<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 22, 1999
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
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NETRO CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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CALIFORNIA 3663 77-0395029
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
3860 N. FIRST STREET
SAN JOSE, CA 95134
(408) 216-1500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
GIDEON BEN-EFRAIM
PRESIDENT AND CHIEF EXECUTIVE OFFICER
NETRO CORPORATION
3860 N. FIRST STREET
SAN JOSE, CA 95134
(408) 216-1500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
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TAE HEA NAHM LAIRD H. SIMONS III
LAURA A. GORDON EDWARD M. URSCHEL
SANJAY K. KHARE WILLIAM L. HUGHES
J.D. FAY FENWICK & WEST LLP
GENE YOON TWO PALO ALTO SQUARE
VENTURE LAW GROUP PALO ALTO, CA 94306
A PROFESSIONAL CORPORATION (650) 494-0600
2800 SAND HILL ROAD
MENLO PARK, CA 94025
(650) 854-4488
</TABLE>
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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, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] -------------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] -------------------
If 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,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF SECURITIES PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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Common Stock........................ $57,500,000 $15,985.00
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(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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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 IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED , 1999
PROSPECTUS
SHARES
[NETRO LOGO]
COMMON STOCK
----------------------
This is Netro Corporation's initial public offering of common stock.
We expect the public offering price to be between $ and $ per
share. Currently, no public market exists for the shares. After pricing of this
offering, we expect that the common stock will trade on the Nasdaq National
Market under the symbol "NTRO."
INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
----------------------
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PER SHARE TOTAL
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Public offering price................................ $ $
Underwriting discount................................ $ $
Proceeds, before expenses, to Netro Corporation...... $ $
</TABLE>
The underwriters may also purchase up to an additional
shares at the public offering price, less the underwriting discount, within 30
days from the date of this prospectus to cover over-allotments.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The shares of common stock will be ready for delivery in New York, New
York on or about , 1999.
----------------------
MERRILL LYNCH & CO.
BANCBOSTON ROBERTSON STEPHENS
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER
INCORPORATED
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The date of this prospectus is , 1999.
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[INSIDE FRONT COVER]
[COLOR ARTWORK]
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TABLE OF CONTENTS
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PAGE
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Prospectus Summary.......................................... 1
Risk Factors................................................ 4
Forward-Looking Statements.................................. 16
Trademarks.................................................. 16
Use of Proceeds............................................. 17
Dividend Policy............................................. 17
Capitalization.............................................. 18
Dilution.................................................... 19
Selected Consolidated Financial Data........................ 20
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 21
Business.................................................... 30
Management.................................................. 42
Certain Transactions........................................ 52
Principal Shareholders...................................... 54
Description of Capital Stock................................ 56
Shares Eligible for Future Sale............................. 58
Underwriting................................................ 60
Legal Matters............................................... 63
Experts..................................................... 63
Where You Can Find More Information......................... 63
Index to Consolidated Financial Statements.................. F-1
</TABLE>
INFORMATION IN PROSPECTUS
Unless specifically stated, the information in this prospectus has been
adjusted to reflect the automatic conversion of all outstanding shares of our
preferred stock into shares of common stock, but does not take into account the
possible sale of additional shares of common stock to the underwriters to cover
over-allotments.
You should rely only on the information contained in this prospectus. We
and the underwriters have not authorized any other person to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely on it. Information contained on our Web site is
not part of this prospectus. We and the underwriters are not making an offer to
sell these securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in this prospectus
is accurate as of the date on the front cover of this prospectus only. Our
business, financial condition, results of operations and prospects may have
changed since that date.
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PROSPECTUS SUMMARY
This summary is not complete and does not contain all the information that
may be important to you. You should read the entire prospectus carefully,
including the financial data and related notes, before making an investment
decision.
NETRO CORPORATION
We are a leading provider of intelligent broadband wireless access systems
to competitive communications service providers worldwide. Our AirStar system
allows service providers to rapidly and cost effectively offer integrated voice
and high-speed packet data services to their business subscribers. We have
engineered AirStar to support broad service rollouts and to operate at a number
of different licensed frequencies worldwide. AirStar derives its
price-performance benefits from dynamic bandwidth allocation and an intelligent
point-to-multipoint architecture. We believe that AirStar is one of the first
commercially available broadband wireless access systems providing integrated
voice and high-speed data services using a point-to-multipoint architecture.
We began shipping the beta AirStar system to service providers in the
third quarter of 1998. The AirStar system is currently deployed in trials or
initial commercial deployments in 17 service providers and enterprises
worldwide. Most of these service providers are served through our strategic
relationships with Lucent and Siemens/Italtel.
In recent years, the volume of high-speed data traffic across
communications networks worldwide has grown dramatically as the public Internet
and private corporate intranets have become essential for communications and
e-commerce. This traffic growth has created demand for cost-effective, broadband
network access, as business users increasingly rely on high-bandwidth network
applications and content. Increased deregulation has enabled a number of
competitive service providers to provide local network access that has
historically been offered exclusively by the incumbent provider in a given
geographical region. There are a number of alternatives to deliver broadband
access through existing or new wireline infrastructures, but technical,
performance, cost or availability issues often limit the ability of these
alternatives to satisfy the access needs of service providers and businesses
worldwide. Broadband wireless offers competitive service providers the ability
to rapidly provide service to large numbers of businesses without the
constraints of a legacy wireline infrastructure.
Competitive service providers deploying broadband wireless networks today
must differentiate their services to a wide base of business users and compete
effectively with services offered through fiber, leased lines, DSL and cable
modems. Our system is designed to address these needs and deliver the following
benefits to service providers:
Service Integration and Bandwidth on Demand. Service providers using
AirStar's intelligent wireless transport can support both voice and high-speed
packet data services on the same system, enabling them to increase revenue from
their licensed spectrum. AirStar allows service providers to offer symmetrical
broadband services, with on-demand burst rates up to 8 Mbps.
Cost-Effective Deployment and Operation. AirStar allows a competitive
service provider to compete effectively in the broadband access market. AirStar
is designed to provide for low overall system costs and enable success-based
capital deployment by directly linking network buildout expenditures to
subscriber growth. Additionally, AirStar's statistical multiplexing allows a
service provider to optimize spectrum use and the deployment of equipment by
expanding effective transmission capacity.
Quality of Service and Reliability. Service providers using AirStar can
deploy voice and high-speed packet data services at different price points to
different market segments with the option for guaranteed quality of service
levels and up to 99.999% availability. These capabilities allow a service
provider to match and guarantee delivered bandwidth to a particular business'
requirements and budget.
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Rapid Time to Market. Service providers using AirStar can achieve rapid
time to market for integrated voice and high-speed data services through
AirStar's efficient installation, end-to-end network management integration and
intelligent wireless transport. By installing a single AirStar base station, the
service provider can attain coverage of many potential subscribers. For example,
a typical cell at 10 GHz or 26 GHz can cover ranges from 110 to 275 square miles
or 5 to 15 square miles, respectively, depending on local conditions, and has a
transmission capacity equivalent to approximately 400 to 450 T1 lines, or an
aggregate capacity of over 600 Mbps.
Our objective is to be the leading supplier of broadband wireless access
systems used by competitive service providers at multiple licensed frequencies
worldwide. We intend to capitalize on early design wins with key service
providers to increase sales as these service providers deploy broadband services
more widely. Furthermore, as this occurs, we intend to utilize reference sales
and new product offerings to drive sales in new markets. We intend to leverage
our architecture to offer new features that will provide competitive advantages
to service providers. We are currently developing new products at new
frequencies to meet the needs of service providers worldwide. Additionally, we
intend to build upon the success that we have achieved through our strategic
relationships with Lucent and Siemens/Italtel to meet the needs of service
providers seeking to deploy large-scale networks and to expand our customer
base.
Netro was incorporated in California in November 1994. Our principal
executive offices are located at 3860 N. First Street, San Jose, California
95134, and our telephone number is (408) 216-1500.
THE OFFERING
Common stock offered................ shares.
Common stock to be outstanding after
this offering....................... shares. The number of
shares that will be outstanding after
the offering is based on the actual
number outstanding as of June 30, 1999.
It includes options to purchase
shares of common stock outstanding as
of June 30, 1999 at a weighted average
exercise price of $ per share, and
shares of preferred stock issuable upon
exercise of outstanding warrants at a
weighted average exercise price of
$ per share that will convert into
the same number of shares of common
stock upon completion of this offering.
For more information regarding our
equity benefit plans, see
"Management -- Stock Plans" and note 9
of notes to consolidated financial
statements.
Use of proceeds..................... We intend to use the offering proceeds
for general corporate purposes,
including research and development,
expansion of our sales and marketing
organizations and working capital.
Risk factors........................ See "Risk Factors" and the other
information included in this prospectus
for a discussion of factors you should
carefully consider before deciding to
invest in shares of our common stock.
Proposed Nasdaq National Market
symbol.............................. NTRO
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SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data below should be read together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and the related notes
included elsewhere in this prospectus. The information as of March 31, 1999 and
for the three months ended March 31, 1998 and 1999 is derived from unaudited
financial statements included elsewhere in this prospectus.
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PERIOD FROM
NOVEMBER 14, THREE MONTHS
1994 ENDED
(INCEPTION) TO YEAR ENDED DECEMBER 31, MARCH 31,
DECEMBER 31, ------------------------------ -----------------
1995 1996 1997 1998 1998 1999
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(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues.......................... $ -- $ 731 $ 5,601 $ 5,438 $ 996 $ 2,142
Gross profit (loss)............... -- 112 (2,672) (4,202) (314) 493
Loss from operations.............. (2,262) (12,816) (25,237) (29,132) (6,535) (6,983)
Net loss.......................... (2,069) (12,173) (24,534) (28,828) (6,317) (7,022)
Basic and diluted net loss per
share........................... $(10.61) $ (4.66) $ (5.11) $ (4.07) $ (1.05) $ (0.86)
Shares used to compute basic and
diluted net loss per share...... 195 2,610 4,798 7,087 6,039 8,205
Pro forma basic and diluted net
loss per share.................. $ (0.84) $ (0.19)
Shares used to compute pro forma
basic and diluted net loss per
share........................... 34,391 37,266
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AS OF MARCH 31, 1999
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ACTUAL AS ADJUSTED
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(IN THOUSANDS)
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CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $22,848 $
Working capital............................................. 18,015
Total assets................................................ 34,762
Long-term debt and capital leases, net of current portion... 4,763
Total shareholders' equity.................................. 18,881
</TABLE>
For an explanation of the determination of the number of shares used to
compute basic and diluted net loss per share and pro forma basic and diluted net
loss per share, see note 2 of notes to consolidated financial statements.
The consolidated balance sheet data as of March 31, 1999, as adjusted,
reflects our sale of shares of common stock offered by this prospectus at
an assumed initial public offering price of $ per share, after deducting the
estimated underwriting discount and offering expenses that we will pay. See "Use
of Proceeds" and "Capitalization."
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RISK FACTORS
Before investing in our common stock, you should be aware that there are
various risks, including those described below. As a Netro shareholder, you will
be subject to risks inherent in our business. The value of your investment may
increase or decline and could result in a loss. You should carefully consider
the following factors as well as other information contained in this prospectus
before deciding to invest in shares of our common stock.
WE HAVE A LIMITED OPERATING HISTORY AND OUR BUSINESS MODEL IS UNPROVEN AND MAY
NOT SUCCEED
We have a very limited operating history. We were incorporated in November
1994 and have generated only limited revenues to date, most of which have come
from sales of a predecessor point-to-point product, AirMAN, and customer trials
of AirStar, our current point-to-multipoint product. In addition, our business
model is evolving and relies on the success of competitive service providers and
the cost competitiveness of broadband wireless access solutions compared to
wireline solutions. Due to our limited operating history, it is difficult for us
to predict future results of operations, and you should not expect future
revenue growth to be comparable to our recent revenue growth. In addition, we
believe that comparing our operating results for different periods is not
meaningful, and that therefore, you should not rely on the results for any
period as an indication of our future performance. Investors in our common stock
must consider our business and prospects in light of the risks typically
encountered by companies in their early stages of development, particularly
those in rapidly evolving markets such as the communications equipment industry
and the emerging communication services industry. Some of these risks, in
addition to those risks discussed elsewhere in this "Risk Factors" section,
include:
- a history of losses and potential for future losses;
- significant fluctuations in quarterly operating results;
- the intensely competitive market for telecommunications equipment;
- the challenges encountered in expanding our sales organization;
- the risks relating to the timely introduction of new products and
product enhancements; and
- the risks associated with the expansion of our field support
infrastructure.
WE HAVE A HISTORY OF LOSSES, EXPECT FUTURE LOSSES AND MAY NEVER ACHIEVE OR
SUSTAIN PROFITABILITY
As of March 31, 1999, we had an accumulated deficit of $74.6 million, and
we expect to continue to incur net losses. We anticipate continuing to incur
significant sales and marketing, research and development and general and
administrative expenses and, as a result, we will need to generate significantly
higher revenues to achieve and sustain profitability. We incurred net losses of
approximately $12.2 million, $24.5 million, $28.8 million and $7.0 million in
1996, 1997 and 1998 and the three months ended March 31, 1999. Our financial
results to date are largely based on sales of AirMAN and customer trials of
AirStar. Although our AirStar revenues have grown in recent quarters, our past
results should not be relied on as indications of future performance. We cannot
be certain that we will realize sufficient revenues to achieve and sustain
profitability.
OUR OPERATING RESULTS ARE SUBJECT TO MANY FACTORS, SOME OF WHICH ARE OUTSIDE OF
OUR CONTROL, THAT COULD CAUSE OUR QUARTERLY OPERATING RESULTS TO FLUCTUATE AND
OUR STOCK PRICE TO BE VOLATILE
Our quarterly and annual operating results have fluctuated in the past and
are likely to fluctuate significantly in the future due to a variety of factors,
some of which are outside of our control. Our operating results to date are
largely based on sales of AirMAN and customer trials of AirStar. It is likely
that in some future quarter our operating results may fall below the
expectations of securities analysts and investors. In this event, the trading
price of our common stock could significantly decline.
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Some of the factors that could affect our quarterly or annual operating
results include:
- our ability to attain and maintain production volumes and quality
levels for our products;
- our ability to obtain sufficient supplies of sole source or long
lead-time components for our products;
- our ability to achieve cost reductions;
- the size, timing and frequency of network buildouts, which are
typically large and infrequent;
- the timing and amount of, or cancellation or rescheduling of, orders
for our products, particularly large orders from our key distributors
and system integrators;
- our ability to develop, introduce, ship and support new products and
product features and to manage product transitions; and
- a decrease in the average selling prices of our products.
Service providers and system integrators may delay delivery schedules or
cancel their orders without notice. Due to these and other factors, quarterly
revenues, expenses and results of operations could vary significantly in the
future, and you should not rely on period-to-period comparisons as indications
of future performance.
WE HAVE NOT MANUFACTURED OUR PRODUCTS IN SUBSTANTIAL VOLUMES. IF WE ARE UNABLE
TO DO SO IN A COST-EFFICIENT WAY, OUR MANUFACTURING COSTS WILL BE HIGHER THAN
EXPECTED, WHICH WOULD ADVERSELY AFFECT OUR BUSINESS
We have not manufactured our products in large volumes. We manufacture
only small quantities of our products at our own facilities, and we have only
recently begun limited quantity manufacturing runs with two contract
manufacturers. If we or our manufacturers are unable to develop processes by
which we can manufacture substantial volumes of our products at the required
quality and expected costs in relatively short periods of time, our financial
results will suffer. Manufacturing our products, particularly the radio elements
of our products, is complex and difficult. One of our contract manufacturers
does not have a history of producing these elements on a large scale. We have no
substantial experience on which to base forecasts of customer orders, and,
consequently, we may be unable to meet demand or we may build an excess of
inventory with our contract manufacturers. Furthermore, if we do not achieve
economies of scale in manufacturing, our gross margins, and hence our operating
results, will not meet expectations. In addition, many of our contracts with
distributors and system integrators provide for financial penalties in the event
of a delay in delivery of products, which would adversely affect our business.
IF WE CANNOT REDUCE OUR MANUFACTURING COSTS, POTENTIAL CUSTOMERS WILL NOT
PURCHASE OUR PRODUCTS
Market acceptance of our products will depend in part on reductions in the
unit cost of our products. We expect that as broadband access systems become
more widely deployed, the price of broadband access products will decline.
However, we may be unable to reduce the cost of our products sufficiently to
enable us to compete with other broadband access technologies or with access
lines leased from the incumbent carrier, commonly known as leased lines, prices
of which are generally declining. Our cost reduction efforts may not allow us to
keep pace with competitive pricing pressures or lead to improved gross margins.
In order to remain competitive, we must significantly reduce the cost of
manufacturing our products through design and engineering changes. We may not be
successful in redesigning our products. Even if we are successful, our redesign
may be delayed or may contain significant errors and product defects. In
addition, any redesign may fail to result in sufficient cost reductions to allow
us to significantly reduce the price of our products or improve our gross
margin.
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IF BROADBAND WIRELESS ACCESS TECHNOLOGY OR OUR IMPLEMENTATION OF THIS TECHNOLOGY
IS NOT ACCEPTED BY SERVICE PROVIDERS, WE WILL NOT BE ABLE TO SUSTAIN OR GROW OUR
BUSINESS
Our future success is substantially dependent on whether broadband
wireless access technology gains market acceptance by a limited number of
service providers. We have invested substantial resources in the development of
this technology, and all of our products are based on this technology. Service
providers continuously evaluate alternative broadband access technologies,
including wireline technologies such as DSL, cable modem, optical fiber, leased
lines and different wireless technologies. In particular, competitive service
providers are able to use leased lines to offer service. The price of leased
lines has declined significantly in many countries. If this trend continues,
service providers might be more likely to use leased lines than our products,
which would adversely affect our market share and pricing. In addition,
widespread acceptance of broadband, point-to-multipoint wireless technology may
be hindered by inherent technological limitations, such as a need for a clear
line-of-sight for transmissions and a reduction in coverage radius in areas that
experience heavy rain. In the event that service providers adopt technologies
other than the broadband point-to-multipoint wireless technology that we offer,
we may not be able to sustain or grow our business.
THE MAJORITY OF SERVICE PROVIDERS THAT ARE EXPECTED TO USE OUR PRODUCTS ARE
EMERGING COMPANIES WITH LIMITED OPERATING HISTORIES. IF THESE SERVICE PROVIDERS
DO NOT SUCCEED, THERE WILL BE NO MARKET FOR OUR PRODUCTS
Most communications service providers using our products are competitive
local exchange carriers, or CLECs, seeking to challenge service providers that
have had a historical monopoly in a given market. If these CLECs do not succeed,
there will be no market for our products. Many of these CLECs are still forming
their business models, building their infrastructures, acquiring spectrum
licenses and rolling out their services. These service providers have little or
no experience in deploying telecom or datacom services, marketing and
integrating a combination of voice and data solutions, or obtaining rights to
roof space, commonly known as roof rights. Neither they nor we have experience
in integrating an end-to-end service network. There is no proven business model
for competitive service providers providing end-to-end services, and,
consequently, there is no ability to forecast how successful these service
rollouts will be. These service providers require substantial capital for the
development, construction and expansion of their networks and the introduction
of their services. Financing may not be available to emerging service providers
on favorable terms, if at all. Additionally, many competitive service providers
may not be successful in obtaining rights to broadband spectrum. The inability
of emerging service providers to acquire and keep customers, acquire spectrum
licenses, successfully raise needed funds, or respond to any other trends such
as price reductions for their services or diminished demand for communications
services generally, could adversely affect their businesses or cause them to
reduce their capital spending on network buildouts. If competitive service
providers are forced to defer or curtail their capital spending programs, sales
of our products might be impacted, which would have an adverse effect on our
business.
WE HAVE A LONG SALES CYCLE, WHICH LIMITS OUR ABILITY TO PREDICT REVENUES
We do not yet know what our typical sales cycle will be. System
integrators and service providers typically perform numerous tests and
extensively evaluate our products before incorporating them into networks. The
time required for testing, evaluation and design of our products into the
service provider's network typically ranges from six to twelve months. If a
service provider decides to supply commercial service with our products, it can
take an additional six to twelve months or more before a service provider
commences mass deployment of networks that incorporate our products. Because of
this potentially long sales cycle, we may experience a delay between the time
when we increase operating expenses and the time when we generate revenues, if
any, from these expenses. Some factors that affect the length of our sales cycle
include:
- testing and evaluation;
- acquisition of roof rights;
- deployment and planning of network infrastructure;
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- complexity of network;
- scope of project;
- availability of spectrum; and
- regulatory issues.
