, Inc. West Virginia
CenturyTel of Adamsville, Inc. Tennessee
CenturyTel of Arkansas, Inc. Arkansas
CenturyTel of Central Indiana, Inc. Indiana
CenturyTel of Central Louisiana, Inc. Louisiana
CenturyTel of Chatham, Inc. Louisiana
CenturyTel of Chester, Inc. Iowa
CenturyTel of Claiborne, Inc. Tennessee
CenturyTel of East Louisiana, Inc. Louisiana
CenturyTel of Evangeline, Inc. Louisiana
Page 21 of 37
<PAGE> 22
EXHIBIT 1. AFFILIATES (Cont.)
CENTURYTEL, INC.
LIST OF SUBSIDIARIES
(EACH 100% OWNED UNLESS NOTED OTHERWISE)
STATE OR
JURISDICTION OF
SUBSIDIARY INCORPORATION
- ---------- --------------
CenturyTel Holdings, Inc. Louisiana
Century Business Communications, LLC Louisiana
Century Color Graphics, LLC (65%) Louisiana
CenturyTel of Greater Wisconsin, Inc. Wisconsin
Brown Equipment Corp. Nevada
Carter Company, Inc. Hawaii
CenturyTel of Colorado, Inc. Colorado
CenturyTel of Forestville, Inc. Wisconsin
CenturyTel of Larsen-Readfield, Inc. Wisconsin
CenturyTel of Monroe County, Inc. Wisconsin
CenturyTel of Northern Wisconsin, Inc. Wisconsin
CenturyTel of Northwest Wisconsin, Inc. Wisconsin
CenturyTel of the Southwest, Inc. New Mexico
CenturyTel/UTI, Inc. Wisconsin
Honomach PR, Inc. Puerto Rico
Universal Contracting Corp. Wisconsin
Universal Manufacturing Corp. Wisconsin
Universal Telephone Long Distance, Inc. Wisconsin
Page 22 of 37
<PAGE> 23
EXHIBIT 1. AFFILIATES (Cont.)
CENTURYTEL, INC.
LIST OF SUBSIDIARIES
(EACH 100% OWNED UNLESS NOTED OTHERWISE)
STATE OR
JURISDICTION OF
SUBSIDIARY INCORPORATION
- ---------- --------------
CenturyTel of the Northwest, Inc. Washington
Cascade Autovon Company Washington
CenturyTel of Eagle, Inc. Colorado
CenturyTel of Eastern Oregon, Inc. Oregon
CenturyTel Entertainment, Inc. Washington
CenturyTel of the Gem State, Inc. (96%) Idaho
CenturyTel of Inter Island, Inc. Washington
CenturyTel of the Midwest-Kendall, Inc. Wisconsin
CenturyTel of the Midwest-Wisconsin, Inc. Wisconsin
CenturyTel of Minnesota, Inc. Minnesota
CenturyTel of Montana, Inc. (991/6) Oregon
CenturyTel of Oregon, Inc. Oregon
CenturyTel of Paradise, Inc. Washington
CenturyTel of Cowiche, Inc. Washington
CenturyTel of Postville, Inc. Iowa
CenturyTel Telecom Service, Inc. Washington
CenturyTel Telephone Utilities, Inc. Washington
CenturyTel TeleVideo, Inc. Wisconsin
CenturyTel of Upper Michigan, Inc. Michigan
CenturyTel of Washington, Inc. Washington
CenturyTel/WORLDVOX, Inc. Oregon
CenturyTel of Wyoming, Inc. Wyoming
Eagle Valley Communications Corporation Colorado
International Communications Holdings, Inc. Delaware
MVI Corp. Oregon
Page 23 of 37
<PAGE> 24
EXHIBIT 1. AFFILIATES (Cont.)
CENTURYTEL, INC.
LIST OF SUBSIDIARIES
(EACH 100% OWNED UNLESS NOTED OTHERWISE)
STATE OR
JURISDICTION OF
SUBSIDIARY INCORPORATION
- ---------- --------------
CenturyTel of the Northwest, Inc. (Cont.) Washington
Pacific Telecom, Inc. (Shell) Oregon
PTI Broadcasting, Inc. Oregon
PTI Communications of Ketchikan, Inc. Alaska
PTI Communications of Minnesota, Inc, Minnesota
PTI Transponders, Inc. Oregon
Western Services, Inc. Wyoming
CenturyTel of Pecoco, Inc. Wisconsin
CenturyTel/Cable Layers, Inc. Wisconsin
CenturyTel of Fairwater-Brandon-Alto, Inc. Wisconsin
CenturyTel of Southern Wisconsin, Inc. Wisconsin
CenturyTel/Teleview of Wisconsin, Inc, Wisconsin
CenturyTel of Idaho, Inc. Delaware
CenturyTel Interactive Company Louisiana
CenturyTel International, Inc. Louisiana
CenturyTel Investments, LLC Louisiana
CenturyTel Long Distance, Inc. Louisiana
CenturyTel MFN, Inc. Delaware
CenturyTel of Michigan, Inc. Michigan
CenturyTel Michigan Network, LLC Louisiana
CenturyTel Midwest - Michigan, Inc. Michigan
CenturyTel Mobile Communications, Inc. Louisiana
CenturyTel of Mountain Home, INC. Arkansas
CenturyTel of North Louisiana, Inc. Louisiana
CenturyTel of North Mississippi, Inc. Mississippi
Page 24 of 37
<PAGE> 25
EXHIBIT 1. AFFILIATES (Cont.)
CENTURYTEL, INC.
LIST OF SUBSIDIARIES
(EACH 100% OWNED UNLESS NOTED OTHERWISE)
STATE OR
JURISDICTION OF
SUBSIDIARY INCORPORATION
- ---------- --------------
CenturyTel of Northern Michigan, Inc. Michigan
CenturyTel of Northwest Louisiana, Inc. Louisiana
CenturyTel of Odon, Inc. Indiana
CenturyTel of Ohio, Inc. Ohio
CenturyTel of Ooltewah-Collegedale, Inc. Tennessee
CenturyTel Personal Access Network, Inc. Louisiana
Wireless 2000, Inc. (20%) Louisiana
CenturyTel of Port Aransas, Inc. Texas
CenturyTel of Redfield, Inc. Arkansas
CenturyTel of Ringgold, Inc. Louisiana
CenturyTel/Ringgold IC & C, Inc. Louisiana
CenturyTel SM Telecorp, Inc. Texas
CenturyTel Telecommunications, Inc. Texas
CenturyTel/Area Long Lines, Inc. Wisconsin
SM Telecom, Inc. Texas
CenturyTel/SM, Inc. Texas
CenturyTel of San Marcos, Inc. Texas
Telecor Cellular, Inc. Louisiana
CenturyTel Security Systems, Inc. Louisiana
Page 25 of 37
<PAGE> 26
EXHIBIT 1. AFFILIATES (Cont.)
CENTURYTEL, INC.
LIST OF SUBSIDIARIES
(EACH 100% OWNED UNLESS NOTED OTHERWISE)
STATE OR
JURISDICTION OF
SUBSIDIARY INCORPORATION
- ---------- --------------
CenturyTel Security Systems Holding Company, LLC Louisiana
CenturyTel Security Systems of Arkansas, LLC Louisiana
CenturyTel Security Systems of Colorado, L.L.C. Louisiana
CenturyTel Security Systems of Louisiana, L.L.C. Louisiana
CenturyTel Security Systems of Mississippi, L.L.C. Louisiana
CenturyTel Security Systems of Montana, L.L.C. Louisiana
CenturyTel Security Systems of Ohio, L.L.C. Louisiana
CenturyTel Security Systems of Oregon, L.L.C. Louisiana
CenturyTel Security Systems of Washington, L.L.C. Louisiana
CenturyTel Security Systems of Wisconsin, L.L.C. Louisiana
Lone Star Security Systems, LLC Louisiana
Texas-CenturyTel Security Systems, LLC Louisiana
CenturyTel Service Group, LLC Louisiana
CenturyTel Solutions, LLC
CenturyTel of South Arkansas, Inc. Arkansas
CenturyTel of Southeast Louisiana, Inc. Louisiana
CenturyTel of Southwest Louisiana, Inc. Louisiana
CenturyTel Supply Group, Inc. Louisiana
CenturyTel/Tele-Max, Inc. Texas
CenturyTel/Remote Access, Inc. Louisiana
CenturyTel of Lake Dallas, Inc. Texas
Page 26 of 37
<PAGE> 27
EXHIBIT 1. AFFILIATES (Cont.)
CENTURYTEL, INC.
LIST OF SUBSIDIARIES
(EACH 100% OWNED UNLESS NOTED OTHERWISE)
STATE OR
JURISDICTION OF
SUBSIDIARY INCORPORATION
- ---------- --------------
CenturyTel Wireless, Inc. Louisiana
Century Cellunet of Alexandria, Inc. Louisiana
Century Cellunet B-Side Development Corp. Louisiana
Century Cellunet International, Inc. Louisiana
Cellunet of India Limited Mauritius
Century Cellunet of Louisiana, Inc. Louisiana
Century Cellunet of Michigan, Inc. Louisiana
Century Cellunet of Michigan RSAs, Inc. Louisiana
Century Cellunet of Michigan RSA #4, Inc. Louisiana
Century Cellunet of Mississippi RSA #2, Inc. Mississippi
Century Cellunet of Mississippi RSA #7, Inc. Mississippi
Century Cellunet of North Arkansas, Inc. Louisiana
Century Cellunet of Saginaw, Inc. Louisiana
Century Cellunet of South Arkansas, Inc. Louisiana
Century Cellunet of Southern Michigan, Inc. Delaware
Saginaw Bay Cellular Company Michigan
Century Cellunet of Texarkana, Inc. Louisiana
CenturyTel Wireless of Texarkana, LLC Louisiana
CenturyTel Paging, Inc. Louisiana
CenturyTel Telelink, Inc. Louisiana
Page 27 of 37
<PAGE> 28
EXHIBIT 1. AFFILIATES (Cont.)
CENTURYTEL, INC.
LIST OF SUBSIDIARIES
(EACH 100% OWNED UNLESS NOTED OTHERWISE)
STATE OR
JURISDICTION OF
SUBSIDIARY INCORPORATION
- ---------- --------------
CenturyTel Wireless of Louisiana, Inc. Louisiana
Celutel, Inc. Delaware
Brownsville Cellular Telephone Co., Inc. Delaware
Celutel of Biloxi, Inc. (96.45%) Delaware
Jackson Cellular Telephone Co., Inc. (90.22%) Delaware
The McAllen Cellular Telephone Co., Inc. Nevada
Pascagoula Cellular Services, Inc. Mississippi
Pacific Telecom Cellular, Inc. Wisconsin
CenturyTel Wireless of Wisconsin RSA #8, LLC Delaware
Eau Claire Cellular, Inc. Colorado
North-West Cellular of Eau Claire, Inc. Wisconsin
Pacific Telecom Cellular of Idaho, Inc. Idaho
Pacific Telecom Cellular of 1-5 Mobilnet, Inc. Washington
Pacific Telecom Cellular of Illinois, Inc. Illinois
Pacific Telecom Cellular of Michigan, Inc. Michigan
Pacific Telecom Cellular of Michigan RSA #1, Inc. Michigan
Pacific Telecom Cellular of Michigan RSA #2, Inc. Michigan
Pacific Telecom Cellular of Minnesota, Inc. Minnesota
Pacific Telecom Cellular of Montana, Inc. Montana
Pacific Telecom Cellular of Oregon, Inc. Oregon
Pacific Telecom Cellular of South Dakota, Inc. South Dakota
Pacific Telecom Cellular of Washington, Inc. Washington
Page 28 of 37
<PAGE> 29
EXHIBIT 1. AFFILIATES (Cont.)
CENTURYTEL, INC.
LIST OF SUBSIDIARIES
(EACH 100% OWNED UNLESS NOTED OTHERWISE)
STATE OR
JURISDICTION OF
SUBSIDIARY INCORPORATION
- ---------- --------------
CenturyTel Wireless Louisiana, Inc. (Cont.) Louisiana
Pacific Telecom Cellular, Inc. (Cont.) Wisconsin
UC/PTC of Wisconsin, LLC (85%) Wisconsin
CenturyTel Wireless of Wisconsin RSA #1, LLC Delaware
CenturyTel Wireless of Wisconsin RSA #2, LLC Delaware
CenturyTel Wireless of Wisconsin RSA #3, LLC Delaware
CenturyTel Wireless of Wisconsin RSA #6, LLC Delaware
CenturyTel Wireless of Appleton-Oshkosh-Neenah MSA, LLC Delaware
Universal Cellular, Inc. Wisconsin
Century Cellunet of Pine Bluff, LLC Arkansas
CenturyTel Wireless of La Crosse, LLC Delaware
CenturyTel Wireless of Wisconsin RSA #10, LLC Delaware
Universal Cellular for New Mexico RSA #4, Inc. New Mexico
Universal Cellular for Wisconsin RSA #8.1, Inc. Wisconsin
CenturyTel Wireless of North Louisiana, LLC Louisiana
CenturyTel Wireless of Shreveport, LLC Louisiana
Pacific Telecom Cellular of Alaska RSA #1, Inc. Alaska
CenturyTel of Wisconsin, Inc. Wisconsin
Hillsboro Telephone Company, Inc. (20%) Wisconsin
La Crosse Telephone Corporation Wisconsin
Spectra Communications Group, LLC (56.9%) Delaware
Telephone USA of Wisconsin, LLC (89%) Delaware
Page 29 of 37
<PAGE> 30
Exhibit 2. PRODUCT and PRICING
2.01 EQUIPMENT
Products: All current and future LMDS (28,29 & 31GHz) OC-3 and Fast Ethernet
products offered by Triton
Price:
o Pricing is per IFU.
o In addition to the initial license fee, an Annual Support fee for
each IFU installed in the Buyer's networks will be invoiced as
discussed below at Exhibit 2, Section 2.03.
o [*] per IFU for first 500 IFUs (less [*] per IFU as described in
section 4.02)
o [*] per IFU or units 501-800
o [*] per IFU for IFUs 801-1600.
o [*] per IFU for IFUs 1601-2000.
o Mounting/Alignment brackets are [*].
o Software licensing fee [*] of Purchase Order value per year per
IFU.
[*] Confidential Treatment Requested
Page 30 of 37
<PAGE> 31
2.02 DOCUMENTATION
All Documentation shall be available electronically or hardcopy at prices set
forth in Triton's published price book.
Page 31 of 37
<PAGE> 32
2.03 SOFTWARE LICENSE FEE AND ANNUAL SUPPORT FEE FOR SOFTWARE AND TECHNICAL
ASSISTANCE CENTER
The IFU Link Manager, IFU Software and all other Seller provided
Software necessary to operate the Products in Buyer's network shall be provided
under this Software License. Triton will be responsible to make available
up-to-date copies of all Software as well as TAC software support (as described
in the TAC section) for all clients who are in full payment of their"Software
License Fee."
Software License Fee
o All Purchase Orders will include a Software License Fee of [*] of
the Purchase Order's Net Price for IFUs. The Software License Fee
of [*] will be prorated for the balance of the calendar year in
which the PO is issued beginning the month following the scheduled
delivery date in the PO. Example: IFU unit price of [*] with
scheduled delivery date of May 15, 2000. Calculation: [*] X [*] /
12 months X 7 Months remaining in calendar year = [*] per IFU unit
ordered for May 15, 2000 delivery.
Annual Support Fee
o The Annual Support Fee will be [*] per year of the purchase value
of all IFUs installed in the network. The annual support fee
includes "Bronze" level TAC support and all standard software
upgrades. The Annual Software Support Fee ([*] of the PO value all
IFU's) will be billed in the first quarter of each calendar year
based on the total number of IFU's in the Buyers network as of the
last day of the previous calendar year.
[*] Confidential Treatment Requested
Page 32 of 37
<PAGE> 33
2.04 EQUIPMENT WARRANTY - TRITON SUPPLIED EQUIPMENT
(a) Standard Warranty
o The Warranties relating to Triton Supplied Equipment can be found
in Article 8.
(b) Extended IFU Warranty
o The Seller offers the following optional Extended IFU Warranty
terms:
o Additional 12 month warranty [*] of the Purchase Order
IFU net sales price.
o Extended IFU Warranty must be purchased with this Equipment
purchased in this Agreement and is incremental to the twelve months
in the Standard IFU Warranty.
o The return and replacement terms and conditions of the Standard IFU
Warranty apply to the Extended IFU Warranty.
o Extended IFU warranty relates to Equipment only. Technical support
for Software is covered separately.
[*] Confidential Treatment Requested
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<PAGE> 34
2.05 TECHNICAL ASSISTANCE CENTER (TAC) SERVICE LEVEL AGREEMENT
TAC Services is available for all Products.
(a) Bronze Level TAC Services
o Part of net Equipment price as per this Agreement.
o Regular business hour support (08:00 to 17:00 Eastern Time;
Mondays through Fridays excluding Seller's observed holiday
schedule).
o Non-business hour paging services with maximum three (3) hour
response time.
o E-mail communication available for information inquiries with
maximum three (3) business day response.
o Per hour service charge of telephone and administrative time
to manage Triton and Third Party out of warranty Equipment:
[*].
[*] Confidential Treatment Requested
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<PAGE> 35
2.06 CUSTOMER TRAINING
(a) AVAILABLE TRAINING COURSES
o Local IFU Installation
o Physical installation
o Alignment
o Configuration
o Integration
o Remote IFU OAM&P - Administration, Management, and Protocol
o Integrate IFUs into new and existing networks
o Configure all components and aspects of the IFU
o Perform all typical diagnostics and problem isolation to
properly identify failed or degraded operation
o Retrieve all remote administration data
o Apply security measures to ensure network integrity
o IFU Network Engineering
(b) CERTIFICATION
o Installation and Maintenance
o Training is provided at a level to certify the customer in
the Installation and Maintenance of the Triton product.
o Certification verification for each Student is supplied by
Seller.
o Customer will be able to perform all the necessary
functions to install, locally align and configure, and
integrate the IFU in an effective manner.
o Customer will be able to remotely integrate, diagnose
typical failures and degradations, and manage and
administer the IFUs in an effective, consistent manner.
(c) PRICE.
o Additional class prices are based on a course basis at
individual student or group rates, excluding travel and
facilities costs.
o Prices are to be negotiated based on course program
supplied by Seller.
o Price includes all course material and Equipment.
o Minimum number of two (2) students per class.
o Maximum number of ten (10) students per class.
o Customer Premise Training
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<PAGE> 36
o Travel Expense for two (2) Seller Trainers including
lodging, meals, rental care, and airfare.
o Shipment of any training material and Equipment.
o Two (2) fully installed and operational IFUs to be used for
training purposes.
o The payment terms in net 30 days upon issuance of the
invoice.
(d) TRAINING ALLOWANCE
o During the Term of this Agreement, Buyer has the right to require
Seller to train up to five (5) Buyer employees at no charge to
Buyer. The training will be for one week per employee, and will
take place in Orlando, Florida unless another site is specified by
Seller. Buyer will be responsible for all expenses incurred by
Buyers employees related to the training.
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<PAGE> 37
Exhibit 3. YEAR 2000 (Y2K) COMPLIANCE
Section 1.02 Seller warrants, with respect to Products that Seller has
undertaken commercially practicable efforts to ensure, to the extent within its
reasonable control, that when such Products are properly used in accordance with
the applicable Product Specifications, then both before and after 01 January
2000 such Products will accurately receive, provide, and process date and date
dependent data (including calculating, comparing, and sequencing) from, into,
and between the twentieth (20th) and the twenty-first (21st) centuries through
to the year 2036, including the years 1999 and 2000, and leap year calculations.
Seller further warrants during Product warranty period, as specified in this
Agreement, Product shall function without any material, service affecting,
non-conformance to the applicable Product Specifications as a consequence of
date and date dependent data, to the extent that other software used in
combination with Seller's Products sold or licensed hereunder is also Year 2000
Compliant and properly exchanges date and date dependent data with Seller's
Products. If Product fails to so function as set forth herein, the Parties agree
to negotiate a commercially reasonable solution. Any modification to Products
not performed by Seller, other than with respect to Modifiable Software, shall
void this warranty.
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<PAGE> 1
EXHIBIT 10.10
TRITON NETWORK SYSTEMS, INC.
SUPPLY AGREEMENT
This Supply Agreement (the "Agreement") is made as of
December 23, 1999 (the "Effective Date")
between Triton Network Systems, Inc. ("Seller", also referred to as "Triton"),
a Delaware corporation with principal place of business at:
8529 South Park Circle,
Orlando, FL; USA 32819
and
Advanced Radio Telecom Corp. ("Buyer", also referred to as "ART") a Delaware
corporation with principal place of business at:
500 - 108th Avenue NE, Suite 2600,
Bellevue, WA, USA 98004
In consideration of the mutual covenants contained herein,
the Parties agree as follows:
TRITON NETWORK SYSTEMS, Inc. SUPPLY AGREEMENT NUMBER:
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ARTICLE 1. DEFINITIONS
As used in this Agreement, the following terms have the following meanings:
1.01 "ADDITIONAL TERM" has the meaning set forth in Section 3.01.
1.02 "AFFILIATE" means any entity listed in Exhibit I or any entity which
is a parent or subsidiary of a Party or which is controlled by or
under common ownership or control of a Party.
1.03 "AGREEMENT" means this Supply Agreement, and the Exhibits attached
hereto, as they may be amended from time to time.
1.04 "ACCEPTANCE" means with respect to deliveries of the Equipment to
Buyer, that the shipment has been inspected by Buyer, the paperwork,
including packing list, accurately matches the shipment and the
shipment matches the Buyer's Purchase Order or other written
delivery instructions.
1.05 "ANNUAL SUPPORT FEE" shall mean the fees for annual software support
by Seller as reflect in Exhibit 2.
1.06 "BACKWARDS COMPATIBLE" means (i) with respect to Software, the ability
of newer or more advanced versions to function seamlessly with older
or less advanced version of Software and, Products, including without
limitation, all existing Software and Products purchased by Buyer
and (ii) with respect to Equipment the interoperability and
compatibility of such Equipment with existing Products purchased by
Buyer and Buyer's network infrastructure, in each case resulting in no
reduction in the existing level of functionality of the existing
Products or Buyer's network infrastructure.
1.07 "CHANGE ORDER" shall have the meaning set forth in Section 5.03(d).
1.08 "CONFIDENTIALITY AGREEMENT" has the meaning set forth in Section
10.01.
1.09 "DELIVERY DATE" means the date on which Products ordered by Buyer are
to be delivered to the location(s) as specified by Buyer in Purchase
Orders accepted by Seller pursuant to Section 5.03.
1.10 "DOCUMENTATION" means the system standard documentation provided to
Buyer, in written or electronic form, as described in this Agreement.
All Documentation shall be subject to applicable copyright and
confidentiality restrictions.
1.11 "EFFECTIVE DATE" shall mean December 23, 1999.
1.12 "EQUIPMENT" means the hardware Products provided to Buyer as defined
in this Agreement. In addition to hardware developed by Seller,
Equipment generally includes OEM Equipment and other Third Party
Equipment, except as otherwise provided in this Agreement.
1.13 "FORECAST" means non-binding forecasts of Buyer's anticipated Product
orders as most recently revised pursuant to Section 5.03 of this
Agreement.
1.14 "IFU" refers to Seller's Invisible Fiber(TM) unit.
1.15 "INITIAL TERM" has the meaning set forth in Section 3.01.
1.16 "INITIAL PURCHASE CANCELLATION FEE" has the meaning set forth in
Section 4.05.
1.17 "INITIAL PURCHASE COMMITMENT" has the meaning set forth in
Section 4.02.
1.18 "LATE SHIPMENT" has the meaning set forth in Section 5.04.
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1.19 "LIST PRICE" means the Seller's standard price before any discount,
as may be available in price lists from time to time.
1.20 "MAJOR SOFTWARE RELEASE" means a Software Release which contains
significantly new features and functionality (only) and does not
include maintenance releases, updates or bug fixes.
1.21 "NET PRICE" means the price the Buyer will pay after Seller's
discount.
1.22 "PARTY" means either Buyer or Seller.
1.23 "PRODUCT" means, individually and collectively, the Equipment,
Software, and Documentation specified in Exhibit 2. In addition, any
item Seller adds to its generally available standard Product price
list or so identifies to Buyer in a Quotation shall be deemed
incorporated into this Agreement upon the mutual agreement of the
Buyer and Seller, subject to additional terms and conditions specified
in the applicable Product Exhibit, if any.
1.24 "PRODUCT SPECIFICATION" means those specifications set forth in
Exhibit 6 to this Agreement. Exhibit 6 may be revised from time to
time by the mutual agreement of the Parties to address performance
issues revealed by testing during the Term hereof.
1.25 "PURCHASE ORDER" means a written, numerically controlled and dated
purchase authorization document issued by Buyer or Buyer Affiliate to
Seller or Seller Affiliate, specifying the types and quantities of
Products to be furnished by Seller pursuant to this Agreement.
1.26 "RPS" means a Radio Pair System which includes two (2) IFUs, mounting
brackets and initial Software.
1.27 "QUOTATION" means a written budgetary or firm price quotation, as
specified in this Agreement, issued by Seller to Buyer for the supply
of any Products pursuant to this Agreement.
1.28 "SHIP DATE" means the date on which a Product ordered by Buyer is to
be shipped as set forth in the relevant Purchase Order, or in the case
of Software, the date upon which such Software is either available for
download by Buyer or physically shipped to Buyer.
1.29 "SOFTWARE" means the Seller's proprietary and/or Third Party Software
computer programs provided to Buyer (consisting of firmware and logic
instructions in machine readable code residing in, or intended to be
loaded in computer memories which provide basic logic, operating
instructions and Seller-related application instructions, but
excluding customer data) as well as the Documentation used to
describe, maintain and use the programs. Any reference herein to
Software being "sold," "purchased" or the like is understood to be a
reference in fact to the program being licensed.
1.30 "SOFTWARE LICENSE" shall mean the license to use Software granted to
Buyer by Seller pursuant to this Agreement.
1.31 "SOFTWARE RELEASE" means revisions to Software or new Software
containing new features, and/or enhancements, and/or certain problem
fixes that may be supplied by Seller to Buyer from time to time.
1.32 "SOURCE CODE" shall have the meaning set forth in Section 7.07.
1.33 "STANDARD INTERVAL" means the standard time prior to the shipment of
a Product following acceptance of a Purchase Order by Seller. Seller's
Standard Interval is ninety (90) days for forecasted quantities and
one hundred twenty (120) days for unforecasted quantities.
1.34 "TAC" means Seller's Technical Assistance Center.
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1.35 "TERM" means the duration of this Agreement.
1.36 "TERRITORIES" means the countries, country, or portion of country
that are covered by this Agreement as noted in Exhibit 4. The
Parties may, by mutual written agreement, amend this Agreement from
time to time to add additional countries to the Territories.
1.37 "THIRD PARTY" means any individual or legal entity not including
Buyer and Seller and their respective Affiliates.
1.38 "THIRD PARTY EQUIPMENT" means any Equipment not of Seller's
manufacture which are identified in Exhibits to this Agreement. In
addition, any Equipment Seller adds to its generally available
standard Third Party Equipment price list or so identifies to Buyer
in a Quotation shall be subject to the terms and conditions of this
Agreement and any mutually acceptable additional terms and
conditions specified in writing. Seller may also recommend Third
Party Equipment that is not included in the Exhibits or provided by
the Seller. Any Third Party Equipment recommended by but not sold by
the Seller is not covered under the terms and conditions set forth
in this Agreement.
1.39 "THIRD PARTY PRODUCTS" means, collectively, Third Party Equipment and
Third Party Software.
1.40 "THIRD PARTY SOFTWARE" means any Software not owned by Seller which
is included within Licensed Software.
ARTICLE 2. SCOPE OF AGREEMENT
2.01 This Agreement sets forth the terms and conditions under which Buyer
and its Affiliates may order Products from Seller and its Affiliates
and Seller and its Affiliates will supply Products to Buyer and its
Affiliates. Unless otherwise set forth herein, any reference in this
Agreement to Seller or Buyer shall be deemed to include their
respective Affiliates. Buyer may use the Products itself, or may use
the Products to provide services to others, or sell the Products to
Third Parties subject to the terms and conditions of this Agreement.
2.02 Unless specifically stated otherwise, all references to money or
currency shall be in U.S. dollars and all documentation,
correspondence, and communication shall be in the English language.
2.03 Seller shall meet all Buyer supply requirements as set forth in
accepted Purchase Orders irrespective of Purchase Orders for
Equipment from other parties; provided, however, such Buyer
requirements are reasonably consistent with Forecasts submitted by
Buyer to Seller in the manner set forth herein.
2.04 Subject to Section 4.03 below, this Agreement shall also apply to the
products provided by Seller and installed as of the Effective Date in
Buyer's network in San Jose, California pursuant to the Evaluation
Trial Agreement dated as of April 29, 1999, subject to section 4.03
below, which products shall be deemed to be "Products" under this
Agreement.
ARTICLE 3. TERM
3.01 The initial term of this Agreement is three (3) years from the
Effective Date (the "Initial Term"). Following the Initial Term, this
Agreement shall be automatically renewed for successive one (1) year
terms (each, an "Additional Term"); provided, that (i) at any time
after this Initial Term Buyer may terminate this Agreement by
providing thirty (30) days prior written notice to Seller,
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and (ii) at any time beginning one year after the expiration of the
initial Term, Seller may terminate this Agreement by providing
thirty (30) days prior written notice to Buyer.
ARTICLE 4. PURCHASE RIGHTS AND COMMITMENTS
4.01 Subject to the terms and conditions of this Agreement, Seller
agrees to sell and Buyer agrees to buy Products in accordance with
the pricing and benefits set forth in Exhibit 2 of this Agreement.