In addition, the delays inherent in our sales cycle raise additional risks
of service provider decisions to cancel or change their product plans. Our
business could be adversely affected if a significant customer curtails, reduces
or delays orders during our sales cycle or chooses not to deploy networks
incorporating our products.
IF WE ARE UNABLE TO DEPLOY OUR PRODUCTS ON A LARGE SCALE OR INTEGRATE THEM INTO
A LARGE-SCALE NETWORK ENVIRONMENT OR IF OUR PRODUCTS CONTAIN ERRORS OR DEFECTS,
WE COULD LOSE SALES OPPORTUNITIES, SUFFER INJURY TO OUR REPUTATION, OR
EXPERIENCE WARRANTY CLAIMS EXCEEDING OUR RESERVES
We have launched our products only in small-scale installations and trial
deployments to date. Our products have not been deployed on a large scale.
Therefore, we cannot assure you that our products will work as we intend them to
work, including with respect to transmission speed, capacity and quality, nor
can we predict whether our products will sustain system failures in a
large-scale field deployment. In addition, our products may contain undetected
or unresolved errors when they are first introduced or as new versions are
released. Our products are integrated with other network elements. There may be
incompatibilities between these elements and our products that adversely affect
the service provider or its subscribers. As is common in our industry, errors
may be found in new products or upgrades, or there may be incompatibilities in
integrated systems as a whole, after their deployment. If our products do not
function in a large-scale deployment or in a network environment, or if there
are errors or defects in our products, we could experience:
- delays in or loss of sales opportunities;
- diversion of development resources;
- injury to our reputation; and
- increased service, warranty and replacement costs.
Although we have set aside warranty and inventory reserves, we might
experience claims that exceed these reserves with respect to either our current
product or our discontinued point-to-point product.
WE DEPEND ON TWO SYSTEM INTEGRATORS FOR MUCH OF OUR REVENUES. IF THESE SYSTEM
INTEGRATORS DO NOT PURCHASE OUR PRODUCTS, OUR BUSINESS WILL BE ADVERSELY
AFFECTED
We sell most of our products through two system integrators. These system
integrators incorporate our products into larger networks that include equipment
manufactured by them or other parties. Aggregate sales through these two system
integrators accounted for approximately 31% of our revenues for 1998, and
approximately 88% of our revenues for the three months ended March 31, 1999.
Accordingly, unless and until we diversify and expand our customer base, our
future success will significantly depend on the timing and size of future
purchase orders, if any, from these two system integrators and, in particular:
- the product requirements of these system integrators and their service
provider customers;
- the market success of these system integrators; and
- the success of the networks deployed using our products.
The loss of either of these system integrators or the delay of significant
orders from these system integrators, even if only temporary, could, among other
things:
- reduce or delay our recognition of revenues;
- harm our reputation in the industry; or
- reduce our ability to accurately predict cash flow.
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<PAGE> 12
We have no agreements for minimum purchase commitments from our system
integrators or other resellers. The amount and timing of resources that our
system integrators devote to our business is not within our control. Should
either of our system integrators cease to emphasize systems that include our
products, our revenues and consequently results of operations would be adversely
affected. Furthermore, our relationships with these system integrators are
non-exclusive. Therefore, to the extent that they elect to market alternative
broadband access solutions, such as cable modems or DSL, or our competitors'
broadband wireless products more aggressively or instead of our products, our
revenues and consequently results of operations would be adversely affected. For
instance, Siemens has an equity interest in, and an OEM relationship with, one
of our competitors, which may motivate Siemens to select this competitor's
solutions over our own in the future. Our major system integrators or their
affiliates may also acquire or form partnerships with our competitors or may
develop, support or market competing broadband access solutions. There are a
limited number of other system integrators that have the global reach, financial
resources or technical expertise to sell, service and integrate our products
effectively. Some of those other system integrators may market products that
compete with our products. If one or both of our system integrators will not
sell, service or integrate our products, and we cannot identify other system
integrators as replacements, we would be limited in our ability to sell our
products.
WE DEPEND ON TWO CONTRACT MANUFACTURERS. IF THESE MANUFACTURERS ARE UNABLE TO
FILL OUR ORDERS ON A TIMELY BASIS, AND WE ARE UNABLE TO FIND ALTERNATIVE
SOURCES, WE MAY BE UNABLE TO DELIVER PRODUCTS TO MEET CUSTOMER ORDERS
We currently have relationships with two contract manufacturers of our
products. We manufacture only small quantities of products at our own
facilities. Our reliance on contract manufacturers involves a number of risks,
in particular:
- their need to develop high-speed testing and manufacturing methods;
- the possibility that they may not devote adequate capacity to us; and
- reduction of our control over delivery schedules, manufacturing yields
and costs.
Our experience with these manufacturers provides us with no basis to
project their delivery schedules, yields or costs. If our manufacturers are
unable or unwilling to continue manufacturing our components in required
volumes, we would have to identify and train acceptable alternative
manufacturers, which could take as long as six months. In addition, few
manufacturers produce radios like ours on a large scale. It is possible that a
source may not be available to us when needed, and we may not be able to satisfy
our production requirements at acceptable prices and on a timely basis, if at
all. Any significant interruption in supply would affect the allocation of
products to customers, which in turn could have an adverse effect on our
business.
BECAUSE SOME OF OUR KEY COMPONENTS ARE FROM SOLE SOURCE SUPPLIERS OR REQUIRE
LONG LEAD TIMES, OUR BUSINESS IS SUBJECT TO UNEXPECTED INTERRUPTIONS
Many of our key components have long lead times and are purchased from
sole source vendors for which alternative sources are not currently available.
For example, we purchase our Base Station Shelf from Cisco Systems, Inc.
pursuant to an agreement that terminates in February 2000. Cisco has recently
acquired interests in companies with broadband wireless technology, and we
cannot be certain that Cisco will continue to supply us after the termination of
the current agreement. While we plan to eliminate the reliance on the Cisco
shelf in future versions of our product and are in the process of both
developing our own alternative for the shelf and seeking third-party
alternatives for the shelf, engineering or other delays could hinder
introduction of these alternatives. Until we phase out the Cisco shelf, our
inability to obtain sufficient quantities of that shelf may result in delays or
reductions in product shipments, which could adversely affect our business. In
addition, we purchase most of our electronic boards from Solectron, one of our
contract manufacturers, and other components from other sole source and long
lead time vendors.
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<PAGE> 13
Any alternate suppliers for our key components might not meet our quality
standards for component vendors. In the event of a reduction or interruption of
supply, as much as six months could be required before we would begin receiving
adequate supplies from alternative suppliers, if any. It is possible that a
source may not be available for us or be in a position to satisfy our production
requirements at acceptable prices and on a timely basis, if at all. In addition,
the manufacture of some of our long lead time and sole source components is
extremely complex, and our reliance on the suppliers of these components exposes
us to potential production difficulties and quality variations, which could
negatively impact the cost and timely delivery of our products. Any significant
interruption in the supply, or degradation in the quality, of any component
could have a material adverse effect on our business.
OUR FUTURE OPERATING RESULTS ARE DEPENDENT ON THE SALES OF A SINGLE PRODUCT
We currently derive substantially all of our revenues from our broadband
point-to-multipoint wireless products and expect that this will continue for the
foreseeable future. The market may not continue to demand our current products,
and we may not be successful in marketing or developing any new or enhanced
products. Any reduction in the demand for our current products or our failure to
successfully develop, market and introduce new or enhanced products could
adversely affect our business. Factors that could affect sales of our current or
new or enhanced products include:
- the demand for broadband point-to-multipoint wireless solutions;
- our development and introduction of, and the market acceptance of, new
and enhanced products that address customer requirements;
- product introductions or announcements by our competitors;
- price competition in our industry and among competing broadband access
technologies, including leased line pricing; and
- technological change.
IF WE DO NOT DEVELOP NEW PRODUCTS AND PRODUCT FEATURES IN RESPONSE TO CUSTOMER
REQUIREMENTS OR CHANGING STANDARDS, CUSTOMERS WILL NOT BUY OUR PRODUCTS
The communications market is characterized by rapid technological
advances, evolving industry and regulatory standards, changes in end-user
requirements, frequent new product introductions and evolving offerings by
service providers. We believe our future success will depend, in part, on our
ability to anticipate and adapt to these changes and to offer on a timely basis
new products and product features that meet customer demands. Furthermore, in
order to compete in many markets, we will have to develop different versions of
our existing products that operate at different frequencies and comply with
diverse, new or varying governmental regulations in each market. Our ability to
develop on a timely basis new products or enhancements and interfaces to
existing products, or the failure of new products, enhancements or interfaces to
achieve market acceptance, could adversely affect our business.
WE MUST DEVELOP PRODUCTS THAT ARE COMPLIANT WITH A VARIETY OF STANDARDS AND WORK
WITH DIFFERENT SPECTRUM ALLOCATION SCHEMES AND OTHER REGULATORY REQUIREMENTS.
FAILURE TO COMPLY WITH THESE STANDARDS WILL ADVERSELY AFFECT OUR ABILITY TO
INTRODUCE NEW PRODUCTS OR SELL EXISTING PRODUCTS
Many countries require communications equipment used in their country to
comply with specific regulations, including safety regulations. In addition,
broadband wireless equipment must work with diverse spectrum allocation schemes
of many different countries, and some of these countries have not completed
their spectrum allocation process. We cannot predict what these regulations or
spectrum allocation schemes will be, nor when they will be completed, and we
cannot assure you that we will be able to comply with these regulations or
requirements. In addition, we have not completed all activities necessary to
comply with existing regulations and requirements in most of the countries in
which we intend to sell our products. Failure of our products to comply, or
delays in compliance, with the various existing and evolving industry
regulations and standards could delay the introduction or hinder the sale of our
products.
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<PAGE> 14
If this compliance proves to be more expensive or time-consuming than we
anticipate, our business would be adversely affected.
IF WE EXPERIENCE DIFFICULTIES OR DELAYS IN DEVELOPING NEW PRODUCTS, WE MIGHT
INCUR SIGNIFICANT UNEXPECTED EXPENSES OR REDUCED REVENUES
We intend to continue to invest in product and technology development. The
development of new or enhanced products is a complex and uncertain process
requiring the accurate anticipation of technological and market trends. We may
experience design or manufacturing difficulties that could delay or prevent our
development, introduction or marketing of new products and enhancements, any of
which could cause us to incur unexpected expenses or lose revenues.
WE DEPEND ON REVENUES FROM INTERNATIONAL SALES. IF WE ARE UNABLE TO MANAGE OUR
INTERNATIONAL OPERATIONS EFFECTIVELY, OUR BUSINESS WOULD BE ADVERSELY AFFECTED
Sales in foreign countries accounted for 76% of our revenues in 1998 and
49% in the three months ended March 31, 1999. In addition, most equipment
purchased by domestic customers has been shipped to international service
providers. International operations are subject to a number of risks and
uncertainties, including:
- the difficulties and costs of obtaining regulatory approvals for our
products;
- unexpected changes in regulatory requirements;
- legal uncertainties regarding liability, tariffs and other trade
barriers;
- inadequate protection of intellectual property in some countries;
- increased difficulty in collecting delinquent or unpaid accounts;
- potentially adverse tax consequences;
- the difficulties and costs of staffing and managing international
operations;
- political and economic instability; and
- currency fluctuations.
Any of these factors could have an adverse impact on our existing
international operations and business or impair our ability to expand into
international markets.
WE DEPEND ON A SMALL NUMBER OF CUSTOMERS, AND OUR REVENUES FLUCTUATE ACCORDING
TO THE TIMING AND SIZE OF THESE CUSTOMERS' ORDERS
We sell our products to a small number of customers. Unless and until we
diversify and expand our customer base, our future success will significantly
depend on:
- the timing and size of future purchase orders, if any, from our
largest customers;
- the product requirements of these customers;
- the financial and operational success of these customers; and
- the success of service providers that have deployed our products.
Sales to our largest customers have in the past fluctuated and may in the
future fluctuate significantly from quarter-to-quarter and year-to-year.
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<PAGE> 15
MANY PROJECTS THAT INCLUDE OUR PRODUCTS REQUIRE SYSTEM INTEGRATION EXPERTISE AND
THIRD-PARTY FINANCING, WHICH WE ARE UNABLE TO PROVIDE. IF SOURCES FOR SYSTEM
INTEGRATION OR FINANCING CANNOT BE OBTAINED AS NEEDED, SERVICE PROVIDERS MAY NOT
SELECT OUR PRODUCTS
Some service providers using our products purchase them as a part of a
larger network deployment program that can require capital expenditures in the
hundreds of millions of dollars. In some circumstances, these service providers
require their equipment vendors to integrate their equipment and finance the
deployment of these networks. We will be unable to provide this integration or
financing and will therefore have to rely on the ability of our system
integrators or third parties to integrate or finance these transactions. In the
event that we are unable to identify distributors and system integrators that
are able to provide this integration or financing on our behalf, we would be
unable to compete for the business of some service provider accounts and our
business might be adversely affected.
IF THE MARKET FOR BROADBAND ACCESS DOES NOT CONTINUE TO GROW, THERE MAY BE A
LIMITED MARKET FOR OUR PRODUCTS
The commercial market for products designed for broadband access has only
recently begun to develop, and our success will depend in large part on the
increased need for high-speed access networks and the continuation of broadband
spectrum allocations worldwide. Critical issues concerning the increased use of
broadband access services, including reliability, cost, ease of access, quality
of service and security, remain unresolved and may limit the market for our
products. As a result, the future growth rate, if any, or the ultimate size of
the market for our products cannot be accurately predicted.
INTENSE COMPETITION IN THE MARKET FOR COMMUNICATIONS EQUIPMENT COULD PREVENT US
FROM INCREASING OR SUSTAINING REVENUES OR ACHIEVING OR SUSTAINING PROFITABILITY
The market for broadband access products generally, and
point-to-multipoint wireless access products specifically, is rapidly evolving
and highly competitive. As a provider of broadband point-to-multipoint wireless
access products, we compete with several large telecommunications equipment
suppliers such as Alcatel, Bosch, Ericsson, Hughes, Newbridge, Nortel and
Spectrapoint, a newly formed joint venture between Cisco and Motorola, as well
as with smaller start-up companies. In addition, well capitalized companies such
as Nokia are potential entrants into the market. As an industry, broadband
point-to-multipoint wireless access products compete with other potential
broadband access solutions, such as wireless point-to-point technologies and
broadband satellite, wireline technologies that utilize existing infrastructure,
such as digital subscriber line, or DSL, fiber optic cable, cable modem
technologies and leased lines.
We expect our competitors to continue to improve the performance of their
current products and introduce new products or new technologies as industry
standards and customer requirements evolve that may supplant or provide lower
cost alternatives to our products. Successful new product introductions or
enhancements by our competitors could reduce sales or the market acceptance of
our products, perpetuate intense price competition or make our products
obsolete. To be competitive, we must continue to invest significant resources in
research and development, sales and marketing and customer support. We cannot be
sure that we will have sufficient resources to make these investments or that we
will be able to make the technological advances necessary to be competitive. As
a result, we may not be able to compete effectively against our competitors. Our
failure to maintain and enhance our competitive position within the market may
adversely affect our business. Some of the factors on which we compete are:
- availability of product
- availability of financing
- reliability of product
- low entry price point
- ability to scale
- ease of use
- bandwidth of product
- operating experience
- price-performance
- breadth of frequency offerings
- completeness of integration
- customer support
- multi-service capability
- manufacturing capacity
- network management software
- installed base
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<PAGE> 16
Increased competition is likely to result in price reductions, shorter
product life cycles, reduced gross margins, longer sales cycles and loss of
market share, any of which would adversely affect our business.
CHANGES IN REGULATIONS AFFECTING THE COMMUNICATIONS INDUSTRY COULD REDUCE THE
DEMAND FOR OUR PRODUCTS OR REQUIRE US TO MAKE EXPENSIVE MODIFICATIONS TO OUR
PRODUCTS
Any changes to legal requirements relating to the communications industry,
including the adoption by international, federal or state regulatory authorities
of new laws or regulations, legal challenges to existing laws or regulations, or
a reversal of the trend toward deregulation, could have an adverse effect on the
market for our products. Moreover, service providers may require us, or we may
otherwise deem it necessary or advisable, to modify our products to address
actual or anticipated changes in the regulatory environment. Our inability to
modify our products or address any regulatory changes could have an adverse
effect on our business.
IF WE ARE UNABLE TO HIRE OR RETAIN OUR PERSONNEL, WE MIGHT NOT BE ABLE TO
SUCCESSFULLY OPERATE OUR BUSINESS
Given our early stage of development, we are dependent on our ability to
attract, retain and motivate high caliber personnel. Competition for qualified
personnel in our industry and in the Silicon Valley is intense, and we may not
be successful in attracting and retaining these personnel. There are only a
limited number of people with the requisite skills, particularly people with
millimeter wave radio expertise, and the Silicon Valley is characterized by
rapidly increasing salaries. We are also dependent on the continued
contributions of our principal sales, engineering and management personnel, many
of whom would be difficult to replace. We currently do not maintain key person
life insurance on any of our key executives. The loss of the services of any key
personnel or our inability to hire new personnel could restrict our ability to
develop new products and enhance existing products in a timely way, consummate
sales to key system integrators, and manage our business effectively, any of
which would adversely affect our business.
IF WE FAIL TO MANAGE OUR GROWTH, OUR BUSINESS WILL BE ADVERSELY AFFECTED
During 1998, we increased the number of employees from 122 to 149. We
anticipate that further significant expansion, including opening additional
sales locations, will be required to address any future growth. We may not be
able to implement management information and control systems in an efficient and
timely manner, and our current or planned personnel, systems, procedures and
controls may not be adequate to support our future operations. If we are unable
to manage growth effectively, our business will be adversely affected. To manage
the expected growth of our operations and personnel, we will be required to:
- improve financial and operational controls, and reporting systems and
procedures;
- install new management information systems; and
- train, motivate and manage our sales and marketing, engineering,
technical and customer support employees.
OUR LIMITED ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY MAY ADVERSELY AFFECT
OUR BUSINESS
Our success and ability to compete is dependent in part on our proprietary
technology. Any infringement of our proprietary rights could result in
significant litigation costs, and any failure to adequately protect our
proprietary rights could result in our competitors offering similar products,
potentially resulting in loss of a competitive advantage and decreased revenues.
We rely on a combination of patent, copyright, trademark and trade secret laws,
as well as confidentiality agreements and licensing arrangements, to establish
and protect our proprietary rights. We presently have two issued U.S. patents
and two patent applications pending. Despite our efforts to protect our
proprietary rights, existing patent, copyright, trademark and trade secret laws
afford only limited protection. In addition, the laws of some
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<PAGE> 17
foreign countries do not protect our proprietary rights to the same extent as do
the laws of the United States. Attempts may be made to copy or reverse engineer
aspects of our products or to obtain and use information that we regard as
proprietary. Accordingly, we may not be able to protect our proprietary rights
against unauthorized third-party copying or use. Furthermore, policing the
unauthorized use of our products is difficult. Litigation may be necessary in
the future to enforce our intellectual property rights, to protect our trade
secrets or to determine the validity and scope of the proprietary rights of
others. This litigation could result in substantial costs and diversion of
resources and could have an adverse effect on our future operating results.
CLAIMS THAT WE INFRINGE THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS COULD RESULT IN
SIGNIFICANT EXPENSES OR RESTRICTIONS ON OUR ABILITY TO SELL OUR PRODUCTS IN
PARTICULAR MARKETS
The communications industry is characterized by the existence of a large
number of patents and frequent litigation based on allegations of patent
infringement. From time to time, third parties may assert patent, copyright,
trademark and other intellectual property rights to technologies and in various
jurisdictions that are important to our business. Any claims asserting that our
products infringe or may infringe proprietary rights of third parties, if
determined adversely to us, could have an adverse effect on our business. In
addition, in our agreements, we agree to indemnify our customers for any
expenses or liabilities resulting from claimed infringements of patents,
trademarks or copyrights of third parties. As the number of entrants in our
market increases and the functionality of our products is enhanced and overlaps
with the products of other companies, we may become subject to claims of
infringement or misappropriation of the intellectual property rights of others.