4.02 Buyer agrees to place Purchase Orders for 1,000 RPSs to be delivered
by December 31, 2000. This "Initial Purchase Commitment" is Buyer's
sole commitment with respect to purchasing Products from Seller
during the Term. Concurrent with execution of this Agreement, Buyer
will issue a Purchase Order for 170 RPSs to be delivered before
June 30, 2000, which RPSs shall be counted towards the Initial
Purchase Commitment. Buyer will issue confirming Purchase Orders with
specific delivery information such as Ship Date and location. An
additional 750 RPSs of the Initial Purchase Commitment are to be
delivered by December 31, 2000 pursuant to Purchase Orders issued by
Buyer. Buyer may apply purchases of any of Seller's 38Ghz products
to the Initial Purchase Commitment. If prices for Seller's future
38Ghz products are greater than the prices set forth in this
Agreement, the Initial Purchase Commitment shall be measured by total
purchase price not by the number of units.
4.03 Seller shall replace the IFUs which are installed in Buyer's network
in San Jose, California. ("San Jose IFUs") as of the Effective Date
with new IFU's which Seller delivered to) Buyer pursuant to Purchase
Orders number 3886, 3888 or 3891. Seller will replace the IFUs, at
Seller's sole cost and expense, at a mutually acceptable time during
January, 2000. Buyer shall return the San Jose IFUs to Seller, at
Seller's sole cost and expense, and Seller will not bill Buyer for
the San Jose IFUs. Seller shall submit an invoice for equipment
(which invoice shall not include the San Jose IFU's or any replaced
cable or other equipment which has been or will be returned to Seller
in connection with the IFU replacement) provided by Seller and
installed as of the Effective Date in Buyer's network in San Jose,
California. Buyer shall promptly pay such invoice subject to
reconciling such invoice with the Triton supplied equipment in use in
the ART network as of the Effective Date.
4.04 Purchases of RPSs (i) by Affiliates of Buyer, (ii) pursuant to orders
outstanding on the date hereof as set forth in the Letter Agreement,
dated November 11, 1999, between Buyer and Seller, and (iii)
delivered by Seller to Buyer prior to the date of this Agreement,
shall count towards Buyer's Initial Purchase Commitment. Buyer may,
without any further liability to Seller, cancel its Initial Purchase
Commitment upon the occurrence of any of the following events, in
which case Buyer has no obligations to pay any Initial Purchase
Cancellation Fee or otherwise:
(a) Seller materially breaches this Agreement and such breach
recurs, continues or remains uncured after thirty (30) days
written notice;
(b) During the period commencing on the Effective Date and
ending on June 1, 2000, there occur [*], or during the period
commencing on June 1, 2000 through the remainder of the Term,
there occurs [*];
(c) Products fail to meet the performance requirements set
forth in the Product Specifications;
[*] Confidential Treatment Requested
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(d) Seller files a voluntary petition in bankruptcy or has an
involuntary petition in bankruptcy filed against it that is
not dismissed within forty-five (45) days of such involuntary
filing; Seller admits the material allegations of any
petition in bankruptcy filed against it; Seller is adjudged
bankrupt; Seller makes a general assignment for the benefit
of its creditors, if a receiver is appointed for all or a
substantial portion of its assets and is not discharged
within sixty (60) days after his appointment; or Seller
commences any proceeding for relief from its creditors in any
court under any state insolvency statutes;
(e) Seller fails to ship to Buyer the quantity of Products
set forth in an accepted Purchase Order (which Products
conform with Product Specifications) within fifteen (15) days
after the Ship Date set forth in such accepted Purchase
Order;
(f) Seller materially disregards or materially violates any
applicable laws;
(g) The Product Specifications or the price is materially
changed due to the effect of changes in government
regulations which require such change;
(h) A force majeure event which impedes Sellers performance
hereunder continues for a period of thirty (30) days
(regardless of whether, as a result of such event, Buyer
cancels any Purchase Order in accordance with Section 5.05
hereof);
(i) Buyer is enjoined from using any Products and Seller is
unable to cure the effects of such injunction pursuant to
Section 9.02(a) or (b) within thirty (30) days; or
4.05 Subject to Section 4.04, if Buyer fails to place Purchase Orders (or
later cancels such Purchase Orders (other than pursuant to Section
5.05(c))) for 1,000 RPSs to be delivered by December 31, 2000, Buyer
will pay to Seller a penalty (the "Initial Purchase Cancellation Fee")
equal to ten percent (10%) of the aggregate purchase price of the
number of RPSs equal to the remainder of (i) 1000 RPSs minus (ii) the
total number of RPSs included in Purchase Orders placed by Buyer to be
delivered on or before December 31, 2000. Any RPS included in any
Purchase Order placed by Buyer to be delivered prior to December 31,
2000 which is cancelled by Buyer in accordance with Section 5.05(c)
hereof shall be counted as delivered (and accordingly included in
clause (ii) of the immediately preceding sentence) for purposes of
calculating the Initial Purchase Cancellation Fee pursuant to this
Section 4.05. Payment by Buyer of the Initial Purchase Cancellation
Fee shall be Seller's sole and exclusive remedy for Buyer's failure to
satisfy the Initial Purchase Commitment, and Seller agrees not to seek
any other remedy for such failure.
Article 5. TERMS OF PURCHASE
5.01 Pricing
(a) The pricing of the Products shall be as specified in the
attached Exhibit 2 plus applicable taxes unless otherwise
agreed to between the Parties in writing or in the case of
regulatory change as specified in this Section 5.01 (a). The
prices set forth in the attached Exhibit 2 for
Seller-manufactured Products are based on Seller's design,
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manufacture, and delivery pursuant to its design criteria
and manufacturing processes and procedures in effect on the
Effective Date. If, solely as a result of the imposition of
requirements by any Federal, State or local government
during the Term, there is a change in such criteria,
processes or procedures or any material change in the
Products caused by such governmental requirements, the
prices may be adjusted by Seller, subject to reasonable
approval of Buyer and mutual written agreement of Seller and
Buyer. Any OEM Equipment and Third Party Products which have
been so identified in the attached Exhibit 2 shall be
furnished subject to the applicable vendor's then-current
terms, conditions and specifications subject to Buyer's
written acceptance of such terms, conditions and
specifications.
(b) All prices listed in Exhibit 2 and in any and all
Quotations, unless otherwise noted, are FOB Seller and are
exclusive of all freight, insurance, duties, taxes (more
specifically including but not limited to excise, sales,
value added, goods & services, and usage taxes), and any and
all other levies as might be incurred after the FOB point.
5.02 Payment
(a) Product Payment - Payment for Products shall be due upon the
later of thirty (30) days following shipment of such
Products to Buyer and thirty (30) days following the receipt
by Buyer of Seller's invoice with respect to such Products.
Notwithstanding any other provision hereof, in the event
that (i) Buyer fails to make timely payment for Products
pursuant to this Section 5.02(a), and (ii) Buyer does not
make payment to Seller for such Products within fifteen
(15) days after the receipt by Buyer of written notice from
Seller of such failure, Seller shall have no obligation to
ship any Products to Buyer hereunder until such time as
Buyer remits such payment to Seller.
(b) Annual Support Fees - Payment for Annual Support Fees
ordered by Buyer shall be due within thirty (30) days of
receipt of Seller's invoice given in accordance with
Exhibit 2.
(c) Timely Payment - Past due amounts shall bear interest from
the expiration of such period at the rate of one and
one-half percent (1 1/2%) per month (or such lesser rate as
may be the maximum permissible rate under applicable law).
(d) Taxes - Buyer's price for Products as reflected in this
Agreement does not include any taxes, duties or charges of
any kind imposed by any federal, state or local governmental
entity on the sale or shipment to Buyer of Products,
excluding only those taxes based solely on Seller's net
income. When Seller has the legal obligation to collect
such taxes, the appropriate amount shall be added to Buyer's
invoice and shall be paid by Buyer unless Buyer provides
Seller with a valid tax exemption certificate authorized by
the appropriate taxing authority.
5.03 Forecasts and Purchase Orders
(a) Within thirty (30) days after the Effective Date, Buyer will
provide Seller with a written, non-binding Forecast
estimating the Products Buyer will purchase during the
period of twelve (12) consecutive calendar months commencing
on the Effective Date. Buyer will update such Forecast
monthly in order to provide Seller with a twelve month
rolling view of prospective purchases by Buyer. The
Forecasts shall not be binding and only are intended to give
the Parties an estimate of future purchases for planning
purposes.
(b) Products to be procured hereunder, as well as the Ship Date,
shall be listed in a Purchase Order issued by Buyer pursuant
to this Agreement and subject to the Forecast process listed
above. Each Purchase Order shall specifically reference this
Agreement, and time
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is of the essence in connection with the performance of
each Purchase Order. Any Purchase Order issued by Buyer
to Seller for Products shall be governed in all respects
by the terms and conditions of this Agreement. A form of
Purchase Order is attached hereto as Exhibit 7. Buyer and
Seller agree that, except for non-conflicting
administrative terms as provided below, any additional or
preprinted terms or conditions on a Purchase Order shall
be null, void and of no effect. Each Purchase Order shall
specify, in addition to other appropriate information as
may be mutually agreed upon:
(i) name and address of Buyer, or Buyer Affiliate;
(ii) Buyer Purchase Order number and Purchase Order date
of issuance;
(iii) name and address of Seller, or as appropriate,
Seller Affiliate, which shall be an Affiliate set
forth in the Exhibit 1, that will be providing
Product being ordered;
(iv) incorporation within, by reference, this Agreement;
(v) types and quantities of Product to be furnished by
Seller as set forth in Exhibit 2 or as provided in
a Quotation;
(vi) applicable prices, charges, and fees with respect
to such Product as set forth in Exhibit 2 or as
provided in a Quotation;
(vii) location or facility to which Product is to be
delivered;
(viii) Ship Date of Product;
(ix) billing address of the Party responsible for the
payment whether it is the Buyer, or Buyer Affiliate
to which Buyer intends to resell the Product, if
any, and other information required under this
Agreement to be included in a Purchase Order;
(x) proper authorization of Buyer or Buyer's agent
(c) Seller is obligated to accept all Purchase Orders issued by
Purchaser under this Agreement except those Purchase Orders
which (i) are missing the material terms required by this
Article to be contained in a Purchase Order or call for
delivery of Products in an amount which is in excess of [*]
more than the amounts contained in the Forecast for the month
for which such a Purchase Order is issued or (ii) have Ship
Dates that materially vary from Standard Intervals. All
Purchase Orders shall be deemed to have been accepted by
Seller unless (i) Seller notifies Buyer in writing within
fifteen (15) business days of receipt of a Purchase Order
that it will not accept such Purchase Order and (ii) Seller
may rightfully decline to accept such Purchase Order pursuant
to the immediately preceding sentence. Any Purchase Order not
rightfully rejected shall be deemed to be accepted by Seller.
A Purchase Order submitted pursuant to the terms and
conditions of this Agreement, and which Seller has accepted,
shall constitute an Agreement between Buyer and Seller. Any
Purchase Order for which Seller gives timely notice of
non-acceptance if non-acceptance is permitted under this
Section shall be deemed void. The Product quantities listed
on any Purchase Order which conforms to the terms and
conditions of this Agreement, which are consistent with
Forecasts including any permitted variance to such Forecasts
and (i) which are not accepted by Seller pursuant to the
first sentence of this clause (c) or (ii) which are cancelled
by Buyer in accordance with Section 5.05(c) hereof, shall be
counted toward the Initial Purchase Commitment.
(d) In addition to changes allowed in the Forecast process set
forth in Section 5.03 and
[*] Confidential Treatment Requested
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changes pursuant to Sections 5.05 and 5.06, Buyer may at any
time request additions, alterations, deductions, or
deviations to a Purchase Order subject to the condition
that such changes and any adjustments resulting from such
changes, including but not limited to schedules and prices,
shall be mutually agreed upon, and if so agreed,
subsequently detailed in a written revision to the
applicable Purchase Order ("Change Order") signed by a
designated Buyer representative and Seller representative.
Change Orders which are processed outside of Seller's
customary processing cycle or which require additional work
by Seller to comply with such changes may be subject to a
reasonable change fee provided Seller has given Buyer a
written quote for such change fee and Buyer and Seller have
mutually agreed to such change fee in writing prior to or
concurrent with execution of the Change Order. If Buyer
fails to accept the change fee. Seller has no obligation to
accept or comply with the Change Order.
(e) Purchase Orders may be issued either electronically, such as
through electronic data interchange, or via traditional
manual methods, as mutually agreed to by the Parties.
5.04 Delivery - Delivery of Products under this Agreement shall be F.O.B.
Seller's specified facilities. The Seller shall: (a) be responsible
for and arrange for shipment of the Products to Buyer's site as
specified in the Purchase Order applicable thereto; (b) prepay all
shipping and handling charges for the Products; and (c) invoice Buyer
for such charges upon shipment of all the Products specified in a
Purchase Order. Buyer shall reimburse Seller for such charges at
Seller's actual cost. Seller shall be responsible for repair or
replacement of any Products damaged in shipment without cost to
Buyer, and Seller shall file all claims for transportation damage. If
any Product is lost, or damaged in transit, Seller shall use all
commercially reasonable best efforts to supply a replacement within
the shortest possible time at the same price and terms as applicable
to the original Purchase Order.
All shipments are subject to the following conditions:
(a) Partial shipments or early shipments may only be sent by
Seller if Buyer has approved such partial or early shipments
in writing and in advance;
(b) Seller shall notify Buyer, via e-mail as directed by Buyer,
when orders are shipped;
(c) The outside of all packing cartons shall be clearly marked
with (i) model name or number, (ii) part number, (iii) serial
number, when applicable, in barcode and human readable format
(iv) Buyer Purchase Order number and (v) Buyer part number;
(d) Packing slips shall accompany shipment and shall include
serial numbers, when applicable, in barcode and human
readable format and shall reference Buyer's Purchase Order
number;
(e) Shipment sent via truck load or less than truck load shall
be stretch wrapped on pallets with markings facing outwards;
and
(f) Buyer may, at its discretion, (i) reject shipments that do
not comply with the preceding shipping requirements or (ii)
apply as a credit against amounts due to Seller, Buyer's
reasonable labor costs arising from Seller's failure to
comply with the preceding shipping requirements.
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(g) Seller shall not ship Products more than five (5) business
days prior to the requested and accepted Ship Date in the
Purchase Order without the consent of the Buyer. Subject to
the immediately preceding sentence, in the event Seller
ships Products to the Buyer prior to the Ship Date in the
Purchase Order, Seller shall provide Buyer with reasonable
advance notice of the date on which Seller intends to
deliver such Products.
(h) In the absence of specific shipping instructions from Buyer,
Seller may ship by the method it deems most advantageous;
provided however that Buyer shall not reimburse Seller for
the costs of overnight courier or other expedited shipping
unless Buyer has agreed in advance to pay such costs for
such Purchase Order in writing.
(i) Title to the Product (excluding Software) and risk of loss
shall pass to Buyer upon shipment to Buyer.
(j) Buyer shall inspect the Product upon delivery and shall
advise Seller in writing of any obvious physical defects,
discrepancies, and/or shortages observed between the Product
physically inspected and the corresponding Product shipment
packing list provided by Seller. Buyer shall issue to Seller
a defect/discrepancy written report within fifteen (15)
business days of receipt of Product. If no such report is
issued to Seller within fifteen (15) business days the Buyer
shall be deemed to have accepted the Products as delivered.
(k) Buyer shall store all Products at the proper temperature and
other environmental conditions, as specified in the Product
Specifications, to maintain Product quality. In the event of
damage to any Product, for reason of improper storage,
thereby rendering Product unfit for intended use, Buyer
shall promptly notify Seller in writing of the facts, and
shall not use such Product except as directed by Seller.
(l) For all deliveries after January 1, 2000, if any shipment
of Products to Buyer by Seller occurs more than ten (10)
business days following the Ship Date in the accepted
Purchase Order and such delay is not caused by a force
majeure event, such delivery shall be a "Late Shipment."
(m) Not later than thirty (30) days prior to the Ship Date
relating to Product covered by a Purchase Order, Buyer may
notify Seller in writing that (i) Buyer does not wish to
receive shipment of any Products on the date set forth in
such Purchase Order, or (ii) Buyer's facilities are not
prepared in sufficient time for Seller to make delivery on
such date. In either case, Seller shall delay delivery as
requested by Buyer. Seller may, subject to Buyer's consent,
store such Products in a commercially reasonable manner
consistent with the storage requirements set forth in the
Product Specifications at Buyer's risk of loss. Buyer shall
reimburse Seller for reasonable out-of-pocket storage and
shipping fees associated with such delay.
5.05 Cancellation
(a) Subject to Section 5.05(b), upon written notice to Seller,
Buyer may cancel all or any part of a Purchase Order if
Seller receives a written and dated Purchase Order
cancellation notice before the Ship Date.
(b) Buyer shall pay cancellation charges based on the date a
Purchase Order cancellation notice is received by the Seller,
and such cancellation charges shall not exceed the
schedule as shown below (such charges shall be the sole and
exclusive remedy of the Seller with respect to cancellation
of Purchase Orders pursuant to this section 5.05):
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<TABLE>
<CAPTION>
Days Prior Notice of PO Cancellation Order Cancellation Charge
------------------------------------ -------------------------
<S> <C>
Greater than 60 days before Ship Date or within None
30 Days of Purchase Order
Greater than 30 and less than 60 days before Ship Date 20% of the Purchase Price
Less than 30 days before Ship Date 50% of the Purchase Price
</TABLE>
(c) In the event that ten (10) days after the requested Ship
Date for any Purchase Order Seller has not shipped the
Products subject to such Purchase Order, Buyer shall
have the right to cancel such Purchase Order without
cost or charge upon written notice to Seller by
facsimile, e-mail or otherwise. Seller shall notify
Buyer via e-mail if Seller is unable to ship Products on
the Ship Date. Seller shall pay any additional costs
required to expedite late shipments.
5.06 Change of Purchase Orders. Buyer may delay shipment of Product
without penalty as follows:
(a) Buyer may delay shipment of the first 250 RPSs until
June 30, 2000.
(b) Buyer may delay shipment of the next 750 RPSs until
December 31, 2000.
(c) After the first 1000 RPSs are delivered, Buyer may delay
shipment of Product for up to six (6) months for each
Purchase Order issued thereafter as set forth below;
provided, however, Buyer may not delay shipment of
Products less than thirty (30) days before the Ship Date
unless mutually agreed upon:
(i) During the first six (6) months after the first
1,000 RPSs are delivered, up to fifty percent
(50%) of any Purchase Order.
(ii) During the following six (6) months, up to forty
percent (40%) of any Purchase Order.
(iii) During the following six (6) months, up to thirty
percent (30%) of any Purchase Order.
(iv) Remainder of term, up to twenty percent (20%) of
any Purchase Order.
(d) Seller will not invoice Buyer for Products subject to
the above delays until such Products are actually
shipped to Buyer.
5.07 Invoicing. Each invoice shall include (a) Buyer's Purchase Order
number, (b) Seller's invoice number, (c) quantity and price of
each item shipped or services rendered, (d) applicable sales or
other tax, (e) freight charges (if applicable) and (f) final total
cost.
5.08 Resale Rights. Buyer shall have an unlimited right to resell the
Products to its Affiliates or as part of a service arrangement or
business arrangement with Third Parties if the Equipment is to be
used in such service or business arrangement; provided, however,
that Buyer is not permitted to sell to a direct competitor of
Seller. Seller has right of first refusal for sales which are not
to an Affiliate of Buyer or part of a service or business
arrangement (other than for sales pursuant to a foreclosure by any
Third Party on such Third Party's security interest) provided
Seller purchases on identical terms and conditions. Any Software
License, warranty and prepaid Annual Support Fees are transferable
with the sale of Equipment to the extent the foregoing provisions
are applicable to Buyer.
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ARTICLE 6. EQUIPMENT CHANGES
Notwithstanding any other provisions contained herein, Seller reserves the
right, upon prior approval from Buyer, to make changes in the Products in whole
or in part, or to substitute Products of later design at any time prior to
delivery thereof, provided that such changes do not adversely affect performance
or function or increase the cost to Buyer and further provided that the changed
or substituted Products meet or exceed Product Specifications. Such changes do
not obligate Seller to make any changes in items of the Products previously
delivered unless such changes affect the interoperability of Products including
Software in Buyer's network in which case such changes to previously delivered
Products, including Software, as are required to maintain the interoperability
and functionality of such Products will be made at Seller's expense.
ARTICLE 7. SOFTWARE LICENSING
7.01 Buyer is granted no title or ownership rights to the Software or
Documentation, which rights shall remain with Seller or Seller's
suppliers, as appropriate. This Agreement does not entitle Buyer to
the receipt or use of, or access to, Software Source Code (except as
set forth in Sections 7.07 and 7.08) or any right to reproduce the
Software or Documentation, and Buyer agrees that it shall not
decompile, reverse engineer or otherwise attempt to gain access to
the Software Source Code. The obligations of Buyer under this section
shall survive the expiration or termination of this Agreement.
Notwithstanding the foregoing, Buyer may reproduce or copy Software
or Documentation for installation, back-up or archival and test
purposes and may provide such copies to Third Parties who provide
installation or maintenance services for Buyer. Buyer will notify
Seller in the event it provides copies of Software to Third Parties.
7.02 Buyer shall be granted a perpetual, non-exclusive, transferable (as
limited by the provisions of this Agreement), non-assessable,
unlimited-user, paid-up license to:
(a) use the Software furnished;
(b) use and make adaptations of the Software (or any part
thereof), subject to the provisions of this Agreement,
provided that any such adaptations are created as an
integral step in the use of the Software in conjunction with
a Product and that it is not used in any other manner;
(c) make as many copies of the Software and any related
Documentation as Buyer deems necessary for its use, archival
purposes, or test purposes, including use by Third Parties
who are acting under the control and direction of Buyer; and
(d) use the associated Software Documentation.
Buyer agrees that the license to use the Software is subject to its
continued use of and ownership of the Equipment upon which such
Software is installed and that Buyer shall have the right to sell,
pledge as security, or otherwise transfer the Equipment upon which the
Software resides and the related Software. Transferee shall be granted
a license to use the Software but no title or ownership rights to the
Software, which rights shall remain in Seller or its suppliers, as
appropriate and upon sale or transfer the terms of this Software
License shall apply to transferee.
7.03 All Software supplied by Seller under or in implementation of this
Agreement shall be treated by Buyer as the exclusive property, and to
the extent not publicly available, as proprietary and a trade secret,
of Seller and/or its suppliers, as appropriate
7.04 Seller may, from time to time, issue new Software Releases, including
Major Software Releases,
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which shall be made available to Buyer as part of the Annual Support
Fee and without additional cost or expense to Buyer.
7.05 The Software Releases shall be updated periodically throughout the
Term of this Agreement. Once an updated Software Release is
available, it shall be made available to Buyer subject to the terms
of this Agreement.
7.06 From the date of this Agreement through December 31, 2000, Seller
shall provide a special "Founding Customer Service Package" which
provides Buyer with the "Gold Level" support as defined in Exhibit 2
hereto [*] to the Buyer. Subsequent to December 31, 2000, during the
term of this Agreement, Seller shall provide its "Bronze Level"
support as defined in Exhibit 2 hereto at no charge to the Buyer.
After the "Gold Level" support has concluded, for the two (2) week
period following the issuance of a new Software Release, Seller shall
provide Buyer with access to dedicated technical assistance center
personnel twenty-four (24) hours per day, seven (7) days per week
with immediate response time.
7.07 No later than thirty (30) business days after Seller delivers
Software to Buyer, Seller shall, [*] place a copy of all Software
source code, including copies of the source code for any upgrades or
new releases developed by Seller in the future when they are
available (collectively "Source Code"), with an independent escrow
agent reasonably acceptable to Buyer along with written escrow
instructions to deliver all Source Code to Buyer upon request from
Buyer without further instructions in the event Seller declares
bankruptcy, or is involuntarily bankrupt. The Source Code shall be
designated in writing as being held in escrow for Buyer. The escrow
agent shall hold the Source Code for the Term of the Agreement. If,
at any time, Seller declares bankruptcy, or is involuntarily
bankrupt, upon notice from Buyer, the escrow agent shall immediately
transfer the Source Code to Buyer. Possession of the Source Code does
not give Buyer any rights to sell, rent or lease the Source Code or
Software to Third Parties.
7.08 In the event Seller no longer supports past releases of Software and
Buyer requires such unsupported Software to operate Equipment in
Buyer's network, Seller shall, within [*] days of Buyer's request,
provide Buyer with the Source Code for the unsupported Software to
enable Buyer to support the Equipment in its network. Possession of
the Source Code does not give Buyer any rights to sell, rent or lease
the Source Code or Software to Third Parties.
7.09 [*] Software Releases must be Backwards Compatible.
7.10 Repair and return of Equipment is [*] based on serial number with
[*] day turnaround from receipt at factory to return shipment.
ARTICLE 8. WARRANTIES
8.01 Seller Supplied Equipment
(a) Seller warrants for a period ending on (i) the later of
fifteen (15) months from the Ship Date or twelve (12) months
after installation for the first 1,000 RPSs; or (ii) fifteen
(15) months from the Ship Date for all RPSs delivered after
the first 1,000 RPSs, that under normal use and service the
Equipment subject to this Agreement will be free from
material defects or faulty workmanship, and shall operate in
compliance with the applicable Product Specifications. In the
event the Buyer changes its network configuration in a manner
that causes the Equipment not to operate in compliance with
the applicable Product Specifications, the Seller shall use
commercially reasonable
[*] Confidential Treatment Requested
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efforts to modify the Equipment so that it will so operate and
the parties shall negotiate in good faith applicable
amendments to the Product Specifications and the cost of
Product if necessary. The foregoing warranty shall not apply
to items normally consumed during operation such as, but not
limited to, lamps and fuses. [*] Equipment will be Backwards
Compatible with [*] other Equipment and Software. If Equipment
is not free from material defects or faulty workmanship or
fails to comply with the applicable Product Specification
during the warranty period, or is not Backwards Compatible as
required by the immediately preceding sentence, Seller will,
at its option, repair, replace, or modify the Equipment so
that it is free from defects and does comply with the
applicable Product Specifications and is so Backwards
Compatible. The warranty service shall be performed at
Seller's facility. If Seller is unable to repair or modify the
Equipment within a reasonable period of time so that the
Equipment conforms to the applicable Product Specification and
is so compatible, Seller shall replace the Equipment with
Equipment that conforms to such Product Specification and is
so compatible. In such cases Seller does not guarantee that
equipment with like serial numbers will be returned to the
Buyer but such replacement Equipment shall meet all Product
Specifications and provide the same function as the Equipment
it replaces. Seller's sole obligation and Buyer's exclusive
remedy under the warranty provisions of this Article with
respect to Equipment shall be limited to repair, modification,
or replacement of the defective or non functioning Equipment
or refund if Equipment cannot be provided which complies with
Product Specifications.
(b) The warranties set forth in this Article shall not apply to
any Products where the defect or non-conformance is due to:
(i) accident, alteration, abuse, misuse, or
repair not performed by Seller or Seller qualified
technician, provided that Seller will approve agreed
upon employees of Buyer and its agents as qualified
technicians;
(ii) storage other than as set forth in the
Product Specification;
(iii) failure to comply with all applicable
environmental requirements for Product as set forth
in the Product Specification, including but not
limited to temperature or humidity ranges;
(iv) performance of Product installation,
maintenance, operation, repair, relocation, or other
service not in compliance with Product
Specifications, unless such non-complying service was
performed by Seller or on Seller's behalf;
(v) breakage, damage, alteration, or removal of
any Seller affixed seal or label located on the RPS
without the Seller's written approval. The RPSs
contain no Buyer serviceable parts;
(vi) use in conjunction with a product specified
by Seller as incompatible with such Products;
(vii) any error, act, omission, vandalism,
mishandling or misuse by anyone other than Seller or
Seller's agents, employees, vendors, and
subcontractors; or
(viii) where written notice of the defect has not
been given to Seller within the applicable warranty
period.
(c) Buyer shall be responsible for de-installation and
re-installation of any warranty repair or replacement
Equipment. Buyer shall use qualified technicians to perform
any
[*] Confidential Treatment Requested
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maintenance and/or repair to the Product during the warranty
period, where such maintenance and/or repair shall be confined
to tasks performed in accordance with Seller provided
Documentation.
(d) A return material authorization (RMA) must be obtained by
Buyer from the Seller prior to the return of any Product.
Seller shall not unreasonably delay or withhold issuing any
RMA to Buyer. Information regarding the RMA process is
provided in Exhibit 3.
(e) Warranty replacement Equipment may be new or reconditioned to
perform as new, at Seller's option. Notwithstanding the
foregoing, the warranty period of Equipment which has been
subject to repair or replacement by Seller shall commence upon
the Delivery Date of the repaired or replacement Equipment to
Buyer and shall expire on the later of one hundred twenty
(120) days from the Delivery Date or the last day of the
original warranty period with respect to the Equipment which
was repaired or replaced.
(f) All Equipment to be repaired or replaced, whether in or out of
warranty, shall be packed by Buyer in accordance with Seller's
reasonable instructions and shall follow Seller's reasonable
repair and return policy and procedures. Buyer shall bear risk
of loss and shall pay for all transportation charges for
Equipment returned to Seller and Seller shall bear such risk
and pay for transportation charges for repaired or replacement
Equipment shipped to Buyer. Seller shall use reasonable
efforts to ship repaired or replacement Equipment within
thirty (30) days of receipt of the defective Equipment. Seller
shall return the repaired or replaced Equipment to the Buyer
by the same transport method in which the Buyer sent the
Equipment to the Seller.