Any claims, with or without merit, could be time-consuming, result in costly
litigation, divert the efforts of our technical and management personnel, cause
product shipment delays or require us to enter into royalty or licensing
agreements, any of which could have an adverse effect on our operating results.
Royalty or licensing agreements, if required, may not be available on terms
acceptable to us, if at all. Legal action claiming patent infringement may be
commenced against us. We cannot assure you that we would prevail in this
litigation given the complex technical issues and inherent uncertainties in
patent litigation. In the event a claim against us was successful and we could
not obtain a license to the relevant technology on acceptable terms or license a
substitute technology or redesign our products to avoid infringement, our
business would be adversely affected.
IF WE, OUR SUPPLIERS, SYSTEM INTEGRATORS, RESELLERS OR SERVICE PROVIDERS FAIL TO
BE YEAR 2000 COMPLIANT, OUR BUSINESS MIGHT BE SEVERELY DISRUPTED
The risk that software or hardware inaccurately process dates following
the Year 2000 presents several areas of risk for our business. In particular, we
are subject to:
- costs associated with the failure of our products to be Year 2000
compliant, including potential warranty or other claims from our
customers, which may result in significant expense to us;
- business shutdowns or slowdowns as a result of a failure of the
internal management systems we use to run our business, which could
disrupt our business operations;
- interruption of product or component supplies, or a reduction in
product quality, as a result of the failure of systems used by our
suppliers; and
- reductions or deferrals in sales activities as a result of Year 2000
compliance issues of our distributors and system integrators.
CONTROL BY OUR EXISTING SHAREHOLDERS WILL LIMIT YOUR ABILITY TO INFLUENCE THE
OUTCOME OF MATTERS REQUIRING SHAREHOLDER APPROVAL AND COULD DISCOURAGE POTENTIAL
ACQUISITIONS OF OUR BUSINESS BY THIRD PARTIES
Upon completion of this offering, our executive officers, directors and 5%
or greater shareholders and their affiliates will own 22,122,389 shares or
approximately __% of the outstanding shares of common stock. These shareholders,
if acting together, would be able to control all matters requiring approval by
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<PAGE> 18
shareholders, including the election of directors and the approval of mergers or
other business combination transactions. This concentration of ownership could
have the effect of delaying or preventing a change in our control or otherwise
discouraging a potential acquirer from attempting to obtain control of us, which
in turn could have an adverse effect on the market price of our common stock or
prevent our shareholders from realizing a premium over the market price for
their shares of common stock.
OUR ARTICLES OF INCORPORATION AND BYLAWS MAY DISCOURAGE POTENTIAL ACQUISITIONS
OF OUR BUSINESS BY THIRD PARTIES
Some provisions of our Articles of Incorporation and Bylaws and of
California law may discourage, delay or prevent a merger or acquisition that a
shareholder may consider favorable. These provisions include:
- authorizing the board to issue additional preferred stock;
- prohibiting cumulative voting in the election of directors;
- limiting the persons who may call special meetings of shareholders;
- establishing a classified board of directors;
- prohibiting shareholder actions by written consent; and
- establishing advance notice requirements for nominations for election
to the board of directors or for proposing matters that can be acted
on by shareholders at shareholder meetings.
SUBSTANTIAL NUMBERS OF SHARES OF OUR COMMON STOCK WILL BECOME AVAILABLE FOR SALE
IN THE PUBLIC MARKET SIMULTANEOUSLY, WHICH COULD CAUSE THE MARKET PRICE OF OUR
STOCK TO DECLINE
Sales of substantial amounts of common stock in the public market
following this offering, or the appearance that a large number of shares is
available for sale, could cause the market price of our common stock to decline.
The number of shares of common stock available for sale in the public market
will be limited by lock-up agreements under which the holders of substantially
all of our outstanding shares of common stock and options and warrants to
purchase common stock will agree not to sell or otherwise dispose of any of
their shares for a period of 180 days after the date of this prospectus without
the prior written consent of Merrill Lynch. However, Merrill Lynch may, in its
sole discretion and at any time without notice, release all or any portion of
the securities subject to lock-up agreements. In addition to the adverse effect
a price decline could have on holders of common stock, that decline would likely
impede our ability to raise capital through the issuance of additional shares of
common stock or other equity securities.
PURCHASERS IN THIS OFFERING WILL SUFFER IMMEDIATE, SUBSTANTIAL DILUTION IN NET
TANGIBLE BOOK VALUE PER SHARE
Because our common stock has in the past been sold at prices substantially
less than the initial public offering price that you will pay, you will suffer
immediate dilution of $ per share in pro forma net tangible book value. The
exercise of outstanding options and warrants is likely to result in further
dilution.
WE MAY NOT BE ABLE TO OBTAIN ADDITIONAL CAPITAL TO FUND OUR OPERATIONS ON
REASONABLE TERMS
Our capital requirements depend on several factors, including the rate of
market acceptance of our products, the ability to expand our distribution and
customer base, the growth of sales and marketing expenses and other factors. If
capital requirements vary from those currently planned, we may require
additional financing sooner than anticipated. If we raise additional funds
through the issuance of equity securities, the percentage ownership of our
shareholders will be reduced, shareholders may experience additional dilution,
or these equity securities may have rights, preferences or privileges senior to
those of the holders of our common stock. If we raise additional funds through
the issuance of debt securities, those securities would have rights, preferences
and privileges senior to holders of common stock and the
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<PAGE> 19
terms of this debt could impose restrictions on our operations. Additional
financing may not be available when needed on terms favorable to us or at all.
If adequate funds are not available or are not available on acceptable terms, we
may be unable to develop or enhance our services, take advantage of future
opportunities or respond to competitive pressures, which could adversely affect
our business.
OUR STOCK PRICE MAY BE VOLATILE AND YOU MAY BE UNABLE TO RESELL YOUR SHARES AT
OR ABOVE THE OFFERING PRICE
There previously has not been a public market for our common stock. We
cannot predict the extent to which investor interest in us will lead to the
development of a trading market or how liquid that market might become. The
initial public offering price for the shares will be determined by negotiations
between us and the representatives of the underwriters and may not be indicative
of prices that will prevail in the trading market. The trading price of our
common stock could be subject to wide fluctuations in response to factors such
as:
- actual or anticipated variations in quarterly operating results;
- announcements of technological innovations;
- new products or services announced or offered by us or our
competitors;
- changes in financial estimates by securities analysts;
- announcements of significant acquisitions, strategic partnerships,
joint ventures or capital commitments by us or our competitors;
- additions or departures of key personnel;
- sales of common stock; and
- other events or factors, many of which are beyond our control.
In addition, the stock market in general, and the Nasdaq National Market
and stocks of technology companies in particular, have experienced extreme price
and volume fluctuations that have often been unrelated or disproportionate to
the operating performance of these companies. Broad market and industry factors
may adversely affect the market price of our common stock, regardless of our
actual operating performance. In the past, following periods of volatility in
the market price of a company's securities, securities class-action litigation
has often been initiated against these companies. This litigation, if initiated,
could result in substantial costs and a diversion of management's attention and
resources, which would adversely affect our business.
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FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about us, including:
- uncertainty regarding the commercial acceptance of broadband wireless
technologies;
- uncertainty regarding our future operating results;
- our ability to introduce new products;
- delays or losses of sales due to long sales and implementation cycles
for our products;
- the possibility of lower prices, reduced gross margins and loss of
market share due to increased competition; and
- increased demands on our resources due to anticipated growth.
In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus might not occur. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information or future events.
TRADEMARKS
Each trademark, trade name or service mark appearing in this prospectus
belongs to its holder. AirView and AirMAN are our registered trademarks.
AirStar, CellMAC, Netro and the Netro logo are our trademarks.
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USE OF PROCEEDS
We estimate our net proceeds from the sale of the shares of our
common stock offered in this offering to be approximately $ million, or
approximately $ million if the underwriters' over-allotment option is
exercised in full, based on an assumed initial public offering price of $
per share and after deducting the estimated underwriting discount and offering
expenses.
We intend to use the net proceeds from this offering for general corporate
purposes, including research and development, expansion of our sales and
marketing organizations and working capital. Pending these uses, we intend to
invest the net proceeds from this offering in short-term, investment-grade,
interest-bearing securities.
DIVIDEND POLICY
We have never paid cash dividends on our common stock. We currently intend
to retain any future earnings to fund the development and growth of our
business. Therefore, we do not currently anticipate paying any cash dividends in
the foreseeable future. In addition, pursuant to our loan agreement with Silicon
Valley Bank and subject to limited exceptions, we may not pay dividends on our
capital stock so long as obligations are outstanding under the loan agreement or
for so long as Silicon Valley Bank has any commitment to make advances to us
under the loan agreement.
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CAPITALIZATION
The following table summarizes our capitalization as of March 31, 1999 as
follows:
- on an actual basis;
- on a pro forma basis to give effect to the conversion of all
outstanding shares of our preferred stock into common stock; and
- on a pro forma, as adjusted basis to reflect the application of the
net proceeds from our initial public offering and the conversion of
all outstanding shares of our preferred stock into common stock.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
----------------------------------
PRO FORMA
AS
ACTUAL PRO FORMA ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Cash, cash equivalents and short-term investments........... $ 22,848 $ 22,848 $
======== ======== ========
Long-term debt and capital leases, net of current portion... $ 4,763 $ 4,763 $ 4,763
-------- -------- --------
Shareholders' equity:
Preferred stock, 31,192,517 shares authorized, 29,250,875
shares outstanding, actual; no shares outstanding, pro
forma; 5,000,000 shares authorized and no shares
outstanding, pro forma as adjusted..................... 92,853 -- --
Common stock, 50,000,000 shares authorized, 8,560,775
shares outstanding, actual; 37,811,650 shares
outstanding, pro forma; 100,000,000 shares authorized,
shares outstanding, pro forma as
adjusted(1)............................................ 3,409 96,262
Notes receivable from shareholders........................ (800) (800) (800)
Deferred stock compensation............................... (1,955) (1,955) (1,955)
Accumulated deficit....................................... (74,626) (74,626) (74,626)
-------- -------- --------
Total shareholders' equity............................. 18,881 18,881
-------- -------- --------
Total capitalization.............................. $ 23,644 $ 23,644 $
======== ======== ========
</TABLE>
- ---------------
(1) The number of shares of common stock outstanding is based on the actual
number of shares outstanding as of March 31, 1999. It excludes:
- 4,638,738 shares of common stock issuable upon exercise of options
outstanding as of March 31, 1999 at a weighted average exercise price
of $1.68 per share; and
- 57,028 shares of preferred stock issuable upon exercise of warrants
outstanding as of March 31, 1999 at a weighted average exercise price
of $7.39 per share that will convert into the same number of shares of
common stock upon completion of this offering.
For more information regarding our equity benefit plans, see
"Management -- Stock Plans" and notes 9 and 12 of notes to consolidated
financial statements.
18
<PAGE> 23
DILUTION
As of March 31, 1999, our net tangible book value was approximately $18.9
million, or $0.50 per share of common stock, after giving effect to the
conversion of all outstanding shares of our preferred stock into common stock.
Net tangible book value represents the total amount of our tangible assets less
total liabilities divided by the number of shares of common stock outstanding.
Without taking into account any other changes in net tangible book value after
March 31, 1999, other than to give effect to the receipt by us of the net
proceeds from the sale of the shares of common stock in this offering at an
assumed initial public offering price of $ per share, our pro forma net
tangible book value as of March 31, 1999 would have been approximately $ ,
or $ per share. This represents an immediate increase in net tangible book
value of $ per share to existing shareholders and an immediate dilution of
$ per share to new investors purchasing shares in this offering. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Net tangible book value per share as of March 31, 1999.... $0.50
Increase per share attributable to new investors..........
-----
Pro forma net tangible book value per share after this
offering..................................................
-----
Dilution per share to new investors......................... $
=====
</TABLE>
The following table summarizes, on a pro forma basis, as of March 31,
1999, the number of shares of common stock purchased from us, the total
consideration paid to us and the average price per share paid by (1) existing
shareholders and (2) new investors, before deducting the estimated underwriting
discount and offering expenses payable by us:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders.............. 37,811,650 % $96,262,000 % $2.55
New public investors...............
---------- ----- ----------- -----
Total............................ 100.0% 100.0%
========== ===== =========== =====
</TABLE>
If the underwriters' over-allotment option is exercised in full, the
number of shares held by new investors will increase to , or % of
the total shares of common stock outstanding after this offering.
The information in the above table excludes:
- 4,638,738 shares of common stock issuable upon exercise of options
outstanding as of March 31, 1999 at a weighted average exercise price
of $1.68 per share;
- 57,028 shares of preferred stock issuable upon exercise of warrants
outstanding as of March 31, 1999 at a weighted average exercise price
of $7.39 per share that will convert into the same number of shares of
common stock upon completion of this offering; and
- an aggregate of shares available for future issuance
under our 1996 Stock Option Plan, 1997 Directors' Stock Option Plan
and 1999 Employee Stock Purchase Plan as of June 30, 1999. See
"Management -- Stock Plans" and notes 9 and 12 of notes to
consolidated financial statements.
19
<PAGE> 24
SELECTED CONSOLIDATED FINANCIAL DATA
You should read the following selected consolidated financial data in
conjunction with our consolidated financial statements and the related notes and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus. The statement of operations
data for each of the years ended December 31, 1996, 1997 and 1998, and the
balance sheet data as of December 31, 1997 and 1998, are derived from and are
qualified in their entirety by our financial statements that have been audited
by Arthur Andersen LLP, independent public accountants, which are included
elsewhere in this prospectus. The statement of operations data set forth below
for the period from November 14, 1994 (inception) to December 31, 1995 and the
balance sheet data as of December 31, 1995 and 1996 are derived from our audited
financial statements not included in this prospectus. The statement of
operations data for the three months ended March 31, 1998 and 1999 and the
balance sheet data as of March 31, 1999 are derived from unaudited financial
statements, were prepared on the same basis as the audited consolidated
financial statements and include in the opinion of our management all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the information set forth in those financial statements.
The historical results presented below are not necessarily indicative of the
results to be expected for any future fiscal year. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 14, THREE MONTHS
1994 ENDED
(INCEPTION) TO YEAR ENDED DECEMBER 31, MARCH 31,
DECEMBER 31, -------------------------------- ---------------------
1995 1996 1997 1998 1998 1999
-------------- -------- -------- -------- ------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues.............................. $ -- $ 731 $ 5,601 $ 5,438 $ 996 $ 2,142
Cost of revenues...................... -- 619 8,273 9,640 1,310 1,649
------- -------- -------- -------- ------- -------
Gross profit (loss)................... -- 112 (2,672) (4,202) (314) 493
------- -------- -------- -------- ------- -------
Operating expenses:
Research and development............ 1,598 10,446 15,289 16,143 4,257 4,224
Sales and marketing................. -- 1,293 3,776 4,819 1,051 1,332
General and administrative.......... 664 1,189 3,500 3,968 913 1,752
Amortization of deferred stock
compensation...................... -- -- -- -- -- 168
------- -------- -------- -------- ------- -------
Total operating expenses.......... 2,262 12,928 22,565 24,930 6,221 7,476
------- -------- -------- -------- ------- -------
Loss from operations.................. (2,262) (12,816) (25,237) (29,132) (6,535) (6,983)
Other income (expense)................ 193 643 703 304 218 (39)
------- -------- -------- -------- ------- -------
Net loss.............................. $(2,069) $(12,173) $(24,534) $(28,828) $(6,317) $(7,022)
======= ======== ======== ======== ======= =======
Basic and diluted net loss per
share............................... $(10.61) $ (4.66) $ (5.11) $ (4.07) $ (1.05) $ (0.86)
Shares used to compute basic and
diluted net loss per share.......... 195 2,610 4,798 7,087 6,039 8,205
Pro forma basic and diluted net loss
per share (unaudited)............... $ (0.84) $ (0.19)
Shares used to compute pro forma basic
and diluted net loss per share
(unaudited)......................... 34,391 37,266
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
-------------------------------------------------- MARCH 31,
1995 1996 1997 1998 1999
-------------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments.......................... $ 14,350 $ 13,913 $ 25,706 $ 15,128 $ 22,848
Working capital........................ 13,821 12,687 25,657 12,523 18,015
Total assets........................... 15,114 19,833 37,708 26,788 34,762
Long-term debt and capital leases, net
of current portion................... -- 556 4,209 4,547 4,763
Total shareholders' equity............. 14,538 16,127 27,005 13,893 18,881
</TABLE>
20
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ substantially from those
anticipated in these forward-looking statements as a result of many factors,
including those set forth under "Risk Factors" and elsewhere in this prospectus.
The following discussion should be read together with our consolidated financial
statements and related notes included elsewhere in this prospectus.
OVERVIEW
We are a leading provider of intelligent broadband wireless access systems
to competitive communications service providers worldwide. We were incorporated
in 1994 and introduced our first product, the AirMAN point-to-point system, in
1996. AirMAN was discontinued in September 1998 because the market for
high-capacity point-to-point broadband wireless access systems did not develop
as we had expected. From 1996 onward, substantially all of our product
development efforts were devoted to the AirStar point-to-multipoint broadband
wireless access system. The first AirStar beta systems were shipped in the third
quarter of 1998.
All of our 1996 and 1997 revenues and approximately 47% of our 1998
revenues were derived from sales of the AirMAN system. Currently, our revenues
are generated from sales of AirStar systems through system integrators that
integrate our products, local resellers and our direct sales force. We began
initial sales of an early 26 GHz AirStar system in Europe in early 1998.
Subsequently, we introduced the AirStar system more widely to the European,
Latin American and Middle Eastern markets. For 1998 and the three months ended
March 31, 1999, international revenues represented approximately 76% and 49% of
total revenues. In addition, a substantial portion of our domestic revenues is
derived from systems intended for installation in international locations.
Although we have historically assembled our products in-house, we are
currently in the process of outsourcing manufacturing and assembly to contract
manufacturers. We expect these contract manufacturers to be responsible for most
of our volume production in the future. Currently, we have contracts in place
with Solectron Corporation and Microelectronic Technologies, Inc. of Taiwan to
serve as our manufacturers.
System integrators and service providers typically perform numerous tests
and extensively evaluate our products before incorporating them into networks.
The time required for testing, evaluation and design of our products into the
service provider's network typically ranges from six to twelve months. If a
service provider decides to supply commercial service with our products, it can
take an additional six to twelve months before a service provider commences
deployment of networks that incorporate our products. During the trial period,
we sell to service providers a limited number of hubs, consisting of a Base
Station and Base Radio Units, and corresponding subscriber equipment, consisting
of the Subscriber Access System and the Subscriber Radio Unit. The successful
completion of this trial phase often results in another sale of additional hubs
and subscriber equipment intended for commercial service.
Revenues. Our current revenues primarily consist of product revenues from
the sale of the AirStar system. Revenues from product sales are generally
recognized when all of the following conditions are met: the product has
shipped, we have the right to invoice the customer, collection of the receivable
is probable and we have fulfilled all contractual obligations to the customer.
Cost of Revenues. Our cost of revenues consists of contract manufacturing
costs, material costs, compensation costs, manufacturing overhead, warranty
reserves and other direct product costs.
Research and Development. Research and development expenses consist of
compensation costs, the cost of certain software development tools, consultant
fees and prototype expenses related to the design, development and testing of
our products. Our policy is to expense all research and development expenses as
incurred. For certain projects we receive third-party research and development
funding, which is offset against the related expenses.
21
<PAGE> 26
Sales and Marketing. Sales and marketing expenses consist primarily of
compensation costs, commissions, travel and related expenses for marketing,
sales and field service support personnel, as well as product management, trade
show and promotional expenses.
General and Administrative. General and administrative expenses consist
primarily of compensation costs and related expenses for executive, finance,
management information systems, human resources, and administrative personnel.
These expenses also include professional fees, facilities and other general
corporate expenses.
Amortization of Deferred Stock Compensation. Amortization of deferred
stock compensation resulted from the granting of stock options to employees with
exercise prices per share determined to be below the estimated fair values per
share of our common stock at dates of grant. The deferred compensation is being
amortized to expense over the vesting period of the individual options,
generally four years. We have recorded total deferred stock compensation of $2.1
million through March 31, 1999.
Other Income (Expense). Other income (expense) consists primarily of
interest income earned on low-risk, short-term investments and interest paid on
outstanding debt.
Income Taxes. We have not recorded any provision for income taxes for any
of the periods presented because we have generated net losses since inception.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 AND 1999
Revenues. Revenues increased 115% from $996,000 for the three months ended
March 31, 1998 to $2.1 million for the three months ended March 31, 1999. This
increase was primarily due to an increase in the number of sales of the 26 GHz
AirStar system and was partially offset by a decrease in sales of AirMAN
systems. Sales to three customers, Nortel, Pele-Phone and Italtel, represented
43%, 18% and 15% of revenues for the three months ended March 31, 1998. Sales to
two customers, Lucent and Italtel, represented 51% and 37% of revenues for the
three months ended March 31, 1999. Substantially all of the revenues for these
periods were generated from installations in international locations.
Gross Profit. Gross profit increased from a loss of $314,000 for the three
months ended March 31, 1998 to a profit of $493,000 for the three months ended
March 31, 1999. This increase in gross profit was primarily due to lower unit
costs and lower labor costs associated with higher volume product sales and
greater product maturity of the AirStar system. Gross profit, as a percentage of
revenues, improved from negative 32% for the three months ended March 31, 1998
to 23% for the three months ended March 31, 1999. We anticipate that gross
profit will vary significantly from period to period until our sales and
production volumes stabilize.
Research and Development. Research and development expenses decreased from
$4.3 million for the three months ended March 31, 1998 to $4.2 million for the
three months ended March 31, 1999, primarily due to the offset of $450,000 from
third-party research and development funding. This decrease was primarily the
result of the greater increase in revenues during the stated periods. Gross
research and development expenses increased from $4.3 million for the three
months ended March 31, 1998 to $4.7 million for the three months ended March 31,
1999. This increase was primarily due to an increase in our research and
development personnel, number of development projects and related third-party
design and consulting charges. These projects primarily consisted of the
development of the AirStar system at 26, 10 and 38 GHz.
Sales and Marketing. Sales and marketing expenses increased from $1.1
million for the three months ended March 31, 1998 to $1.3 million for the three
months ended March 31, 1999. This increase was due to the continued expansion in
sales, technical assistance and field support personnel necessary to support
both the pre-sale and post-sale activities associated with the AirStar system.
Increased spending includes compensation costs, travel and increased sales
commissions due to higher sales. Sales and marketing expenses, as a percentage
of revenues, decreased from 106% to 62%. This decrease was primarily due to a
greater increase in revenues during the stated periods.
22
<PAGE> 27
General and Administrative. General and administrative expenses increased
from $913,000 for the three months ended March 31, 1998 to $1.8 million for the
three months ended March 31, 1999. This increase was due to an increase in rent
expense resulting from additional office space assumed and an increase in
personnel. General and administrative expenses, as a percentage of revenues,
decreased from 92% to 82%. This decrease was primarily due to a greater increase
in revenues during the stated periods.
Amortization of Deferred Stock Compensation. Amortization of deferred
compensation was $168,000 for the three months ended March 31, 1999. This
amortization is due to deferred compensation of approximately $2.1 million,
related to stock options granted in the year ended December 31, 1998 and the
three months ended March 31, 1999, which we are amortizing over the vesting
periods of the applicable options beginning in 1999.
Other Income (Expense). Other income decreased from $218,000 for the three
months ended March 31, 1998 to an expense of $39,000 for the three months ended
March 31, 1999. This decrease was primarily due to less interest earned on lower
average cash balances, and interest expense incurred due to greater utilization
of secured equipment loans and lease and bank financing for working capital.
COMPARISON OF YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
Revenues. Revenues increased from $731,000 in 1996 to $5.6 million in 1997
due to increased sales of AirMAN in 1997 after its introduction in late 1996.
Revenues decreased from $5.6 million in 1997 to $5.4 million in 1998. This
decrease was primarily due to the discontinuation of the AirMAN system, which
resulted in declining revenues that more than offset the revenues generated from
the launch of the AirStar system. Sales to two customers, PanDacom and o.tel.o
Communications GmbH, represented 79% and 12% of revenues for 1996. Sales to four
customers, PanDacom, Pele-Phone, o.tel.o and Alpine-Energie, represented 39%,
21%, 20% and 12% of revenues for 1997. PanDacom resold substantially all of its
purchases to o.tel.o in 1996 and 1997. Sales to four customers, Alpine-Energie,
Lucent, Italtel and Pele-Phone, represented 27%, 16%, 15% and 10% of revenues
for 1998. Substantially all of the revenues for these years were generated from
installations in international locations.
Gross Profit (Loss). Gross profit decreased from $112,000 in 1996 to a
loss of $2.7 million in 1997 due to sales discounts and inventory write-downs
related to the AirMAN system. Gross profit decreased from a loss of $2.7 million
in 1997 to a loss of $4.2 million in 1998. This decrease was primarily due to
pricing pressures for the AirMAN system in the point-to-point equipment market
and increased warranty reserves for the AirMAN system.
Research and Development. Research and development expenses increased from
$10.4 million in 1996 to $15.3 million in 1997 and $16.1 million in 1998. The
increases in research and development expenses were primarily due to increases
in personnel and compensation costs, prototype material expenses, third party
engineering charges and expenses related to the beta release of the initial
AirStar system. Gross research and development expenses increased from $15.3
million in 1997 to $17.0 million in 1998. Gross research and development
expenses in 1998 were partially offset by third-party research and development
funding of $900,000.
Sales and Marketing. Sales and marketing expenses increased from $1.3
million in 1996 to $3.8 million in 1997 and $4.8 million in 1998. These
increases were primarily due to the significant expansion in sales, technical
assistance and field support personnel necessary to support both the pre-sale
and post-sale activities associated with the AirStar system. Increased spending
also included compensation costs, travel and increased sales commissions due to
higher sales.
General and Administrative. General and administrative expenses increased
from $1.2 million in 1996 to $3.5 million in 1997 and $4.0 million in 1998. The
increases in 1997 and 1998 were primarily due to increased rent expense due to
relocation to larger facilities, as well as an increase in personnel.
Other Income (Expense). Other income increased from $643,000 in 1996 to
$703,000 in 1997 and decreased to $304,000 in 1998. In 1997, interest earned
increased due to higher average cash balances year
23
<PAGE> 28
to year. The decrease in 1998 was primarily due to interest expense resulting
from greater utilization of secured equipment loans and lease and bank financing
for working capital.
QUARTERLY RESULTS OF OPERATIONS
The following tables present unaudited quarterly operating results, in
dollars and as a percentage of revenues, for the five quarters ended March 31,
1999. We believe this information reflects all adjustments (consisting only of
normal recurring adjustments) that we consider necessary for a fair presentation
of such information in accordance with generally accepted accounting principles.
The results for any quarter are not necessarily indicative of results for any
future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------
MAR 31, JUNE 30, SEPT 30, DEC 31, MAR 31,
1998 1998 1998 1998 1999
------- -------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
DATA:
Revenues:
AirStar................................ $ 585 $ 650 $ 103 $ 1,574 $ 2,133
AirMAN................................. 411 1,627 463 25 9
------- ------- ------- ------- -------
Total revenues................. 996 2,277 566 1,599 2,142
Cost of revenues......................... 1,310 2,963 2,523 2,844 1,649
------- ------- ------- ------- -------
Gross profit (loss)...................... (314) (686) (1,957) (1,245) 493
------- ------- ------- ------- -------
Operating expenses:
Research and development............... 4,257 4,512 4,430 2,944 4,224
Sales and marketing.................... 1,051 1,279 1,262 1,227 1,332
General and administrative............. 913 987 990 1,078 1,752
Amortization of deferred stock
compensation........................ -- -- -- -- 168
------- ------- ------- ------- -------
Total operating expenses....... 6,221 6,778 6,682 5,249 7,476
------- ------- ------- ------- -------
Loss from operations..................... (6,535) (7,464) (8,639) (6,494) (6,983)
Other income (expense)................... 218 100 38 (52) (39)
------- ------- ------- ------- -------
Net loss................................. $(6,317) $(7,364) $(8,601) $(6,546) $(7,022)
======= ======= ======= ======= =======
AS A PERCENT OF TOTAL REVENUES:
Revenues:
AirStar................................ 59% 29% 18% 98% 99%
AirMAN................................. 41 71 82 2 1
------- ------- ------- ------- -------
Total revenues................. 100 100 100 100 100
Cost of revenues......................... 132 130 446 178 77
------- ------- ------- ------- -------
Gross profit (loss)...................... (32) (30) (346) (78) 23
------- ------- ------- ------- -------
Operating expenses:
Research and development............... 427 198 783 184 197
Sales and marketing.................... 105 56 223 77 62
General and administrative............. 92 43 175 67 82
Amortization of deferred stock
compensation........................ -- -- -- -- 8
------- ------- ------- ------- -------
Total operating expenses....... 625 297 1,181 328 349
------- ------- ------- ------- -------
Loss from operations..................... (656) (327) (1,527) (406) (326)
Other income (expense)................... 22 4 7 (3) (2)
------- ------- ------- ------- -------
Net loss................................. (634)% (323)% (1,520)% (409)% (328)%
======= ======= ======= ======= =======
</TABLE>
Revenues increased for the two quarters ended March 31 and June 30, 1998
due to increased sales volumes driven by AirMAN system discounts. During these
quarters, revenues also increased due to
24
<PAGE> 29
AirStar system sales to customers for our pre-beta testing program. Revenues
decreased for the quarter ended September 30, 1998 primarily due to the
discontinuation of the AirMAN system. Revenues increased for the quarters ended
December 31, 1998 and March 31, 1999 due to AirStar system sales following our
beta release. Gross profit increased for the quarters ended September 30, 1998,
December 31, 1998 and March 31, 1999 primarily due to increased sales of AirStar
products at relatively higher profit margins. Research and development expenses
decreased in the quarter ended December 31, 1998 primarily due to third-party
engineering funding and fluctuations in third-party design and consulting
charges and usage of prototype material. Sales and marketing expenses fluctuate
on a quarterly basis due to seasonal promotional and marketing expenses for
trade shows. General and administrative expenses increased in the quarter ended
March 31, 1999 due to an increase in rent expense resulting from additional
office space assumed and an increase in personnel. Other income decreased for
the quarters ended June 30, September 30 and December 31, 1998 primarily due to
an increase in interest expense as a result of greater utilization of secured
equipment loans and lease financing and bank financing for working capital.
We believe that period-to-period comparisons of our operating results are
not necessarily meaningful. You should not rely on them to predict future
performance. The amount and timing of our operating expenses generally may
fluctuate significantly in the future as a result of a variety of factors. We
face a number of risks and uncertainties encountered by early stage companies,
particularly those in rapidly evolving markets such as the telecommunications
and data communications equipment industries. We may not be able to successfully
address these risks and difficulties. In addition, although we have experienced
revenue growth recently, our revenue growth may not continue, and we may not
achieve or maintain profitability in the future.
Our quarterly and annual operating results have fluctuated in the past and
are likely to fluctuate significantly in the future due to a variety of factors,
many of which are outside of our control. Our operating results to date are
largely based on sales of AirMAN and customer trials of AirStar. It is likely
that in some future quarter our operating results may fall below the
expectations of securities analysts and investors. In this event, the trading
price of our common stock could significantly decline.
Some of the factors that could affect our quarterly or annual operating
results include:
- our ability to attain and maintain production volumes and quality
levels for our products;
- our ability to obtain sufficient supplies of sole source or long lead
time components for our products;
- our ability to achieve cost reductions;
- the size, timing and frequency of network buildouts, which are
typically large and infrequent;
- the timing and amount of, or cancellation or rescheduling of, orders
for our products, particularly large orders from our system
integrators and resellers;
- our ability to develop, introduce, ship and support new products and
product features and to manage product transitions; and
- a decrease in the average selling prices of our products.
Our sales cycle, which is lengthy -- typically between six and twelve
months -- contributes to fluctuations in our quarterly operating results.
Further, the emerging and evolving nature of the market for point-to-multipoint
systems may lead prospective customers to postpone their purchasing decisions.
In addition, general concerns regarding Year 2000 compliance may further delay
purchase decisions by prospective customers.
Most of our expenses, such as employee compensation and lease payments for
facilities and equipment, are relatively fixed in the near term. In addition,
our expense levels are based, in part, on our expectations regarding future
revenues. As a result, any shortfall in revenues relative to our expectations
could cause significant changes in our operating results from quarter to
quarter. Due to the foregoing
25
<PAGE> 30
factors, we believe period-to-period comparisons of our revenue levels and
operating results are not meaningful. You should not rely on our quarterly
revenues and operating results to predict our future performance.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through the
sale of preferred equity securities and more recently through the use of secured
loans and leases for the purchase of capital equipment and bank financing for
working capital. As of March 31, 1999, we have raised an aggregate of $93.1
million, before offering expenses of $200,000, through the sale of preferred
stock.
As of March 31, 1999, cash and cash equivalents were $8.0 million and
short-term investments were $14.9 million. We have a $6.0 million bank line of
credit. As of March 31, 1999, borrowings outstanding were $2.9 million and
amounts utilized for outstanding letters of credit were $500,000 under this
agreement. The line of credit is secured by eligible outstanding accounts
receivable and inventory. The borrowings under the line are due in January 2000
and accrue interest at the 30-day LIBOR plus 2.25% or the bank's prime rate, at
our option. In addition, we have secured equipment financing with three lenders
which allows a maximum borrowing of $11.8 million of which $2.0 million was
available as of March 31, 1999. As of March 31, 1999, $7.0 million remained
outstanding under these arrangements. See note 6 of notes to consolidated
financial statements.
Cash used for operations was $5.0 million for the three months ended March
31, 1999 and $25.9 million for fiscal 1998. Cash used for operations for both
periods was primarily due to the net loss, partially offset by non-cash charges.
Cash used in investing activities was $6.4 million for the three months
ended March 31, 1999, primarily due to excess cash invested in short-term
investments. Cash used in investing activities was $2.2 million for fiscal 1998,
primarily for capital equipment purchases.
Cash provided by financing activities was $13.3 million for the three
months ended March 31, 1999. Cash provided by financing activities was $18.5
million for fiscal 1998. Cash provided by financing activities for both periods
was primarily due to issuance of preferred stock and, to a lesser extent,
capital lease and bank financing.
We have no material commitments other than obligations under our credit
facilities and operating and capital leases. See notes 6 and 7 of notes to
consolidated financial statements. Our future capital requirements will depend
upon many factors, including the timing of research and product development
efforts and expansion of our marketing efforts. We expect to continue to expend
significant but smaller amounts on property and equipment related to the
expansion of our facilities, research and development laboratory and test
equipment, as the capital required for volume manufacturing is being committed
by our contract manufacturers.
In future periods, we generally anticipate significant increases in
working capital on a period-to-period basis primarily as a result of planned
increased product revenues. In conjunction with the expected increase in
revenues, we expect higher levels of inventory and accounts receivable. While we
also expect an increase in accounts payable and other liabilities, we do not
expect that they will offset the increases in inventory and accounts receivable.
We believe that continued substantial investment in research and
development is critical to attaining our strategic product and cost-reduction
objectives. We also expect to expand our field sales and customer support
organizations as customers move from trials to large scale deployments, which
will in turn increase sales and marketing expenses. The growth of our business
and operation as a public company will require additional personnel and costs
resulting in increases in our general and administrative expenses.
We believe that the net proceeds from this offering together with our cash
and cash equivalents balances, short-term investments and funds available under
our existing line of credit will be sufficient to
26
<PAGE> 31
satisfy our cash requirements for at least the next 12 months. Our management
intends to invest our cash in excess of current operating requirements in
short-term, interest-bearing, investment-grade securities.
IMPACT OF YEAR 2000
Many currently installed computer systems and software products are coded
to accept only two-digit entries in date code fields. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. Any of our computer
programs or hardware that have date-sensitive software or embedded chips and
have not been upgraded to comply with these "year 2000" requirements may
recognize a date using "00" as the year 1900 rather that the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business activities.
General Readiness Assessment. The year 2000 problem affects the
computers, software and other equipment that we use, operate or maintain for our
operations. As a result, we have formalized our year 2000 compliance plan, to be
implemented by a team of our internal information technology staff responsible
for monitoring the assessment and remediation status of our year 2000 projects
and reporting that status to our executive staff. This project team is currently
assessing the potential effect and costs of remediating the year 2000 problem
for our internal systems. To date, we have not obtained verification or
validation from any independent third parties of our processes to assess and
correct any of our year 2000 problems or the costs associated with these
activities.
Assessment of Netro's Products. Beginning in 1998, we began assessing the
ability of our products to operate properly in the year 2000. We believe that
our current products are year 2000 compliant, other than software used in our
AirMAN product. We are in the process of notifying all of our customers that are
using our AirMAN product that we have a software upgrade that fixes the
non-compliant software. Additionally, as we design and develop new products, we
subject them to testing for year 2000 compliance and the ability to distinguish
between various date formats. We expect to continue to test our software and
products for year 2000 compliance and compliance when used with other standard
operating systems or computer platforms. Accordingly, we do not believe that the
year 2000 issue presents a material exposure as it relates to our products
Assessment of Internal Infrastructure. We believe that we have identified
most of the major computers, software applications and related equipment used in
connection with our internal operations that will need to be evaluated to
determine if they must be modified, upgraded or replaced to minimize the
possibility of a material disruption to our business. Based on a review of our
computer systems, we have determined that we will be required to modify or
replace some portions of our software so that those systems will properly
utilize dates beyond December 31, 1999. We presently believe that with
modifications or replacements of existing software through our maintenance
contracts with third-party vendors, year 2000 issues can be mitigated. We expect
to complete this process before December 31, 1999.
Systems Other than Information Technology Systems. In addition to
computers and related systems, the operation of office and facilities equipment,
such as fax machines, telephone switches, security systems and other common
devices, may be affected by the year 2000 problem. We are currently assessing
the potential effect and costs of remediating the year 2000 problem on our
office equipment and our facilities in San Jose, California. We expect to
complete this process before December 31, 1999.
Costs of Remediation. We estimate the total cost to us of completing any
required modifications, upgrades or replacements of our internal systems will
not exceed $100,000, most of which we expect to incur during calendar 1999. This
estimate is being monitored, and we will revise it as additional information
becomes available. Based on the activities described above, we do not believe
that the year 2000 problem will have a material adverse effect on our business
or operating results. In addition, we have not deferred any material information
technology projects nor equipment purchases as a result of our year 2000 problem
activities.
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Suppliers. As part of our year 2000 plan, we have contacted third-party
suppliers of components and key subcontractors used in the delivery of our
products to identify and, to the extent possible, resolve issues involving the
year 2000 problem. However, we have limited or no control over the actions of
these third-party suppliers and subcontractors. Thus, while we expect that we
will be able to resolve any significant year 2000 problems with these third
parties, there can be no assurance that these suppliers will resolve any or all
year 2000 problems before the occurrence of a material disruption to the
operation of our business. Any failure on the part of these third parties to
timely resolve year 2000 problems with their systems in a timely manner could
have a material adverse effect on our business. We expect to complete this
process before December 31, 1999.
Most Likely Consequences of Year 2000 Problems. We expect to identify and
resolve all year 2000 problems that could materially adversely affect our
business operations before December 31, 1999. However, we believe that it is not
possible to determine with complete certainty that all year 2000 problems
affecting us have been identified or corrected. The number of devices and
systems that could be affected and the interactions among these devices and
systems are too numerous to address. In addition, no one can accurately predict
which year 2000 problem-related failures will occur or the severity, timing,
duration or financial consequences of these potential failures. As a result, we
believe that the following consequences are possible:
- a significant number of operational inconveniences and inefficiencies
for us, our contract manufacturers and our customers that will divert
management's time and attention and financial and human resources from
ordinary business activities;
- possible business disputes and claims, including claims under product
warranty, due to year 2000 problems experienced by our customers and
incorrectly attributed to our products or performance, which we
believe will be resolved in the ordinary course of business; and
- a few serious business disputes alleging that we failed to comply with
the terms of contracts or industry standards of performance, some of
which could result in litigation or contract termination.