(g) If the Equipment that is returned to Seller is determined by
Seller to be beyond repair and is outside the warranty period,
Seller shall notify Buyer and Seller shall upon request from
Buyer sell Buyer replacement Equipment at the then current
Agreement price between the Parties for such Equipment, or if
no such Agreement exists, at the last price paid for such
Product.
(h) Seller shall maintain an adequate inventory of spare parts to
repair and replace all Products for a period beginning on the
date of this Agreement and ending on the fifth (5th)
anniversary of the termination of this Agreement or, if
longer, as otherwise provided by law.
8.02 Third Party Products
(a) With respect to any Third Party Products furnished by Seller
to Buyer, Seller shall secure from the applicable
manufacturers such warranties and indemnities as may be
available with respect to such Third Party Products, and
assign and pass through to Buyer all available warranties and
indemnities for such Third Party Products to the extent
legally assignable. In the event such warranties and
indemnities are not assignable to Buyer, Seller shall enforce,
if necessary, such warranties and indemnities on Buyer's
behalf. In addition to the above, Seller shall, at Buyer's
request, register Buyer with any and all Third Party Products
vendors (for Third Party Products that constitute systems as
opposed to individual components) such that Buyer is
acknowledged as a support obligation of the Third Party
Products vendors and Buyer can receive and obtain product
notices directly from the Third Party Products vendors. Seller
shall produce evidence of such registration within sixty (60)
calendar days from the date Buyer requests that Seller obtain
such registration.
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(b) All Third Party Products unless otherwise stated in this
Agreement, or in the Third Party warranties, will follow the
same repair and return procedures as noted in Article 8.01.
8.03 Software
(a) Seller warrants for a period ending on (i) the later of
fifteen (15) months from the Ship Date or twelve (12) months
after installation for the first 1,000 RPSs; or (ii) fifteen
(15) months from the Ship Date for all RPSs delivered after
the first 1,000 RPSs, that under normal use and service the
Software shall (i) perform the necessary provide the full
functionality described in the Documentation and Product
Specifications and (ii) be Backwards Compatible with all other
Products. In the event the Buyer changes its network
configuration in a manner that causes the Software not to
operate in compliance with the applicable Product
Specifications, the Seller shall use commercially reasonable
efforts to modify the Software so that it will so operate and
the parties shall negotiate in good faith applicable
amendments to the Product Specifications. Seller represents
and warrants that, to the best of its knowledge, any Software
provided by Seller hereunder does not contain and will not
receive from any Seller data transmission via modem or other
Seller medium, any virus, worm, trap door, back door, timer,
clock, counter, or other limiting routine, instruction, or
design that would erase data or programming or otherwise cause
the Software or Equipment to become inoperable or incapable of
being used in the full manner for which it was designed and
created (but specifically excluding locking mechanisms
designed to prevent Buyer from using those Software features
or functions not licensed to Buyer under the terms of this
Agreement, referred to as "disabling code") including, without
limitation, any limitations that are triggered by:
(i) the Software being used or copied a certain number
of times, or after the lapse of a certain period of
time;
(ii) the Software being installed on or moved to a central
processing unit that has a serial number, model
number, or other identification different from the
central processing unit on which the Software was
originally installed; or
(iii) the occurrence or lapse of any similar triggering
factor or event.
(b) In the event Seller introduces a disabling code into the
Software, Seller shall:
(i) take all steps necessary at Seller's sole cost to
test a new copy of the Software for the presence of
disabling codes;
(ii) furnish to Buyer a new copy of the Software without
the presence of disabling codes;
(iii) install and implement such new copy of the Software
at no additional cost to Buyer; and
(iv) take all steps necessary, at Seller's sole cost, to
restore any and all data or programming lost by
Buyer as a result of such disabling code. In the
event disabling codes are identified by Buyer or
Seller in the Software, Seller shall furnish to Buyer
a new copy of the Software without the presence of
disabling codes.
(c) Seller warrants all Software is Y2K compliant as set forth in
Exhibit 5.
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8.04 All Products. For all Products to be sold to Buyer under this
Agreement, Seller represents and warrants that the Products and
Buyer's ownership and use of such Products will not infringe upon
or misappropriate the intellectual property rights of any party and
no party shall have the right to seek damages from Buyer or enjoin
Buyer's right to use such Products.
8.05 THE WARRANTIES SET FORTH ABOVE CONSTITUTE THE ONLY WARRANTIES WITH
RESPECT TO THE PRODUCTS PROVIDED. THEY ARE IN LIEU OF ALL OTHER
WARRANTIES WRITTEN OR ORAL, STATUTORY, EXPRESS. IMPLIED OR
OTHERWISE, INCLUDING WITHOUT LIMITATION THE WARRANTY OF
MERCHANTABILITY AND THE WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE.
8.06 The terms of this Article shall survive any expiration or
termination of this Agreement.
ARTICLE 9. PATENT AND COPYRIGHT INFRINGEMENT INDEMNITY
9.01 Indemnification - Seller agrees to indemnify Buyer, as set forth
herein, with respect to any suit, claim, or proceeding brought
against Buyer alleging that Buyer's use of the Equipment or Software
constitutes an infringement of any United States or foreign patent,
copyright, trademark, trade secret or other intellectual property
rights. Seller agrees to defend Buyer, at Seller's expense,
against any such claims and to pay all settlement payments, costs
and legal expenses, including reasonable attorneys' fees, and any
damages awarded in any final judgment arising from such suit, claim
or proceeding; provided, however, that Buyer shall promptly advise
Seller of any such suit, claim, or proceeding and shall reasonably
cooperate with Seller in the defense or settlement of such suit,
claim or proceeding; provided further that Seller shall have sole
control thereof; and provided further that in those circumstances
where Seller's control of the defense may materially affect Buyer's
network and operations, Seller agrees to consult with Buyer in good
faith to obtain Buyer's input into appropriate defense methods. The
obligation of Seller hereunder with respect to any infringement
claim shall not apply to infringement claims based on:
(a) use of Product by Buyer in a manner, including combinations
with other products not provided by Seller, not contemplated
nor suggested by this Agreement or by Seller's product
documentation existing as of the Effective Date of this
Agreement;
(b) use of Product by Buyer in any other combination with other
products not provided by Seller, unless Seller would
otherwise normally be liable for such a combination as a
direct (or on the basis of contribution or inducement)
infringement, or unless the products not provided by Seller
are those products normally used in connection with
providing communication services over Buyer's network, and
provided that but for the existence of such combination by
Buyer, there would be no infringement claim;
(c) use of Product in a Territory other than that for which it
has been specified in Exhibit 4 to this Agreement;
(d) modifications made by Buyer without Seller's consent;
(e) Buyer's use of Equipment supplied by Third Parties;
(f) Seller's use of specifications or designs (except
specifications or designs which are or become industry
standards or are used by Seller in a Product that is
supplied to other customers) which are supplied by Buyer to
Seller for use in Seller Products to he purchased under this
Agreement provided that but for such use by Seller there
would be no infringement claim and further provided that the
Seller team providing the custom
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development and the Seller employees assigned to the Buyer
account team shall use all commercially reasonable best
efforts, without violating any Third Party confidentiality
obligations, to determine whether the requested
specification or design would violate any Third Party
patent, copyright, trademark, or other intellectual
property right and provide notice to Buyer of such knowledge
as soon as reasonably possible; and
(g) The foregoing exclusions shall not apply to use of Products,
Equipment or Software in Buyer's data communications network
if Buyer and Seller have discussed the use and
implementation of Seller's Product with other products not
provided by Seller and Buyer has purchased Products for use
in its network in a manner consistent with such discussions.
9.02 Injunction - In the event that an injunction is obtained against
Buyer's use of Equipment or Software arising from such patent or
copyright suit, claim or proceeding, in whole or in part, Seller
shall, at its option, either:
(a) procure for Buyer, at Seller's sole cost and expense, the
right to continue using the portion of the system enjoined
from use; or
(b) replace or modify, at Seller's sole cost and expense, the
same so that Buyer's use is not subject to any such
injunction.
If, after using commercially reasonable best efforts, Seller is not able to
achieve any of the above remedies, Seller shall refund the purchase price of
Product and pay for the de-installation of Seller's Product. Thereupon,
neither Party shall have any further liabilities or obligations under this
Agreement.
9.03 Limitation of Liability- THE FOREGOING STATES THE ENTIRE LIABILITY OF
SELLER FOR PATENT OR COPYRIGHT INFRINGEMENT BY THE EQUIPMENT OR
SOFTWARE. THE REMEDIES CONTAINED HEREIN ARE BUYER'S SOLE REMEDY FOR
ANY CLAIM OF INFRINGEMENT OF THIRD PARTY PATENT, COPYRIGHT,
TRADEMARK, TRADE SECRET OR OTHER INTELLECTUAL PROPERTY RIGHTS.
9.04 The terms of this Article shall survive any expiration or termination
of this Agreement.
ARTICLE 10. CONFIDENTIALITY
10.01 Confidentiality - All terms and conditions of that certain Mutual
Confidentiality and Non-Disclosure Agreement dated as of January 20,
1998 (the "Confidentiality Agreement") executed between Buyer and
Seller are hereby incorporated herein by this reference and shall
survive any expiration or termination of the Confidentiality
Agreement.
10.02 Release of Information - Neither Party shall, without the express
written consent of the other Party, publicly announce the existence
or terms of this Agreement or advertise or release any publicity or
press release regarding this Agreement except such disclosures that
may be required to comply with securities laws, court order or
similar order of an administrative or regulatory agency provided each
Party shall use reasonable BEST efforts to seek confidential
treatment or other protective orders which are available to limit
such disclosures and provide the other Party with advanced notice of
such disclosures. Notwithstanding the foregoing, either Party shall
be entitled to disclose this Agreement and its specific terms and
conditions to its financing sources, including prospective financing
sources and to its auditors, attorneys and other agents in the normal
course of its business; provided that such financing sources,
auditors, attorneys and other agents keep such information
confidential.
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ARTICLE 11. LIMITATION OF LIABILITY
11.01 General - THE TOTAL LIABILITY OF SELLER FOR ALL CLAIMS OF ANY KIND
FOR ANY LOSS OR DAMAGE, WHETHER IN AGREEMENT, WARRANTY, TORT
(INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE, OR CLAIMS FOR
INDEMNIFICATION ARISING OUT OF, CONNECTED WITH, OR RESULTING FROM THE
PERFORMANCE OR NON-PERFORMANCE OF THIS AGREEMENT EXCEPT FOR ARTICLE
9, ARTICLE 10, [*] SELLER'S OBLIGATION TO INDEMNIFY BUYER FOR
INFRINGEMENT CLAIMS SHALL IN NO CASE EXCEED THE TOTAL PRICE OF ALL
PURCHASE ORDERS ACCEPTED UNDER THIS AGREEMENT. NOTWITHSTANDING ANY
PROVISION OF THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE FOR LOST
PROFITS OR LOSS OF DATA OR FOR ANY INCIDENTAL, INDIRECT,
CONSEQUENTIAL, OR SPEC DAMAGES OF ANY NATURE WHATSOEVER FOR ANY
ACTION ARISING UNDER THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION,
THOSE RESULTING FROM THE USE OF EQUIPMENT PURCHASED HEREUNDER, OR THE
FAILURE OF THE EQUIPMENT TO PERFORM, OR FOR ANY OTHER REASON. THESE
LIMITATIONS SHALL APPLY NOTWITHSTANDING THE FAILURE OF THE ESSENTIAL
PURPOSE OF ANY LIMITED REMEDY.
11.02 Specific Exclusions - Subject to the terms of this Agreement, Seller
shall not be responsible for any failures or inadequacies of
performance resulting from products not supplied by Seller. Seller
shall not be responsible for interference or disruption of service
caused by operation of other radio systems, lightning, motor ignition
or other similar interference. In the event Buyer utilizes facilities
or services supplied by others such as common carrier circuits,
antennas or towers, Buyer shall have the total responsibility for the
availability or adequacy of such services or facilities. Seller shall
have no liability as a result of non-performance, failures or poor
performance of the Product caused by, resulting from or attributable
to Buyer provided designs, specifications or Product configuration
requirements that have not been discussed with and approved by Seller
or failures caused by improper installation by Buyer.
11.03 The terms of this Article shall survive any expiration or termination
of this Agreement.
ARTICLE 12. MISCELLANEOUS
12.01 Applicable Law - The validity, construction, and performance of this
Agreement shall be governed by and interpreted in accordance with the
laws of the State of New York without giving effect to the principles
of conflict of laws thereof except to the extent that any mandatory
provisions of local laws in any country take precedence over the
provisions of this Agreement and New York State law. Jurisdiction
will reside in the federal courts located in Orange County, FL, USA,
King County, WA, USA. In the event of a dispute between the Parties
relating to this Agreement, the Parties shall make good faith efforts
to resolve such dispute through direct negotiations; provided, that
this provision shall in no way limit the rights of the Parties at any
time to pursue resolution through arbitration, judicial proceedings
or any other means of dispute resolution. Nothing in this
subparagraph precludes the Parties from agreeing to submit the
dispute for resolution by arbitration under conditions and procedures
to which they agree in advance.
[*] Confidential Treatment Requested
- --------------------------------------------------------------------------------
Triton Network Systems, Inc. Confidential 19
Supply Agreement No. ____________ December 21, 1999 G2.0
<PAGE> 20
12-02 Assignment - Other than as explicitly stated in this Agreement,
neither Party may assign or transfer this Agreement, or any of its
rights hereunder, without the prior written consent of the other
Party, which consent shall not be unreasonably withheld. Buyers
consent shall not be required for any assignment or transfer by
Seller to any Third Party for all or a part of Seller's right to
receive any monies ("Receivables") which may become due to Seller
pursuant to this Agreement. Consent shall also not be required for
the following transactions if the transactions do not involve a
direct competitor of the non-assigning Party: (a) a reorganization,
merger, consolidation or other form of corporate transaction or
series of transactions, (b) the sale of all or substantially all of
the assets of the Buyer or the Seller, or (c) the acquisition of all
or substantially all the outstanding equity of the Buyer or the
Seller.
Any assignment or transfer in violation of this Agreement shall be
void. Seller reserves the right to refuse to honor any assignment or
sublicense which, in the opinion of its legal counsel, would require
it to violate any United States export restriction, other law, or
regulation.
12.03 Consents - Each Party hereto represents and warrants that:
(a) it has obtained all necessary approvals, consents, and
authorizations of Third Parties and governmental authorities
to enter into this Agreement and to perform and carry out
its obligations hereunder;
(b) the persons executing this Agreement on its behalf have
express authority to do so, and, in so doing, to bind the
Party thereto;
(c) the execution, delivery, and performance of this Agreement
has been duly authorized by all necessary partnership or
corporate action and this Agreement is a valid and binding
obligation of such Party, enforceable in accordance with its
terms;
(d) On the Effective Date, Buyer has the necessary FCC
authorizations to use the relevant radio spectrum; and
(e) In the case of Seller, that Seller has obtained all
necessary government approvals for manufacture and sale of
Equipment.
12.04 Counterparts and Facsimile Signatures - 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. Facsimile signatures shall have the same effect as
original signatures, but any Party transmitting a signature by
facsimile shall promptly follow up with a copy of the same document
bearing the original signature of that Party.
12.05 Entire Agreement - This Agreement, including the Exhibits which are
attached hereto and incorporated herein, comprises all the terms,
conditions, and agreements of the Parties hereto with respect to the
subject matter hereof and supersedes all previous negotiations,
proposals, commitments, writings, publications, and understandings of
any nature whatsoever. No agent, employee, or representative of
Seller or Buyer has any authority to bind Seller or Buyer,
respectively, to any affirmation, representation, or warranty, except
as stated in this Agreement and unless such affirmation,
representation, or warranty is specifically included within this
Agreement it shall not be enforceable by Buyer or Seller, as
applicable, or any assignee or sub-licensee of Buyer or Seller, as
applicable. Buyer and Seller each hereby acknowledge and agree that
Buyer and Seller, respectively, has not relied on any representations
or warranties other than those expressly set forth in this Agreement.
- --------------------------------------------------------------------------------
Triton Network Systems, Inc. Confidential 20
Supply Agreement No. ___________ December 21. 1999 G2.0
<PAGE> 21
12.06 Export - Buyer shall not export any Product or technical data
received from Seller pursuant to this Agreement, or release any such
Product or technical data with the knowledge or intent that such
Product or technical data will be exported or transmitted to any
country or to foreign nationals of any country, except in accordance
with applicable laws or regulations concerning the exporting of such
items arising in the U.S. or other such jurisdiction affecting the
Product. Buyer shall obtain all authorizations from the appropriate
government in accordance with applicable law prior to exporting or
transmitting any such Products or technical data as specified above.
Seller will provide such assistance as Buyer reasonably requests to
obtain such authorizations. Buyer acknowledges that the transfer of
Products or components thereof outside of Canada or the United States
may be subject to the specific approval of the applicable Product
suppliers and other suppliers. All such approvals, if applicable,
shall be conditions precedent to any of the obligations of Seller
hereunder respecting such Product or components thereof.
12.07 Factoring - Seller may, upon notice to Buyer and subject to Buyer's
consent which may not be unreasonably withheld, sell receivables to a
Third Party or Affiliate.
12.08 Force Majeure - If the performance by a Party of any of its
obligations under this Agreement shall be prevented, restricted, or
interfered with by reason of any circumstances beyond the reasonable
control of that Party, including without limitation, fire, explosion,
embargoes, government ordinances or requirements, civil or military
authorities, acts of God or of the public enemy, war, revolution,
civil commotion, acts or omissions of carriers, loss of sources of
energy, power failure, breakdown of machinery, or labor difficulties
of third parties, including without limitation, strikes, slowdowns,
picketing, or boycotts, or other causes beyond the reasonable control
of the Party whose performance is affected, then the Parry affected,
upon giving prompt notice to the other Party, shall be excused from
such performance on a day-for-day basis to the extent of such
prevention, restriction, or interference (and the other Party shall
likewise be excused from performance of its obligations on a
day-for-day basis to the extent such Party's obligations relate to
the performance so prevented, restricted or interfered with),
provided that the Party so affected shall use reasonable efforts to
avoid or remove such causes of non-performance and both parties shall
proceed to perform their obligations with dispatch whenever such
causes are removed or cease. With respect to labor difficulties as
specified above, a Party shall not be obligated to accede to any
demands being made by employees or other personnel.
12.09 Headings - All headings used herein are for index and reference
purposes only, and shall not be given any substantive effect. This
Agreement has been created jointly by the Parties and no rule of
construction requiring interpretation against the drafter of this
Agreement shall apply in its interpretation.
12.10 Litigation Expense - The Party prevailing in arbitration, at trial,
or on appeal shall be entitled, in addition to such other relief as
may be granted, to a sum the court or arbitration may fix as
reasonable attorneys' fees, plus any associated costs.
12.11 Modification of Agreement - No addition to or modification of this
Agreement shall be effective or binding on either of the Parties
hereto unless reduced to writing and executed by the respective duly
authorized representatives of each of the Parties hereto.
12.12 Non-Waiver - The failure by either Party hereto at any time to
require performance by the other Party or to claim a breach of any
provision of this Agreement shall not be construed as affecting any
subsequent breach or the right to require the performance with
respect thereto or to claim a breach with respect thereto.
- --------------------------------------------------------------------------------
Triton Network Systems, Inc. Confidential 21
Supply Agreement No. ____________ December 21, 1999 G2.0
<PAGE> 22
12.13 NOTICE - All notices required or permitted to be given hereunder shall
be in writing and shall be delivered to the address listed on the
signature page of this Agreement by (i) certified mail, return receipt
requested, (ii) nationally recognized overnight courier, (iii) telecopy
or (iv) by hand. Any notice given pursuant to this Section shall be
effective five (5) days after the day it is mailed or upon receipt as
evidenced by the Postal Service return receipt card, or courier or hand
delivery written confirmation, or in the case of a telecopy, the
appropriate answerback, whichever is earlier. Either Party hereto may
change its address by a notice given to the other Party hereto in the
manner set forth above. All Purchase Orders and invoices to be delivered
pursuant to this Agreement shall be delivered via a delivery provider
that provides proof of delivery, such as certified mail, overnight mail,
or private courier company.
12.14 REGISTRATION - Product furnished under this Agreement for installation
within the United States shall, at the time of installation, comply to
the extent applicable, with the requirements of the Federal
Communications Commission's Rules and Regulations including, without
limitation, all labeling and customer instruction requirements. Product
furnished under this Agreement for installation outside the United States
shall comply with local governmental regulations, as applicable.
12.15 RELATIONSHIP OF THE PARTIES - The provisions of this Agreement shall not
be construed to establish any form of partnership, agency, or other joint
venture of any kind between Seller and Buyer, nor to constitute either
Party as the agent, employee, or legal representative of the other. All
persons provided by either Party to accomplish the intent of this
Agreement shall be considered solely as the providing Party's employees
or agents and the furnishing Party shall be solely responsible for
compliance with all laws, rules, and regulations involving, but not
limited to, employment of labor, hours of labor, working conditions,
workers' compensation, payment of wages, and withholding and payment of
applicable taxes, including, but not limited to income taxes,
unemployment taxes, and social security taxes.
12.16 SEVERABILITY - If any of the provisions of this Agreement shall be
declared or determined to be invalid or unenforceable under applicable
law and a Party deems such provisions to be material, that Party may
terminate this Agreement upon written notice to the other Party.
Otherwise such invalidity in whole or in part, of any term, covenant,
condition or provision of this Agreement shall not affect the validity of
the remainder of such term, covenant, condition or provision or the
Agreement or render this Agreement unenforceable, but this Agreement
shall be construed as if not containing the particular invalid or
unenforceable provision and the rights and obligations of the Parties
shall be construed and enforced accordingly.
12.17 THIRD PARTY BENEFICIARIES DISALLOWED - All covenants and agreements of
the Parties hereto are solely and exclusively for the benefit of the
Parties to this Agreement and no other person or entity shall have
standing to require performance of any such covenants and agreements, and
no person or entity shall, under any circumstances, be deemed to be a
beneficiary of such obligations.
12.18 INSPECTION - During the Term of this Agreement, Buyer has the right to
inspect the Seller's factory as often as Buyer deems necessary to ensure
quality assurance; provided that Buyer gives Seller reasonable written
notice of such inspection; and provided further that such inspections do
not unreasonably adversely affect the Seller's day-to-day activities at
the factory.
22
<PAGE> 23
12.19 CUSTOMER FEATURE REQUESTS - Seller shall use its commercially reasonable
efforts to complete and deliver to Buyer the agreed upon Customer Feature
Requests set forth in the "IFU Software & IFU Management Software Plan"
and the "IFU Hardware Plan" attached as Exhibit 8 hereto in accordance
with such plans.
SIGNATURES
IN WITNESS WHEREOF, the Parties hereto have executed this "Agreement" as of the
"Effective Date" shown above, by their representative(s) being duly authorized
and having signed accordingly.
<TABLE>
<S> <C>
TRITON NETWORK SYSTEMS INC. ADVANCED RADIO TELECOM CORP.
Signed: /s/ H.W. Speaks, Jr. Signed: /s/ Robert S. McCambridge
------------------------------- -------------------------------
Name: H.W. Speaks, Jr. Name: Robert S. McCambridge
------------------------------- -------------------------------
Title: President Title: President
------------------------------- -------------------------------
Date: 12-22-99 Date: 12-22-99
------------------------------- -------------------------------
</TABLE>
Address for Notice:
<TABLE>
<S> <C>
Triton: ART:
Triton Network Systems Inc. Advanced Radio Telecom Corp.
8529 SouthPark Circle 500 - 108th Avenue NE, Suite 2600
Orlando, FL 32819 Bellevue, Washington 98004
Attention: CFO Attention: President
Telecopier No.: 407.903.2233 Telecopier No.: 425.990.1642
</TABLE>
With a copy to:
<TABLE>
<S> <C>
Holland & Knight LLP Advanced Radio Telecom Corp.
220 So. Orange Ave., Suite 2600 500 - 108th Avenue NE, Suite 2600
Orlando, FL 32801 Bellevue, Washington 98004
Attention: Louis Conti Attention: General Counsel
Telecopier No.: 407.244.5288 Telecopier No.: 425.990.1642
</TABLE>
23
<PAGE> 24
Exhibit 1
<PAGE> 25
Exhibit 1. AFFILIATES
Seller Affiliate A
Seller Affiliate B
Seller Affiliate C
Seller Affiliate D
Buyer Affiliate A
Buyer Affiliate B
Buyer Affiliate C
Buyer Affiliate D
24
<PAGE> 26
Exhibit 2
<PAGE> 27
Exhibit 2. PRODUCT AND PRICING
2.01 EQUIPMENT
PRODUCTS: All current and future 38GHz products offered by Triton
PRICE:
o Pricing is per RPS.
o An Annual Support Fee for each IFU installed in the Buyer's
networks will be invoiced as discussed below at Exhibit 2,
Section 2.03.
o $31,500 per RPS for first 1,000. After the first 1,000, ART price
per RPS will be no higher than the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
ARTICLE I. PURCHASE PRICE TABLE FOR RPS
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RPS Units 1 1,020 2,041 3,061 4,081
Ordered to to to to to
1,020 2,040 3,060 4,080 5,200
====================================================================================
Hardware
Discount % [*] [*] [*] [*] [*]
From List
- ------------------------------------------------------------------------------------
Unit Price [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
ARTICLE II. PURCHASE PRICE TABLE FOR RPS
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RPS Units 5,201 6,321 7,440 Greater
Ordered to to to than
6,320 7,440 8,560 8,560
====================================================================================
Hardware
Discount % [*] [*] [*] [*]
From List
- ------------------------------------------------------------------------------------
Unit Price [*] [*] [*] [*]
- ------------------------------------------------------------------------------------
</TABLE>
[*] Confidential Treatment Requested
25
<PAGE> 28
o [*]
[*] Confidential Treatment Requested
26
<PAGE> 29
2.02 DOCUMENTATION
All Documentation shall be available electronically at no charge to Buyer.
27
<PAGE> 30
2.03 ANNUAL SUPPORT FEE FOR SOFTWARE AND TECHNICAL ASSISTANCE CENTER
Annual Support Fee
o On or before January 31, 2000, Buyer shall notify Seller of the total
number of IFUs Buyer has installed in its network as of December 31,
1999. Seller shall invoice Buyer an Annual Support Fee equal to [*]
for each IFU installed by Buyer as of December 31, 1999 to cover the
Annual Support Fee for calendar year 2000.
o On or before January 31, 2001, Buyer shall notify Seller of the total
number of IFUs Buyer has installed in its network as of December 31,
2000. Seller shall invoice Buyer an Annual Support Fee equal to [*]
for each IFU installed by Buyer as of December 31, 2000, including
those installed in prior years, to cover the Annual Support Fee for
calendar year 2001.
o On or before January 31, 2002, Buyer shall notify Seller of the total
number of IFUs Buyer has installed in its network as of December 31,
2001. Seller shall invoice Buyer an Annual Support Fee equal to [*]
for each IFU installed by Buyer as of December 31, 2001, including
those installed in prior years, to cover the Annual Support Fee for
calendar year 2002.
o On or before January 31 of each year following 2002, Buyer shall
notify Seller of the total number of IFUs Buyer has installed in its
network as of December 31 of the immediately preceding year. Seller
shall invoice Buyer an Annual Support Fee equal to [*] for each IFU
installed by Buyer as of December 31 of such immediately preceding
year, including those installed in all prior years, to cover the
Annual Support Fee for such year.
o If the Annual Support Fee is not paid, Seller will not be required to
provide any new Software Releases to Buyer until such time as Buyer
pays the overdue Annual Support Fee.
[*] Confidential Treatment Requested
28
<PAGE> 31
2.04 EQUIPMENT WARRANTY -- TRITON SUPPLIED EQUIPMENT
(a) STANDARD WARRANTY
o The Warranties relating to Products can be found in Article 8.
(b) EXTENDED IFU WARRANTY
o The Seller offers the following optional Extended IFU Warranty
terms:
o Additional 12 month warranty [*] of the Purchase Order IFU
net sales price.
o Extended IFU Warranty must be purchased with this Equipment
purchased in this Agreement and is incremental to the twelve
months in the Standard IFU Warranty.
o The return and replacement terms and conditions of the Standard
IFU Warranty apply to the Extended IFU Warranty.
o Extended IFU warranty relates to Equipment only. Technical
support for Software is covered separately.
[*] Confidential Treatment Requested
29
<PAGE> 32
2.05 TECHNICAL ASSISTANCE CENTER (TAC) SERVICE LEVEL AGREEMENT
TAC Services are available for all Products. Without limiting Seller's
obligations as otherwise set forth herein, Seller shall provide TAC Services
during the Term in support of the then-current Software Release and at least the
two (2) immediately preceding Major Software Releases.
(c) BRONZE LEVEL TAC SERVICES
o Part of net Equipment price as per this Agreement.
o Regular business hour support (08:00 to 17:00 Eastern Time;
Mondays through Fridays excluding Seller's observed holiday
schedule).
o Non-business hour paging services with maximum three (3) hour
response time.
o E-mail communication available for information inquiries with
maximum three (3) business day response.
o Per hour service charge of telephone and administrative time to
manage Triton and Third Party out of warranty Equipment: [*].
(d) SILVER LEVEL TAC SERVICES
o Additional charge based on quantity of RPSs purchased.
o Dedicated TAC telephone line.
o Dedicated TAC personnel during regular Business Hour support
(08:00 to 17:00 Eastern Time; Mondays through Fridays excluding
Seller's observed Holiday schedule).
o Non-business hour paging services with maximum one (1) hour
response time.
o E-mail communication available for information inquiries with
maximum one (1) business day response.
o Per hour service charge of telephone and administrative time to
manage RPS and Third Party out of warranty Equipment: [*].