Contingency Plans: We are currently developing contingency plans to be
implemented if our efforts to identify and correct year 2000 problems affecting
our internal systems are not effective. We expect to complete our contingency
plans before December 31, 1999. Depending on the systems affected, these plans
could include:
- accelerated replacement of affected equipment or software;
- short- to medium-term use of backup equipment and software or other
redundant systems;
- increased work hours for our personnel or the hiring of additional
information technology staff; and
- the use of contract personnel to correct, on an accelerated basis, any
year 2000 problems that arise or to provide interim alternate
solutions for information system deficiencies.
Our implementation of any of these contingency plans could have a material
adverse effect on our business.
Disclaimer: The discussion of our efforts and expectations relating to
year 2000 compliance are forward-looking statements. Our ability to achieve year
2000 compliance, and the level of incremental costs associated therewith, could
be adversely affected by, among other things, the availability and cost of
contract personnel and external resources, third-party suppliers' ability to
modify proprietary software and unanticipated problems not identified in the
ongoing compliance review.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Hedging Instruments. We transact business in various
foreign currencies and, accordingly, we are subject to exposure from adverse
movements in foreign currency exchange rates. To
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date, the effect of changes in foreign currency exchange rates on revenues and
operating expenses have not been material. Basically, all of our revenues are
earned in U.S. dollars. Operating expenses incurred by our German subsidiary are
denominated primarily in European currencies. We currently do not use financial
instruments to hedge these operating expenses. We intend to assess the need to
utilize financial instruments to hedge currency exposures on an ongoing basis.
We do not use derivative financial instruments for speculative trading
purposes.
Fixed Income Investments. Our exposure to market risks for changes in
interest rates relates primarily to corporate debt securities. We place our
investments with high credit quality issuers and, by policy, limit the amount of
the credit exposure to any one issuer.
Our general policy is to limit the risk of principal loss and ensure the
safety of invested funds by limiting market and credit risk. All highly liquid
investments with a maturity of less than three months at the date of purchase
are considered to be cash equivalents; all investments with maturities of three
months or greater are classified as held-to-maturity and considered to be
short-term investments.
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BUSINESS
We are a leading provider of intelligent broadband wireless access systems
to competitive communications service providers worldwide. Our AirStar system
allows service providers to rapidly and cost effectively offer integrated voice
and high-speed packet data services to their business subscribers. We have
engineered AirStar to support broad service rollouts and to operate at a number
of different licensed frequencies worldwide. AirStar derives its
price-performance benefits from dynamic bandwidth allocation and an intelligent
point-to-multipoint architecture. We believe that AirStar is one of the first
commercially available broadband wireless access systems providing integrated
voice and high-speed data services using a point-to-multipoint architecture.
INDUSTRY BACKGROUND
In recent years, the volume of high-speed data traffic across
communications networks worldwide has grown dramatically as the public Internet
and private corporate intranets have become essential for communications and
e-commerce. International Data Corporation forecasts that the number of Internet
users worldwide will grow from approximately 142 million in 1998 to
approximately 502 million by the end of 2003. In addition to an increase in
network traffic volume resulting from this growing user base, traffic is also
increasing due to the development of sophisticated multimedia content and the
deployment of bandwidth-consuming network applications such as e-commerce. IDC
estimates that by 2003, 87% of worldwide e-commerce revenue will be generated
from business users or business-to-business transactions. These forms of content
and network applications require the transmission of large, bandwidth-intensive
files across networks. As users increasingly rely on higher-bandwidth network
applications and content for business and personal use, they require
cost-effective broadband network access, which is often unavailable or
inadequate over the legacy wireline access network infrastructure.
Telecommunications deregulation worldwide is creating greatly expanded
opportunities for a larger group of service providers to meet the increasing
demand for broadband network access. Increased deregulation has enabled a large
number of CLECs to provide local network access historically only offered by the
incumbent, often monopolistic, provider in a given geographical region. This
opportunity is increasingly global as Europe, Latin America and Japan join the
U.S. and the United Kingdom in promoting a competitive local access environment.
Many of these CLECs are focusing on the deployment of wireless broadband
networks because of the inherent ability of wireless technology to offer service
quickly to a large number of subscribers. Furthermore, regulators and local
service providers are focused on wireless broadband as a key technology enabler
for future broadband networks, especially in countries where existing wireline
infrastructure quality would require substantial investment to carry broadband
services. The Strategis Group estimates that wireless broadband, defined as
licensed frequencies from 2.5 to 43 GHz, has the potential to address 60% of the
metropolitan broadband business services market.
In order to enable greater local competition and accelerate broadband
deployments, the FCC and similar regulators abroad have recently opened up
various bands of wireless spectrum at frequencies of 10 GHz and above. These
frequency bands have been allocated or awarded in large contiguous blocks and
have the potential to support both broadband data and traditional voice
services, unlike some lower frequency bands used for narrowband mobile
telephony. To obtain the rights to these licensed bands, many service providers
have either paid substantial upfront fees, committed to large capital
deployments for wireless network buildouts or acquired companies that own
broadband spectrum. Additionally, some mobile telephony operators are seeking to
leverage their wireless experience, roof rights and backhaul infrastructure by
acquiring spectrum to deploy broadband services in what is called fixed mobile
integration, or FMI. These spectrum acquisitions have given CLECs and mobile
operators an alternative means to provide broadband services.
Although increased demand and deregulation have generated new
opportunities for service providers using both wireline and wireless networks,
bandwidth limitations of the "last mile" have constrained service providers from
exploiting these opportunities. The last mile generally spans the link between
the network backbone and the subscriber. Although many wide area network
backbones have been upgraded
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with fiber and have utilized technologies to operate at speeds up to 9 gigabits
per second, the local access telephone network typically consists of legacy
copper lines originally designed to transmit constant-rate voice at a fraction
of that speed. This access bottleneck is frustrating a broad base of business
users, many of which require symmetrical access to high-speed data that tends to
be bursty.
Wireline technologies attempt to solve these bandwidth constraints, but
they do not meet the needs of many CLECs that are seeking to offer broadband
services to businesses worldwide. DSL and cable modem services have recently
been launched by incumbent owners of copper or coaxial cable infrastructures, or
by selected CLECs in the U.S. that have been granted regulatory access to those
infrastructures. Most DSL and cable modem deployments, however, offer
high-speed, asymmetrical services or slower speed symmetrical services. In the
case of DSL, speeds can vary with distance and infrastructure quality. Neither
of these services satisfies the needs of many businesses that require access to
symmetrical high-speed data. Additionally, because coaxial cable passes more
residences than businesses, or is not deployed in many countries, it is not an
alternative for many business users worldwide. Leased lines are available to
business users in many countries, but the prices associated with these
dedicated, high-bandwidth lines are often prohibitive, especially outside the
U.S. Similarly, fiber optic technology is typically only deployed to solve the
bandwidth needs of the largest businesses, where high installation costs can be
spread over many users. In short, these wireline technologies are not
cost-effective for many businesses, or they require either substantial upfront
capital investment or a high-quality existing infrastructure.
CLECs and mobile operators with licenses to broadband wireless spectrum
worldwide are now seeking to capitalize on deregulation and increased demand to
offer broadband network access to subscribers. Many of these CLECs target
business customers for which alternate broadband access technologies are
unavailable, inadequate or not cost-effective. Broadband wireless technologies
can offer immediate coverage of a metropolitan area and can be deployed rapidly
without dependence on the quality of or access to a legacy network.
Although many CLECs with broadband wireless spectrum recognize the
opportunity to meet new demand for integrated voice and high-speed data
services, many are constrained from cost effectively offering these services to
a wide base of business users. Historically, most wireless broadband access
technologies were only cost-effective for providing a dedicated link to connect
high traffic nodes in a network such as large office buildings where high radio
costs can be spread over many users. These dedicated wireless links are
typically referred to as point-to-point connections.
CLECs and mobile operators deploying broadband wireless networks today
must differentiate their services to a wide base of business users while
effectively competing with services offered by fiber, leased lines, DSL and
cable modems. For example, a CLEC deploying a wireless network could offer
multiple integrated voice and data services with guaranteed quality levels to
maximize revenue from its spectrum. A CLEC that could rapidly offer these
services to a broad base of business customers would often have an early-mover
advantage in a particular metropolitan market. Any broadband wireless solution
implemented by these CLECs must be reliable and cost-effective to deploy.
Although a large market opportunity exists to provide solutions that allow CLECs
to deploy differentiated services, very few vendors offer commercially available
wireless broadband products to serve this market.
THE NETRO SOLUTION
We are a leading provider of intelligent broadband wireless access systems
to competitive communications service providers worldwide. Our AirStar system
allows service providers to rapidly and cost effectively offer integrated voice
and high-speed packet data services to their business subscribers. We have
engineered AirStar to support broad service rollouts and to operate at a number
of different licensed frequencies worldwide. AirStar derives its
price-performance benefits from dynamic bandwidth allocation and an intelligent
point-to-multipoint architecture. We believe that AirStar is one of the first
commercially available broadband wireless access systems providing integrated
voice and high-speed data services using a
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point-to-multipoint architecture. We believe our AirStar system provides the
following benefits to service providers:
Service Integration and Bandwidth on Demand. Our AirStar system employs
our proprietary ATM-based media access control layer, CellMAC, which enables
flexible and dynamic sharing of bandwidth on a packet-by-packet basis among a
number of subscribers and service types. Many existing access network
implementations are optimized for either voice or data traffic. Voice traffic
requires constant, low capacity transmissions while data traffic requires
bursty, high-capacity transmissions. Consequently, network operators wishing to
carry both types of traffic often must set aside capacity to service peak data
traffic requirements, allow degradation of service during heavy usage or service
a smaller number of subscribers. In contrast, service providers using AirStar's
intelligent wireless transport can support voice and high-speed data from the
same system without these performance compromises. Additionally, AirStar allows
service providers to offer symmetrical broadband services, with burst rates up
to 8 Mbps to meet the needs of many business users that send and receive large
files for email, application hosting, intranet access and e-commerce.
Cost-Effective Deployment and Operation. AirStar's cost-effective
deployment allows a service provider to compete effectively in the broadband
access market. By employing a point-to-multipoint, hub-and-spoke architecture,
one AirStar hub radio can serve multiple subscriber radios, which lowers total
radio costs relative to point-to-point solutions. AirStar also uses a time
division multiple access, or TDMA, architecture, which reduces duplicate network
hardware components such as modems, and further lowers overall system costs. In
addition, a significant portion of the buildout of an AirStar network is
directly related to subscriber growth, resulting in success-based deployment of
capital. To deploy service to incremental subscribers in a sector, a provider
simply installs plug-and-play subscriber equipment at the business and
provisions the installation remotely. Finally, AirStar's statistical
multiplexing allows a service provider to optimize spectrum use and the
deployment of equipment by expanding effective transmission capacity.
Quality of Service and Reliability. Service providers using AirStar can
deploy voice and data services at different price points to different market
segments with the option for guaranteed quality of service levels and up to
99.999% availability. AirStar can prioritize transmissions based on different
traffic priority levels, and fill available transmission capacity with packets
of lower priority data traffic. Furthermore, AirStar's system is engineered to
enable competitive service providers to offer the same high reliability and
availability for all services that incumbent service providers have historically
offered for voice services. Reliability is accomplished through forward error
correction, redundancy and comprehensive network management software.
Rapid Time to Market. Service providers using AirStar can achieve rapid
time to market for integrated voice and high-speed data through AirStar's
efficient installation, end-to-end network management and intelligent wireless
transport. Competitive service providers that we target have typically committed
a high level of capital investment to enter the broadband access market, and
thus are focused on quickly realizing return on their investment. Our AirStar
system is scalable and allows service providers to rapidly offer new services to
existing or incremental subscribers within a cell by a simple software command
and a plug-and-play radio installation that is automatically configured by the
base station with little technician intervention. By installing one AirStar base
station, the service provider can attain coverage of many potential subscribers.
For example, a typical cell at 10 GHz or 26 GHz can cover ranges from 110 to 275
square miles or 5 to 15 square miles, respectively, depending on local
conditions, and has a transmission capacity equivalent to approximately 400 to
450 T1 lines, or an aggregate capacity of over 600 Mbps. Compared to other
broadband access technologies that often require lengthy and expensive plant
upgrades before offering service or do not support integrated voice and
symmetrical data services, AirStar allows a service provider to rapidly deploy
integrated voice and high-speed data services as demand warrants.
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STRATEGY
Our objective is to be the leading supplier of broadband wireless access
systems used by competitive service providers at multiple licensed frequencies
worldwide. Key elements of our strategy include the following:
Increase Deployments within Our Existing Service Provider Base. As the
needs of service providers evolve, we intend to extend product features to
leverage the success achieved at key service providers. We believe that we are
one of the first vendors to deliver a commercially available point-to-multipoint
broadband access system and thus have an early mover advantage. To date, service
providers have deployed the AirStar system in limited commercial rollouts or
trials. We intend to convert early design wins within our existing service
provider base into large-scale commercial deployments. We expect the average
time between trial and commercial rollout to decrease as these service providers
successfully deploy service to subscribers and become more familiar with the
system.
Drive Deployments by New Service Providers. We believe that our
visibility as one of the first vendors to commercially offer point-to-multipoint
broadband wireless access products will provide additional customer trials and
reference sales. We intend to utilize successful deployments at existing service
providers as reference accounts for new service providers. Our products are
designed to provide price and performance advantages that will help generate new
revenues rapidly for many service providers that license broadband wireless
spectrum worldwide. Consequently, we intend to aggressively expand our product
marketing and development beyond existing service providers at the 10 and 26 GHz
frequencies and into new markets domestically and internationally to serve a
broader service provider base. For example, we intend to conduct 38 GHz trial
installations in 1999, allowing us to serve CLECs at that frequency in the U.S.
market.
Provide Competitive Advantages to Service Providers. We intend to
continue to focus our product development efforts on features that enable
service providers to deploy differentiated, profitable services to their
business subscribers. The AirStar system allows service providers to rapidly and
cost-effectively deploy voice and data services when demand warrants. As service
providers begin to deploy AirStar on a broader basis, we expect they will demand
support for additional data and voice services and higher bandwidth interfaces
to increase their market share. We intend to offer new features that will enable
service providers to further differentiate their services. For example, we
expect to introduce support for ISDN-PRI and Frame Relay interfaces and up to 16
Mbps burst rates in 1999.
Strengthen and Expand Relationships with Leading Communications Equipment
Vendors. We intend to build on our success with Lucent and Siemens/Italtel to
meet the needs of service providers seeking to deploy large-scale networks and
to expand our service provider base. Our relationships with these two vendors
enable service providers deploying AirStar to access turnkey services, such as
system integration, and to receive an increased level of customer service. We
believe the provision of these turnkey services can facilitate broader
deployments worldwide. We further believe that leading communications equipment
vendors have a global sales presence and are in the strongest position to
provide service providers with system integration and comprehensive services and
support. Thus, we believe strengthening these relationships and selectively
establishing new relationships will facilitate increased volume deployments of
our products in the global market.
Capitalize on Technology Leadership to Rapidly and Cost Effectively
Introduce New Products. Our platform enables dynamic bandwidth allocation by
integrating a number of technical competencies, including millimeter wave radio
design, data networking and network management software. We believe integrating
these competencies is highly complex, and we intend to leverage our technology
expertise to introduce new products and features rapidly and cost effectively.
Our modular architectural design enables us to reuse many common networking
elements and protocol software. As a result, the introduction of products in a
new frequency typically only requires relatively simple modifications in the
radio elements rather than the extensive development time and costs of entirely
redesigned equipment.
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Leverage Third-Party Customer Support to Scale Rapidly. We are actively
training our system integrators, our other resellers and service providers
themselves in the operation and maintenance of the AirStar system. Many of our
service providers and system integrators have extensive experience in deploying
and provisioning broadband networks on a large scale. We plan to work closely
with our system integrators and service providers to enable them to provide
their own primary and secondary tiers of support for the AirStar system while
our engineers and customer service personnel will provide backup support on a
24-hour, 7-day basis. By educating our system integrators and service providers'
personnel about primary and secondary levels of support, we intend to scale our
business rapidly as service providers worldwide transition from trials to
commercial deployments.
PRODUCTS
The AirStar system is typically deployed in a cellular, hub-and-spoke
architecture. Each cell has a central hub that can provide immediate coverage of
a particular area, with coverage depending on the licensed frequency, local
conditions and the service availability chosen by the service provider. The
AirStar system consists of integrated network and millimeter wave radio
components located at a central hub and at multiple subscriber locations within
a cell. Components of this system, which are described below, are the Base
Station, the Base Radio Unit, the Subscriber Radio Unit and Subscriber Access
System, all of which are managed by the AirView LE network management software.
Equipment at the hub consists of the Base Station and the Base Radio Unit.
Equipment at a subscriber's premises consists of a Subscriber Access System and
a Subscriber Radio Unit. The AirView LE is typically used at the service
provider's Metropolitan Switching Center, or MSC, where it is used to remotely
monitor the subscriber and the hub equipment. The table below shows the coverage
statistics for a typical installation and configuration under common local
conditions in the geographic regions where we expect many of our products to be
deployed.
<TABLE>
<CAPTION>
COVERAGE AREA
FREQUENCY (SQUARE MILES)
--------- --------------
<S> <C> <C> <C>
10 GHz 110 - 275
26 GHz 5 - 15
38 GHz 2 - 6
</TABLE>
The Base Radio Units at the hub site send and receive simultaneous
broadband transmissions from multiple Subscriber Radio Units. The system
schedules transmissions from each subscriber on a packet-by-packet basis. The
Base Station prioritizes the transmissions and allocates just enough bandwidth
or time slots to complete the transfer of each packet. The Base Station and the
Subscriber Access System process and manage the information transmitted by the
radio components over the air. Security of the transmissions over the air is
achieved through discrete identifiers for each of the Subscriber Access Systems
and bit-level scrambling of the digital transmission through our air interface
protocol. This traffic is processed and delivered to the service provider's MSC,
where the voice and data traffic is interconnected with the public switched
telephone network for voice networks, the Internet backbone or public frame
relay networks.
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The following diagram depicts a wireless broadband access network using
our AirStar system.
[CHART]
Diagram and captions on page 35 of the S-1 form:
1. Left: A diagram depicting the "Subscriber Premises" with a "Netro AirStar
Subscriber Radio Unit" connected to a "Netro AirStar Subscriber Access System"
connected to a PBX (which in turn is connected to three telephones and a fax), a
Router (Frame Relay) and a Computer "LAN". The Subscriber Radio Unit points to a
Netro AirStar Base Radio Unit in the adjacent Left Central Station.
2. Left Central Section A diagram depicting a "Netro AirStar Base Radio Unit"
connected to a Netro AirStar Base Station (with arrows noting the BMU, the BSC
and the BSS). The diagram depicts the "Central Hub". The Base Station is
connected through "fiber" to a cloud and a computer monitor. "Netro AirView Link
Explorer Network Management Software" is in the right Central Section.
3. Right Central Section and Right Section. A diagram depicting the
"backbone" with a cloud depicting traffic from the Base Station being converted
into several networks depicted by clouds: Internet, Frame Relay, PSTN, TDM,
Mobile Switching Center and ATM.
Base Station. Each hub can be configured to provide full redundancy, as
required by telecom service providers, for each of the Base Station components
and the Base Radio Units. A typical Base Station configuration requires a single
Base Station Shelf, which houses several Base Sector Controllers, and is
connected to several Base Modem Units. The design of the Base Station greatly
facilitates redundancy configuration compared to competing solutions that
require much more space.
- BSS. The Base Station Shelf is a chassis with an ATM backplane that
houses the Base Sector Controllers and is connected to the Base Modem
Unit. The BSS aggregates traffic from multiple Base Sector Controllers
and enables them to interface with the various public wide area
networks. It provides network interfaces to these wide area networks
at rates from 34 Mbps (E3) or 45 Mbps (DS3) to 155 Mbps (OC-3/STM-1).
- BSC. The Base Sector Controller controls activity within each sector
by shaping, policing and grooming traffic received from multiple
subscribers. These functions combine to provide network management and
routing within sectors. The BSC supports the CellMAC protocol in
hardware and software and multiplexes and concentrates ATM traffic to
the ATM network through the BSS' ATM UNI trunk. It has built-in Simple
Network Management Protocol, or SNMP, remote management agents, and
enables redundancy support and switching.
- BMU. The Base Modem Unit works together with the Base Radio Unit that
covers a particular sector. It supports high-speed quadrature
amplitude mode, or QAM, modulation to convert air interface signals
into digital bit stream by using burst modulation techniques.
BRU. The Base Radio Unit is a radio transceiver with a single, built-in
sector antenna covering a 90(LOGO) sector. It is compact and lightweight, has a
low profile and is easy to install and align. The BRU transmits and receives
signals from the Subscriber Radio Unit. A typical Base Station configuration
would include four BRUs to cover the whole cell area. We are currently testing a
new release that supports 45(LOGO)
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sectors that will enable higher transmission capacity in some configurations. We
expect this release to be available to our customers in 1999.
SRU. The Subscriber Radio Unit is a radio transceiver with a single
directional antenna with a plug-and-play feature resulting from automatic
frequency tuning. We offer the SRU with built-in or external antennas. It is
compact and lightweight, has a low profile and is easy to install and align. The
SRU transmits and receives signals from the BRU.
SAS. The Subscriber Access System provides the subscriber premises
interfaces and translates voice and data traffic to asynchronous transfer mode,
or ATM, cells for air transmission in a TDMA CellMAC format to and from the Base
Station. It supports the following features:
- Software interfaces to full and fractional T1/E1 and Ethernet for IP
over ATM. We are currently testing a new release that adds intelligent
voice processing for ISDN-PRI and DASS2, a 100 BaseT interface and
Frame Relay. We expect this release to be available to our customers
in 1999.
- Ability to request, through the CellMAC air interface protocol, and
support high-speed sustained transmission up to rates in excess of 500
Kbps to and from the Base Station and burst transmissions up to
channel rates of 8 Mbps. We are currently testing a new release that
supports high-speed sustained transmission up to rates in excess of 3
Mbps and burst transmission up to channel rates of 16 Mbps. We expect
this release to be available to our customers in 1999.
- Remote monitoring of the SRUs.
AirView LE. All components of the AirStar network are managed remotely by
our AirView Link Explorer software, using SNMP. With AirView LE, an SRU, once
installed, can "self-admit" into the network, saving configuration and
installation time, and SAS software upgrades can be supported remotely. AirView
LE provides remote SNMP monitoring of all configuration items and alarms. We are
currently testing a new release that enables AirView to interface with leading
third-party network management systems, enabling service provisioning, fault
management, performance monitoring and simultaneous access by multiple network
operators. We expect this release to be available to our customers in 1999. This
remote and simultaneous access capability supports the management of regional or
national networks.
TECHNOLOGY
We believe we have developed industry-leading technologies, including
CellMAC's software and hardware implementations, an advanced ATM/TDMA
architecture, burst modulation technology and networking software capabilities.
We first commercialized these technologies in the form of our AirStar family of
products by focusing on the service provider's needs.
CellMAC Air Interface Protocol. We believe our proprietary ATM-based
CellMAC protocol maximizes the benefit of point-to-multipoint transmission
through our TDMA/ATM architecture, and advanced TDMA-based burst modulation and
demodulation techniques. CellMAC schedules transmissions from each subscriber on
a packet-by-packet basis. It allows subscribers to request additional bandwidth
from the Base Station for bursty data services through a bandwidth reservation
mechanism that requires little wasted spectrum. The Base Station can prioritize
the requests according to service level agreements and allocates just enough
bandwidth or time slots to complete the transfer of each packet. Traffic from
each subscriber terminal shares the bandwidth on a packet-by-packet basis, as
necessary, to fulfill the quality of service for each subscriber.
ATM Architecture. We have implemented ATM/TDMA technology over the air
interface to efficiently combine constant bit rate voice and variable bit rate,
bursty packet data onto a single bit stream. CellMAC is our implementation of
ATM protocol over the air. We believe ATM is the only standardized technology
that can transport voice and data traffic simultaneously and maintain QoS for
each traffic type: low end-to-end delay for voice, and statistical multiplexing
and fair sharing for bursty data. With statistical
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multiplexing of bursty data services, bandwidth for IP services can be provided
based on average throughput requirements rather than peak throughput
requirements. As a result, the capacity of the transmission channel is increased
by this peak to average throughput ratio, resulting in better use of spectrum
and thus lower equipment expenditures.
Burst Modulation and Millimeter Wave Radio Technology. During the same
time point-to-point wireless transmission evolved toward point-to-multipoint
topologies, modulation technology migrated from frequency shift keying, or FSK,
to the more bandwidth and power efficient QAM modulation. This has led to demand
for increased performance in radio design as well as improved operational
robustness. Higher throughput and lower power requirements necessitate advanced
radio design. Since our inception, we have worked extensively on radio designs
and volume manufacturing processes to create robust yet cost-effective radios
that support QAM modulation. The current AirStar radios are our third generation
design.
System and Services Software. Our software architecture and use of
object-oriented design principles for both real-time and network management
software are key to making our AirStar software modular and adjustable to
additional communications protocols. Our software extends the ability of the
AirStar system to enable the inter-working of voice protocols and support
statistical multiplexing of voice services. In a release we are currently
testing, our software extends the capabilities of the CellMAC protocol to
provide dynamic bandwidth allocation to voice services, such as ISDN PRI and
DASS2.
SALES AND MARKETING
We have sales representatives in France, Germany and the United Kingdom,
as well as in Atlanta, Georgia and in our corporate headquarters in San Jose,
California. We sell our products through worldwide system integrators, our
direct sales force and local resellers. We have established OEM relationships
with two leading system integrators, Lucent and Siemens/Italtel. In each case,
the system integrator resells AirStar under its own brand name, Lucent as Lucent
OnDemand and Siemens/Italtel as SRA MP. We have worked with these system
integrators in development of end-to-end network management systems and radio
planning tools. Our system integrators typically have the means to provide
vendor financing of equipment and may do so in situations where our equipment is
purchased as part of the total network. For some service providers, this
financing is a necessary part of the total solution.
We also target key strategic accounts with our direct sales force. In
determining which accounts to service directly, we identify those that are key
early adopters that can help drive the product feature sets in a manner that
will better address the needs of the marketplace as a whole. Regardless of the
actual distribution channel that services the account, our direct sales force
maintains contact with the service provider and the system integrator account
team. This contact keeps us close to the evolving needs of the service providers
and helps ensure that we are well positioned within each account. In some
markets, we have established distribution relationships with local resellers
that also provide support and maintenance to the service providers they cover.
Our marketing group provides marketing support services for our executive
staff, direct sales force as well as for system integrators and resellers.
Through our marketing activities, we provide technical and strategic sales
support to our direct sales personnel and system integrators or resellers
including: in-depth product presentations, technical manuals, sales tools,
pricing, marketing communications, marketing research, trademark administration
and other support functions.
Our marketing group is also responsible for product management activities
throughout each product's lifecycle. These include the definition of product
features, approval of product releases, specification of enhancements to our
product and service offerings, and determination of future product platforms.
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<PAGE> 42
STRATEGIC RELATIONSHIPS
We have established strategic relationships with two worldwide system
integrators to facilitate the deployment of our products and to meet the
requirements of service providers with end-to-end network integration as they
seek to deploy our broadband wireless access solution.
- Lucent. Under an OEM agreement we signed with Lucent in October 1998
after extensive qualifying and testing of our AirStar product, Lucent
will sell and market our AirStar equipment on a non-exclusive basis
for a period of up to three years, with an option to extend this
initial period. Lucent is currently marketing the AirStar product
under the name Lucent OnDemand. We have agreed to manufacture and sell
our products to Lucent and to provide Lucent with technical support
and assistance in the development of customer proposals. Lucent plans
to offer the OnDemand solution as part of an end-to-end solution with
a complete suite of support services, NetCare(R) that includes
planning, design and consulting, network implementation and
integration and administration services and tools as well as
comprehensive support. We have also entered into an accelerated
development agreement with Lucent to collaborate on the development of
the 38 GHz version of the AirStar.
- Siemens - Italtel. Italtel is an entity that is owned 50% by Siemens
and 50% by Telecom Italia. Siemens has advised us that Italtel serves
as the center of competence of radio technology in the Siemens group
of affiliated companies. Under an OEM agreement we signed with Italtel
in November 1997, Siemens and some of its affiliates will sell and
market our products on a non-exclusive basis for a period of up to
five years and we will manufacture and sell these products. Siemens is
currently marketing the AirStar product under the name Siemens SRA MP.
Siemens/Italtel plans to sell our products as part of an integrated
network solution. Italtel has also made an equity investment in Netro.
CUSTOMERS
We target service providers worldwide that have broadband wireless
spectrum rights or are planning to acquire rights to deliver broadband services
to subscribers. We began shipping the beta AirStar system to service providers
in the third quarter of 1998. Our direct sales in most cases are to our system
integrators, Lucent and Siemens/Italtel, or to distributors that in turn sell to
service providers. The following is a partial list of service providers or
enterprises that have purchased or deployed our AirStar system, either as a
trial system or to carry traffic to subscribers, and the locations of
deployment, and in connection with which we have recognized revenues in excess
of $80,000.
<TABLE>
<S> <C>
- Advanced Radio Telecom (Norway)
- Airtel (Spain)
- AT&T Local Services (U.S.)
- Byblos Bank (Lebanon)
- COMSAT Peru, S.A.(Peru)
- CTI Movil (Argentina)
- Formus Communications, Inc.
(Hungary)
- Future Communications Company
(Kuwait)
- Infostrada (Italy)
- KG Telecommunication Co. Ltd.
(Taiwan)
- Medunet (Saudi Arabia)
- NTL (U.K.)
- Retevision (Spain)
- RSL Communications (Austria)
- TechTel (Argentina)
</TABLE>
In addition, we have service provider trials in Germany and Japan and
several trial installations with system integrators in the U.S. and Europe.
OPERATIONS AND MANUFACTURING
Our manufacturing activities, based in our San Jose facility, consist
primarily of low-volume production and procurement. Our strategy is to outsource
manufacturing to contract manufacturers, which
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<PAGE> 43
have the expertise and ability to achieve cost reductions associated with volume
manufacturing and to respond quickly to customer orders while maintaining high
quality standards. This also serves to turn some of our fixed costs into
variable costs and enables us to enjoy the purchasing efficiencies of these
larger manufacturers. We have manufacturing contracts in place with Solectron
Corporation and Microelectronic Technologies, Inc. of Taiwan (MTI). MTI will
manufacture millimeter wave radio equipment, and Solectron will manufacture both
millimeter wave radio equipment and digital system components. Our agreement
with MTI makes us MTI's exclusive customer for terrestrial point-to-multipoint
millimeter wave radio equipment, provided we meet annual purchase minimums.
Our operations and manufacturing groups will facilitate technology
transfer between our research and development group and the contract
manufacturers. We may also use our manufacturing operation to expedite the sales
cycle before the full product release to external manufacturers.
RESEARCH AND DEVELOPMENT
We believe that our extensive experience designing and implementing
high-quality network and radio components and system software has enabled us to
develop high-value integrated systems solutions. As a result of these
development efforts, we believe we have created an industry-leading platform for
cost effective broadband wireless voice and data delivery with dynamic bandwidth
allocation.
We believe that our future success depends on our continued investment in
research and development in core radio, networking and software technologies,
and we expect to continue to invest a significant portion of revenues in this
area. Our net research and development expenditures for 1996, 1997, 1998 and the
three months ended March 31, 1999 were $10.4 million, $15.3 million, $16.1
million and $4.2 million. We are committed to an ongoing new product development
program that is based on an assessment of service providers' needs and
technological changes in the communications market. We are currently investing
significant resources in enhancing our network management software, integrating
base station components, extending the capabilities, frequencies and capacity of
AirStar's transmission, improving performance and accelerating cost reduction.
CUSTOMER SERVICE
A high level of continuing service and support is critical to our
objective of developing long-term customer relationships. Our customer support
organization is based in our San Jose headquarters. We also have a customer
service presence in the United Kingdom and Germany. Our headquarters support
organization serves as the interface to our research and development group to
escalate certain problems and also provides information about customers' needs
to the marketing and research and development organizations. Our customer
support model consists of three tiers of support: local problem isolation, fault
isolation and repair, and expert level support.
Our main focus is to provide system integrators with the ability to
provide local support worldwide to service providers, including training, spare
parts, maintenance and installation. As most of the hands-on support is provided
through system integrators, local resellers or the service providers themselves,
we focus on offering various training courses to enable system integrators and
service providers perform both local problem isolation and fault isolation and
repair. When the sale is direct to the service provider, the service provider
typically assumes responsibilities for both local problem isolation and fault
isolation and repair tiers. Currently, the majority of our service and support
activities are related to training and installation support for service
providers. These services are provided directly at customer installations with
resources from our customer support group or remotely by our San Jose
headquarters team.
We have a number of flexible hardware and software maintenance and support
programs available for products beyond the applicable warranty period, depending
on our customer preferences. In the case of trials, we offer an evaluation
support package, where training, installation and acceptance testing are
delivered within specific time frames. These activities are usually performed
on-site by our personnel. As more trials begin carrying commercial traffic, we
will migrate the support capabilities to off-hours, 24-hour, 7-day support, and
continue to provide expert level support for service providers and system
integrators.
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<PAGE> 44
COMPETITION
The market for broadband access products generally, and
point-to-multipoint wireless access products specifically, is rapidly evolving
and highly competitive. As a provider of broadband point-to-multipoint wireless
access products, we compete with several large telecommunications equipment
suppliers such as Alcatel, Bosch, Ericsson, Hughes, Newbridge, Nortel and
Spectrapoint, a newly formed joint venture between Cisco and Motorola, as well
as with smaller start-up companies. In addition, well capitalized companies such
as Nokia are potential entrants into the market. As an industry, broadband
point-to-multipoint wireless access products compete with other potential
broadband access solutions, such as wireless point-to-point technologies and
broadband satellite, wireline technologies that utilize existing infrastructure,
such as digital subscriber line, or DSL, fiber optic cable, cable modem
technologies and leased lines.
We expect competition to persist and intensify in the future. Many of our
competitors are substantially larger than we are and have significantly greater
financial, sales and marketing, technical, manufacturing and other resources and
more established distribution channels. These competitors may be able to respond
more rapidly to new or emerging technologies and changes in customer
requirements or devote greater resources to the development, promotion, sale and
financing of their products than we can. Furthermore, some of our competitors
may make strategic acquisitions or establish cooperative relationships among
themselves or with third parties to increase their ability to rapidly gain
market share by addressing the needs of our prospective customers. These
competitors may enter our existing or future markets with solutions that may be
less expensive, provide higher performance or additional features or be
introduced earlier than our solutions. We also expect that other companies may
enter our market with better products and technologies. If any technology that
is competing with ours is more reliable, faster, less expensive or has other
advantages over our technology, then the demand for our products and services
would decrease, which would seriously harm our business.
We expect our competitors to continue to improve the performance of their
current products and introduce new products or new technologies as industry
standards and customer requirements evolve that may supplant or provide lower
cost alternatives to our products. Successful new product introductions or
enhancements by our competitors could reduce sales or the market acceptance of
our products, perpetuate intense price competition or make our products
obsolete. To be competitive, we must continue to invest significant resources in
research and development, sales and marketing and customer support. We cannot be
sure that we will have sufficient resources to make these investments or that we
will be able to make the technological advances necessary to be competitive. As
a result, we may not be able to compete effectively against our competitors. Our
failure to maintain and enhance our competitive position within the market may
adversely affect our business. Some of the factors on which we compete are:
<TABLE>
<S> <C>
- availability of product
- availability of financing
- reliability of product
- low entry price point
- ability to scale
- ease of use
- bandwidth of product
- operating experience
- price-performance
- breadth of frequency offerings
- completeness of integration
- customer support
- multi-service capability
- manufacturing capacity
- network management software
- installed base
</TABLE>
Increased competition is likely to result in price reductions, shorter
product life cycles, reduced gross margins, longer sales cycles and loss of
market share, any of which would adversely affect our business.
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<PAGE> 45
INTELLECTUAL PROPERTY
We rely on a combination of patent, copyright, trademark and trade secret
laws, as well as confidentiality agreements and licensing arrangements, to
establish and protect our proprietary rights. We presently have two issued U.S.
patents, and two patent applications pending, with more in process. Despite our
efforts to protect our proprietary rights, existing copyright, trademark and
trade secret laws afford only limited protection. In addition, the laws of some
foreign countries do not protect our proprietary rights to the same extent as do
the laws of the United States. Attempts may be made to copy or reverse engineer
aspects of our products or to obtain and use information that we regard as
proprietary. Accordingly, we may not be able to protect our proprietary rights
against unauthorized third-party copying or use. Furthermore, policing the
unauthorized use of our products is difficult. Litigation may be necessary in
the future to enforce our intellectual property rights, to protect our trade
secrets or to determine the validity and scope of the proprietary rights of
others. This litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on our future operating
results.
PROPERTIES
We sublease an approximately 66,000 square foot facility in San Jose,
California, approximately 47,000 of which we currently use for executive offices
and for administrative, engineering, product development, manufacturing and
sales and marketing purposes. The remaining space is available for our use for
general offices, light manufacturing, storage or other related uses. The
sublease for this facility expires in September 2001.
EMPLOYEES
As of March 31, 1999, we employed approximately 146 full-time employees
and 22 contract personnel. Our full-time employees include 50 people in
operations and manufacturing, 61 in engineering, 22 in sales, marketing and
customer service, and 13 in finance and administration. None of our employees is
represented by collective bargaining agreements, and we consider relations with
our employees to be good.
LEGAL PROCEEDINGS
In March 1999, one of our former contract manufacturers, Quadrus
Manufacturing, a division of Bell Microproducts Inc., filed for binding
arbitration in Santa Clara County, California with respect to a dispute with us.
The arbitration involves claims by Quadrus for approximately $950,000 for
amounts allegedly owed by us for inventory purchased by Quadrus in anticipation
of our projected demand. In June 1999, we filed an answer and counterclaim
alleging damages of approximately $275,000 for product failures. We believe we
have meritorious defenses to their claim, and we intend to defend this
arbitration vigorously. However, we may not prevail in this arbitration. The
arbitration process is inherently uncertain. Our defense of this arbitration,
regardless of its eventual outcome, has been, and will likely continue to be,
time-consuming, costly and a diversion for our personnel. A failure to prevail
could result in us having to pay monetary damages to Quadrus, which could
materially harm our business.
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<PAGE> 46
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers, directors and other key employees and their ages as
of June 22, 1999 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Richard M. Moley.......................... 60 Chairman of the Board of Directors
Gideon Ben-Efraim......................... 56 President, Chief Executive Officer and
Director
Michael T. Everett........................ 50 Executive Vice President and Chief
Financial Officer
Matthew Powell............................ 44 Senior Vice President, Worldwide Sales
John Perry................................ 51 Chief Technology Officer and Vice
President, Engineering
Cynthia M. Hillery........................ 45 Vice President, Marketing
Man Wong.................................. 47 Vice President, Operations
Zohar Lotan............................... 51 Vice President, Customer Service
Stuart Feeney............................. 34 Vice President, Engineering
James Hannigan............................ 54 Vice President, Software
Thomas R. Baruch.......................... 60 Director
Neal Douglas.............................. 40 Director
Irwin Federman............................ 63 Director
John L. Walecka........................... 39 Director
</TABLE>
Richard M. Moley has been a director since November 1997 and Chairman of
the Board of Directors since March 1998. Since August 1997, Mr. Moley has been a
private investor. From July 1996 to August 1997, he served as Senior Vice
President, Networking and as a director of Cisco Systems, Inc., following Cisco
Systems' purchase of Stratacom, Inc., where he was from June 1986 to July 1996,
Chairman of the Board, Chief Executive Officer and President. Mr. Moley serves
on the boards of directors of Linear Technology Corporation, a designer and
manufacturer of linear integrated circuits, CIDCO Incorporated, a designer and
developer of subscriber telephone equipment, Echelon Corporation, a developer of
control network hardware and software products, CMC Industries, a manufacturer
of telecommunications systems and equipment, and several private companies.
Gideon Ben-Efraim has served as our President, Chief Executive Officer and
a director since founding Netro in November 1994. From November 1994 to March
1998, Mr. Ben-Efraim was Chairman of the Board of Directors. Prior to joining
Netro, Mr. Ben-Efraim was a founder and Executive Vice President, Engineering
and Business Development at P-Com Inc., a digital microwave radio company, from
June 1991 to November 1994. Mr. Ben-Efraim received a B.S. in Industrial
Engineering and Management from Tel Aviv University.