(e) GOLD LEVEL TAC SERVICES
o Additional charge based on quality of RPSs purchased.
o Dedicated TAC telephone line.
o Dedicated TAC personnel available twenty-four (24) hours per
day, seven (7) days per week with immediate response time.
o Single point of contact for all network related issues including
Third-Party Equipment and Software.
o E-mail communication available for information inquiries with
maximum half (0.5) business day response.
o Per hour service charge of telephone and administrative time to
manage RPS
[*] Confidential Treatment Requested
30
<PAGE> 33
and Third Party out of warranty Equipment: [*].
[*] Confidential Treatment Requested
31
<PAGE> 34
2.06 CUSTOMER TRAINING
(a) AVAILABLE TRAINING COURSES
o Local IFU Installation
o Physical installation
o Alignment
o Configuration
o Integration
o Remote IFU OAM&P - Administration, Management and Protocol
o Integrate IFUs into new and existing networks
o Configure all components and aspects of the IFU
o Perform all typical diagnostics and problem isolation to
properly identify failed or degraded operation
o Retrieve all remote administration data
o Apply security measures to ensure network integrity
o IFU Network Engineering
(b) CERTIFICATION
o Installation and Maintenance
o Training is provided at a level to certify the customer in the
Installation and Maintenance of the Triton product.
o Certification verification for each Student is supplied by
Seller.
o Customer will be able to perform all the necessary functions to
install, locally align and configure, and integrate the IFU in an
effective manner.
o Customer will be able to remotely integrate, diagnose typical
failures and degradations, and manage and administer the IFUs in
an effective, consistent manner.
(c) PRICE
o Two Network Management, two Installations and one Engineering
classes are to be provided at no charge with commitment to an
initial order.
o Additional class prices are based on a course basis at
individual student or group rates, excluding travel and
facilities costs.
o Prices are to be negotiated based on course program supplied by
Seller.
o Price includes all course material and Equipment.
32
<PAGE> 35
o Minimum number of two (2) students per class.
o Maximum number of ten (10) students per class.
o Customer Premise Training
o Travel Expense for two (2) Seller Trainers including
lodging, meals, rental care, and airfare.
o Shipment of any training material and Equipment.
o Two (2) fully installed and operational IFUs to be used for
training purposes.
o The payment terms in net 30 days upon issuance of the invoice.
33
<PAGE> 36
Exhibit 3
<PAGE> 37
EXHIBIT 3. RETURN MATERIALS AUTHORIZATION
[LOGO]
TRITON(TM)
Network Systems, Inc.
Customer Return Material Authorization Procedures
The following document should be referenced when returning Triton Network
Systems product.
BEFORE OBTAINING AN RMA (CUSTOMER RESPONSIBILITY)
The customer should attempt troubleshooting procedures as provided within
existing Triton Network Systems documentation and work with the Triton Network
Systems Technical Assistance Center (TAC) to resolve any problems. If
reasonable attempts at troubleshooting do not bring resolution, then the item
should be replaced and a Return Material Authorization (RMA) should be
generated.
OBTAINING AN RMA
The customer should call the TAC at 877-687-4866 or +1-407-903-0997 or contact
the TAC via fax or e-mail to obtain an RMA number. The minimum information
required (or confirmed from previous troubleshooting) for generation of an RMA
by the TAC is:
o Customer Company
o Contact Name
o Contact Phone, FAX
o Site Address of Product
o Shipping Address for Repaired Product
o Part Number of Product if printed on unit
o Model Number of Product if printed on unit
o Serial Number of Product
o Description of Problem
PACKAGING AND RETURN PROCEDURES
The TAC will provide an RMA number to the customer who will indicate the RMA
and serial number on the return label. The IFU must be returned in packaging
that provides a level of protection equal to the original type packaging. If
original type packaging is not available, Triton Network Systems will upon
request from Customer provide packaging.
All Equipment to be repaired or replaced, whether in or out of warranty, shall
be packed by Customer in accordance with Triton Network Systems's reasonable
instructions and shall follow Triton Network Systems's Repair and Return policy
and procedures. Customer shall bear risk of loss and shall pay for all
transportation charges for Equipment returned to Triton Network Systems and
Triton Network Systems shall bear such risk and pay for transportation charges
for repaired or replacement Equipment shipped to Customer. Triton Network
Systems shall use reasonable efforts to ship repaired or replacement Equipment
within thirty (30) days of receipt of the defective Equipment for routine
warranty repair or replacement. Triton Network Systems shall return the
repaired or replaced Equipment to the Customer the same transport method in
which the Customer sent the Equipment to the Triton Network Systems.
34
<PAGE> 38
WHERE TO SEND RMA PRODUCT
RMA product should be sent to the following address:
Triton Network Systems
8337 SouthPark Circle
Attn.: Kevin Haney, Depot Manager
Orlando, FL 32819
407.903.2254
REPAIR TIME
IFUs will be repaired in 30 days or less on a "same for same" basis, identical
serial number IFUs will be returned. If the Equipment that is returned to
Triton Network Systems is determined by Triton Network Systems to be beyond
repair or is outside the warranty period, Triton Network Systems shall notify
Customer and if Customer decides to purchase Equipment to replace the defective
IFU, Customer shall issue a Purchase Order and Triton Network Systems shall
sell Customer replacement Equipment at the lesser of the most recent Agreement
price between the Parties for such Equipment, or the then current price for
such Equipment.
IMPROPERLY RETURNED PRODUCT
If product is sent to Triton Network Systems without a valid RMA number, it
will be returned to the customer at their expense without repairs being
performed.
35
<PAGE> 39
Exhibit 4
<PAGE> 40
Exhibit 4. TERRITORIES
United States.
Canada.
36
<PAGE> 41
Exhibit 5
<PAGE> 42
Exhibit 5. YEAR 2000 (Y2K) COMPLIANCE
Seller warrants, with respect to Products, that Seller has undertaken all
commercially practicable efforts to ensure, to the extent within its reasonable
control, that when such Products are properly used in accordance with the
applicable Product Specifications, then both before and after 01 January 2000
such Products will accurately receive, provide, and process date and date
dependent data (including calculating, comparing, and sequencing) from, into,
and between the twentieth (20th) and the twenty-first (21st) centuries through
to the year 2036, including the years 1999 and 2000, and leap year calculations.
Seller further warrants that during the Product warranty period, as specified
in this Agreement, Product shall function without any material, service
affecting, non-conformance to the applicable Product Specifications as a
consequence of date and date dependent data, to the extent that other software
used in combination with Seller's Products sold or licensed hereunder is also
Year 2000 Compliant and properly exchanges date and date dependent data with
Seller's Products. If Product fails to so function as set forth herein, (i)
Buyer may cancel its Initial Purchase Commitment and shall have no obligations
to pay any Initial Purchase Cancellation Fee or otherwise, and (ii) such
failure shall be deemed to be a breach by Seller of the warranties set forth in
Article 8 of this Agreement and Buyer shall be entitled to the remedies set
forth in Article 8 of this Agreement. Any modification to Products not performed
by Seller, other than with respect to Modifiable Software, shall void this
warranty only to the extent such modification causes the Product to fail to
function as set forth in this Exhibit 5.
37
<PAGE> 43
Exhibit 6
<PAGE> 44
Exhibit 6. PRODUCT SPECIFICATIONS
38
<PAGE> 45
[TRITON LOGO]
TNS-38 100 Mbps Invisible
Fiber(TM) Internet: Product
Specification
Document Number: SY-SPE-23-fe
Version & Revision: 1.0.27.3
Release Status: DRAFT
Security Level: TNS and Customer Under Non-Disclosure
Audience: TNS and Customer Under Non-Disclosure
Authors: Engineering, Product Management
Date: 21-December-1999
Distribution: TNS and Customer Under Non-Disclosure
<TABLE>
<S> <C>
- --------------------------------------- ---------------------------------------
PRODUCT MANAGEMENT: Dave Harlow MARKETING: Doug Campbell
- --------------------------------------- ---------------------------------------
ENGINEERING: Mike Clark SALES: Doug Campbell
- --------------------------------------- ---------------------------------------
SYSTEMS: Peter Chow OPERATIONS: Al Samball
- --------------------------------------- ---------------------------------------
HARDWARE: Roger Babb FINANCE: Ken Vine
- --------------------------------------- ---------------------------------------
SOFTWARE: Chris Matthies MANUFACTURING: Bob Daly
- --------------------------------------- ---------------------------------------
TEST AND INTEGRATION: Al Morone QUALITY: Dave Verrelli
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
</TABLE>
<PAGE> 46
<TABLE>
<S> <C> <C> <C>
TNS-38 100 Mbps Invisible Fiber(TM) Internet: Product Specification 21-Dec-1999
Security Level: TNS and ART Under Non-Disclosure Document Number: SY-SPE-23-fe
Audience: TNS and ART Under Non-Disclosure Revision: 1.0.27.3
Authors: Engineering, Product Management Release Status: Approved
</TABLE>
Change History
<TABLE>
<CAPTION>
Date Updated by Change Description Revision
<S> <C> <C> <C>
31-AUG-99 Engineering, Initial document draft 1.0.22
Product
Management
10-NOV-99 Engineering, Updated based on Release 1. 1.0.27
Product
Management
07-DEC-99 Engineering, Updated. 1.0.27.1
Product
Management
16-DEC-99 Product Updated 2.2.17.1, 2.2.27, and 6.1.4.1 1.0.27.2
Management
21-DEC-99 Product Updated 2.3.1.2, 2.3.1.5.2, and 4.3.1.2.1 1.0.27.3
Management
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TNS-38 100 Mbps Invisible Fiber(TM) Internet: Product Specification 21-Dec-1999
Security Level: TNS and ART Under Non-Disclosure Document Number: SY-SPE-23-fe
Audience: TNS and ART Under Non-Disclosure Revision: 1.0.27.3
Authors: Engineering, Product Management Release Status: Approved
</TABLE>
TABLE OF CONTENTS
<TABLE>
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1. Introduction .............................................................. 4
1.1 Purpose .............................................................. 4
1.2 Scope ................................................................ 4
1.3 References ........................................................... 4
2. System Requirements ....................................................... 5
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TNS-38 100 Mbps Invisible Fiber(TM) Internet: Product Specification 21-Dec-1999
Security Level: TNS and ART Under Non-Disclosure Document Number: SY-SPE-23-fe
Audience: TNS and ART Under Non-Disclosure Revision: 1.0.27.3
Authors: Engineering, Product Management Release Status: Approved
</TABLE>
1 INTRODUCTION
1.1 PURPOSE
This document contains Triton Network Systems, Inc. TNS-38 100 Mbps Internet
IFU Product Specification.
1.2 SCOPE
This document is a complete customer Product Specification for the TNS-38 100
Mbps Internet IFU product.
1.3 REFERENCES
None
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TNS-38 100 Mbps Invisible Fiber(TM) Internet: Product Specification 21-Dec-1999
Security Level: TNS and ART Under Non-Disclosure Document Number: SY-SPE-23-fe
Audience: TNS and ART Under Non-Disclosure Revision: 1.0.27.3
Authors: Engineering, Product Management Release Status: Approved
</TABLE>
2 SYSTEM REQUIREMENTS
<TABLE>
<CAPTION>
Req. No. Specification Description
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2. IFU System Performance, Environmental, and Regulatory
2.1 Network Topology IFUs can be deployed in Linear (backhaul) networks and
Consecutive Point Ring networks
2.2 Performance
2.2.1 Data Rate
2.2.1.1 FE 100 Mbps full duplex
2.2.2 OAM&P communication channel A separate 3 Mbps radio overhead channel
2.2.3 Frequency
2.2.3.1 Frequency (Band A) 38.6 to 39.3 GHz (700 MHz)
2.2.3.2 Frequency (Band B) 39.3 to 40.0 GHz (700 MHz)
2.2.4 Tx Polarization The IFU that transmits in the A Band (38.6 to 39.3 GHz) will
be transmitting on the HORIZONTAL plane. The IFU that
transmits in the B Band (39.3 to 40.0 GHz) will be
transmitting on the VERTICAL plane.
2.2.5 Short-Term Tx Frequency Accuracy +/-1 ppm first year
2.2.6 Long-term Tx Frequency Stability +/-5 ppm over 15 years (in compliance with FCC Part
101.107)
2.2.7 Full Duplex Channels 14 (programmable)
2.2.8 Tx/Rx Offset 700 MHz
2.2.9 Tuning Range Channels 1-7, 8-14
2.2.10 Channel Bandwidth 50 MHz (in compliance with FCC Part 101, 109)
2.2.11 Modulation
2.2.11.1 FE 8 PSK
2.2.12 BER (faded) 10(-12) or better
2.2.13 Maximum BER Radio Link remains in operation up to a BER of 10(-12)
2.2.14 System Availability System Availability of 99.9999% for a ring configuration
2.2.15 Antenna gain [*] dBi nominal, [*] dBi minimum
2.2.16 Receiver sensitivity @ BER of 10(-12)
2.2.16.1 FE [*] dBm typical, [*] dBm minimum
2.2.17 Transmit Power
2.2.17.1 FE [*] dBm to [*] dBm typical, [*] dBm to [*] dBm minimum
2.2.18 System Gain
2.2.18.1 FE [*] dB typical
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TNS-38 100 Mbps Invisible Fiber(TM) Internet: Product Specification 21-Dec-1999
Security Level: TNS and ART Under Non-Disclosure Document Number: SY-SPE-23-fe
Audience: TNS and ART Under Non-Disclosure Revision: 1.0.27.3
Authors: Engineering, Product Management Release Status: Approved
</TABLE>
<TABLE>
<CAPTION>
REQ. NO. SPECIFICATION DESCRIPTION
<S> <C> <C>
2. IFU SYSTEM PERFORMANCE, ENVIRONMENTAL, AND REGULATORY (CONTINUED)
2.2.19 RF Link System Gain (including Tx/Rx
Antennas)
2.2.19.1 FE >= 177 dB typical
2.2.20 Tx Dynamic Range Up to 50 dB
2.2.21 Receiver Overload [*] dBm
2.2.22 Noise Figure [*] dB typical, [*] dB maximum
2.2.23 Forward Error Correction Reed Solomon and Trellis Code Modulation (concatenated)
2.2.24 Adaptive Tx Power Control (AdTPC) Closed loop AdTPC up to 50 dB in typically 0.5 dB steps, and always
less than [*] step increments. With rate of change of up to
[*].
2.2.25 Radio link recovery time after propagation Less than [*] ms
interruption
2.2.26 Co-channel single entry C/I (causing 1 dB (C/I = Carrier to Interference Ratio) 20 dB below carrier typical
degradation) and [*] dB maximum for 10e-12 BER performance.
2.2.27 Adjacent single entry C/I (causing 1 dB (C/I = Carrier to Interference Ratio) -15 dB typical and [*] dB
degradation) maximum for 10e-12 BER performance.
2.2.28 MTBF (Mean Time Between Failure) Meets or exceeds [*] hours as defined by Telcordia TR-332, Issue 5.
The MTBF would apply to any component that could interfere with the
radio link and/or SNMP processing or communication.
2.2.29 MTTR (Mean Time To Replace) MTTR is the time interval to replace a failed IFU assuming the IFU
has been configured. MTTR <= 15 minutes.
2.2.30 Link Latency
2.2.30.1 FE < [*], across an IFU link. The delay does not contemplate the latency
due to additional network elements.
2.3 Environmental
2.3.1 Operating Conditions
2.3.1.1 Temperature (ambient) -27 (degrees)F to +131 (degrees)F (-33 (degrees)C to +55 (degrees)C)
2.3.1.2 Humidity Up to 100% condensing (not submerged)
2.3.1.3 Altitude -450 ft to 16,000 ft (-135 m to 4,650 m)
2.3.1.4 Wind Loading
2.3.1.4.1 Operational Designed to operate up to 90 mph (145 kph)
2.3.1.4.2 Survival Designed to survive up to 125 mph (200 kph)
2.3.1.5 Maximum deflection angle 0.1 degree in 70 mph (110 kph) wind.
2.3.5 Storage
2.3.5.1 Temp -40 (degrees)F to -158 (degrees)F (-40 (degrees)C to +70 (degrees)C)
2.3.5.2 Humidity Up to 95% non-condensing
2.4 Regulatory
2.4.1 FCC/IC Parts 15B, 101/RSS-191
2.4.2 UL/CSA 50, 1950 / C22,2 # 94-M91, C22-24
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TNS-38 100 Mbps Invisible Fiber(TM) Internet: Product Specification 21-Dec-1999
Security Level: TNS and ART Under Non-Disclosure Document Number: SY-SPE-23-fe
Audience: TNS and ART Under Non-Disclosure Revision: 1.0.27.3
Authors: Engineering, Product Management Release Status: Approved
</TABLE>
<TABLE>
<CAPTION>
Reg. No. Specification Description
<S> <C> <C>
3. IFU Physical Characteristics
3.1 MECHANICAL
3.1.1 IFU Packaging Integrated Out Door Unit only
3.1.2 Weight (without bracket) < [*] lbs.
3.1.3 Dimensions 16' H X 16" W X 14.5" D (40cm M x 40cm W x 36cm D)
3.1.4 Mounting Pole (4.5" O.D.) or wall mountable using mounting bracket.
3.1.4.1 Bracket Weight < 18 lbs.
3.1.4.2 Radio rotation +/- 60" in azimuth
(+/- 90" in azimuth with extension option)
+/- 30" in elevation
3.1.4.3 Horizontal Alignment Resolution +/- 0.45" (nominal)
+/- 0.8" (90 mph / 145 kph wind)
3.1.4.4 Includes a secured locking mechanism Yes.
3.1.5 Shock/Vibration Designed to comply with ETS 300 019-1-4, Class 4, 1E.
3.1.6 Appearance Default color is off-white. Customer paintable.
3.1.7 Enclosure NEMA 4X
3.1.8 Flammability Comply with UL 94V0 flammability requirements.
3.1.9 Safety Includes electrical, optical, and RF hazard labels.
3.2 CONNECTORS
3.2.1 Fiber Optic Connector 8-fiber, sealed screw-on connector.
3.2.1.1 FE The Fiber Optic Connector supports the following signals:
two 100BaseFX and two 10BaseFL.
3.2.2 Power Connector 4-pin, sealed screw-on connector. Conforms to MIL-C-38999.
Two pairs of -48 V DC signals for power and ground to the
electronic components of the IFU.
3.2.3 General Purpose Input (GPI) / Test 19-pin, sealed screw-on connector. Conforms to MIL-C-38999.
Connector
This connector supports the following signals: two GP
inputs, and with a test cable the connector supports one
10BaseT, one RS-232, and one RSSI.
3.3 CABLING
3.3.1 Fiber Optic Connector Connector
3.3.1.1 FE Cable bundle consists of 4 multi-mode (for OAM&P and
Inter-IFU connection) and 4 multi-mode (for payload and
add/drop cables) fibers. All fibers use SC connectors.
3.3.2 Power Connector Cable Two pairs of -48 VDC signals.
3.3.3 General Purpose Input (GPI) Cable Cable bundle consists of 2 pair of external alarm input
conductors.
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TNS-38 100 Mbps Invisible Fiber(TM) Internet: Product Specification 21-Dec-1999
Security Level: TNS and ART Under Non-Disclosure Document Number: SY-SPE-23-fe
Audience: TNS and ART Under Non-Disclosure Revision: 1.0.27.3
Authors: Engineering, Product Management Release Status: Approved
</TABLE>
<TABLE>
<CAPTION>
REG. NO. SPECIFICATION DESCRIPTION
<S> <C> <C>
3. IFU PHYSICAL CHARACTERISTICS (CONTINUED)
3.3.4 Test Cable Cable bundle that consists of the following cables and
connectors:
Local Ethernet. Using RJ45 male connector.
RSSI. Using BNC male connector.
RS-232: Using female DB-9 connector.
4. IFU EXTERNAL INTERFACES
4.1 Power Interface
4.1.1 Signals Two pairs of -48 V DC signals for power and ground to the
electronic components of the IFU.
4.1.2 Voltage -28 to -56 VDC
4.1.3 Power Consumption [*] Watts at 68 F (20 C) degrees: [*] Watts Maximum
4.1.4 Current Rating [*] Amps
4.2 Air Interface
4.2.1 RF Characteristics (Refer to Section 2 above)
4.2.2 Antenna
4.2.2.1 Minimum Gain Compliant with CFR 47, Part 101.115 +38 dBi minimum.
4.2.2.2 Polarization Dual Feed, Dual Linear.
4.2.2.2 Polarization (Continued) A unit - Tx horizontal, Rx vertical
B unit - Tx vertical, Rx horizontal
4.2.2.3 Radiation Suppression Compliant with CFR 47, Part 101.115
4.2.3 Modulation
4.2.3.1 Fast Ethernet
4.2.3.1.1 Modulation 8 PSK
4.3 Customer Data Interface
4.3.1 Fast Ethernet Interface
4.3.1.1 Application Designed for interconnecting Ethernet data networks such
as Ethernet-based TCP/IP networks or SPX/IPX networks.
These signals are used for connecting to the customer's
100BaseFX Ethernet equipment at network termination
points. They also can be used for interconnecting IFUs in a
back-to-back configuration.
4.3.1.2 Physical Interface
4.3.1.2.1 100BaseFX Payload Port 100BaseFX fiber, 1310 nm multimode
100BaseFX Ethernet interface used to receive and transmit
user payload data. (ON/OFF build configurable)
4.3.1.2.2 100BaseFX Add/Drop Port 100BaseFX fiber, 1310 nm multimode
100BaseFX Ethernet interface used as an add/drop point to
receive and transmit user payload data.
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TNS-38 100 Mbps Invisible Fiber(TM) Internet: Product Specification 21-Dec-1999
Security Level: TNS and ART Under Non-Disclosure Document Number: SY-SPE-23-fe
Audience: TNS and ART Under Non-Disclosure Revision: 1.0.27.3
Authors: Engineering, Product Management Release Status: Approved
</TABLE>
<TABLE>
<CAPTION>
REQ. NO SPECIFICATION DESCRIPTION
<S> <C> <C> <C>
4. IFU EXTERNAL INTERFACES (CONTINUED)
4.3.2 Data Rate 100 Mbps, full duplex
4.3.3 Protocol Complies with IEEE 802.3u (Fast Ethernet) and Ethernet v2
standards.
4.4 OAM&P Interface
4.4.1 OAM&P Port 10BaseFL fiber, 850 nm multimode
10BaseFL optical Ethernet management port is intended to
connect to a remote network management system.
4.4.2 Inter-IFU Port 10BaseFL fiber, 850 nm multimode
10BaseFL optical Ethernet management port intended to
transport IFU OAM&P traffic between two IFUs connected in
a back-to-back configuration.
4.4.3 Local Management Port 10BaseT Ethernet port provides an interface to a locally
connected IFU Link Manager workstation.
4.4.4 RSSI Port Provides a direct feed of the received RSSI signal from the
IFU's internal modem. The signal consists of a voltage
output which can be measured with a voltmeter to determine
the relative strength of the received radio signal (+/- 50mV
/dB)
4.4.5 Transmitter on Indicator Light visible from outside the enclosure is illuminated when
transmitter power is on. Compliant with CFR 47,
Part 101.131
4.4.6 Local RS-232 The IFU's IP Address and the subnet mask are output on
the RS-232 serial port once per minute.
4.5 GENERAL PURPOSE INPUT INTERFACE
4.5.1 Input signals There are two GP input ports. Each port consists of a cable
pair supporting two signals, one for power and one for
ground.
4.5.2 Threshold If the difference between power and ground decreases to
less than 1 volt, then an alarm condition is raised. If the
difference between power and ground increases to greater
than 7 volts, then the alarm condition is cleared.
4.5.3 Application Each of the two GP inputs can be connected to customer-
provided external equipment that causes the IFU to report
an alarm when voltage drops below the threshold. For
example, a power failure could trigger this alarm.
5. IFU HARDWARE FEATURES
5.1 CPU MBX 860 card from Motorola
5.1.1 Clock Speed [*] MHz
5.1.2 Memory [*] M DRAM, [*] M Flash
5.2 Power Supply
5.2.1 Voltage -28 to -56 VDC
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TNS-38 100 Mbps Invisible Fiber(TM) Internet: Product Specification 21-Dec-1999
Security Level: TNS and ART Under Non-Disclosure Document Number: SY-SPE-23-fe
Audience: TNS and ART Under Non-Disclosure Revision: 1.0.27.3
Authors: Engineering, Product Management Release Status: Approved
</TABLE>
<TABLE>
<CAPTION>
Req. No. Specification Description
5. IFU Hardware Features (Continued)
<S> <C> <C>
5.3 NIC
5.3.1 FE Two 100BaseFX ports
[*] switch
5.3.2 OAM&P ports [*] 10BaseFL ports and [*] 10BaseT port linked by a HUB
5.4 Antenna
5.4.1 Size 13.5" (33 cm) diameter
5.4.2 Gain [*] dBi nominal, [*] dBi minimum
5.4.3 Main-lobe beamwidth [*]
5.4.4 Sidelobes FCC Part 101.115 Category A compliant.
5.5 RF Filter
5.5.1 Low A band channel 1-7 in band A
5.5.2 High A band channel 8-14 in band A
5.5.3 Low B band channel 1-7 in band B
5.5.4 High B band channel 8-14 in band B
5.6 Modem
5.6.1 Modulation
5.6.1.1 FE 8 PSK
5.7 Transmitter
5.7.1 Output frequency range 38.6 GHz to 40.0 GHz
5.7.2 Output power (Refer to the Section 2.3.17.1 for Tx power)
5.8 Receiver
5.8.1 Input frequency range 38.6 GHz to 40.0 GHz
5.8.2 Input Receiver Overload [*] dBm
5.9 Reference Oscillator
5.9.1 Frequency 50 MHz
6. Network Management
6.1 IFU Link Manager The IFU Link Manager (IFU-LM) is an IFU link management
tool developed by TNS. IFU-LM is written in Java(TM) and can
be run on a wide variety of platforms. The IFU-LM
communicates with the IFU locally or remotely over TCP/IP.
The following section highlights the many features that IFU-
LM offers.
These features are available to customer who logs in using password for Access Level 1.
Not all features listed are available for user of Access Level 2 and 3 (see section 6.1.3).
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TNS-38 100 Mbps Invisible Fiber(TM) Internet: Product Specification 21-Dec-1999
Security Level: TNS and ART Under Non-Disclosure Document Number: SY-SPE-23-fe
Audience: TNS and ART Under Non-Disclosure Revision: 1.0.27.3
Authors: Engineering, Product Management Release Status: Approved
</TABLE>
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<CAPTION>
Req. No. Specification Description
<S> <C> <C>
6. Network Management (Continued)
6.1.1 Network Tree View Displays network containment hierarchy in tree structure where branches are clusters
of IFU and leaves are IFUs.
IFU Clusters and IFUs are represented by corresponding hard-coded icon graphics.
Allows user to add and delete IFUs (leaves) and clusters (branches) as needed to
reflect the network topology.
6.1.2 Network Monitoring Feature Provides continuous monitoring of the IFUs in a network without logging-in to each IFU.
User can launch multiple Network Monitor windows. Each window monitors multiple IFU links
(partitioned by IP Address filtering).
Each Network Monitor window consists of multiple rows where each row displays the status
of the 2 IFUs that form an RF link.
The Information display per IFU consists of: IP Address, alarm status, RSSI, SQM, and
reporting statistics (total number of IFUs being monitored, number of IFUs with active
alarm, number of IFUs that are Not Reporting).
The operator can program the system to automatically send email to a programmable valid
destination to report the status of an IFU when its status changes to Not Reporting or
Alarmed.
6.1.3 Security Management Features Access to each IFU is restricted to authorized users only. Each authorized user is given
an IFU login ID and password enabling him/her to perform the management tasks according to
the security access level.
Users log in to an IFU using their assigned User Login ID and Password.
There are 3 Security Access levels:
Level 1: Full READ-WRITE access plus User/Password Administration and Network
Administration.
Level 2: Full READ-WRITE access. No User/Password Administration and Network
Administration privileges.
Level 3: READ-only. No user/password administration.
Each IFU includes [*] editable User Login IDs and passwords for the [*] Security Access
levels.
Level 1 user can perform Login ID/Password administration for the corresponding IFU.
Displays warning message if SW version mismatched between IFU-LM and the IFU which the
user tries to login to.
Controls access to certain management functions based on user's login security level.
User can display all users currently logged on to the IFU.
User can view a log of the [*] user login sessions.
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TNS-38 100 Mbps Invisible Fiber(TM) Internet: Product Specification 21-Dec-1999
Security Level: TNS and ART Under Non-Disclosure Document Number: SY-SPE-23-fe
Audience: TNS and ART Under Non-Disclosure Revision: 1.0.27.3
Authors: Engineering, Product Management Release Status: Approved
</TABLE>
<TABLE>
<CAPTION>
Req. No. Specification Description
<S> <C> <C>
6. Network Management (Continued)
6.1.4 Configuration Management Features Allows users to read or change the IFU configuration
attributes based on their access privilege.
Some of the attributes are strictly READ-ONLY while others
can be changed by users with WRITE privilege.
Examples of the read-only attributes are IFU Serial Number,
IFU Product Type, SW Version, etc.
Examples of the attributes that can be read and changed
are Channel Number, IFU's and EMS' IP addresses, Rain
Region, SNMP Community String, etc.