Michael T. Everett has served as our Chief Financial Officer since joining
Netro in March 1997, at which time he was appointed Senior Vice President. He
has been Executive Vice President since January 1999. From December 1996 to
February 1997, he served as Executive Vice President and Chief Financial Officer
at Diva Communications Inc. Prior to joining Netro, Mr. Everett spent ten years
at Raychem Corporation, a telecommunication and electronic components supplier,
from April 1987 to November 1996, as General Counsel and Chief Financial
Officer, and most recently, Senior Vice President, Asia. Mr. Everett received a
B.A. from Dartmouth College and a J.D. from the University of Pennsylvania Law
School.
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<PAGE> 47
Matthew Powell has served as our Senior Vice President, Worldwide Sales
since March 1998. Prior to joining Netro, Mr. Powell served as Director of
Marketing at Cisco Systems from February 1997 to March 1998 and in various sales
management positions at StrataCom from 1986 to February 1997. Mr. Powell
received a B.A. from Tulane University and an M.B.A. from The Wharton School,
University of Pennsylvania.
John Perry has served as our Chief Technology Officer and Vice President,
Engineering since joining Netro in September 1998. Prior to joining Netro, Mr.
Perry served as Vice President, Engineering at Diva Communications Inc. from
January 1996 to September 1998, and Vice President, Engineering at Ericsson
Raynet from October 1993 to December 1995. Mr. Perry received a Bachelor's
degree in Electrical Engineering and Device Electronics from the University of
Hertfordshire, England.
Cynthia M. Hillery has served as our Vice President, Marketing since April
1997. From May 1996 until April 1997, Ms. Hillery served as our Vice President,
Networking Products. Prior to joining Netro, Ms. Hillery served as Senior
Director of Product Management at Network Equipment Technologies from January
1987 to May 1996. Ms. Hillery received a B.A. from the University of California,
Berkeley and a Ph.D. from the University of Chicago.
Man Wong has served as our Vice President, Operations since joining Netro
in May 1999. Prior to joining Netro, Mr. Wong was Director of Operations at
GaSonics International Corporation, a microwave plasma semiconductor equipment
manufacturing company, from March 1996 to May 1999. From October 1993 to March
1996, Mr. Wong was the Manufacturing Engineering and Advanced Development
Manager at Litton Electron Devices Division. Mr. Wong received a B.S. in Physics
from The Chinese University, Hong Kong, an M.B.A. from Golden Gate University,
and an M.Sc. and Ph.D. in Physics from the University of Waterloo (Canada).
Zohar Lotan joined Netro in April 1995 as Director of Engineering and
acting Vice President, Engineering. In May 1996, he joined the marketing team as
Senior Director for Program Management and became Vice President, Customer
Service in September 1998. Prior to joining Netro, Mr. Lotan managed a software
design team at Nortel from August 1988 to April 1995, developing wireless and
ISDN communications. Mr. Lotan received a B.Sc. degree in Electrical Engineering
from the Technion, Israel Institute of Technology and M.Sc. degree in
Engineering Economic Systems from Stanford University, California.
Stuart Feeney has served as our Director, Radio Engineering and later as
our Vice President, Engineering since May 1995. Prior to joining Netro, Mr.
Feeney served as Director of System Engineering at P-Com from June 1992 to May
1995. Mr. Feeney received a Bachelor's degree in Engineering from the University
of Salford, England, and a general business education from the University of
Manchester Institute of Science and Technology.
James Hannigan has served as our Vice President, Software since June 1999.
Prior to joining Netro, Mr. Hannigan served as Vice President, Software at Cisco
Systems from May 1998 to May 1999. From March 1982 to June 1997, he was at
Tandem Computer in the position of Vice President, Software Development for the
non-stop software division. Mr. Hannigan received a B. Sc. in Mathematics from
California Polytechnic University in San Luis Obispo.
Thomas R. Baruch has been a director since November 1994. Mr. Baruch has
been a General Partner in CMEA Ventures, a venture capital firm, since 1988. Mr.
Baruch is also a Special Partner in New Enterprise Associates, a venture capital
firm. Prior to joining CMEA, Mr. Baruch was the President and Chief Executive
Officer of Microwave Technology, Inc., from 1983 to 1988. Mr. Baruch serves on
the boards of directors of Physiometrix Inc., a developer and manufacturer of
non-invasive advanced medical products, as well as several private companies.
Neal Douglas has been a director since June 1995. Since January 1993, Mr.
Douglas has been a General Partner of AT&T Ventures, a venture capital firm.
From May 1989 to January 1993, Mr. Douglas was a partner of New Enterprise
Associates, a venture capital firm. Mr. Douglas currently serves on the boards
of directors of Software.com, a provider of scalable, high performance messaging
software
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<PAGE> 48
applications for providers of Internet communications and services, Cellnet Data
Systems, Inc., a provider of fixed network wireless information services,
FVC.COM, an Internet video applications company, TUT Systems, a provider of
products that enable high speed data transmissions over copper wires, and
several privately held companies.
Irwin Federman has been a director since June 1995. Mr. Federman has been
a general partner of U.S. Venture Partners, a venture capital company, since
1990. Mr. Federman serves on the boards of directors of SanDisk Corporation, a
solid-state memory system company, Western Digital Corporation, a disk drive
manufacturer, Komag Incorporated, a thin film media manufacturer, CheckPoint
Software Technologies, Inc., a network security software company, and MMC
Networks, Inc., a developer and supplier of network processors.
John L. Walecka has been a director since November 1995. Since 1984, Mr.
Walecka has been at Brentwood Venture Capital, a venture capital investment
firm, and has been a general partner since 1990. Mr. Walecka serves on the
boards of directors of Rhythms NetConnections Inc., a service provider using DSL
technology, and is also a director of several privately held companies.
BOARD COMPOSITION
We currently have authorized six directors. In accordance with the terms
of our Articles of Incorporation, effective upon the closing of this offering,
the terms of office of the directors will be divided into two classes: Class I,
whose term will expire at the annual meeting of shareholders to be held in 2000
or a special meeting held instead of that annual meeting, and Class II, whose
term will expire at the annual meeting of shareholders to be held in 2001 or a
special meeting held instead of that annual meeting. The Class I directors are
Messrs. Baruch, Douglas and Federman; the Class II directors are Messrs.
Ben-Efraim, Moley and Walecka. At each annual meeting of shareholders after the
initial classification or special meeting held instead of an 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 second annual meeting
following election or special meeting held instead of an annual meeting. In
addition, our Articles of Incorporation provide that the authorized number of
directors may be changed only by resolution of the board of directors. Any
additional directorships resulting from an increase in the number of directors
will be distributed among the two classes so that, as nearly as possible, each
class will consist of one-half of the directors. This classification of the
board of directors may have the effect of delaying or preventing changes in
control or management of Netro. Although directors of Netro may be removed for
cause by the affirmative vote of the holders of a majority of the common stock,
our Articles of Incorporation provide that holders of two-thirds of the common
stock must vote to approve the removal of a director without cause.
BOARD COMPENSATION
We do not currently compensate our directors, but directors are reimbursed
for out-of-pocket expenses incurred in connection with attendance at meetings of
the board of directors or any committees of the board of directors. Our
directors are eligible to participate in our 1996 Stock Option Plan and, to the
extent that a director is an employee of Netro, to participate in our 1999
Employee Stock Purchase Plan. Our directors who are not employees also receive
periodic stock option grants under our 1997 Directors' Stock Option Plan.
BOARD COMMITTEES
Upon the effectiveness of this offering, the Compensation Committee will
consist of Messrs. Baruch and Walecka. The Compensation Committee reviews and
approves the compensation and benefits for our executive officers and grants
stock options under our stock option plans; and makes recommendations to the
board of directors regarding such matters. Upon the effectiveness of this
offering, the Audit Committee will consist of Messrs. Douglas and Federman. The
Audit Committee makes recommendations to the board of directors regarding the
selection of independent auditors; reviews the results and scope of the
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<PAGE> 49
audit and other services provided by our independent auditors; and reviews and
evaluates our audit and control functions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee serves 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. See "Certain Transactions" for a description of transactions between
Netro and entities affiliated with members of the Compensation Committee.
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning the
compensation received for services rendered to Netro during the fiscal year
ended December 31, 1998 by the Chief Executive Officer, each of the other four
most highly compensated executive officers serving as such as of December 31,
1998, each of whose aggregate compensation during Netro's last fiscal year
exceeded $100,000, and two other executive officers whose annual compensation
exceeded $100,000 in 1998, but whose employment with Netro terminated prior to
December 31, 1998, all of whom are referred to below as Named Executive
Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
- --------------------------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Gideon Ben-Efraim........................... $200,000 $50,000 -- $ --
Chief Executive Officer, President and
Director
Michael T. Everett.......................... 165,077 45,000 -- --
Chief Financial Officer and Executive Vice
President
Matthew Powell.............................. 100,000 120,000 400,000 --
Senior Vice President, Worldwide Sales
Cynthia M. Hillery.......................... 132,956 20,000 40,000 --
Vice President, Marketing
Avram Caspi(1).............................. 138,606 25,000 120,000 13,441(1)
Vice President, Operations
Amir Makleff(2)............................. 163,863 -- -- --
Vice President, Engineering
Eli Pasternak(3)............................ 158,376 -- -- --
Chief Scientist
</TABLE>
- ---------------
(1) Mr. Caspi's employment with Netro terminated in June 1999. His other
compensation consisted of relocation expenses.
(2) Mr. Makleff's employment with Netro terminated in November 1998.
(3) Mr. Pasternak's employment with Netro terminated in November 1998.
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<PAGE> 50
The following table provides certain summary information regarding stock
options granted to the Named Executive Officers during the fiscal year ended
December 31, 1998.
Individual grants below consist of options granted pursuant to Netro's
1995 and 1996 Stock Option Plans. The 5% and 10% assumed annual rates of
compounded stock price appreciation are mandated by the rules of the SEC. There
can be no assurance that the actual stock price appreciation over the ten-year
option term will be at the assumed 5% and 10% levels or at any other defined
level. Unless the market price of the common stock appreciates over the option
term, no value will be realized from the option grants made to the Named
Executive Officers.
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------- POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL RATES
NUMBER OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO TERM
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------------
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
- ---- ---------- ------------ -------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gideon Ben-Efraim............ -- --% $ -- -- $ -- $ --
Michael T. Everett........... -- -- -- -- -- --
Matthew Powell............... 400,000 25.0 2.00 3/3/08 503,116 1,274,994
Cynthia M. Hillery........... 40,000 2.0 2.00 6/2/08 50,312 127,499
Avram Caspi.................. 120,000 7.0 2.00 3/3/08 150,935 382,498
Amir Makleff................. -- -- -- -- -- --
Eli Pasternak................ -- -- -- -- -- --
</TABLE>
Mr. Ben-Efraim received 300,000 options under the 1999 Executive Stock
Plan in April 1999. Mr. Everett received 225,000 options under the 1999
Executive Stock Plan in April 1999. Mr. Powell received 150,000 options under
the 1999 Executive Stock Plan in April 1999. Ms. Hillery received 100,000
options under the 1999 Executive Stock Plan in April 1999. Mr. Caspi received
20,000 options under the 1999 Executive Stock Plan in April 1999, which were
repurchased upon his termination.
The following table provides certain summary information concerning the
exercise of options by the Named Executive Officers in 1998 and the shares of
common stock represented by outstanding stock options held by each of the Named
Executive Officers as of December 31, 1998. The value of unexercised
in-the-money options set forth below represents the difference between the fair
market value of the underlying common stock on December 31, 1998 using an
assumed initial public offering price of $
per share as the fair market value and the exercise price of the option.
AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER UNDERLYING IN-THE-MONEY
OF SHARES UNEXERCISED OPTIONS AT OPTIONS AT
ACQUIRED FISCAL YEAR-END FISCAL YEAR-END
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gideon Ben-Efraim............... -- $ -- 400,000 --
Michael T. Everett.............. -- -- 183,750 236,250
Matthew Powell.................. -- -- -- 400,000
Cynthia M. Hillery.............. 61,250 37,417 101,333
Avram Caspi..................... -- -- -- 120,000
Amir Makleff.................... 450,000 -- --
Eli Pasternak................... -- -- -- --
</TABLE>
46
<PAGE> 51
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
In March 1995, Netro entered into an employment agreement with Gideon
Ben-Efraim, Netro's Chief Executive Officer, President and Director. The initial
base salary under this agreement was $120,000 per year, with an automatic
increase to $145,000 upon the closing of Netro's Series A preferred stock
financing. Mr. Ben-Efraim's salary has been increased pursuant to annual review
by the Board of Directors. Pursuant to the agreement, Mr. Ben-Efraim receives a
cash bonus equal to 20% of his base salary, in addition to participation in any
annual executive bonus plan of Netro. In the event of termination other than for
cause, the agreement entitles Mr. Ben-Efraim to severance benefits equal to
twelve months of his then-current base salary as well as a lapse of 25% of
Netro's repurchase option on unvested shares then held by Mr. Ben-Efraim,
including those held by his family trust. If Netro enters into certain change-
of-control transactions, the vesting of Mr. Ben-Efraim's options and shares
subject to repurchase, including those held by his family trust, will accelerate
so that all unvested options and shares would become fully vested upon the
closing of the change-of-control transaction. The agreement also provides that,
in the event Netro grants registration rights to any officers or investors,
Netro will grant no less favorable rights to Mr. Ben-Efraim.
Netro has entered into change-of-control agreements with Richard M. Moley,
Gideon Ben-Efraim, Michael T. Everett, Matthew Powell, John Perry, Man Wong and
James Hannigan. Pursuant to Mr. Moley's agreement, in the event of a merger,
consolidation, acquisition or other change-of-control event, unvested shares and
options held by Mr. Moley, or his affiliates, will vest immediately with respect
to the number of shares that would otherwise have vested through the date that
is two years after the next monthly vesting date following the change-of-control
event. Mr. Ben-Efraim and Mr. Everett each have an agreement with Netro which
provides that, if his employment with Netro is involuntarily terminated without
cause within one year following a change of control or if he is not offered a
comparable position by the acquiror, each of his unvested options will vest
immediately with respect to the number of shares that would otherwise have
vested pursuant to the terms of such option through the date that is two years
after the next monthly vesting date following the change-of-control event.
Pursuant to the agreement for Mr. Powell, in the event that Mr. Powell is
involuntarily terminated without cause following a change of control and is not
offered a comparable position by the acquiror, unvested shares and options held
by Mr. Powell will vest immediately with respect to the number of shares that
would otherwise have vested through the first fifteen months of employment, if
the termination occurs before Mr. Powell has completed one year of employment.
However, if the termination occurs after two full years of employment, the
accelerated vesting will occur with respect to an additional twelve months of
vesting. Pursuant to each of the agreements for Mr. Perry, Mr. Wong and Mr.
Hannigan, in the event the employee is involuntarily terminated without cause
following a change of control and without an offer of a comparable position with
the acquiror, and the termination occurs before the employee has completed one
year of employment, unvested shares and options held by that employee will vest
immediately with respect to the number of shares that would otherwise have
vested through the first year of employment.
STOCK PLANS
1996 Stock Option Plan
Our 1996 Stock Option Plan is intended to serve as the successor equity
incentive program to our 1995 Stock Option Plan. No option grants will be made
under the 1995 Stock Option Plan after this offering. The 1996 Stock Option Plan
provides for the grant of incentive stock options, as defined in Section 422 of
the Internal Revenue Code, to employees and the grant of nonstatutory stock
options to employees, non-employee directors and consultants. The purposes of
the 1996 Stock Option Plan are to attract and retain the best available
personnel, to provide additional incentives to our employees and consultants and
to promote the success of our business. Options outstanding under the 1995 Stock
Option Plan are subject to substantially the same terms as described below for
option awards under the 1996 Stock Option Plan.
47
<PAGE> 52
The 1996 Stock Option Plan was adopted by our board of directors in
December 1996 and approved by our shareholders in January 1997. Unless
terminated earlier by the board of directors, the 1996 Stock Option Plan will
terminate in December 2006. The 1996 Stock Option Plan was amended by our board
of directors in April 1999 and June 1999 to increase the total number of shares
reserved for issuance by 2,120,284 shares, to provide for an automatic annual
increase in the number of shares reserved for issuance and to incorporate other
changes. The 1996 Stock Option Plan amendments will be submitted to our
shareholders for their approval prior to the date of this offering. As of June
11, 1999, a total of 8,800,000 shares of common stock had been reserved for
issuance under the 1996 Stock Option Plan, which includes the aggregate number
of shares remaining available for grant under the 1995 Stock Option Plan as of
the date of this offering. The number of shares reserved for issuance under the
1996 Stock Option Plan will be subject to an automatic annual increase on the
first day of each of our fiscal years beginning in 2001 and ending in 2005 equal
to the least of (1) 750,000 shares; (2) 3% of our outstanding common stock on
the last day of the immediately preceding fiscal year; or (3) a lesser number of
shares determined by the administrator. As of June 11, 1999, options to purchase
an aggregate of 4,562,478 shares of common stock were outstanding under the 1995
Stock Option Plan and 1996 Stock Option Plan at a weighted average exercise
price of $1.99, 2,418,542 shares had been issued upon exercise of outstanding
options, and 2,290,523 shares remained available for future grant.
The Compensation Committee currently administers the 1996 Stock Option
Plan and the Board of Directors has designated the Compensation Committee to
administer the 1996 Stock Option Plan with respect to different groups of
service providers. The administrator of the 1996 Stock Option Plan will
determine numbers of vesting schedules for and exercise prices for options,
granted under the 1996 Stock Option Plan, provided, however, an individual
employee may not receive option grants for more than 1,000,000 shares in any
fiscal year.
The exercise price of incentive stock options must be at least equal to
100% of the fair market value of our common stock on the date of grant, and no
less than 110% of the fair market value in the case of incentive stock options
granted to an employee who holds, at the time the option is granted, more than
10% of the total voting power of all classes of our stock or any parent's or
subsidiary's stock. Nonstatutory stock options granted under the 1996 Stock
Option Plan will have an exercise price as determined by the administrator of
the 1996 Stock Option Plan, provided that the exercise price of a nonstatutory
stock option intended to qualify as performance-based compensation under Section
162(m) of the Internal Revenue Code must equal at least 100% of the fair market
value of the common stock on the date of grant. Payment of the exercise price
may be made in cash or other form of consideration approved by the
administrator. The administrator determines the term of options, which may not
exceed ten years, or five years in the case of an incentive stock option granted
to an employee who holds, at the time the option is granted, more than 10% of
the total voting power of all classes of our stock or any parent's or
subsidiary's stock. No option may be transferred by the optionee other than by
will or the laws of descent or distribution, provided, however, that the
administrator may in its discretion provide for the transferability of
nonstatutory stock options granted under the 1996 Stock Option Plan. Each option
may be exercised during the lifetime of the optionee only by the optionee or a
permitted transferee. The administrator determines when options become
exercisable. Options granted under the 1996 Stock Option Plan generally become
exercisable at the rate of 1/4th of the total number of shares subject to the
options twelve months after the date of grant, and 1/48th of the total number of
shares subject to the options each month thereafter. To the extent an optionee
would have the right in any calendar year to exercise for the first time one or
more incentive stock options for shares having an aggregate fair market value in
excess of $100,000 as of the date the options were granted, the excess options
will be treated as nonstatutory stock options.
In the event of a sale of all or substantially all of the assets of Netro,
or the merger or consolidation of Netro with or into another corporation in
which the successor corporation issues its securities to our shareholders,
outstanding options will be assumed or substituted by the successor corporation.
If the successor corporation does not agree to this assumption or substitution,
the options will terminate upon the closing of the transaction.
48
<PAGE> 53
The board of directors may amend, modify or terminate the 1996 Stock
Option Plan at any time as long as any amendment, modification or termination
does not impair vesting rights of plan participants and provided that
shareholder approval is required for an amendment to the extent required by
applicable law, regulations or rules. The 1996 Stock Option Plan will terminate
in December 2006 unless the board of directors terminates it earlier.