6.1.4.1 The following configuration Site Name/ID
management parameters can be read
and changed:
Near-end (this) IFU's IP Address
Far-end IFU's IP Address
Network Mask
NTP Server IP Address
Gateway IP Address
EMS 1 IP Address
EMS 2 IP Address
Grade of Service
Tx/Rx Carrier Frequency
Rain Model (User selectable Rain Statistics - Rain
Attenuation Algorithm pair from the following choices:
Crane-Crane, Crane-ITU, ITU-ITU)
Rain Region (User selectable Rain based on whether Crane
or ITU Rain Model is chosen. Available Rain Region
choices for the Crane Model are: A, B1, B2, C, D1, D2, D3,
E, F, G, H: available Rain Region choices for the ITU Rain
Model are: A, B, C, D, E, F, H, K, M, N, P)
Near-end IFU's Latitude and Longitude
Far-end IFU's Latitude and Longitude
Link Distance (If both Link Distance and Near-end/Far-end
Lat/Long were entered, the value of Link Distance
supersedes the values of Near-end/Far-end Lat/Long.)
Installation Date
In-Service Date
SNMP Trap Community Name
6.1.4.2 The following configuration IFU Serial Number
management parameters are read-only:
IFU Part Number
NIC Type (IFU Product Type: OC-3 or FE)
Link Type (A/B unit)
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TNS-38 100 Mbps Invisible Fiber(TM) Internet: Product Specification 21-Dec-1999
Security Level: TNS and ART Under Non-Disclosure Document Number: SY-SPE-23-fe
Audience: TNS and ART Under Non-Disclosure Revision: 1.0.27.3
Authors: Engineering, Product Management Release Status: Approved
</TABLE>
<TABLE>
<CAPTION>
Req. No. Specification Description
<S> <C> <S>
6. Network Management (Continued)
6.1.4.2 The following configuration management Antenna Orientation (Horizontal/Vertical)
parameters are read-only (Continued):
OS Software Version
Application Software Version
Link Budget (for OC-3 or FE depending on
the IFU Product Type)
Modem Hardware Version
Modem Software Version
Last Configuration Change Date/Time
6.1.4.3 IP Address & Subnet Mask Broadcast The IFU's IP Address and the subnet mask
(Configuration Management) are output on the RS-232 serial port [*].
This capability enables the craftsperson with
serial connectivity to an IFU to safely
obtain its IP address to be used to connect
to it via IFU-LM.
6.1.5 Fault Management Features Viewing of the IFU's active alarms (time-
stamped) stored on the individual IFU.
Allows user to lag a note with each alarm
type.
Viewing of the Alarm History Log [*] events
(time-stamped) stored on the individual IFU
(an event is either an alarm set or alarm clear).
Mask/Unmask of all alarms.
Displays the Modem Lock status.
Configuration of the SET/CLEAR threshold
values for certain Threshold Crossing Alarm
(TCA) parameters.
6.1.5.1 The following TCA parameters RSSI
can be configured:
SQM
IFU Internal Temperature
6.1.5.2 The following alarms can be generated Payload Offline
when corresponding fault of threshold-
crossing conditions occur. When
conditions no longer exist, the
corresponding alarm-clear is generated.
Exciter Unlock
Modem Unlock
Power Supply Failure for Tx
Power Supply Failure On Unswitched Rail
Tx Failure
SONET Clock LOL from RF
RSSI Too Low
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TNS-38 100 Mbps Invisible Fiber(TM) Internet: Product Specification 21-Dec-1999
Security Level: TNS and ART Under Non-Disclosure Document Number: SY-SPE-23-fe
Audience: TNS and ART Under Non-Disclosure Revision: 1.0.27.3
Authors: Engineering, Product Management Release Status: Approved
</TABLE>
<TABLE>
<CAPTION>
Req. No. Specification Description
<S> <C> <C>
6. Network Management (Continued)
6.1.5.2 (Continued) SQM Too Low
SONET LOS from Fiber
Internal Communication Failure
Power Supply Failure On +12v Rail
Power Supply Failure On -48v Rail
IF Tuning Failure
Tx ID Mismatched
External Alarm Input #1 Active
External Alarm Input #2 Active
Power Management Timeout
Internal Temperature Too High
Internal Temperature Too Low
Carrier Frequency Offset Error
Tx Power At Max
6.1.6 Performance Management Features
6.1.6.1 PM parameters that can be displayed
via IFU-LM:
RF Parameters RSSI (or RSL)
SQM
BER
Transmit Power Out
Environmental: IFU Internal Temperature
Ethernet Parameters: [*]
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TNS-38 100 Mbps Invisible Fiber(TM) Internet: Product Specification 21-Dec-1999
Security Level: TNS and ART Under Non-Disclosure Document Number: SY-SPE-23-fe
Audience: TNS and ART Under Non-Disclosure Revision: 1.0.27.3
Authors: Engineering, Product Management Release Status: Approved
</TABLE>
<TABLE>
<CAPTION>
Req. No. Specification Description
<S> <C> <C>
6. Network Management (Continued)
6.1.6.1 (Continued) [*]
6.1.6.2 PM graphs that can be viewed: Several types of PM data can be viewed graphically over a
given time period:
SQM plot
Modem power plot
Reed Solomon modem block error plot
Modem lock status in discrete values. 0=unlocked
1=locked.
IFU internal temperature plot
Tx Power Plot
6.1.7 Tx Power ON/OFF Allows user to turn ON or OFF the power supply to the
Transmitter and displays status.
6.1.9 Adaptive Tx Power Control (AdTPC) Allows user to [*].
Automatic hop distance calculation.
Adaptive Tx Power Control to maintain RSSI at pre-set level
under varying channel conditions.
6.1.10 Manual System Reboot Allows manual system reboot
6.1.11 Manual Modem Reboot Allows manual reboot at the Modem.
6.2 IFU Link Manager Command-Line Allows IFU-LM to be launched via command-line with an
Arguments optional argument for either an IP address or host name
(DNS). This allows HP OpenView(TM) Network Node Manager
to launch IFU-LM within its environment (either from a menu or by
clicking on an IFU icon).
6.3 SNMP Agent
6.3.1 SNMP Version Embedded SNMP Agent [*].
6.3.2 SNMP NMS Compatibility The SNMP Agent is compatible with HP Openview(TM)
[*].
6.3.3 SNMP 'Lite' Agent Solution Supports only the Fault Management function. All other
management functions are performed through IFU-LM. The
SNMP agent maps alarms generated by the IFU Alarm
Manager into SNMP Traps and sends them to the EMS/NMS.
6.3.3.1 Generic Traps Supported coldStart, warmStart
6.3.3.2 TNS Enterprise-Specific Traps Please refer to the MIB Specification for Traps that can be
reported.
6.3.3.3 Number of Trap Destinations 2 (EMS1 and EMS2 attribute a configurable via IFU-LM)
</TABLE>
[*] Confidential Treatment Requested
Page 15 of 15
<PAGE> 60
<TABLE>
<S> <C> <C> <C>
TNS-38 100 Mbps Invisible Fiber(TM) Internet: Product Specification 21-Dec-1999
Security Level: TNS and ART Under Non-Disclosure Document Number: SY-SPE-23-fe
Audience: TNS and ART Under Non-Disclosure Revision: 1.0.27.3
Authors: Engineering, Product Management Release Status: Approved
</TABLE>
<TABLE>
<CAPTION>
Req No. Specification Description
<S> <C> <C>
6. Network Management (Continued)
6.3.3.4 Traps Enable/Disable Via IFU-LM Alarm Mask/Unmask feature.
6.4 TNS Enterprise MIB for TNS-38 OC-3/FE
IFU
6.4.1 TNS Private Enterprise Number 4216
6.4.2 Compatibility RFC 1155, RFC 1157, RFC 1212, RFC 1215, X. 208/X.680
6.4.3 HPOV NNM Compatibility Compilable and loadable onto HPOV NNM 6.0.
</TABLE>
Page 16 of 16
<PAGE> 61
EXHIBIT 7
<PAGE> 62
EXHIBIT 7. FORM OF PURCHASE ORDER
<PAGE> 63
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
This Purchase Order is subject to Supply Agreement
ART (LOGO) dated 31 Dec 1999 between Advanced Radio Telecom
Advanced Radio Telecom(TM) Corp. and Triton Network Systems Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
PHASE ORDER 500 - 108th Avenue NE, Suite 2600
Number: POXXXX Bellevue, Washington 98004
Office: (425) 688-8700
Please Quote Phase Order Number on all correspondence. Facsimile: (425) 688-0703
Toll-Free: (800) 580-0278
Date 12/17/1999 Page: 1 Website: http://www.art-net.net
- ------------------------------------------------------------------------------------------------------------------------------------
Order From: Triton Network Systems, Inc. Deliver to: Advanced Radio Telecom
8529 South Park Circle Distribution Center
4th Floor 23215 66th Ave. S.
Orlando FL 32819 Kent, WA 98032
Contact: Kelly Summers Contact:
Phone: (407) 903-0900 Ext. 0000 Ship Via: USF FOB:
FAX: (407) 903-0997 Ext. 0000 Terms: Net 30
- ------------------------------------------------------------------------------------------------------------------------------------
1 Your Item Number ART Reference Qty UOM Unit Cost Extension
Item Description Date Req'd
- ------------------------------------------------------------------------------------------------------------------------------------
1 TNS-38-ETP-FE-200 IFU 4.00 Each [*] [*]
IFU Including Mounting Brackets & Software 3/1/2000
- ------------------------------------------------------------------------------------------------------------------------------------
Authorized Signature Date
--------------------------------------- ------------------
Subtotal: [*]
Freight: $0.00
Tax amount: $0.00
Total Value: [*]
</TABLE>
[*] Confidential Treatment Requested
<PAGE> 64
EXHIBIT 8
<PAGE> 65
Exhibit 8. CUSTOMER FEATURE REQUESTS
<PAGE> 66
EXHIBIT 8a
[TRITON LOGO]
IFU HARDWARE PLAN
SHORT HAUL RADIO for TNS-38-ETP-FE PRODUCTS:
REQUIREMENT:
ART believes that at least [*] of their [*] will be at distances
that are shorter than the distance needed for the IFU to maintain a receive
signal level of [*]. The impact of not being able to transmit at a level
below our current typical minimum level of [*] means that the IFU is
operating at a level beyond what is required to maintain the link at a BER
>10(-12) on short links [*].
PLAN:
Using a phased approach, Triton Network Systems, Inc. will provide enhancements
to the 100 Mbps Internet IFU by Q2, 2000, which will enable the IFU to operate
at a minimum transmit level of [*] that will allow the receive signal level
to be maintained at [*] at a minimum link distance of [*]. Phase II
will provide the ability to reduce the transmit power even further by [*],
to a minimum transmit level of [*] that will allow the receive signal level
to be maintained at [*] at a minimum link distance of [*].
ANTENNA PATTERNS IN A DIGITIZED FORMAT for TNS-38-ETP-FE PRODUCTS:
REQUIREMENT:
ART has requested digitized antenna patterns with a minimum granularity shown
in the table below for at least one antenna for each of the antenna positions
in both the elevation and azimuth directions (VV, HH, VH, and HV):
<TABLE>
<CAPTION>
ANGLE FROM BEAM CENTER IN DEGREES MEASUREMENT GRANULARITY
--------------------------------- -----------------------
<S> <C>
< 5 0.1 degree
5 to 10 0.5 degree
10 to 25 1.0 degree
25 to 90 3.0 degree
90 to 180 10.0 degree
</TABLE>
PLAN:
Triton Network Systems, Inc. commits to provide the requested antenna patterns
in the granularity proposed. Expected completion date is April 3, 1999.
[*] Confidential Treatment Requested
Page 1 of 1
<PAGE> 67
EXHIBIT 8a
The table below lists all RF ART Customer Feature Requests and a plan for
resolution. Items identified as resolved on the chart below are changes or
features that will appear in release [*]. Delivery of Release [*]
is expected by [*]. Delivery of [*] is expected by the end of the
[*]. Items that are identified on the chart below as closed
are changes or features that will appear in release 1.0 or 1.1. Delivery of
Release 1.0 is expected by January 3, 2000. Delivery of 1.1 is expected by
January 31, 2000.
<TABLE>
<CAPTION>
ART
CFR# DESCRIPTION STATUS RELEASE COMMENTS
- ---- ----------- ------ ------- --------
<S> <C> <C> <C> <C>
5 Support for modem loopback test [*] [*]
mode functionality
11 Display transmit power monitor in Resolved 1.0 Introduced in Release
dBm 1.0.
12 Display received signal level in Resolved 1.0 Introduced in Release
dBm 1.0.
13 Setting initial transmit power [*] [*]
14 IFU weight less than 40 lbs. [*] Expected weight goal
of [*]
22 Flexible rain data entry [*] [*]
23 Provide link BER test mode based [*] [*]
on [*] data [*]
24 Improve receiver sensitivity @ [*] [*] typical.
10e-12-to [*] [*] minimum.
25 User control of RSSI thresholds [*] [*]
(see CFR #13)
</TABLE>
[*] Confidential Treatment Requested
Page 2 of 2
<PAGE> 68
EXHIBIT 8b
[LOGO] TRITON
NETWORK SYSTEMS, INC.
IFU Software & IFU Management Software Plan
The table below lists all non-RF ART Customer Feature Requests and a plan for
resolution. As discussed during the Triton/ART conference call on 12/17/99,
Triton will further develop the requirements and review an Alpha design of the
Mass Deployment capabilities with ART to ensure support of ART processes, to
occur no later than January 15/00. The Alpha design will serve as a basis for
developing a mutually agreeable feature rollout schedule. Items identified as
resolved on the chart below are changes or features that will appear in release
2.0, 2.1 or sooner. Delivery of Release 2.0 is expected by March 31, 2000.
Delivery of 2.1 is expected by the end of the second quarter of 2000. Items
that are identified on the chart below as closed are changes or features that
will appear in release 1.0 or 1.1. Delivery of Release 1.0 is expected by
January 3, 2000. Delivery of 1.1 is expected by January 31, 2000.
<TABLE>
<CAPTION>
ART
CFR# DESCRIPTION STATUS RELEASE COMMENTS
- ---- ----------- ------ ------- --------
<S> <C> <C> <C> <C>
1 Support for Multiple Simultaneous Resolved 2.0 Resolved when IFU LM
Users of IFU LM Launched from a moves to web-based
Single Host operation.
2 Support for IFU ASCII Resolved 2.0 Introduced in Release
Configuration File 2.0 and enhanced in
Release 2.1.
3 Support for Ethernet Performance Closed 1.0 Already available.
Management Minor enhancements
requested to capture
"snapshot" of register
values rather than 15
minute intervals
(available in Release
1.1).
4 Support for Echoing Critical IP Closed 1.0 Already available.
Address Data on RS232 port
6 Support for Software Loading Resolved 2.0 Introduced in Release
2.0 and enhanced for
mass deployment in
Release 2.1.
7 [*] [*] [*]
8 Support for Multiple SNMP trap [*] 2.0 [*]
destinations
9 Support for IP address-based Resolved 2.1 [*]
Access Lists
</TABLE>
[*] Confidential Treatment Requested
Page 1 of 1
<PAGE> 69
EXHIBIT 8b
<TABLE>
<CAPTION>
ART
CFR# Description Status Release Comments
- ---- ----------- ------ ------- --------
<S> <C> <C> <C> <C>
15 Context Sensitive Help Resolved 2.0 Will maintain ability for
IFU LM Help to run
Independently of IFU
LM.
16 Timestamps displayed in Local Resolved 2.0
Time
17 Link Manager Budget Calculation Closed 1.1 Clarification provided
Display to ART that a Transmit
Power reset will occur
and the link will be
"restarted". Graphic
change will occur in
Release 1.1 and will
include Yes/No option.
18 Remove references to SONET from Resolved 2.0
IFU LM when radio is Fast Ethernet
19 Alarm's Masked notification on Resolved 1.1 Add visual indication
front Link Manager screen which is set when one
or more alarms on the
IFU are masked. Also
add SNMP trap for
same event.
20 Correct GPI alarm text so spacing Closed 1.0 Text currently runs
is preserved together - spaces are
lost between words.
21 Prevent Serial Number field from Closed 1.1
being "selectable".
</TABLE>
<TABLE>
SOFTWARE RELEASE SCHEDULE
- -------------------------
<S> <C>
Release 1.0 January 3/00
Release 1.1 January 31/00
Release [*] [*]
Release [*] [*]
</TABLE>
[*] Confidential Treatment Requested
Page 2 of 2
<PAGE> 1
EXHIBIT 10.11
AUGUST 16, 1999
Mr. Skip Speaks
4234 Gilbert Avenue
Dallas, TX 75219
Dear Skip:
On behalf of myself and our Board of Directors, I am extremely pleased to offer
you the position of President and Chief Executive Officer of Triton Network
Systems, Inc. (Triton) reporting to the Board of Directors. The following is
designed to serve as a record of the essential terms of your employment,
which supersedes all prior discussions:
POSITION
PRESIDENT & CHIEF EXECUTIVE OFFICER (CEO), TRITON NETWORK SYSTEMS, INC.
This position is the most senior executive level position within Triton Network
Systems. Responsibilities include, but are not limited to management of all
aspects of Triton's business and management of all management personnel. The
objectives of the position will be based upon Triton Network System's business
plan and associated operating budgets established by you and your team and
approved by the Board of Directors.
SALARY
Your base salary will be $290,000 per annum based semi-monthly in arrears.
BONUSES
25% of your base salary paid upon completion of the unaudited financials for
the previous year, based upon completion of personal and corporate objectives
assigned by the board. For calendar year 1999 your bonus will be no less than
$60,000.
STOCK OPTIONS
You will receive 1,000,000 Triton share options with an exercise price of $2.50
per Share. Your options will be granted in accordance with and governed by the
Triton Network Systems, Inc. 1997 Stock Option Plan (the "Plan") and will vest
based on the following formula:
o One fourth (250,000 share options) after completion of one full year
of employment with Triton.
o 1/48th (of the 1,000,000 share options) each month thereafter so long
as you are employed by Triton.
<PAGE> 2
Mr. Skip Speaks
August 16, 1999
Page 2
In addition to the one million share option grant above, you will receive an
additional grant of 250,000 Triton share options to be granted in accordance
with and also governed by the Plan and which will vest after you have been
employed for six (6) years but with accelerated vesting in full upon the
company (on a consolidated basis) generating Two Hundred Million Dollars
($200,000,000.00) in gross sales during any fiscal year. The exercise price for
these options shall also be Two Dollars and Fifty Cents ($2.50) per share.
It is Triton's intention that all of the above options will be "incentive stock
options" as such term is defined in Section 422 of the Internal Revenue Code,
to the extent allowed by the Plan and applicable law.
You shall vest in all of the above options and stock as provided above until
you are no longer employed by or providing services to Triton or any of its
affiliates. You shall remain vested in all of the above options to the extent
you were vested as of the date of your termination and you shall vest no
further thereafter, except that if your employment is terminated at any time by
us without "Cause" (as that term is defined below) or at any time by you "for
cause" (as that term is defined below) or if you die or become disabled, your
stock option vesting for all the above options will accelerate by six (6)
months. In addition to the foregoing, if such termination without "Cause" by us
or "for cause" by you or your death or disability occurs within six months of
the commencement of your employment, a total of One Hundred Thousand (100,000)
shares will vest.
In addition, with regard to your grant of 1,250,000 shares as provided above,
should a "change of control" occur; that is, a sale, transfer or other
transaction that results in the Triton shareholders immediately prior to such
transaction not owning after such transaction a majority of the voting equity,
or if all or substantially all of the assets of the company are sold to a party
not controlled by a majority of the Triton shareholders immediately prior to
such transaction, then all of your share options shall vest in full upon the
closing of such transaction. As a condition of your options or stock vesting
upon a change of control transaction, you will agree that, for one year after
the closing of such transaction, you will not directly or indirectly engage in
(whether as an employee, consultant, proprietor, partner, director or
otherwise), or have any ownership interest in, or participate in the financing,
operation, management or control of, any business that competes with Triton,
whether in the U.S. or abroad. Ownership of no more than 1% of $250,000 of
stock (whichever is less) of a publicly traded corporation, and ownership of
Ericcson stock, will not constitute a violation of this provision. If requested
by the acquirer, your commitment not to compete with Triton during such one
year period will be set forth in a separate non-compete agreement in a form
reasonably acceptable to the acquirer and you.
All of the above options shall be granted pursuant to a written agreement,
incorporating the above terms and otherwise subject to the terms of the Plan,
to be provided to you no later than August 20, 1999.
<PAGE> 3
Mr. Skip Speaks
August 16, 1999
Page 3
At such time as Triton becomes subject to the reporting requirements under the
Securities Exchange Act of 1934, Triton shall use its best efforts to: (a) file
all periodic reports required to be filed under such Act at the times provided
therein or in the rules and regulations of the Securities and Exchange
Commission; and (b) to file and cause to remain effective a Registration
Statement on Form S-8 (or any successor form) with respect to any outstanding
options granted to you hereunder.
SEVERANCE
The company will provide you with a severance package in the event that Triton
terminates your employment without "Cause". Cause shall mean:
A. Illegal acts (other than minor traffic violations, misdemeanors, or other
acts that do not result in criminal conviction) including theft or
embezzlement.
B. A material violation of published written policies of the company or
material violation of any confidentiality or proprietary information
agreement with the company.
C. Irresponsible or unauthorized acts of a willful nature in the performance
of duties or continuing failure to follow the reasonable written directions
of the Board of Directors.
Notwithstanding the foregoing, you will not be deemed to have been terminated
for Cause without (i) reasonable written notice to you setting forth the
reasons for Triton's intention to terminate for Cause, and (ii) an opportunity
for you, together with your counsel, if any, to be heard before the Triton
Board of Directors.
The severance package will provide you with up to twelve (12) months base
salary and benefits continuance from the time of your involuntary termination.
If you are employed within twelve months of your termination from the company,
your severance payments will stop at the time of your new employment.
You will also receive the severance package and accelerated stock option
vesting as set forth above if you at any time terminate your employment "for
cause" after the occurrence of one or more of the following events:
(i) The failure of Triton to maintain you in the position of President and
Chief Executive Officer;
(ii) The removal or non-election of you to Triton's Board of Directors;
(iii) A reduction in your base salary; or
(iv) A breach by Triton of any material provision of this letter agreement
which remains uncorrected for thirty (30) days following written notice
to Triton of such breach.
<PAGE> 4
Mr. Skip Speaks
August 16, 1999
Page 4
During the period in which severance benefits are continuing, you will not
directly or indirectly engage in (whether as an employee, consultant,
proprietor, partner, director or otherwise), or have any ownership interest in,
or participate in the financing, operation, management or control of, any
business that competes with Triton, whether in the U.S. or abroad. Ownership of
no more than 1% or $250,000 of stock (whichever is less) of a publicly traded
corporation, and ownership of Ericsson stock, will not constitute a violation
of this provision.
If the benefits accruing to you upon a change of control transaction trigger a
"golden parachute" excise tax under Section 4999 of the Internal Revenue Code,
then Triton will pay you one-half the amount of the excise tax.
LOAN
The company will provide you with a $300,000 loan at zero interest to replace
your current housing loan. This loan will have a term of five years and shall
be paid back sooner out of the first proceeds of the sale any Triton stock and
must be paid back within 12 months of termination of employment with Triton for
any reason. This loan will be secured by your stock options and 2nd mortgage on
your home in California. Should the IRS rules deem it necessary, the company
will be required to impute the IRS mandated minimum interest and report that as
compensation to you.
SIGN ON INCENTIVE
The company will pay to you together with your first pay check, a
non-refundable sign on bonus of $125,000. The company will also pay you on or
before January 15, 2000 an additional $125,000 bonus (the "Additional Bonus").
The Additional Bonus will be pro-rated over (9) months. You will be required to
repay the pro-rata portion of the Additional Bonus should you terminate your
employment with Triton prior to September 30, 2000 other than "for cause" (as
that term is defined above) in which event you will have no obligation to repay
any of the Additional Bonus. No repayment of the Additional Bonus will be
required in the event Triton is acquired in a change of control transaction.
VACATION
You will be eligible for three weeks of vacation annually.
BENEFITS
Triton will provide you and your dependents with the benefits provided to other
Senior Executives and their dependents. Those benefits currently offered are
listed below but may be changed by the company in its sole discretion:
o Medical Insurance o Disability Insurance
<PAGE> 5
Mr. Skip Speaks
August 16, 1999
Page 5
o Life Insurance o Dental Insurance
o 401(K) Plan Eligibility o Tuition Reimbursement
RELOCATION
You will be reimbursed for relocation expenses to Orlando, Florida from Dallas,
Texas for your townhouse furniture and one car. Triton will also reimburse you
for repayment of expenses to your previous employer for your move to Dallas,
should this be necessary.
OTHER
The company will bear the cost of air travel when you commute from your
home/office in California to the company offices in Orlando, Florida. The
company will pay for temporary living expenses in Orlando, Florida for an
initial two month period.
Triton will reimburse your legal expenses to review this letter up to $1000.
MEDIATION AND ARBITRATION
In the event of any dispute between us, you agree to first attempt to resolve
the dispute amicably by direct discussions with the Board of Directors and in
the event such discussions do not resolve the dispute, you agree to enter into
a non-binding mediation of the dispute. If the mediation is unsuccessful in
resolving the dispute, you agree to join us in a binding arbitration in
accordance with the provisions set forth in Section 9 of the attached Employee
Proprietary Information Agreement.
PROPRIETARY INFORMATION AGREEMENT
You will be required to sign the attached Employee Proprietary Information
Agreement. You will also be asked to sign a limited non-compete Agreement in
a form acceptable to you, which prevents you from competing with Triton during
the period you are receiving severance benefits from Triton and, in the event
of a change of control and full vesting of your stock options, for 1 year after
that point.
COMMENCEMENT OF EMPLOYMENT
Your employment with Triton is scheduled to commence September 6, 1999, subject
to final discussions between you and your current employer.
TERM
Subject to all of the provisions herein, specifically including, but not
limited to, the severance and accelerated stock option vesting provisions, your
employment is at will and may be terminated by the employee or the company
without cause on 60 days' written notice.
The undersigned has fully authority to act on behalf of Triton and bind Triton
to the terms herein. The preceding sets forth all of the terms of Triton's
offer to employ you. If this offer is in accordance with your understanding and
acceptable to you, please sign, date and return to me a copy of this
<PAGE> 6
Mr. Skip Speaks
August 16, 1999
Page 6
letter. This letter agreement may be signed in counterpart, and signed copies
exchanged by facsimile. Upon your signature, this letter agreement will be
binding upon Triton and its respective successors and assigns.
Sincerely,
/s/ Robert Goodman
- --------------------------
Robert Goodman
Chairman of the Board
I am in agreement with the terms as stated and hereby accept this offer of
employment by Triton Network Systems, Inc.
/s/ Skip Speaks August 17, 1999
- --------------------------- -----------------------------
Skip Speaks Date
<PAGE> 1
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into as
of the 9th day of September, 1999, (the "Effective Date") by and between TRITON
NETWORK SYSTEMS, INC. (the "Company"), a Florida corporation, and Brian Andrew
(the "Employee").
BACKGROUND
The Company desires to continue to retain the services of the Employee,
and the Employee desires to continue to be retained by the Company, on the terms
and conditions set forth in this Agreement. During the term of his employment as
an Employee (but not as a consultant) pursuant to this Agreement, the Employee
will serve as Chairman of the Board of Directors and, in his capacity as an
employee, will report to the Chief Executive Officer.
The Employee recognizes and agrees that during the course of his
employment with the Company he will have substantial contacts with various
Customers and Potential Customers of the Company and will have access to the
Company's confidential business information and trade secrets. The Employee
acknowledges that the restrictive covenants contained in this Agreement are
reasonable and reasonably necessary to protect the Company's relationships with
its Customers and Potential Customers as well as its confidential business
information and trade secrets.
Accordingly, in consideration of the mutual promises, terms and
conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
TERMS
1. EMPLOYMENT: EMPLOYMENT TERM. The Company hereby continues to employ
the Employee, and the Employee hereby accepts continued employment by the
Company upon the terms and conditions set forth in this Agreement. The Employee
agrees to devote his full business time, energy, skills and best efforts to such
employment. The Employee shall not, directly or indirectly, alone or as a member
of a partnership, or as an officer, director, employee or agent of any other
person, firm or business organization engage in any other business activities or
pursuits requiring his personal service that materially conflict with his duties
hereunder or the diligent performance of such duties. The Employment Term shall
expire on May 1, 2000 or the date of an Initial Public Offering "IPO"),
whichever occurs first. Notwithstanding the above, the Parties agree that the
Company may terminate Employee's employment prior to expiration of the
Employment Term, for any reason, or no reason, with or without cause, upon
written notice to the Employee.
2. CONSULTING SERVICES. Upon the termination of the Employee's
employment with the Company, either at the expiration of the Employment Term, or
earlier, the Company will retain the services of Employee as a consultant for a
period beginning on the date of the
<PAGE> 2
termination of the Employee's employment hereunder and continuing through August
1, 2001, unless there is a "Change in Control" of the Company "Change of
Control"). In the event of a Change of Control which occurs at any time during
the first six (6) months of the Employee's status as a Consultant, the Company
will continue to pay consulting fees to Employee for the balance of said six (6)
month period. In the event of a Change of Control which occurs after the
Employee's first six (6) months as a consultant, the Employee's status as a
Consultant shall terminate on the effective date of the Change of Control, and
the Company shall have no further obligations to Employee. Upon becoming a
consultant, the employee will make himself available to consult with the
Company's Board of Directors but he will not be expected to consult exclusively
for, or on a full time basis with, the Company. The Employee will also not be
prohibited from pursuing other employment opportunities while serving as a
consultant, provided that it does not violate any terms of this Agreement.
3. COMPENSATION.
3.1 SALARY. During his employment hereunder, the Employee shall be
paid a base salary prorated at a rate equivalent to an annual salary of one
hundred and seventy-five thousand dollars ($175,000), payable in such
installments as the Company pays its other employees ("Base Salary"). Employee
shall also be paid a bonus in the amount of twenty percent (20%) of the
Employee's Base Salary, prorated on an annualized basis, if the Company's
financial performance for the fiscal year meets or exceeds the goals which have
been set by the Board of Directors. The goals for the current fiscal year which
have been set by the Board of Directors shall be attached hereto as Exhibit A.
While serving as a consultant following the expiration of the Employment Term,
the Employee shall be compensated as set forth in Section 3.5.
3.2 STOCK OPTIONS: RESTRICTED STOCK. As an incentive for the
Employee's services under this Agreement, the Employee has been granted options
to purchase one hundred thousand (100,000) shares of TRITON common stock,
exercisable at $2.50 per share, all of which will vest on August 1, 2001. The
stock options referenced in this Section 3.2 are in addition to the shares of
TRITON common stock which have previously been sold to Employee, and which are
in escrow and subject to a lapsing repurchase right held by the Company (the
"Restricted Stock"). The Company hereby agrees that so long as the Employee has
not been terminated for "Cause," the Restricted Stock will continue to vest
(i.e., the repurchase right will continue to lapse) as long as Employee remains
an employee or consultant or remains willing to serve as a consultant.
3.3 BENEFITS. During his period of employment hereunder, the
Employee shall be entitled to participate in the Company's health benefits and
vacation policy as are available and consistent with the Company's policies
related to such benefits.
-2-
<PAGE> 3
3.4 EXPENSE REIMBURSEMENT. The Employee shall, upon submission of
adequate documentary evidence satisfactory to the Company, be entitled to
reimbursement of reasonable out-of-pocket expenses incurred in the performance
of his duties hereunder in accordance with policies established by the Company,
provided that each such expenditure is of a nature deductible under Section 162
of the Internal Revenue Code of 1986, as amended, on the federal income tax
return of the Company as a business expense and not as deductible compensation
to the Employee.
3.5 CONSULTING FEES. During the first six (6) months of his service
as a consultant, Employee shall be paid consulting fees in the amount of
$14,583.33 per month, payable in monthly installments. During the remaining
period of his service as a consultant, ending August 1, 2001, Employee shall be
paid consulting fees in the amount of two thousand five hundred dollars ($2,500)
per month, payable in such installments as the Company pays its employees. There
shall be no bonus during the period of service as a consultant. The benefits
identified in Section 3.3 shall continue only during the first six (6) months of
Employee's service as a consultant.
4. TERMINATION.
4.1 WITHOUT CAUSE. Employee's services as an employee may be
terminated by either party prior to the end of the Employment Term, at any
time, for any reason or no reason, with written notice. If the Company should
terminate the Employee's employment, without Cause, at any time during the Term,
the Company (i) will pay the Employee all accrued but unpaid Base Salary, all
accrued but unpaid bonus, and all incurred but unpaid expense reimbursements
which are payable to Employee pursuant to this Agreement ("Severance Payment")
up to and including the effective date of termination and (ii) will engage the
Employee as a consultant on the terms set forth in Sections 2 and 3.5.
Additionally, if the Employee is terminated without Cause, and the Company fails
for any reason to engage the Employee as a consultant as set forth above, or the
Company for any reason, with or without Cause, terminates the Employee's
services as a consultant, then any unvested restricted stock and stock options
held by Employee will be subject to immediate vesting, and Employee may exercise
any unexercised stock options held by him.
4.2 FOR CAUSE. Termination for "Cause" shall only apply during
Employee's status as an Employee, but not as a Consultant. As used here,
termination for "Cause" shall mean only the following:
-3-
<PAGE> 4
A. Illegal acts (other than minor traffic violations,
misdemeanors, or other acts that do not result in criminal conviction) including
theft or embezzlement.
B. An intentional violation of published written policies of the
Company or an intentional violation of any Confidentiality or Proprietary
Information Agreement with the Company which causes demonstrable and substantial
harm to the Company.
C. Irresponsible or unauthorized acts of a willful nature in the
performance of duties which cause demonstrable and substantial harm to the
Company or continuing failure, after written warning, to follow the reasonable
written directions of the Board of Directors.
Notwithstanding the foregoing, Employee will not be deemed to have
been terminated for Cause without (i) reasonable written notice to him setting
forth the reasons for the Company's intention to terminate for Cause, and (ii)
an opportunity for him, together with his counsel, if any, to be heard before
the Company's Board of Directors.
5. PAYMENT AND OTHER PROVISIONS UPON TERMINATION FOR CAUSE. If the
Employee's employment with the Company is terminated by the Company for Cause,
then the Employee shall not be entitled to Severance Payments and, in lieu
thereof, on or before the Employee's last day of employment with the Company,
the Company shall pay to the Employee his Base Salary, if any, earned but
unpaid up to the date of termination plus benefits, if any, earned but unpaid up
to the date of termination, and shall reimburse the Employee for any expenses to
which the Employee is due reimbursement under Section 3 hereof. In addition, the
Employee shall retain the right to exercise any vested by unexercised stock
options in accordance with the Option Plan.
6. RESTRICTIVE COVENANTS. In order to induce the Company to enter into
this Employment Agreement, and as a material condition of his employment by the
Company, the Employee acknowledges that the Company has a legitimate business
interest in protecting the goodwill, confidential information, advantageous
business relationships, trade secrets, business methods and other valuable and
confidential aspects of the Company and its subsidiaries and affiliated
companies. In order to protect the Company's legitimate business interests, the
Employee agrees as follows:
6.1 NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Employee
acknowledges and agrees that the Confidential Information (as defined below) is
a valuable, special and unique asset of the Company's business. Employee
acknowledges receipt and delivery of the Confidential Information and
specialized training, received during the course of his employment with the
Company. Accordingly, except in connection with the performance of his duties
hereunder, the Employee shall not at any time during or subsequent to the term
of his employment (i) disclose, directly or indirectly, to any person, firm,
corporation, partnership, association or other entity, any proprietary or
confidential information relating to the Company;
-4-
<PAGE> 5
or (ii) utilize such information for any reason or purpose whatsoever.
"Confidential Information" includes but is not limited to, any information
concerning the Company's financial condition or prospects, the Company's
customers or potential customers' business or financial information of the
customers or potential customers obtained during the course of Employee's
employment with the Company, the design, development, manufacture, marketing or
sale of the Company's products or the Company's methods of operating its
business. Confidential Information shall not include information which, at the
time of disclosure, is known or available to the general public by publication
or otherwise through no act or failure to act on the part of the Employee.
The Employee acknowledges that the above-defined Confidential
Information constitutes "trade secrets" as defined in the Florida Uniform Trade
Secrets Act (Chapter 688, Florida Statutes), and all remedies provided
thereunder shall, in addition but not by way of limitation, be available to the
Company in the event of breach or threatened breach by the Employee.
6.2 COMPETITION. During the Restricted Period (as defined below) and
within the Restricted Area (as defined below), the Employee will not,
individually or in conjunction with others, directly or indirectly, enter into
or engage in any business which competes directly or indirectly with the
business of the Company as conducted at any time during the Restricted Period,
on the Employee's own behalf or in the service of or on behalf of others as
principal, partner, officer, director, manager, employee or shareholder (other
than as holder of less than 1% of the outstanding capital stock of a publicly
traded corporation), by soliciting, intentionally inducing or influencing any
person, partnership, corporation or other entity which has a business
relationship with the Company to discontinue or reduce the extent of such
relationship with the Company. The "business of the Company" shall be construed
to mean production and/or sale or licensing of Broadband Wireless Equipment.
6.3 NON-SOLICITATION AND NON-DISPARAGEMENT. During the Restricted
Period the Employee, on his own behalf or on behalf of any other person,
partnership, corporation or other entity, will not directly or indirectly,
recruit or hire any other employee, agent or consultant of the Company or
encourage any other employee, agent or consultant to terminate his or her
relationship with the Company. Further, the Employee agrees that he will not, at
any time, make disparaging comments about the Company, its Officers, or
Directors.
6.4 RETURN OF CONFIDENTIAL INFORMATION. Upon termination of the
Employee's employment, for whatever reason and whether voluntary or involuntary,
or at any time at the request of the Company, the Employee shall promptly return
all Confidential Information in the possession or under the control of the
Employee to the Company and shall not retain any copies or other reproductions
or extracts thereof. The Employee shall at any time at the request of the
Company destroy or have destroyed all memoranda, notes, reports, and documents,
whether in "hard copy" form or as stored on magnetic or other media, and all
copies and other reproductions
-5-
<PAGE> 6
and extracts thereof, prepared by the Employee and shall provide the Company
with a certificate that the foregoing materials have in fact been returned or
destroyed.
6.5 BOOKS AND RECORDS. All books, records and accounts of the
Company, whether prepared by the Employee or otherwise coming into the
Employee's possession, shall be the exclusive property of the Company and shall
be returned immediately to the Company upon termination of the Employee's
employment or upon the Company's request at any time.
6.6 CONSTRUCTION. It is agreed by the parties hereto that if any
portion of the above restrictive covenants are held to be unreasonable,
arbitrary, against public policy, or for any other reason unenforceable, the
covenants herein shall be considered diminishable both as to time and geographic
area; and each month for the specified period shall be deemed a separate period
of time, and the restrictive covenants shall remain effective so long as the
same is not unreasonable, arbitrary or against public policy. The parties hereto
agree that in the event any court determines the specified time period or the
specified geographic area to be unreasonable, arbitrary or against public
policy, a lesser period or geographic area which is determined to be reasonable,
nonarbitrary and not against public policy shall be enforced against the
Employee.
6.7 CALCULATION OF TIME. The time period covered by the restrictive
covenants contained in this Section 6 shall not include any period(s) of
violation of any restrictive covenant or any period(s) of time required for
litigation brought by the Company to enforce any covenant.
6.8 DISGORGEMENT. The Employee covenants and agrees that if it is
proven by virtue of a judgment from a Court of competent jurisdiction that the
Employee has violated any of the covenants or agreements set forth in this
Section 6, the Company shall be entitled to an accounting and repayment of all
profits, compensation, commission, remuneration or other benefits that the
Employee has realized, directly or indirectly, or may realize as a result of or
in connection with such violation. These remedies shall be in addition to, and
not in limitation of, any injunctive relief or other rights or remedies to which
the Company may be entitled at law, in equity or under this Agreement.
6.9 DEFINITIONS. As used in this Section 6,
6.9.1 The "Company" includes any parent, subsidiary or affiliated
company of the Company.
6.9.2 The "Restricted Period" commences on the Effective Date of
this Agreement and terminates on August 1, 2001.
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<PAGE> 7
6.9.3 The "Restricted Area" is the United States and any other
location where the Company conducts business during the Restricted Period,
including by telephone, telecopy, e-mail or other forms of communication.
6.10 INDEPENDENT COVENANTS. The covenants set forth in this Section
6 shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any potential or alleged claim or cause of
action of the Employee against the Company, whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by the Company
of the covenants contained herein. An alleged or actual breach of the Agreement
by the Company shall not be a defense to enforcement of the provisions of this
Section 6. It is acknowledged and agreed that the provisions of this Section 6
shall survive the termination of this Agreement.
6.11 INJUNCTION/SPECIFIC PERFORMANCE: SETOFF. The Employee
acknowledges that if it were to breach any of the provisions of this Section 6,
it would result in an immediate and irreparable injury to the legitimate
business interests of the Company which cannot be adequately or reasonably
compensated at law. Therefore, the Employee agrees that the Company shall be
entitled, if any such breach shall occur or be threatened or attempted, if it so
elects, to a decree of specific performance and to a temporary and permanent
injunction enjoining and restraining such breach, either directly or indirectly,
and that such right to injunction shall be cumulative to whatever other remedies
for actual damages the Company may possess. The Employee further agrees that the
Company may set off against or recoup from any amounts due under the Purchase
Agreement to the extent of any losses incurred by the Company as a result of any
breach by the Employee of the provisions of this Section 6. If any action is
brought by the Company pursuant to this Section 6, the prevailing party shall be
entitled to recover costs and reasonable attorneys' fees incurred in such
action, the amount of such reasonable attorneys' fees to be determined by the
court and not a jury.
7. INTELLECTUAL PROPERTY. As between the Employee and the Company, all
products, designs, styles, processes, discoveries, materials, ideas, creations,
inventions and properties, whether or not furnished by the Employee, created,
developed, invented or used in connection with the Employee's employment with
the Company or the business of the Company under this Agreement will be the sole
and absolute property of the Company for any and all purposes whatsoever in
perpetuity, whether or not conceived, discovered and/or developed during regular
working hours. The Employee will not have, and will not claim to have, under
this Agreement or otherwise, any right, title or interest of any kind or nature
whatsoever in or to any such products, processes, discoveries, material ideas,
creations, inventions and properties which are related to the Company's
business.
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<PAGE> 8
8. MISCELLANEOUS
8.1 REPRESENTATION OF THE EMPLOYEE. The Employee represents and
warrants to the Company that the Employee is not party to or bound by any
employment agreement, noncompetition agreement or confidentiality agreement with
any person or entity other than the Company and its affiliates.
8.2 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any person other than the parties hereto and their
respective successors and permitted assigns.
8.3 ENTIRE AGREEMENT. This Agreement (including the documents
attached hereto) constitutes the entire agreement between the parties hereto and
supersedes any prior understandings, agreements, or representations by or
between the parties hereto, written or oral, to the extent they related in any
way to the subject matter hereof.
8.4 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. The Employee may not assign either this Agreement or any
of its rights, interests, or obligations hereunder without the prior written
approval of the Company.
8.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
8.6 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.7 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if it is sent
by registered or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to the Employee:
Mr. Brian Andrew
573 Fox Hunt Circle
Longwood, FL 32750.
(407) 328-0614
-8-
<PAGE> 9
If to the Company:
Triton Network Systems, Inc.
Attn: Robert P. Goodman
8529 SouthPark Circle
Orlando, FL 32819
(407) 903-0900
Facsimile: (407) 903-0997
Any party hereto may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, facsimile transmission, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication shall
be deemed to have been duly given unless and until it actually is received by
the intended recipient; provided, however, that if notice is sent by U.S. mail
it shall be deemed received on the fifth (5th) business day after it is sent.
Any party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other party
notice in the manner herein set forth.
8.8. GOVERNING CHOICE OF LAW. This Agreement shall be governed by
and construed in accordance with the domestic laws of the State of Florida
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Florida or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Florida.
8.9. AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by all
parties hereto. No waiver by any party of any default misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
8.10. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
8.11. CONSTRUCTION. The parties hereto have participated jointly in
the negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no
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<PAGE> 10
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement.
8.12. SUBMISSION TO JURISDICTION. Each of the parties hereto submits
to the jurisdiction of any state or federal court sitting in Orange County,
Florida, in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court. Each party also agrees not to bring
any action or proceeding arising out of or relating to this Agreement in any
other court, Each of the parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety,
or other security that might be required of any other parties with respect
thereto.
8.13. ATTORNEYS' FEES. If litigation shall be brought to enforce or
interpret any provision contained herein, the prevailing party shall be entitled
to its reasonable attorney's fees (including those for negotiations, trial and
appeals) and disbursements incurred by the prevailing party in such litigation.
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<PAGE> 11
This Agreement has been executed by the parties as of the date first above
written.
Company:
TRITON NETWORK SYSTEMS, INC.
By: /s/ Robert F. Goodman
---------------------------------
Name: Robert F. Goodman
Title: Chairman
Employee:
/s/ Brian J. Andrew
------------------------------------
Brian J. Andrew
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<PAGE> 1
EXHIBIT 10.13
[LETTERHEAD]
September 22, 1998
Mr, Kenneth R. Vines
4556 Daffodil Trail
Plano, Texas 75093
Dear Ken:
On behalf of myself and our Board of Directors. I am pleased to offer you the
position of Chief Financial Officer (CFO), Triton Network Systems, Inc.
(Triton). The following is designed to serve as a record of the essential terms
of your employment, which supersedes all prior discussions:
POSITION
SENIOR VICE PRESIDENT & CHIEF FINANCIAL OFFICER (CFO);
TRITON NETWORK SYSTEMS, INC.
This position is an executive level position within Triton Network Systems.
Responsibilities include, but are not limited to management of Finance,
Accounting, Human Resources, MIS, and Facilities. The objectives of the position
will be based upon Triton Network Systems business plan and associated operating
budgets established by the executive management team and approved by the Board
of Directors.
SALARY
Your base salary will be $150,000 per annum payable semi-monthly in arrears.
BONUSES
20% end of year bonus based upon completion of personal and corporate
objectives.
STOCK OPTIONS
You will receive, subject to board approval, 300,000 Triton share options with
an exercise price of $.26 per Share. Your options will vest based on the
following formula:
o One fourth (1/4) after completion of one full year of employment with
Triton.
o 1/48th each month thereafter.
8529 SouthPark Circle o Orlando, FL 32819
Phone (407) 903-0900 o Fax (407) 903-0999
<PAGE> 2
Mr. Kenneth R. Vines
September 22, 1998
Page Two
This vesting is provided in each case that your employment by or services to the
company have not been terminated prior to the date of any such vesting except as
specified in this offer letter. You will also have the option of purchasing the
options upon your employment and placing these in an escrow account with the
above vesting schedule. Options are granted in accordance with and governed by
the Triton Network Systems, Inc. 1997 Stock Option Plan. Should the company be
sold or be acquired by another company (excluding transactions in which the
Triton shareholders hold a majority of the voting equity of the surviving
entity), all stock or stock options will vest immediately.
Notwithstanding anything herein or in the Plan to the contrary, if the
undersigned's employment with the Company is terminated Without Cause within one
year of the Vesting Commencement Date, then, upon such termination, the Shares
subject to the Option shall be vested in an amount equal to 1/48th of the Shares
per month from the Vesting Commencement Date until the termination date, plus an
additional 6/48ths of the Shares subject to the Option shall also vest at the
time of termination.
SEVERANCE
The company will provide you with a severance package in the event that Triton
Network Systems, Inc. terminates your employment without cause. Without
cause shall mean for any reason other than:
A. Illegal acts (other than minor traffic violations, misdemeanors, or
other Acts that do not result in criminal conviction) including theft
or embezzlement.
B. Material violation of published written policies of the company or
material violation of any confidentiality or proprietary information
agreement with the company.
C. Irresponsible, unauthorized acts of a willful nature in the performance
of duties or repeated failure to follow the reasonable directions of
the Board of Directors or CEO.
That package will provide you with up to six (6) months base salary,
twenty-flve percent (25%) of your annual bonus and benefit continuance from the
time of your involuntary termination. If you are employed within six months of
your termination from the company, your severance payments will stop at the time
of your new employment. You will continue to vest your stock options during your
severance period. If your employment is terminated without cause because of or
within one year after a sale of the company, you will receive six months
compensation (base salary and bonus at plan), plus six months benefit
continuance.
<PAGE> 3
Mr. Kenneth R. Vines
September 22, 1998
Page Three
VACATION
You will be eligible for three weeks of vacation.
BENEFITS
Triton will provide the following paid benefits, at its sole discretion:
- Medical Insurance - Disability Insurance
- Life Insurance - Dental Insurance
- 401 (K) Plan Eligibility - Tuition Reimbursement
RELOCATION
You will be reimbursed for relocation expenses as outlined in Exhibit A.
PROPIETARY INFORMATION AGREEMENT
You will be asked to sign the attached Employee Proprietary Information
Agreement.
COMMENCEMENT OF EMPLOYMENT
No later than October 19, 1998.
The preceding sets forth all of the terms of Triton Network Systems, Inc.'s
offer to employ you. If this offer is in accordance with your understanding and
acceptable to you, please sign, date and return to me a copy of this letter by
September 30, 1998.
Sincerely
/s/ Brian J. Andrew
- ---------------------------------
Brian J. Andrew
President & Chief Executive Officer
I am in agreement with the terms as stated and will accept this offer of
employment by Triton Network Systems, Inc.
9/30/98
- ----------------------------- -----------------------------
Name Date
<PAGE> 4
[LETTERHEAD]
July 20, 1999
Mr. Kenneth R. Vines
11431 Willow Gardens Drive
Windermere, FL 34786
Dear Ken:
In consideration of your further employment with the Company, we are
proposing the following Amendment to your Employment Offer letter dated
September 22. 1998.
NON-DISPARAGEMENT:
You agree that should your employment with the Company terminate for
any reason, you will not disparage the Company, which includes, but is not
limited to, making negative comments about the Company, its products, its
employees, Officers, or Board of Directors, or your employment with the Company.
In addition, should your employment With the Company terminate for any reason,
the Company agrees to not disparage you.
NON-SOLICITATION:
You agree that for six (6) months following your employment with the
Company, whether the termination shall be voluntary or involuntary, with or
without cause, or for any other reason whatsoever, you shall not, directly or
indirectly or on behalf of yourself or any other person or entity: (a) attempt
to hire any other employee of the Company or otherwise encourage or attempt to
encourage any other employee of the Company to leave employment With the
Company; or (b) in any manner or at any time, solicit or encourage or discuss
with any person, firm, corporation, or any business entity who are Customers of
the Company and/or other employees of the Company to cease doing business with
the Company and/or other employees of the Company. In the event you breach any
term contained in this Section, you immediately waive any right or entitlement
to the Severance Benefits described in the Employment Severance Agreement and
will pay to the Company an amount equal to any portion of the Severance Benefits
paid to you prior to your breach, in addition to any damages the Company may be
able to recover.
CONFIDENTIAL
<PAGE> 5
If you are in agreement with the terms of this Amendment, please sign
and date below.
Sincerely,
---------------------------
I accept the terms of this amendment to my offer of employment.
- -----------------------------
Name
- -----------------------------
Date
CONFIDENTIAL
<PAGE> 1
Exhibit 10.14
[TRITON NETWORK SYSTEMS, INC. LOGO]
December 18, 1998
Mr. Doug Campbell
161 Lonong Chuan #02-01
New Tech Park, Singapore 556741
Dear Doug:
it is with pleasure that Triton Network Systems, Inc. extends to you an offer of
employment for the position of Vice President, Marketing and International
Sales. You will be reporting to Brian J. Andrew, and your work location will be
in Orlando, Florida. The following is designed to serve as a record of the
essential terms of your employment, which supersedes all prior discussions:
COMMENCEMENT OF EMPLOYMENT: No later than 17 Feb 99 or sooner.
REMUNERATION: Your base salary will be $126,000 per annum payable
semi-monthly in arrears with a 20% end of year bonus based
upon completion of personal and corporate objectives
STOCK OWNERSHIP: You will receive, subject to board approval, 250,000 Triton
share options. Your options will vest based on the following
formula:
- One fourth (1/4) after completion of one full year of
service with Triton.
- 1/48th each month thereafter
This vesting is provided in each case that your employment by
or services to the Company have not been terminated prior to
the date of any such vesting.
Your official stock option contract will be sent to you for
your review and signature.
RELOCATION: Triton will re-imburse for [illegible] all valid relocation
expenses, when supported with original receipts, for up to
six months after your start date.
In the event that you voluntarily resign from Triton within
twelve months of your start date, you will be liable for all
your relocation expenses previously re-imbursed by Triton.
<PAGE> 2
VACATION: Vacation is on a calendar year basis, and accrues on a
monthly basis. For the first three years of employment, the
fate of accrual shell be 10 hours per month (three weeks per
year). After three years of continuous employment with
Triton, your vacation entitlement will increase to 13.3 hours
per month (four weeks per year).
BENEFITS: Triton will provide the following paid benefits, at its sole
discretion:
Medical Insurance Disability Insurance
Life Insurance Dental Insurance
401(K) Plan Eligibility Tuition Reimbursement
Please sign and return the offer letter to me on or before 5:00 PM EST date
1998.
1 am delighted that you are joining the Triton team and look forward to
assisting you in achieving your professional objectives. I believe that you will
enjoy working here and find it to be a professionally satisfying experience.
Please let me know if you have any questions about your employment at Triton or
if there is any other information or material I can provide for you.
Sincerely
/s/ Brian J. Andrew
- --------------------------------------------
Brian J. Andrew
President & CEO Triton Network Systems, Inc.
Acceptance of Offer
/s/ Doug Campbell
- --------------------------------------------
Doug Campbell
<PAGE> 1
Exhibit 10.14.1
[TRITON NETWORK SYSTEMS, INC. LOGO]
July 20, 1999
Mr. Douglas R.B. Campbell
5961 Masters Blvd., Bay Hill
Orlando, FL 32819
Dear Doug:
In consideration of your further employment with the Company, we are
proposing the following Amendment to your Employment Offer letter dated December
18, 1999.
POSITION & TITLE:
Your new position in the Company will be Vice President, Sales &
Marketing reporting to the Chief Executive Officer.
SEVERANCE PACKAGE:
The Company will provide you with a severance package in the event you
are terminated without cause. Without cause shall mean for any reason other
than:
1. Illegal acts (other than minor traffic violations or misdemeanors),
including but not limited to theft or embezzlement.
2. Violation of published written policies of the Company or violation
of any confidentiality or proprietary information agreement with
the Company.
3. Irresponsible unauthorized acts of a willful nature in the
performance of duties or repeated failure to follow the reasonable
directions of the Board of Directors or Officers of the Company.
The severance package will provide you with up to six (6) months base
salary, twenty-five percent (25%) of your annual bonus, and benefit continuance
from the time of your involuntary termination for a six (6) month period. If you
are employed within six (6) months of your termination from the Company, your
severance payments will stop at the time of your new employment. You will
continue to vest your stock options during your severance period which may be up
to six (6) months. If your employment is terminated without cause because of, or
within one (1) year after, a sale of the Company, you will receive six (6)
months compensation (bass salary and bonus), plus six (6) months benefit
continuance.
Page 1
<PAGE> 2
Should you be terminated, without cause, within your first year of
employment, the minimum continued vesting period will be the number of months
required to obtain one year of vesting.
NON-DISPARAGEMENT:
You agree that should your employment with the Company terminate for
any reason, you will not disparage the Company, which includes, but is not
limited to, making negative comments about the Company, its products, its
employees, Officers, or Board of Directors, or your employment with the Company.
In addition, should your employment with the Company terminate for any reason,
the Company agrees to not disparage you.
NON-SOLICITATION:
You agree that for six (6) months following the your employment with
the Company, whether the termination shall be voluntary or involuntary, with or
without cause, or for any other reason whatsoever, you shall not, directly or
indirectly or on behalf of yourself or any other person or entity: (a) attempt
to hire any other employee of the Company or otherwise encourage or attempt to
encourage any other employee of the Company to leave employment with the
Company; or (b) in any manner or at any time, solicit or encourage or discuss
with any person, firm, corporation, or any business entity who are Customer of
the Company and/or other employees of the Company to cease doing business with
the Company and/or other employees of the Company. In the event you breach any
term contained in this Section, you immediately waive any right or entitlement
to the Severance Benefits described in the Employment Severance Agreement and
will pay to the Company an amount equal to any portion of the Severance Benefits
paid to you prior to your breach, in addition to any damages the Company may be
able to recover.
If you are in agreement with the terms of this Amendment, please sign
and date below.
Sincerely
/s/ Brian J. Andrew
-----------------------
Brian J. Andrew
I accept the terms of this amendment to my offer of employment
/s/ DRB Campbell
- -----------------------
Name DRB Campbell
18 Oct 99
- -----------------------
Date
Confidential Page 2
<PAGE> 1
February 27, 1997 Exhibit 10.15
Michael Clark
1315 Black Oak
Carrollton, TX 75007
Dear Mike
It is with pleasure that Milcom, Inc. for Triton Network Systems, Inc. extends
to you an offer of employment as the Vice President of Engineering. You will be
reporting to Brian Andrew and your work location will be in Orlando, Florida.
The following is designed to serve as a record of the essential terms of your
employment, which supersedes all prior discussions:
Commencement of employment: April 1, 1997
Remuneration: Your base salary will be $125,000 per annum payable semi-monthly
in arrears. With a 20% end of year bonus based on completion of
personal and corporate objectives.
Stock options: As a member of the Triton startup team, you will receive earned
equity in the form of stock options totaling 2% of total company
stock. Your options will vest based on the following formula:
- One third at start of employment
- One third after three years of continuous employment
- One third based on successful completion of agreed individual
objectives over three years.
Relocation: Triton will cover up to $30,000 worth of documented relocation
costs associated with your move to Orlando, Florida.
Vacation: Vacation is on a calendar year basis, and accrues on a monthly
basis. For the first three years of employment, the rate of
accrual shall be 10 hours per month (three weeks per year). After
three years of continuous employment with Triton, your vacation
entitlement will increase to 13.3 hours per month (four weeks per
year).
Benefits: Triton will provide the following paid benefits, at its sole
discretion:
Medical Insurance Disability Insurance
Life Insurance Dental Insurance
401(K) Plan Eligibility Tuition Reimbursement
<PAGE> 2
-2-
March 1, 1997
In the interim, Milcom, Inc. will cover the cost of your current
coverage within the COBRA program as offered by your current employer
upon termination with them.
Please sign and return the offer letter to me on or before 5:00 PM EST Friday,
March 7, 1997.
I am delighted that you are joining the Triton team and look forward to
assisting you in achieving your professional objectives. I believe that you
will enjoy working here and find it to be a professionally satisfying
experience. Please let me know if you have any questions about your employment
at Triton or if there is any other information or material I can provide for
you.
Sincerely,
/s/ BRIAN J. ANDREW
- -------------------
Brian J. Andrew
President & CEO Triton Network Systems, Inc.
/s/ ANDY BADOLATO
- ------------------
Andy Badolato
President, Milcom, Inc.
Accepted:
Signature: Michael A. Clark
-----------------
Name: Michael A. Clark
----------------------
Date: 3/1/97
----------------------
<PAGE> 1
Exhibit 10.15.1
July 20, 1999
Mr. Michael A. Clark
8514 Fulton Court
Oriando,FL 32835
Dear Mike:
In consideration of your further employment with the Company, we are
proposing the following Amendment to your Employment Offer letter dated
February 27, 1997.
SEVERANCE PACKAGE:
The Company will provide you With a severance package in the event you
are terminated without cause. Without cause shall mean for any reason other
than:
1. Illegal acts (other than minor traffic violations or
misdemeanors), including but not limited to theft or
embezzlement.
2. Violation of published written policies of the Company or
violation of any confidentiality or proprietary information
agreement with the Company.
3. Irresponsible unauthorized acts of a willful nature in the
performance of duties or repeated failure to follow the
reasonable directions of the Board of Directors or Officers,
of the Company.
The severance package will provide you with up to six (6) months bass
salary, twenty-five percent (25%) of your annual bonus, and benefit continuance
from the time of your involuntary termination for a six (6) month period. If
you are employed within six (6) months of your termination from the Company,
your severance payments Will stop at the time of your new employment. You will
continue to vest your stock options during your severance period which may be
up to six (6) months. If your employment is terminated without cause because
of, or within one (1) year after, a sale of the Company, you Will receive six
(6) months compensation (base salary and bonus), plus six (6) months benefit
continuance.
Confidential Page 1
<PAGE> 2
NON-DISPARAGEMENT
You agree that should your employment with the Company terminate for
any reason, you WILL not disparage the Company, which includes, but is not
limited to, making negative comments about the Company, its products, its
employees, Officers, or Board of Directors, or your employment with the
Company. In addition, should your employment with the Company terminate for any
reason, the Company agrees to not disparage you.
NON-SOLICITATION:
You agree that for six (6) months following the your employment with
the Company, whether the termination shall be voluntary or involuntary, with or
without cause, or for any other reason whatsoever, you shall not, directly or
indirectly or on behalf of yourself or any other person or entity: (a) attempt
to hire any other employee of the Company or otherwise encourage or attempt to
encourage any other employee of the Company to leave employment with the
Company; or (b) in any manner or at any time, solicit or encourage or discuss
with any person, firm, corporation, or any business entity who are Customer of
the Company and/or other employees of the Company to cease doing business with
the Company and/or other employees of the Company. In the event you breach any
term contained in this Section, you immediately waive any right or entitlement
to the Severance Benefits described in the Employment Severance Agreement and
will pay to the Company an amount equal to any portion of the Severance
Benefits paid to you prior to your breach, in addition to any damages the
Company may be able to recover.
If you are in agreement With the terms of this Amendment, please sign
and date below.
Sincerely,
/s/ Brian J. Andrew
----------------------------------------
Brian J. Andrew
I accept the terms of this amendment to my offer of employment.
/s/ Michael A. Clark
- -----------------------------------
Name: Michael A. Clark
8/2/99
- -----------------------------------
Date
Confidential Page 2
<PAGE> 1
EXHIBIT 10.16
TRITON NETWORK SYSTEMS, INC.
101 PHILIPPE PARKWAY, SUITE 308
SAFETY HARBOR, FL 34695
MARCH 20, 1997
Mr. Dan Guiliford
634 Tall Oaks Terrace
Longwood, Florida 32750
Dear Dan:
I am pleased to offer you the position of Vice President of Product Development
for Triton Network Systems, Inc., a Delaware corporation to be located in
Orlando, Florida. Triton Network Systems, Inc. is a new company which has been
formed to exploit certain commercial markets for wireless technology developed
for the United States military by the Electronics and Missiles division of
Lockheed Martin Corporation. Triton is currently in negotiation with Lockheed
for the purpose of licensing the necessary technology. The effective date of
your employment will be April 1, 1997.
In this position, you will report to the President of Triton Network Systems,
Inc.
Your compensation in this position will include the following:
o Base Salary of $10,416.67 per month, paid twice monthly in accordance
with Triton's standard payroll policies. The first and last payment by
the company will be adjusted, if necessary, to reflect a commencement
or termination date other than the first or last working day of a pay
period.
o An Incentive Bonus of $25,000 per annum, based on achievement of
performance objectives mutually agreed between yourself and the
President, on an annual basis.
In addition, you will be reimbursed for normal and reasonable expenses incurred
when you travel outside Orlando on company business, in accordance with the
Company's approved Travel Reimbursement Policy.
Subject to action by the Company's Board of Directors and compliance with
applicable state and federal securities laws, the Company will sell to you
shares of Common Stock (the "Shares"), subject to a Repurchase Option by the
Company to be defined in a restricted stock purchase agreement.
<PAGE> 2
Page 2, Dan Guiliford
March 20, 1997
In addition, the company will establish an Employee Benefits Program, including
Health Insurance, with coverage comparable to other companies in our industry
in Orlando. You will be entitled to participate in this program. Until this
plan is established, Triton will pay the cost of your current coverage within
the COBRA program as offered by your previous employer.
The company will provide you with three weeks of paid vacation leave per year
after completion of one year's service. In addition, you will be entitled to
company paid sick leave and personal leave up to a maximum of 10 days per year.
It is expected that you will devote your full business time, attentions and
energies to Triton Network Systems, Inc. and not engage in other employment.
You will be required to enter into an Non-Compete and Intellectual Property
Agreement with the Company covering Patents, Trade Secrets and other
intellectual property of the company.
Your employment with Triton is for no specific period and constitutes "at-will"
employment. As a result, you are free to terminate your employment at any time,
for any reason or for no reason. Similarly, the Company is free to terminate
your employment at any time, for any reason or for no reason. However, in the
event that Triton terminates your employment without "cause," or you become
permanently disabled as determined by the Board of Directors, you will be
entitled to severance pay in the form of continuation of your base salary for a
period of six months. Your stock options will not continue to vast after your
termination date. If you resign or are terminated with "cause," you will not be
entitled to any severance. "Cause" means gross negligence, habitual neglect of
duties, dishonesty, criminal acts, violation of any state or federal securities
laws or failure to abide by the lawful policies or instructions of the Board of
Directors.
This offer letter, the Non-Compete and Intellectual Property Agreement and the
restricted stock purchase agreement set forth in the terms of your employment
with the Company and supersede any and all prior understandings and agreements,
whether written or oral. This agreement can only be amended in writing signed
by you and an officer and director of the Company. Any waiver of a right under
this agreement must be in writing. This agreement will be governed by Florida
law.
<PAGE> 3
Page 3, Dan Guiliford
March 20, 1997
We look forward to you joining the Company. If the foregoing terms are
agreeable, please indicate your acceptance by signing the enclosed copy of this
letter in the space provided below and returning it to me, along with your
completed Non-Compete and Intellectual Property Agreement.
Sincerely yours,
TRITON NETWORK SYSTEMS, INC.
/s/ Robert D. Francis
- --------------------------------
Robert D. Francis
Chairman of the Board
ACCEPTED
/s/ Dan Guiliford
- --------------------------------
Dan Guiliford
Dated: 05/28/97
--------------------------
<PAGE> 1
Exhibit 10.17
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE HEREUNDER HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED UNLESS
REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS
UNLESS THE HOLDER OF SUCH WARRANT OR SHARES DELIVERS TO THE COMPANY AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY STATING THAT SUCH
PROPOSED TRANSFER WILL BE MADE PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.
COMMON STOCK PURCHASE WARRANT
Company: TRITON NETWORK SYSTEMS, INC., a Delaware corporation
("Company")
Number of Shares: Such number of shares of Common Stock as shall be equal to 4%
of $7,000,000 divided by 90% of the price per share of Common
Stock used in a firm underwritten initial public offering of
the Company's common stock. In the event the Company has not
completed a firm underwritten initial public offering on or
before the first anniversary hereof, the number of shares
shall be 56,000 shares.
Class of Stock: Common Stock
Exercise Price: 90% of the price per share of Common Stock used in a firm
underwritten initial public offering of the Company's common
stock. In the event the Company has not completed a firm
underwritten initial public offering on or before the first
anniversary hereof, the exercise price shall be equal to the
price per share of the securities sold in the Company's most
recent equity offering prior to the date of this Warrant,
which is $5.00 per share.
Issued as of: February 25, 2000
Expiration Date: As described in Section 1
FOR VALUE RECEIVED in the form of a Commitment Letter dated January 14,
2000 and revised January 20, 2000 from FINOVA Capital Corporation in favor of
the Company, the adequacy and receipt of which are hereby acknowledged, TRITON
NETWORK SYSTEMS, INC., a Delaware corporation, hereby certifies that FINOVA
Capital Corporation, a Delaware corporation, and its successors and assigns, are
entitled to purchase from the Company at any time and from, time to time on and
after the date hereof until 6:00 p.m. California local time on the Expiration
Date at an Exercise Price (as described in Section 1), fully paid and
nonassessable shares of Common Stock of the Company, on the terms and conditions
hereinafter set forth (the
1
<PAGE> 2
"Shares"). The number of such shares of Common, Stock and the Exercise Price are
subject to adjustment as provided in the Warrant.
1. Certain Definitions. As used in this Warrant, the following terms
have the following definitions:
"Common Stock" means the Company's Common Stock, $0.001 par value,
and includes any common stock of the Company of any class or classes resulting
from any reclassification or reclassifications thereof.
"Company" means TRITON NETWORK SYSTEMS, INC., a Delaware
corporation.
"Convertible Securities" means evidence of indebtedness, shares of
stock or other securities which are at any time directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.
"Current Market Price" of a share of Common Stock or of any other
security as of a relevant date means: (i) the Fair Value thereof as determined
in accordance with clause (ii) of the definition of Fair Value with respect to
Common Stock or any other security that is not listed on a national securities
exchange or traded on the over-the-counter market or quoted on NASDAQ, and (ii)
the closing price on such date (excluding any trades which are not bona fide
arm's length transactions) with respect to Common Stock or any other security
that is listed on a national securities exchange or traded on the
over-the-counter market or quoted on NASDAQ. The closing price for each day
shall be (i) the last sale price of shares of Common Stock or such other
security on such date or, if no such sale takes place on such date, the average
of the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which the
same are then listed or admitted to trading, or (ii) if no shares of Common
Stock or if no securities of the same class as such other security are then
listed or admitted to trading on any national securities exchange, the average
of the reported closing bid and asked prices thereof on such date in the
over-the-counter market as shown by NASDAQ or, if no shares of Common Stock or
if no securities of the same class as such other security are then quoted in
such system, as published by the National Quotation Bureau, Incorporated or any
similar successor organization, and in either case as reported by any member
firm of the New York Stock Exchange selected by the Warrantholders.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Period" means the period commencing on the date hereof and
ending at 6:00 p.m. California local time on the Expiration Date.
"Exercise Price" shall have the meaning set forth above.
"Expiration Date" means the date that is seven (7) years after the
date hereof.
"Fair Value" means: (i) with respect to a share of Common Stock or
any other security, the Current Market Price thereof, and (ii) with respect to
any other property, assets, business or entity, or if the Shares have not been
registered under the Securities Act, an amount
2
<PAGE> 3
determined in good faith by the Board of Directors of the Company.
"Indemnified Party" and "Indemnifying Party" have the meanings set
forth in Section 11(f)(iii).
"Registrable Stock" means: (i) all Warrant Shares which are issuable
to the Warrantholders pursuant to the Warrants, whether or not the Warrants have
in fact been exercised and whether or not such Warrant Shares have in fact been
issued, (ii) all Warrant shares acquired by the Warrantholders pursuant to the
Warrants, and (iii) any shares of Common Stock, whether or not such shares of
Common Stock have in fact been issued, and stocks or other securities of the
Company issued upon conversion of, in a stock split or reclassification of, or a
stock dividend or other distribution on, or in substitution or exchange for, or
otherwise in connection with, such Warrant Shares or in a merger or
consolidation involving the Company or its assets; provided, however, that the
foregoing securities shall not be considered Registrable Stock if they were
previously registered pursuant to Section 11 hereunder or if they are
transferable without registration pursuant to Rule 144(k) under the Securities
Act. For purposes of Section 11, a Warrantholder of record shall be treated as
the record holder of the related Warrant Shares and other securities issuable
pursuant to the Warrants.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Warrant(s)" means this Warrant and any warrants issued in exchange
or replacement of this Warrant or upon transfer hereof.
"Warrantholder(s) and "Holder" means FINOVA Capital Corporation, a
Delaware corporation, and its successors and assigns.
"Warrant Shares" means shares of Common Stock issuable to
Warrantholders pursuant to the Warrants.
1. Exercise of Warrant. This Warrant may be exercised, in whole or in
part, at any time and from time to time during the Exercise Period by written
notice to the Company (accompanied by physical surrender of this Warrant) and
upon payment to the Company of the Exercise Price (subject to adjustment as
provided herein) for the shares of Common Stock in respect of which the Warrant
is exercised.
2. Form of Payout of Exercise Price. Anything contained herein to the
contrary notwithstanding, at the option of the Warrantholders, the Exercise
Price may be paid in any one or a combination of the following forms: (a) by
wire transfer to the Company, (b) by a certified or cashier's check to the
Company, (c) by the cancellation of any indebtedness owed by the Company and/or
any subsidiaries of the Company to the Warrantholder, and/or (d) by the
surrender to the Company of that number of Warrant Shares having a Fair Value
equal to the Exercise Price in accordance with Section 4 below.
3. Cashless Exercise. In lieu of exercising this Warrant as specified
in Sections 2 and 3 above, the Warrantholders may from time to time at the
Warrantholders' option convert
3
<PAGE> 4
this Warrant, in whole or in part, into a number of shares of Common Stock of
the Company determined by dividing (A) the aggregate Fair Value of such shares
or other securities otherwise issuable upon exercise of this Warrant, minus the
aggregate Exercise Price of such shares by (B) the Fair Value of one such
share.
4. Certificates for Warrant Shares; New Warrant. The Company agrees
that the Warrant Shares shall be deemed to have been issued to the
Warrantholders as the record owners of such Warrant Shares as of the close of
business on the date on which payment for such Warrant Shares has been made (or
deemed to be made by cashless exercise) in accordance with the terms of this
Warrant. Certificates for the Warrant Shares shall be delivered to
Warrantholders within a reasonable time, not exceeding thirty (30) days, after
this Warrant his been exercised. A new Warrant representing the number of
shares, if any, with respect to which this Warrant remains exercisable also
shall be issued to the Warrantholders within such time so long as this Warrant
has been surrendered to the Company at the time of exercise.
5. Adjustment of Exercise Price. Number of Shares and Nature of
Securities Issuable Upon Exercise of Warrants.
(a) Exercise Price; Adjustment of Number of Shares. The Exercise
Price shall be subject to adjustment from time to time as, hereinafter provided.
Upon each adjustment of the Exercise Price, the Warrantholders shall thereafter
be entitled to purchase, at the Exercise Price resulting from such adjustment, a
number of shares determined by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
(b) Reorganization, Reclassification, Consolidation, Merger or Sale.
If any capital reorganization or reclassification of the capital stock of the
Company, or any or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive cash, stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provisions
shall be made whereby the Warrantholders shall thereafter have the right to
purchase and receive upon the basis and upon the terms and conditions specified
in this Warrant upon exercise of this Warrant and in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby, such cash, shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of Common Stock equal to the number of shares
of such Common Stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby, and in any such case appropriate
provision shall be made with respect to the rights and interests of the
Warrantholders to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Exercise Price and of the number
of shares purchasable and receivable upon the exercise of this Warrant) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock securities or assets thereafter deliverable upon the exercise hereof.
(c) Stock Splits and Reverse Splits. In case at any time the Company
shall subdivide its outstanding shares of Common Stock into a greater number of
shares, the Exercise
4
<PAGE> 5
Price in effect immediately prior to such subdivision shall be proportionately
reduced and the number of shares of Common Stock purchasable pursuant to this
Warrant immediately prior to such subdivision shall be proportionately
increased, and conversely, in case at any time the Company shall combine its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination shall be proportionately
increased and the number of shares of Common Stock purchasable upon the exercise
of this Warrant immediately prior to such combination shall be proportionately
reduced.
(d) Dissolution, Liquidation and Wind-Up. In case the Company shall,
at any time prior to the expiration of this Warrant, dissolve, liquidate or wind
up its affairs, the Warrantholders shall be entitled, upon the exercise of this
Warrant, to receive, in lieu of the shares of Common Stock of the Company which
such Warrantholders would have been entitled to receive, the same kind and
amount of assets as would have been issued, distributed or paid to such
Warrantholders upon any such dissolution, liquidation or winding up with respect
to such shares of Common Stock of the Company, had such Warrantholders been the
holders of record of the Warrant Shares receivable upon the exercise of this
Warrant on the record date for the determination of those persons entitled to
receive any such liquidating distribution. After any such dissolution,
liquidation or winding up which shall result in any cash distribution in excess
of the Exercise Price provided for by this Warrant, the Warrantholders may, at
each such Warrantholder's option, exercise the same without making payment of
the Exercise Price, and in such case the Company shall, upon the distribution to
said Warrantholders, consider that said Exercise Price has been paid in full to
it and in making settlement to said Warrantholders, shall deduct from the amount
payable to such Warrantholders an amount equal to such Exercise Price.
(e) Adjustment Certificate. In each case of an adjustment in the
number of shares of Common Stock or other stock, securities or property
receivable on the exercise of the Warrants, the Company shall compute such
adjustment in accordance with the terms of this Warrant and prepare and duly
execute and deliver to the Warrantholders a certificate setting forth such
adjustment and showing in detail the facts upon which such adjustment is based.
6. Special Agreements of the Company.
(a) Reservation of Shares. The Company covenants and agrees that all
Warrant Shares will, upon issuance, be validly issued, fully paid and
nonassessable and free from all preemptive rights of any stockholder, and from
all taxes, liens and charges with respect to the issue thereof. The Company
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved, a sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by this Warrant.
(b) Avoidance of Certain Actions. The Company will not, by amendment
of its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, issue or sale of securities or otherwise, avoid
or take any action which would have the effect of avoiding the observance or
performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in carrying out all of the
provisions of this Warrant and in taking all of such actions as may be necessary
or appropriate in order to protect the rights of the Warrantholders against
impairment of their rights hereunder.
5
<PAGE> 6
(c) Listing on Securities Exchanges; Registration. If, and so long
as, any class of the Company's Common Stock shall be listed on any national
securities exchange (as defined in the Exchange Act), the Company will, at its
expense, obtain and maintain the approval for listing upon official notice of
issuance of all Warrant Shares and maintain the listing of Warrant Shares after
their issuance; and the Company will so list on such national securities
exchange, and will maintain such listing of, any other securities that at any
time are issuable upon exercise of this Warrant if and at the time any
securities of the same class shall be listed on such national securities
exchange by the Company.
7. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon exercise hereof, such
fraction shall be rounded to the nearest whole share. A fraction of one-half
shall be rounded up to the next highest integer.
8. Notices of Stock Dividends, Subscriptions, Reclassifications,
Consolidations, Mergers, etc. If at any time: (i) the Company shall declare a
cash or stock dividend (or an increase in the then existing dividend rate), or
declare a dividend on Common Stock payable otherwise than in cash out of its net
earnings after taxes for the prior fiscal year, or (ii) the company shall
authorize the granting to the holders, of Common Stock of rights to subscribe
for or purchase any shares of capital stock of any class or of any other rights;
or (iii) there shall be any capital reorganization, or reclassification, or
redemption of the capital stock of the Company, or consolidation or merger of
the Company with, or sale of all or substantially all of its assets to, another
corporation or firm; or (iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company; or (v) the Company
proposes to effect a Public Offering, then the Company shall give to the
Warrantholders at the addresses of such Warrantholders as shown on the books of
the Company, at least forty-five (45) days prior to the applicable record date
hereinafter specified, a written notice summarizing such action or event and
stating the record date for any such dividend or rights (or, if a record date is
not to be selected, the date as of which the holders of Common Stock of record
entitled to such dividend or rights are to be determined), the date on which any
such reorganization, reclassification, consolidation, merger, sale of assets,
dissolution, liquidation or winding up or Public Offering is expected to become
effective, and the date as of which it is expected the holders of Common Stock
of record shall be entitled to effect any exchange of their shares of Common
Stock for cash (or cash equivalent), securities or other property deliverable
upon any such reorganization, reclassification, consolidation, merger, sale of
assets, dissolution, liquidation or winding up or Public Offering.
9. Registered Holder, Transfer of Warrants or Warrant Shares.
(a) Maintenance of Registration Books, Ownership of this Warrant.
The Company shall keep at its principal office a register in which the Company
shall provide for the registration, transfer and exchange of this Warrant. The
Company shall not at any time, except upon the dissolution, liquidation or
winding-up of the Company, close such register so as to result in preventing or
delaying the exercise or transfer of this Warrant.
(b) Exchange and Replacement. To the extent permissible under any
applicable securities laws, this Warrant is exchangeable upon surrender hereof
by the registered
6
<PAGE> 7
holder to the Company at its principal office for new Warrants of like tenor
and date representing in the aggregate the right to purchase the number of
shares purchasable hereunder, each of such new Warrants to represent the right
to purchase such number of shares as shall be designated by said registered
holder at the time of surrender. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the registered
holder hereof in person or by duly authorized attorney, and new Warrants shall
be made and delivered by the Company, of the same tenor and date as this Warrant
but registered in the name of the transferee(s), upon surrender of this Warrant,
duly endorsed, to said office of the Company. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and upon surrender and cancellation of this Warrant,
if mutilated, the Company will make, and deliver a new Warrant of like tenor, in
lieu of this Warrant, without requiring the posting of any bond or the giving of
any other security. This Warrant shall be promptly canceled by the Company upon
the surrender hereof in connection with any exchange, transfer or replacement.
The Company shall pay all expenses, taxes and other charges payable in
connection with the preparation, execution and delivery of Warrants pursuant to
this Section 10.
10. Registration. The holders of the Warrant Shares shall have
registration rights equivalent to those enjoyed by the holders of the Company's
Series C Preferred Stock in accordance with Section 2 of that certain Amended
and Restated Investors' Rights Agreement ("Investors' Rights Agreement"), dated
October ___, 1999, by and between the Company and the holders of its Preferred
Stock, except that Holder shall be required to approve any waiver or amendment
under Section 5 thereof affecting Holder's rights. The Company shall use
commercially reasonable efforts to amend the Investors' Rights Agreement to
provide therefor.
11. Representation and Warranties of the Company. The Company hereby
represents and warrants to and covenants with Warrantholder, and each holder of
Warrant Shares that:
(a) Organization and Capitalization of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. As of the date hereof, the authorized capital of the
Company consists of 98,705,000 shares of Common and Preferred Stock of which
51,247,676 shares of Common and Preferred Stock, all are issued and outstanding.
The Company has, and at all times during the Exercise Period will have, reserved
for issuance pursuant to the Warrants that number of shares of Common Stock that
are issuable pursuant to the Warrants. All the outstanding shares of Common
Stock have been validly issued without violation of any preemptive or similar
rights, are fully paid and nonassessable and have been issued in compliance with
all federal and applicable state securities laws.
(b) Authority. The Company has full corporate power and authority to
execute and deliver this Warrant, to issue the shares of Common Stock issuable
upon exercise of this Warrant, and to perform all of its obligations hereunder,
and the execution, delivery and performance hereof has been duly authorized by
all necessary corporate action on its part. This Warrant has been duly executed
on behalf of the Company and constitutes the legal, valid and binding obligation
of the Company enforceable in accordance with its terms.
(c) No Legal Bar. Neither the execution, delivery or performance of
this Warrant nor the issuance of the shares of Common Stock issuable upon
exercise of this Warrant
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<PAGE> 8
will (a) conflict with or result in a violation of the Certificate of
Incorporation or By-Laws of the Company, (b) conflict with or result in a
violation of any law, statute, regulation, order or decree applicable to the
Company or any affiliate, (c) require any consent or authorization or filing
with, or other act by or in respect of any governmental authority, or (d) result
in a material breach of, constitute a default under or constitute an event
creating rights of acceleration, termination or cancellation under any mortgage,
lease, contract, franchise, instrument or other agreement to which the Company
is a party or by which it is bound.
(d) Validity of Shares. When issued upon the exercise of this
Warrant as contemplated herein, the shares of Common Stock so issued will have
been validly issued and will be fully paid and nonassessable. On the date
hereof, the par value of the Common Stock is less than the Exercise Price per
share of Common Stock.
12. Representations and Warranties of the Warrantholder. This Warrant
has been issued by the Company in reliance upon the following representations
and covenants of Warrantholder.
(i) Investment Purpose. This Warrant and the Warrant Shares will
be acquired for investment for the Warrantholder's own account, and not as a
nominee or agent and not with a view to the sale or distribution of any part
thereof, and the Warrantholder has no present intention of selling, granting any
participation in or otherwise distributing the same. The Warrantholder further
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person, or to any third person, with respect to this Warrant.
(ii) Private Issue. The Warrantholder understands (i) that the
Warrant and the Warrant Shares issuable upon exercise of this Warrant are not
registered under the Securities Act, or qualified under applicable state
securities laws on the ground that the issuance of this Warrant will be exempt
from the registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(iii) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of the Warrant Shares issuable upon exercise of
this Warrant unless and until (i) it shall have notified the Company of the
proposed disposition, and (ii) if requested by the Company, it shall have
furnished the Company with an opinion of counsel satisfactory to the Company and
its counsel to the effect that (A) appropriate action necessary for compliance
with the Securities Act has been taken, or (B) an exemption from the
registration requirements of the Securities Act is available. Notwithstanding
the foregoing, the restrictions imposed upon the transferability of the Warrant
Shares shall terminate as to this Warrant and any particular share of Common
Stock when (1) such security shall have been effectively registered under the
Securities Act and sold by the Holder thereof in accordance with such
registration or (2) such security shall have been sold without registration in
compliance with Rule 144 under the Securities Act, or (3) a letter shall have
been issued to the Warrantholder at its request by the staff of the Securities
and Exchange Commission or a ruling shall have been issued to the Warrantholder
at its request by such Commission stating that no action shall be recommended by
the staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the Securities Act in accordance with the
conditions set forth in such letter or
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ruling and such letter or ruling specifies that no subsequent restrictions on
transfer are required. Whenever the restrictions imposed hereunder shall
terminate, as hereinabove provided, the Warrantholder or the Holder of a share
of Common Stock issued upon exercise of this Warrant as to which such
restrictions have terminated shall be entitled to receive from the Company,
without expense to such Holder, one or more new certificates for the Warrant or
for such shares of Common Stock not bearing any restrictive legend.
(iv) Rule 144. The Warrantholder acknowledges that it has
received and reviewed a copy of Rule 144 promulgated under the Securities Act,
which permits limited public resales of securities acquired in a non-public
offering, subject to the satisfaction of certain conditions.
(v) Sale of Warrant. The Warrantholder acknowledges that in the
event the applicable requirements of Rule 144 are not met, registration under
the Securities Act or compliance with another exemption from registration will
be required for any disposition of this Warrant or the Warrant Shares. The
Warrantholder understands that although Rule 144 is not exclusive, the
Securities and Exchange Commission has expressed its opinion that persons
proposing to sell restricted securities received in a private offering other
than in a registered offering or pursuant to Rule 144 will have a substantial
burden of proof in establishing that an exemption from registration is available
for such offers or sales and that such persons and the brokers who participate
in the transactions do so at their own risk. The Warrantholder also acknowledges
that it is not receiving any rights with respect to registration of this Warrant
or the Warrant Shares under the Securities Act.
(vi) Financial Risk. The Warrantholder has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment, and has the ability to bear the economic
risks of its investment.
(vii) Accredited Investor. The Warrantholder is an "accredited
investor" within the meaning of Rule 501 of Regulation D promulgated under
the Act.
(viii) No Public Market. The Warrantholder understands that no
public market now exists for any of the securities issued by the Company,
(ix) Receipt of Information. The Warrantholder has received and
reviewed this Warrant; it, its attorney and its accountant have had access to,
and an opportunity to review all documents and other materials requested of, the
Company; it and they have been given an opportunity to ask any and all questions
or, and receive answers from, the Company concerning the terms and conditions of
this Warrant and to evaluate the suitability of an investment in this Warrant;
and, in evaluating the suitability of an investment in this Warrant; it and they
have not relief upon any representations or other information (whether oral or
written) other than as set forth herein.
14. Lock-Up Period. Warrantholder hereby agrees that, if so requested
by the Company or any representative of the underwriters (the "Managing
Underwriter") in connection with any registration of the offering of any
securities of the Company under the Securities Act or a public offering that is
exempt from the Securities Act (e.g. Regulation A offering), Warrantholder shall
not sell or otherwise transfer any Warrant Shares or other securities of the
Company during the
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<PAGE> 10
180-day period (or such other period as may be requested in writing by the
Managing Underwriter and agreed to in writing by the Company) (the "Market
Standoff Period") following the effective date of a registration statement of
the Company filed under the Securities Act or the commencement date of such an
exempt public offering. Such restriction shall apply only to the first
registration statement or exempt public offering of the Company to become
effective under the Securities Act that includes securities to be sold on
behalf of the Company to the public in an underwritten public offering. The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such Market Standoff Period.
15. Miscellaneous Provisions.
(a) Governing Law. This Warrant shall be deemed to have been made
in the State of California and the validity of this Warrant, the construction,
interpretation, and enforcement thereof, and the rights of the parties thereto
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) Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been given when personally delivered
to the addressee or five (5) days after being mailed by certified mail addressed
to the address below stated of the party to which notice is given, or to such
changed address as such party may have fixed by notice:
To the Company:
TRITON NETWORK SYSTEMS, INC.
8529 Southpark Circle
Orlando, FL 32819
Attn: ___________________________
To the Warrantholders Or holder of Warrant Shares:
FINOVA Capital Corporation
10 Waterside Drive
Farmington, Connecticut 06032
Attn: Contracts Administration Dept.
provided, however, that any notice of change of address shall be effective upon
receipt.
(c) Successors and Assigns. This Warrant shall be binding upon and
inure to the benefit of the Company, the Warrantholders and the holders of
Warrant Shares and the successors, assigns and transferees of the Company, the
Warrantholders and the holders of Warrant Shares.
(d) Attorneys' Fees. The Company agrees to pay, on demand, all
attorneys' fees (include attorneys' fees incurred pursuant to proceedings
arising under the Bankruptcy Code) and all other costs and expenses which may be
incurred by the Warrantholders and the holders of
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Warrant Shares in connection with any amendment to this Warrant which may be
requested by the Company and/or in any action or proceeding in which the Company
is not the prevailing party, if such action or proceeding is in connection with,
arising out of, or consequential to the protection, assertion, or enforcement of
rights under this Warrant.
(e) Entire Agreement, Amendments and Waivers. This Warrant sets
forth the entire understanding of the parties with respect to the transactions
contemplated hereby. The failure of any party to seek redress for the violation
or to insist upon the strict performance of any term of this Warrant shall not
constitute a waiver of such term and such party shall be entitled to enforce
such term without regard to such forbearance. This Warrant may be amended, the
Company may take any action herein prohibited or omit to take action herein
required to be performed by it, and any breach of or compliance with any
covenant, agreement, warranty or representation may be waived, only if the
Company has obtained the written consent or written waiver of the majority in
interest of the Warrantholders, and then such consent or waiver shall be
effective only in the specific instance and for the specific purpose for which
given.
(f) Severability. If any term of this Warrant as applied to any
person or to any circumstance is prohibited, void, invalid or unenforceable in
any jurisdiction, such term shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or invalidity without in any way affecting any
other term of this Warrant or affecting the validity or enforceability of this
Warrant or of such provision in any other jurisdiction.
(g) Headings. The headings in this Warrant are inserted only for
convenience of reference and shall not be used in the construction of any of its
terms.
(h) Transferability. This Warrant may be assigned, transferred or
sold by Warrantholder only in compliance with the provisions of applicable
securities laws and with the consent of Company which shall not be unreasonably
withheld; provided, however, that no consent of the Company shall be required
for any assignment or transfer of this Warrant to any direct or indirect
subsidiary or parent of the Warrantholders or to any entity in which
Warrantholder has a 50% or greater ownership interest.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officers effective as of the date first set forth above.
TRITON NETWORK SYSTEMS, INC.
a Delaware corporation
By: /s/ Ken Vines
------------------------
Printed Name: Ken Vines
--------------
Title: CFO
---------------------
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<PAGE> 1
Exhibit 10.18
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE
HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE TRANSFERRED UNLESS REGISTERED UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS UNLESS THE HOLDER OF
SUCH WARRANT OR SHARES DELIVERS TO THE COMPANY AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY STATING THAT SUCH
PROPOSED TRANSFER WILL BE MADE PURSUANT TO AN EXEMPTION FROM
SUCH REGISTRATION REQUIREMENTS.
COMMON STOCK PURCHASE WARRANT
-----------------------------
Company: TRITON NETWORK SYSTEMS, INC., a Delaware corporation
("Company")
Number of Shares: Such number of shares of Common Stock as shall be
equal to 4% of $2,000,000 divided by 90% of the
price per share of Common Stock used in a firm
underwritten initial public offering of the
Company's common stock. In the event the Company has
not completed a firm underwritten initial public
offering on or before the first anniversary hereof,
the number of shares shall be 16,000 shares.
Class of Stock: Common Stock
Exercise Price: 90% of the price per share of Common Stock used in a
firm underwritten initial public offering of the
Company's common stock. In the event the Company has
not completed a firm underwritten initial public
offering on or before the first anniversary hereof,
the exercise price shall be equal to the price per
share of the securities sold in the Company's most
recent equity offering prior to the date of This
Warrant, which is $5.00 per share.
Issued as of: February 25, 2000
Expiration Date: As described in Section 1
FOR VALUE RECEIVED in the form of a Commitment Letter dated January
14, 2000 and revised January 20, 2000 from FINOVA Capital Corporation in favor
of the Company, the adequacy and receipt of which are hereby acknowledged,
TRITON NETWORK SYSTEMS, INC., a Delaware corporation, hereby certifies that
FINOVA Capital Corporation, a Delaware corporation, and its successors and
assigns, are entitled to purchase from the Company at any time and from time to
time on and after the date the $2,000,000 Credit Facility becomes available for
use until 6:00 p.m. California local time on the Expiration Date at an Exercise
Price (as described in Section 1), fully paid and nonassessable shares of Common
Stock of the Company, on the terms and conditions hereinafter set forth (the
"Shares"). The number of such shares of Common Stock and the Exercise Price are
subject to adjustment as provided in the Warrant.
<PAGE> 2
1. Certain Definitions. As used in this Warrant, the following
terms have the following definitions:
"Common Stock" means the Company's Common Stock, $0.001 par
value, and includes any common stock of the Company of any class or classes
resulting from any reclassification or reclassifications thereof.
"Company" means TRITON NETWORK SYSTEMS, INC., a Delaware
corporation.
"Convertible Securities" means evidence of indebtedness,
shares of stock or other securities which are at any time directly or
indirectly convertible into or exchangeable for Additional Shares of Common
Stock.
"Current Market Price" of a share of Common Stock or of any
other security as of a relevant date means: (i) the Fair Value thereof as
determined in accordance with clause (ii) of the definition of Fair Value with
respect to Common Stock or any other security that is not listed on a national
securities exchange or traded on the over-the-counter market or quoted on
NASDAQ, and (ii) the closing price on such date (excluding any trades which are
not bona fide arm's length transactions) with respect to Common Stock or any
other security that is listed on a national securities exchange or traded on
the over-the-counter market or quoted on NASDAQ. The closing price for each day
shall be (i) the last sale price of shares of Common Stock or such other
security on such date or, if no such sale takes place on such date, the average
of the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which the
same are then listed or admitted to trading, or (ii) if no shares of Common
Stock or if no securities of the same class as such other security are then
listed or admitted to trading on any national securities exchange, the average
of the reported closing bid and asked prices thereof on such date in the
over-the-counter market as shown by NASDAQ or, if no shares of Common Stock or
if no securities of the same class as such other security are then quoted in
such system, as published by the National Quotation Bureau, Incorporated or any
similar successor organization, and in either case as reported by any member
firm of the New York Stock Exchange selected by the Warrantholders.
"Exchange" means the Securities Exchange Act of 1934, as
amended.
"Exercise Period" means the period commencing on the date
hereof and ending at 6:00 p.m. California local time on the Expiration Date.
"Exercise Price" shall have the meaning set forth above.
"Expiration Date" means the date that is seven (7) years
after the date hereof.
"Fair Value" means: (i) with respect to a share of Common
Stock or any other security, the Current Market Price thereof, and (it) with
respect to any other property, assets, business or entity, or if the Shares
have not been registered under the Securities Act, an amount determined in good
faith by the Board of Directors of the Company.
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<PAGE> 3
"Indemnified Party" and "Indemnifying Party" have the
meanings set forth in Section 11(f)(iii).
"Registrable Stock" means: (i) all Warrant Shares which are
issuable to the warrantholders pursuant to the Warrants, whether or not the
Warrants have in fact been exercised and whether or not such Warrant Shares
have in fact been issued, (ii) an Warrant Shares acquired by the Warrantholders
pursuant to the Warrants, and (iii) any shares of Common Stock, whether or not
such shares of Common Stock have in fact been issued, and stocks or other
securities of the Company issued upon conversion of, in a stock split or
reclassification of, or a stock dividend or other distribution on, or in
substitution or exchange for, or otherwise in connection with, such Warrant
Shares or in a merger or consolidation involving the Company or its assets;
provided, however, that the foregoing securities shall not be considered
Registrable Stock if they were previously registered pursuant to Section 11
hereunder or if they are transferable without registration pursuant to Rule
144(k) under the Securities Act. For purposes of Section 11, a Warrantholder of
record shall be treated as the record holder of the related Warrant Shares and
other securities issuable pursuant to the Warrants.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Warrant(s)" means this Warrant and any warrants issued in
Exchange or replacement of this Warrant or upon transfer hereof.
"Warrantholder(s) and "Holder" means FINOVA Capital
Corporation, a Delaware corporation, and its successors and assigns.
"Warrant Shares" means shares of Common Stock issuable to
Warrantholders pursuant to the Warrants.
1. Exercise of Warrant. This Warrant may be exercised, in whole
or in part, at any time and from time to time during the Exercise Period by
written notice to the Company (accompanied by physical surrender of this
Warrant) and upon payment to the Company of the Exercise Price (subject to
adjustment as provided herein) for the shares of Common Stock in respect of
which the Warrant is exercised.
2. Form of Payout of Exercise Price. Anything contained herein
to the contrary notwithstanding, at the option of the Warrantholders, the
Exercise Price may be paid in any one or a combination of the following forms:
(a) by wire transfer to the Company, (b) by a certified or cashier's check to
the Company, (c) by the cancellation of any indebtedness owed by the Company
and/or any subsidiaries of the Company to the Warrantholder, and/or (d) by the
surrender to the Company of that number of Warrant Shares having a Fair Value
equal to the Exercise Price in accordance with Section 4 below.
3. Cashless Exercise. In lieu of exercising this Warrant as
specified in Sections 2 and 3 above, the Warrantholders may from time to time
at the Warrantholders' option convert this Warrant, in whole or in part, into a
number of shares of Common Stock of the Company determined by dividing (A) the
aggregate Fair Value of such shares or other securities otherwise
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<PAGE> 4
issuable upon exercise of this Warrant minus the aggregate Exercise Price of
such shares by (B) the Fair Value of one such share.
4. Certificates for Warrant Shares; New Warrant. The Company
agrees that the Warrant Shares shall be deemed to have been issued to the
Warrantholders as the record owners of such Warrant Shares as of the close of
business on the date on which payment for such Warrant Shams has been made (or
deemed to be made by cashless exercise) in accordance with the terms of this
Warrant. Certificates for the Warrant Shares shall be delivered to
Warrantholders within a reasonable time, not exceeding thirty (30) days, after
this Warrant has been exercised. A new Warrant representing the number of
shares, if any, with respect to which this Warrant remains exercisable also
shall be issued to the Warrantholders within such time so long as this Warrant
has been surrendered to the Company at the time of exercise.
5. Adjustment of Exercise Price; Number of Shares and Nature of
Securities Issuable Upon Exercise of Warrants.
(a) Exercise Price: Adjustment of Number of Shares. The
Exercise Price shall be subject to adjustment from time to time as hereinafter
provided. Upon each adjustment of the Exercise Price, the Warrantholders shall
thereafter be entitled to purchase, at the Exercise Price resulting from such
adjustment, a number of shares determined by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
(b) Reorganization, Reclassification, Consolidation, Merger
or Sale. If any capital reorganization or reclassification of the capital stock
of the Company, or any or any consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets to
another corporation shall be effected in such a way that holders of Common
Stock shall be entitled to receive cash, stock, securities or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the Warrantholders shall thereafter
have the right to purchase and receive upon the basis and upon the terms and
conditions specified in this Warrant upon exercise of this Warrant and in lieu
of the shares of the Common Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby,
such cash, shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares of Common
Stock equal to the number of shares of such Common Stock immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby, and in any such case appropriate provision shall be made
with respect to the rights and interests of the Warrantholders to the end that
the provisions hereof (including, without limitation, provisions for
adjustments of the Exercise Price and of the number of shares purchasable and
receivable upon the exercise of this Warrant) shall thereafter be applicable,
as nearly as may be, in relation to any shares of stock securities or assets
thereafter deliverable upon the exercise hereof.
(c) Stock Splits and Reverse Splits. In case at any time the
Company shall subdivide its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of Common
Stock purchasable pursuant to this Warrant immediately prior to
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<PAGE> 5
such subdivision shall be proportionately increased, and conversely, in case at
any time the Company shall combine its outstanding shares of Common Stock into
a smaller number of shares, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased and the number of shares of
Common Stock purchasable upon the exercise of this Warrant immediately prior
to such combination shall be proportionately reduced.
(d) Dissolution, Liquidation and Wind-Up. In case the Company
shall, at any time prior to the expiration of this Warrant, dissolve, liquidate
or wind up its affairs, the Warrantholders shall be entitled, upon the exercise
of this Warrant, to receive, in lieu of the shares of Common Stock of the
Company which such Warrantholders would have been entitled to receive, the same
kind and amount of assets as would have been issued, distributed or paid to
such Warrantholders upon any such dissolution, liquidation or winding up with
respect to such shares of Common Stock of the Company, had such Warrantholders
been the holders of record of the Warrant Shares receivable upon the exercise
of this Warrant on the record date for the determination of those persons
entitled to receive any such liquidating distribution. After any such
dissolution, liquidation or winding up which shall result in any cash
distribution in excess of the Exercise Price provided for by this Warrant, the
Warrantholders may, at each such Warrantholder's option, exercise the same
without making payment of the Exercise Price, and in such case the Company
shall, upon the distribution to said Warrantholders, consider that said
Exercise Price has been paid in full to it and in making settlement to said
Warrantholders, shall deduct from the amount payable to such Warrantholders an
amount equal to such Exercise Price.
(e) Adjustment Certificate. In each case of an adjustment in
the number of shares of Common Stock or other stock, securities or property
receivable on the exercise of the Warrants, the Company shall compute such
adjustment in accordance with the terms of this Warrant and prepare and duly
execute and deliver to the Warrantholders a certificate setting forth such
adjustment and showing in detail the facts upon which such adjustment is based.
6. Social Agreements of the Company.
(a) Reservation of Shares. The Company covenants and agrees
that all Warrant Shares will, upon issuance, be validly issued, fully paid and
nonassessable and free from all preemptive rights of any stockholder, and from
all taxes, liens and charges with respect to the issue thereof. The Company
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times
have authorized, and reserved, a sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by this Warrant.
(b) Avoidance of Certain Actions. The Company will not, by
amendment of its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, issue or sale of securities or
otherwise, avoid or take any action which would have the effect of avoiding the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in
carrying out all of the provisions of this Warrant and in taking all of such
actions as my be necessary or appropriate in order to protect the rights of the
Warrantholders against impairment of their rights hereunder.
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<PAGE> 6
(c) Listing on Securities Exchanges; Registration. If, and so
long as, any class of the Company's Common Stock shall be listed on any
national securities exchange (as defined in the Exchange Act), the Company
will, at its expense, obtain and maintain the approval for listing upon
official notice of issuance of all Warrant Shares and maintain the listing of
Warrant Shares after their issuance; and the Company will so list on such
national securities exchange, and will maintain such listing of, any other
securities that at any time are issuable upon exercise of this Warrant if and
at the time any securities of the same class shall be listed on such national
securities exchange by the Company.
7. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon exercise hereof, such
fraction shall be rounded to the nearest whole share. A fraction of one-half
shall be rounded up to the next highest integer.
8. Notices of Stock Dividends. Subscriptions, Reclassifications.
Consolidations, Mergers, etc., If at any time: (i) the Company shall declare a
cash or stock dividend (or an increase in the then existing dividend rate), or
declare a dividend on Common Stock payable otherwise than in cash out of its
net earnings after taxes for the prior fiscal year, or (ii) the Company shall
authorize the granting to the holders of Common Stock of rights to subscribe
for or purchase any shares of capital stock of class or of any other rights; or
(iii) there shall be any capital reorganization, or reclassification, or
redemption of the capital stock of the Company, or consolidation or merger of
the Company with, or sale of all or substantially all of its assets to, another
corporation or firm; or (iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company; or (v) the Company
proposes to effect a Public Offering, then the Company shall give to the
Warrantholders at the addresses of such Warrantholders as shown on the books of
the Company, at least forty-five (45) days prior to the applicable record date
hereinafter specified, a written notice summarizing such action or event and
stating the record date for any such dividend or rights (or, if a record date
is not to be selected, the date as of which the holders of Common Stock of
record entitled to such dividend or rights are to be determined), the date on
which any such reorganization, reclassification, consolidation, merger, sale of
assets, dissolution, liquidation or winding up or Public Offering is expected
to become effective, and the date as of which it is expected the holders of
Common Stock of record shall be entitled to effect any exchange of their shares
of Common Stock for cash (or cash equivalent), securities or other property
deliverable upon any such reorganization, reclassification, consolidation,
merger, sale of assets, dissolution, liquidation or winding up or Public
Offering.
9. Registered Holder, Transfer of Warrants or Warrant Shares.
(a) Maintenance of Registration Books; Ownership of this
Warrant. The Company shall keep at its principal office a register in which the
Company shall provide for the registration, transfer and exchange of this
Warrant. The Company shall not at any time, except upon the dissolution,
liquidation or winding-up of the Company, close such register so as to result
in preventing or delaying the exercise or transfer of this Warrant.
(b) Exchange and Replacement. To the extent permissible under
any applicable securities laws, this warrant is exchangeable upon surrender
hereof by the registered
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<PAGE> 7
holder to the Company at its principal office for new Warrants of like tenor
and date representing in the aggregate the right to purchase the number of
shares purchasable hereunder, each of such new Warrants to represent the right
to purchase such number of shares as shall be designated by said registered
holder at the time of surrender. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the
registered holder hereof in person or by duly authorized attorney, and new
Warrants shall be made and delivered by the Company, of the same tenor and date
as this Warrant but registered in the name of the transferee(s), upon surrender
of this Warrant, duly endorsed, to said office of the Company. Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and upon surrender and cancellation
of this Warrant, if mutilated, the Company will make and deliver a new Warrant
of like tenor, in lieu of this Warrant, without requiring the posting of any
bond or the giving of any other security. This Warrant shall be promptly
canceled by the Company upon the surrender hereof in connection with any
exchange, transfer or replacement. The Company shall pay all expenses, taxes
and other charges payable in connection with the preparation, execution and
delivery of Warrants pursuant to this Section 10.
10. Registration. The holders of the Warrant Shares shall have
registration rights equivalent to those enjoyed by the holders of the Company's
Series C Preferred Stock in accordance with Section 2 of that certain Amended
and Restated Investors' Rights Agreement ("Investors' Rights Agreement"), dated
October ___, 1999, by and between the Company and the holders of its Preferred
Stock, except that Holder shall be required to approve any waiver or amendment
under Section 5 thereof affecting Holder's rights. The Company shall use
commercially reasonable efforts to amend the Investors' Rights Agreement to
provide therefor.
11. Representation and Warranties of the Company. The Company
hereby represents and warrants to and covenants with Warrantholder, and each
holder of Warrant Shares that:
(a) Organization and Capitalization of the Company. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. As of the date hereof, the authorized
capital of the Company consists of 98,705,000 shares of Common and Preferred
Stock of which 51,247,676 shares of Common and Preferred Stock, all are issued
and outstanding. The Company has, and at all times during the Exercise Period
will have, reserved for issuance pursuant to the Warrants that number of shares
of Common Stock that are issuable pursuant to the Warrants. All the
outstanding shares of Common Stock have been validly issued without violation
of any preemptive or similar rights, are fully paid and nonassessable and have
been issued in compliance with all federal and applicable state securities
laws.
(b) Authority. The Company has full corporate power and
authority to execute and deliver this Warrant, to issue the shares of Common
Stock issuable upon exercise of this Warrant, and to perform all of its
obligations hereunder, and the execution, delivery and performance hereof has
been duly authorized by all necessary corporate action on its part. This
Warrant has been duly executed on behalf of the Company and constitutes the
legal, valid and binding obligation of the Company enforceable in accordance
with its terms.
(c) No Legal Bar. Neither the execution, delivery or
performance of this Warrant nor the issuance of the shares of Common Stock
issuable upon exercise of this Warrant
7
<PAGE> 8
will (a) conflict with or result in a violation of the Certificate of
Incorporation or By-Laws of the Company, (b) conflict with or result in a
violation of any law, statute, regulation, order or decree applicable to the
Company or any affiliate, (c) require any consent or authorization or filing
with, or other act by or in respect of any governmental authority, or (d)
result in a material breach of, constitute a default under or constitute an
event creating rights of acceleration, termination or cancellation under any
mortgage, lease, contract, franchise, instrument or other agreement to which
the Company is a party or by which it is bound.
(d) Validity of Shares. When issued upon the exercise of this
Warrant as contemplated herein, the shares of Common Stock so issued will have
been validly issued and will be fully paid and nonassessable. On the date
hereof, the par value of the Common Stock is less than the Exercise Price per
share of Common Stock.
12. Representations and Warranties of the Warrantholder. This
Warrant has been issued by the Company in reliance upon the following
representations and covenants of Warrantholder.
(i) Investment Purpose. This Warrant and the Warrant
Shares will be acquired for investment for the Warrantholder's own account, and
not as a nominee or agent and not with a view to the sale or distribution of
any part thereof, and the Warrantholder has no present intention of selling,
granting any participation in or otherwise distributing the same. The
Warrantholder further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or
grant participations to such person, or to any third person, with respect to
this Warrant.
(ii) Private Issue. The Warrantholder understands (i)
that the Warrant and the Warrant Shares issuable upon exercise of this Warrant
are not registered under the Securities Act, or qualified under applicable
state securities laws on the ground that the issuance of this Warrant will be
exempt from the registration and qualifications requirements thereof, and (ii)
that the Company's reliance on such exemption is predicated on the
representations set forth in this Section 10.
(iii) Disposition of Warrantholder's Rights. In no event
will the Warrantholder make a disposition of the Warrant Shares issuable upon
exercise of this Warrant unless and until (i) it shall have notified the
Company of the proposed disposition, and (ii) if requested by the Company, it
shall have furnished the Company with an opinion of counsel satisfactory to the
Company and its counsel to the effect that (A) appropriate action necessary for
compliance with the Securities Act has been taken, or (B) an exemption from the
registration requirements of the Securities Act is available. Notwithstanding
the foregoing, the restrictions imposed upon the transferability of the Warrant
Shares shall terminate as to this Warrant and any particular share of Common
Stock when (1) such security shall have been effectively registered under the
Securities Act and sold by the Holder thereof in accordance with such
registration or (2) such security shall have been sold without registration in
compliance with Rule 144 under the Securities Act, or (3) a letter shall have
been issued to the Warrantholder at its request by the staff of the Securities
and Exchange Commission or a ruling shall have been issued to the Warrantholder
at its request by such Commission stating that no action shall be recommended
by the staff or taken by such Commission, as the case may be, if such security
is transferred without registration under the Securities Act in accordance with
the conditions set forth in such letter or
8
<PAGE> 9
ruling and such letter or ruling specifies that no subsequent restrictions on
transfer are required. Whenever the restrictions imposed hereunder shall
terminate, as hereinabove provided, the Warrantholder or the Holder of a share
of Common Stock issued upon exercise of this Warrant as to which such
restrictions have terminated shall be entitled to receive from the Company,
without expense to such Holder, one or more new certificates for the Warrant or
for such shares of Common Stock not bearing any restrictive legend.
(iv) Rule 144. The Warrantholder acknowledges that it has
received and reviewed a copy of Rule 144 promulgated under the Securities Act,
which permits limited public resales of securities acquired in a non-public
offering, subject to the satisfaction of certain conditions.
(v) Sale of Warrant. The Warrantholder acknowledges that
in the event the applicable requirements of Rule 144 are not met, registration
under the Securities Act or compliance with another exemption from registration
will be required for any disposition of this Warrant or the Warrant Shares. The
Warrantholder understands that although Rule 144 is not exclusive, the
Securities and Exchange Commission has expressed its opinion that persons
proposing to sell restricted securities received in a private offering other
than in a registered offering or pursuant to Rule 144 will have a substantial
burden of proof in establishing that an exemption from registration is
available for such offers or sales and for such persons and the brokers who
participate in the transaction do so at their own risk. The Warrantholder also
acknowledges that it is not receiving any rights with respect to registration of
this Warrant or the Warrant Shares under the Securities Act.
(vi) Financial Risk. The Warrantholder has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of its investment, and has the ability to bear the
economic risks of its investment.
(vii) Accredited Investor. The Warrantholder is an
"accredited investor" within the meaning of Rule 501 of Regulation D
promulgated under the Act.
(viii) No Public Market. The Warrantholder understands that
no public market now exists for any of the securities issued by the Company.
(ix) Receipt of Information. The Warrantholder has
received and reviewed this Warrant; it, its attorney and its accountant have
had access to, and an opportunity to review all documents and other materials
requested of, the Company; it and they have been given an opportunity to ask
any and all questions or, and receive answers from, the Company concerning the
terms and conditions of this Warrant and to evaluate the suitability of an
investment in this Warrant; and, in evaluating the suitability of an investment
in this Warrant; it and they have not relief upon any representations or other
information (whether oral or written) other than as set forth herein.
14. Lock-Up-Period. Warrantholder hereby agrees that, if so
requested by the Company or any representative of the underwriters (the
"Managing Underwriter") in connection with any registration of the offering of
any securities of the Company under the Securities Act or a public offering
that is exempt from the Securities Act (e.g. Regulation A offering),
Warrantholder shall not sell or otherwise transfer any Warrant Shares or other
securities of the Company during the
9
<PAGE> 10
180-day period (or such other period as may be requested in writing by the
Managing Underwriter and agreed to in writing by the Company) (the "Market
Standoff Period") following the effective date of a registration statement of
the Company filed under the Securities Act or the commencement date of such an
exempt public offering. Such restriction shall apply only to the first
registration statement or exempt public offering of the Company to become
effective under the Securities Act that includes securities to be sold on
behalf of the Company to the public in an underwritten public offering. The
Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such Market Standoff
Period.
15. Miscellaneous Provisions.
(a) Governing Law. This Warrant shall be deemed to have been
made in the State of California and the validity of this Warrant, the
construction, interpretation, and enforcement thereof, and the rights of
the parties thereto 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) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been given when personally
delivered to the addressee or five (5) days after being mailed by certified
mail addressed to the address below stated of the party to which notice is
given, or to such changed address as such party may have fixed by notice:
To the Company:
TRITON NETWORK SYSTEMS, INC.
8529 Southpark Circle
Orlando, FL 32819
Attn:
--------------------------
To the Warrantholders
Or holder of Warrant Shares:
FINOVA Capital Corporation
10 Waterside Drive
Farmington, Connecticut 06032
Attn: Contracts Administration Dept.
provided, however, that any notice of change of address shall be effective upon
receipt.
(c) Successors and Assigns. This Warrant shall be binding
upon and inure to the benefit of the Company, the Warrantholders and the
holders of Warrant Shares and the successors, assigns and transferees of the
Company, the Warrantholders and the holders of Warrant Shares.
(d) Attorneys' Fees. The Company agrees to pay, on demand,
all attorneys' fees (include attorneys' fees incurred pursuant to proceedings
arising under the Bankruptcy Code) and all other costs and expenses which may
be incurred by the Warrantholders and the holders of
10
<PAGE> 11
Warrant Shares in connection with any amendment to this Warrant which may be
requested by the Company and/or in any action or proceeding in which the
Company is not the prevailing party, if such action or proceeding is in
connection with, arising out of, or consequential to the protection, assertion,
or enforcement of rights under this Warrant.
(e) Entire Agreement; Amendments and Waivers. This Warrant
sets forth the entire understanding of the parties with respect to the
transactions contemplated hereby. The failure of any party to seek redress for
the violation or to insist upon the strict performance of any term of this
Warrant shall not constitute a waiver of such term and such party shall be
entitled to enforce such term without regard to such forbearance. This Warrant
may be amended, the Company may take any action herein prohibited or omit to
take action herein required to be performed by it, and any breach of or
compliance with any covenant, agreement, warranty or representation may be
waived, only if the, Company has obtained the written consent or written waiver
of the majority in interest of the Warrantholders, and then such consent or
waiver shall be effective only in the specific instance and for the specific
purpose for which given.
(f) Severability. If any term of this Warrant as applied to
any person or to any circumstance is prohibited, void, invalid or unenforceable
in any jurisdiction, such term shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or invalidity without in any way affecting
any other term of this Warrant, or affecting the validity or enforceability of
this Warrant or of such provision in any other jurisdiction.
(g) Headings. The headings in this Warrant are inserted only
for convenience of reference and shall not be used in the construction of any
of its terms.
(h) Transferability. This Warrant may be assigned,
transferred or sold by Warrantholder only in compliance with the provisions of
applicable securities laws and with the consent of Company which shall not be
unreasonably withheld; provided, however, that no consent of the Company shall
be required for any assignment or transfer of this Warrant to any direct or
indirect subsidiary or parent of the Warrantholders or to any entity in which
Warrantholder has a 50% or greater ownership interest.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officers effective as of the date first set forth above.
TRITON NETWORK SYSTEMS, INC.
a Delaware corporation
By: /s/ Ken Vines
-------------------------------------
Printed Name: Ken Vines
---------------------------
Title: CFO
----------------------------------
<PAGE> 1
Exhibit 21.1
List of Subsidiaries of the Registrant
TNS Finance Company, Inc.
<PAGE> 1
Exhibit 23.1
Consent of Independent Certified Public Accountants
We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our report dated
February 11, 2000 (except Note 10, as to which the date is February 29, 2000),
in the Registration Statement (Form S-1 No. 333-00000) and related Prospectus of
Triton Network Systems, Inc. for the registration of 000,000 shares of its
common stock.
/s/ Ernst & Young LLP
Orlando, Florida
February 29, 2000
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