1999 Executive Stock Plan
Our 1999 Executive Stock Plan was adopted by the board of directors in
April 1999 and approved by the shareholders in May 1999. A total of 1,195,000
shares of common stock has been reserved for issuance under the 1999 Executive
Stock Option Plan. As of June 11, 1999, options to purchase 1,195,000 shares of
common stock with a weighted average exercise price of $3.50 had been issued, of
which 1,195,000 shares were outstanding, and no shares remained available for
future option grants. Unless terminated earlier, the 1999 Executive Stock Option
Plan will terminate in April 2009. No further options will be granted under the
1999 Executive Stock Plan.
The terms of options issued under the 1999 Executive Stock Option are
generally the same as those that may be issued under the 1996 Stock Option Plan,
except with respect to the following features. The 1999 Executive Stock Option
Plan does not impose an annual limitation on the number of shares subject to
options that may be issued to any individual employee.
Options granted under the 1999 Executive Stock Plan generally may be
exercised immediately after the grant date, but to the extent the shares subject
to the options are not vested as of the date of exercise, Netro retains a right
to repurchase any shares that remain unvested at the time of the optionee's
termination of employment by paying an amount equal to the exercise price times
the number of unvested shares. Options granted under the 1999 Executive Stock
Plan generally vest at the rate of 25% of the total number of shares subject to
the options twelve months after the date of grant and 1/48th of the total number
of shares subject to the options each month thereafter.
1997 Directors' Stock Option Plan
The 1997 Directors' Stock Option Plan was adopted by the board of
directors in December 1997 and amended in June 1999. A total of 300,000 shares
of common stock has been reserved for issuance under the Directors' Stock Option
Plan. As of June 11, 1999, options to purchase 125,000 shares of common stock
were outstanding under the 1997 Directors' Stock Option Plan at a weighted
average price of $2.00. No shares had been issued upon exercise of outstanding
options and 175,000 shares remained available for future grants.
Under the 1997 Directors' Stock Option Plan, as amended, each non-employee
director who first becomes a non-employee director after the effective date of
the amendment receives an automatic initial grant of an option to purchase
10,000 shares of common stock upon appointment or election. Initial grants to
non-employee directors are vested and exercisable in full as of the date of
grant. The 1997 Directors' Stock Option Plan also provides for annual grants of
options to purchase 10,000 shares of common stock on the first day of each of
our fiscal years to each non-employee director who has served on our board of
directors for at least six months, provided that a non-employee director who
received a 20,000 share initial grant under the original version of the 1997
Directors' Stock Option Plan shall be eligible to receive an annual grant of an
option to purchase 5,000 shares of common stock until the first day of our
fiscal year following the date on which the initial option has fully vested
under the terms of that option after which date each director shall be eligible
to receive an annual grant of an option to purchase 10,000 shares of common
stock. The annual grants to non-employee directors are vested and exercisable in
full as of the date of grant. In June 1999, our board of directors approved an
amendment to the terms of the annual grants issued in January 1999 to our
current non-employee directors, which amendment made those grants vested and
exercisable in full. The exercise price of all stock options granted under the
1997 Directors' Stock Option Plan shall be equal to the fair market value of a
share of Netro's common stock on the date of grant of the option. Options
granted under the 1997 Directors' Stock Option Plan have a term of ten
49
<PAGE> 54
years. However, unvested options will terminate when the optionee ceases to
serve as a director and vested options will terminate if they are not exercised
within 12 months after the director's death or disability or within 90 days
after the director ceases to serve as a director for any other reason.
In the event of a dissolution or liquidation of Netro, sale of all or
substantially all of the assets of Netro or the merger or consolidation of Netro
in which Netro is not the surviving corporation or any other capital
reorganization in which the ownership of more than 50% of the total combined
voting power of our outstanding securities changes hands, each nonemployee
director will have either (1) a reasonable time within which to exercise the
option, including any part of the option that would not otherwise be
exercisable, prior to the effectiveness of such dissolution, liquidation, sale,
merger or reorganization, at the end of which time the option will terminate, or
(2) the right to exercise the option, including any part that would not
otherwise be exercisable, or receive a substitute option with comparable terms,
as to an equivalent number of shares of stock of the corporation succeeding
Netro or acquiring its business by reason of the dissolution, liquidation, sale,
merger or reorganization.
The 1997 Directors' Stock Option Plan is designed to work automatically
without administration. However, to the extent administration is necessary, it
will be performed by the Board of Directors other than the director or directors
that have a personal interest at stake. Although the Board of Directors may
amend or terminate the 1997 Directors' Stock Option Plan, it may not take any
action that may adversely affect any outstanding option. The 1997 Directors'
Stock Option Plan will have a term of ten years unless terminated earlier.
1999 Employee Stock Purchase Plan
Our 1999 Employee Stock Purchase Plan was adopted by the board of
directors in June 1999 and will be submitted for approval by the shareholders in
July 1999. The 1999 Employee Stock Purchase Plan becomes effective on the date
of this prospectus. A total of 1,000,000 shares of common stock has been
reserved for issuance under the 1999 Employee Stock Purchase Plan. The number of
shares reserved for issuance under the 1999 Employee Stock Purchase Plan will be
subject to an automatic annual increase on the first day of each of our fiscal
years beginning after 2001 and ending in 2005 equal to the least of: (1) 250,000
shares; (2) 1% of our outstanding common stock on the last day of the
immediately preceding fiscal year; or (3) a lesser number of shares determined
by the administrator. The 1999 Employee Purchase Plan will terminate in June
2019 unless terminated earlier in accordance with its provisions.
The 1999 Employee Stock Purchase Plan, which is intended to qualify under
Section 423 of the Code, provides our employees with an opportunity to purchase
our common stock through accumulated payroll deductions. The 1999 Employee Stock
Purchase Plan will be administered by the board of directors or by a committee
appointed by the board of directors. The 1999 Employee Stock Purchase Plan
permits an eligible employee to purchase common stock through payroll deductions
of up to 15% of an employee's compensation. Employees, including officers and
employee directors, of Netro, or of any majority-owned subsidiary designated by
the board of directors, are eligible to participate in the 1999 Employee Stock
Purchase Plan if they are employed by Netro or any such subsidiary for at least
20 hours per week and more than five months per year. Unless the board of
directors or its committee determines otherwise, the 1999 Employee Stock
Purchase Plan will be implemented by a series of overlapping offering periods
generally of 24 months' duration with new offering periods, other than the first
offering period, commencing on February 1 and August 1 of each year. Each
offering period will be divided into four consecutive purchase periods of
approximately six months' duration. The first offering period is expected to
commence on the date of this offering and end on July 31, 2001; the initial
purchase period is expected to end on January 31, 2000. The price at which
common stock will be purchased under the 1999 Employee Stock Purchase Plan is
equal to 85% of the fair market value of the common stock on the first day of
the applicable offering period or the last day of the applicable purchase
period, whichever is lower. Employees may end their participation in an offering
period at any time, and participation automatically ends on termination of
employment.
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<PAGE> 55
Under the 1999 Employee Stock Purchase Plan, no employee may be granted an
option if immediately after the grant the employee would own stock and/or hold
outstanding options to purchase stock equaling 5% or more of the total voting
power or value of all classes of our stock or that of our subsidiaries. In
addition, no employee may be granted an option under the 1999 Employee Stock
Purchase Plan if the option would permit the employee to purchase stock under
all of our employee stock purchase plans in an amount that exceeds $25,000 of
fair market value for each calendar year in which the option is outstanding at
any time, In addition, no employee may purchase more than 2,000 shares of common
stock under the 1999 Employee Stock Purchase Plan in any one purchase period. If
the fair market value of the common stock on a purchase date other than the
final purchase date of an offering period is less than the fair market value at
the beginning of the offering period, each participant in the 1999 Employee
Stock Purchase Plan will automatically be withdrawn from the offering period as
of the purchase date and re-enrolled in a new 24-month offering period on the
first business day following the purchase date.
The 1999 Employee Purchase Plan provides that in the event of a merger of
Netro with or into another corporation or a sale of all or substantially all of
its assets, each right to purchase stock under the Purchase Plan will be assumed
or an equivalent right substituted by the successor corporation. However, our
board of directors will shorten any ongoing offering period so that employees'
rights to purchase stock under the 1999 Employee Stock Purchase Plan are
exercised prior to the transaction in the event that the successor corporation
refuses to assume each purchase right or to substitute an equivalent right. The
board of directors has the power to amend or terminate the 1999 Employee Stock
Purchase Plan as long as its action does not adversely affect any outstanding
rights to purchase stock thereunder. However, our board of directors may amend
or terminate the 1999 Employee Stock Purchase Plan or an offering period even if
it would adversely affect options in order to avoid our incurring adverse
accounting charges.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
We have adopted provisions in our Articles of Incorporation that limit the
liability of our directors for monetary damages arising from a breach of their
fiduciary duty as directors to the fullest extent permitted by the California
Corporations Code. This limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission.
Our Bylaws provide that we will indemnify our directors and officers to
the fullest extent permitted by California law, including circumstances in which
indemnification is otherwise discretionary under California law. We have entered
into indemnification agreements with our directors and officers containing
provisions that are in some respects broader than the specific indemnification
provisions contained in the California Corporations Code. The indemnification
agreements may require us to indemnify our directors and officers 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 obtain directors' and
officers' insurance if available on reasonable terms. We currently have a policy
for directors' and officers' insurance, which we intend to replace with a
similar policy that provides coverage for matters relating to public offerings
of our securities.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of ours in which indemnification would be
required or permitted. We are not aware of any threatened litigation or
proceeding that might result in a claim for such indemnification. We believe
that our charter provisions and indemnification agreements are necessary to
attract and retain qualified persons as directors and officers.
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<PAGE> 56
CERTAIN TRANSACTIONS
Stock option grants to directors and executive officers of Netro are
described under the caption "Management -- Executive Compensation."
PRIVATE PLACEMENT TRANSACTIONS
During our last three full fiscal years, we have issued shares of
preferred stock and warrants for the purchase of shares of preferred stock in
private placement transactions, as follows, shown on a post-split basis:
- An aggregate of 6,995,111 shares of Series C preferred stock at $7.00
per share in July, October and November 1996 and January, February,
April, July and November 1997 to 25 investors;
- An aggregate of 4,169,718 shares of Series D preferred stock at $7.78
per share in January, April, July and October 1998 and January,
February, April and June 1999 to 22 investors;
- Warrants to purchase 28,750 shares of Series C preferred stock in June
and September 1997; and
- Warrants to purchase 28,278 shares of Series D preferred stock in
January 1998 and March 1999.
The table below summarizes the shares of preferred stock purchased by our
executive officers, directors and 5% shareholders and persons and entities
associated with them in private placement transactions for the issuance of
shares of preferred stock and warrants for the purchase of shares of preferred
stock. Shares held by affiliated persons and entities have been aggregated. See
"Principal Shareholders" for more information.
<TABLE>
<CAPTION>
SERIES C SERIES D
INVESTOR PREFERRED STOCK PREFERRED STOCK
- -------- --------------- ---------------
<S> <C> <C>
AT&T Ventures(1)...................................... 142,858 125,991
U.S. Venture Partners(2).............................. 70,678 123,767
Brentwood Venture Capital(3).......................... 328,572 89,698
o.tel.o. Communications GmbH.......................... 230,000 --
Richard M. Moley...................................... 50,000 --
</TABLE>
(1) Mr. Douglas, one of our directors, is also a general partner of the general
partners of entities affiliated with AT&T Ventures. See "Principal
Shareholders" for more information.
(2) Mr. Federman, one of our directors, is also a general partner of the general
partner of entities affiliated with U.S. Venture Partners. See "Principal
Shareholders" for more information.
(3) Mr. Walecka, one of our directors, is also a general partner of the general
partner of entities affiliated with Brentwood Venture Capital. See
"Principal Shareholders" for more information.
AGREEMENTS WITH SHAREHOLDERS
One of our shareholders beneficially owning more than 5% of our common
stock, o.tel.o Communications GmbH, was a significant customer, directly
purchasing an aggregate of $89,000 and $1,091,966 of AirMAN product in 1996 and
1997, and purchasing through a reseller an aggregate of $580,000 and $2,181,104
of AirMAN product in 1996 and 1997.
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
Netro has entered into employment and change of control agreements with
certain of its officers and directors. See "Management -- Employment and Change
of Control Agreements."
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<PAGE> 57
INDEMNIFICATION AGREEMENTS
We have entered into indemnification agreements with certain of our
officers and directors containing provisions that may require us to, among other
things, indemnify our officers and directors against certain liabilities that
may arise by reason of their status or service as officers or director, other
than liabilities arising from willful misconduct of a culpable nature, and to
advance their expenses incurred as a result of any proceeding against them as to
which they could be indemnified. For a description of limitations of liability
and certain indemnification arrangements with respect to our directors and
officers, see "Management -- Limitation of Liability and Indemnification
Matters."
REGISTRATION RIGHTS AGREEMENTS
Some of our shareholders are entitled to registration rights in respect of
the common stock issued or issuable upon conversion of preferred stock. See
"Description of Capital Stock -- Registration Rights of Certain Holders."
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<PAGE> 58
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of Netro's common stock as of June 11, 1999 and as adjusted to reflect
the sale of the common stock offered by Netro pursuant to this prospectus and
conversion of all outstanding shares of preferred stock into shares of common
stock by (1) each of our directors, (2) each of our Named Executive Officers,
(3) all directors and executive officers as a group, and (4) each person who is
known by us to own beneficially more than 5% of our common stock.
Except as otherwise noted, the address of each person listed in the table
is c/o Netro Corporation, 3860 North First Street, San Jose, CA 95134, and the
persons named in the table have sole voting and investment power with respect to
all shares of common stock shown as beneficially owned by them, subject to
community property laws where applicable.
Applicable percentage of beneficial ownership is based on 38,276,583
shares of common stock outstanding as of June 11, 1999, together with applicable
options and warrants that are exercisable within 60 days of June 11, 1999 for
such shareholder. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission. The number of shares
beneficially owned by a person includes shares of common stock subject to
options held by that person that are currently exercisable or exercisable within
60 days of June 11, 1999. Shares issuable pursuant to such options are deemed
outstanding for computing the percentage ownership of the person holding such
options but are not deemed outstanding for the purposes of computing the
percentage ownership of each other person. Percentages for beneficial ownership
after offering assume underwriters do not exercise their over-allotment option.
<TABLE>
<CAPTION>
PERCENT BENEFICIALLY
OWNED
--------------------
NUMBER OF SHARES BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING OFFERING
------------------------------------ ------------------ -------- --------
<S> <C> <C> <C>
Gideon Ben-Efraim(1)...................................... 4,400,000 11.4 %
Venture Fund I, L.P.(2)................................... 4,216,071 11.0%
Gideon Ben-Efraim(2)...................................... 4,400,000 11.4
U.S. Venture Partners(3).................................. 4,141,667 10.8
Brentwood Venture Capital(4).............................. 3,001,604 7.8
o.tel.o Communications GmbH(5)............................ 2,952,222 7.7
Eli Pasternak............................................. 1,714,284 4.5
Richard M. Moley(6)....................................... 458,347 1.2
Amir Makleff.............................................. 450,000 1.2
Michael T. Everett(7)..................................... 247,917 *
Thomas R. Baruch(8)....................................... 208,347 *
Matthew Powell(9)......................................... 143,889 *
Cynthia M. Hillery(10).................................... 123,000 *
Avram Caspi............................................... 40,000 *
Neal Douglas(11).......................................... 8,347 * *
Irwin Federman(12)........................................ 8,347 * *
John L. Walecka(13)....................................... 8,347 * *
All directors and executive officers as a group (12
persons)(14)............................................ 19,170,167 48.9
</TABLE>
- ---------------
* Less than 1%.
(1) Includes 400,000 shares issuable upon exercise of options exercisable
within 60 days of June 11, 1999.
(2) Includes 4,216,071 shares held by Venture Fund I, L.P. Neal Douglas, a
director of Netro, is a general partner of Venture Management I, GP, the
general partner of this partnership, shares voting and investment power
with respect to the shares held by this entity, and disclaims beneficial
54
<PAGE> 59
ownership of shares in which he has no pecuniary interest. See Note 11. The
address for Venture Fund I is 3000 Sand Hill Road, Building 1, Suite 285,
Menlo Park, CA 94025.
(3) Includes 3,582,540 shares held by U.S. Venture Partners IV, L.P., 434,878
shares held by Second Ventures II, L.P. and 124,249 shares held by USVP
Entrepreneur Partners II, L.P. Irwin Federman, a director of Netro, is a
general partner of the general partner of each of these partnerships,
shares voting and investment power with respect to the shares held by these
entities, and disclaims beneficial ownership of shares in which he has no
pecuniary interest. See Note 12. The address for U.S. Venture Partners is
2180 Sand Hill Road, Suite 300, Menlo Park, CA 94025.
(4) Includes 2,692,302 shares held by Brentwood Associates VI, L.P. and 39,302
shares held by Brentwood Affiliates Fund, L.P. John L. Walecka, a director
of Netro, is a general partner of Brentwood VI Ventures, L.P. and Brentwood
VII Ventures, L.P., the general partners of each of these partnerships,
shares voting and investment power with respect to the shares held by these
entities and disclaims beneficial ownership of shares in which he has no
pecuniary interest. See note 13. The address for Brentwood Venture Capital
is 3000 Sand Hill Road, Building 1, Suite 260, Menlo Park, CA 94025.
(5) The address for o.tel.o Communications GmbH is Am Bonneshof 35, D-40474
Dusseldorf, Germany.
(6) Includes 8,347 shares issuable upon exercise of options exercisable within
60 days of June 11, 1999. A trust for the benefit of descendants of Richard
M. Moley purchased 400,000 shares in consideration of a promissory note.
The vesting of these shares is contingent upon Mr. Moley's continued
service as a director of Netro.
(7) Includes 247,917 shares issuable upon exercise of options exercisable
within 60 days of June 11, 1999.
(8) Includes 8,347 shares issuable upon exercise of options exercisable within
60 days of June 11, 1999. The address for Mr. Baruch is 235 Montgomery
Street, Suite 920, San Francisco, CA 94104.
(9) Includes 143,889 shares issuable upon exercise of options exercisable
within 60 days of June 11, 1999.
(10) Includes 61,750 shares issuable upon exercise of options exercisable within
60 days of June 11, 1999.
(11) Includes 8,347 shares issuable upon exercise of options exercisable within
60 days of June 11, 1999. Excludes 4,216,071 shares held by Venture Fund I,
L.P. See note 2.
(12) Includes 8,347 shares issuable upon exercise of options exercisable within
60 days of June 11, 1999. Excludes 4,141,667 shares held by U.S. Venture
Partners. See note 3.
(13) Includes 8,347 shares issuable upon exercise of options exercisable within
60 days of June 11, 1999. Excludes 3,001,604 shares held by Brentwood
Venture Capital. See note 4.
(14) Includes 11,359,342 shares held by entities affiliated with certain
directors as described in notes 1, 3 and 4 and 808,500 shares issuable upon
exercise of options exercisable within 60 days of June 11, 1999.
55
<PAGE> 60
DESCRIPTION OF CAPITAL STOCK
Following the closing of the sale of the shares offered hereby, our
authorized capital stock will consist of 100,000,000 shares of common stock and
5,000,000 shares of undesignated preferred stock.
COMMON STOCK
As of March 31, 1999, there were 37,868,678 shares of common stock
outstanding that were held of record by approximately 176 shareholders after
giving effect to the conversion of our Series A preferred stock, Series B
preferred stock, Series C preferred stock, and Series D preferred stock into
common stock at a one-to-one ratio and the exercise of 57,028 warrants to
purchase shares of preferred stock and assuming no exercise of any other
outstanding options or warrants after March 31, 1999. Under the same
assumptions, there will be shares of common stock outstanding
after giving effect to the sale of the shares of common stock offered by us.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the shareholders. Subject to preferences that may be
applicable to any outstanding preferred stock, the holders of common stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the board of directors out of funds legally available therefor. In
the event of a liquidation, dissolution or winding up of Netro, the holders of
common stock are entitled to share ratably in all assets remaining after payment
of liabilities, subject to prior rights of preferred stock, if any, then
outstanding. The common stock has no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
available to the common stock. All outstanding shares of common stock are fully
paid and non-assessable.
PREFERRED STOCK
Effective upon the closing of this offering, Netro will be authorized to
issue 5,000,000 shares of undesignated preferred stock. The board of directors
will have the authority to issue the undesignated preferred stock in one or more
series and to determine the powers, preferences and rights and the
qualifications, limitations or restrictions granted to or imposed upon any
wholly unissued series of undesignated preferred stock and to fix the number of
shares constituting any series and the designation of that series, without any
further vote or action by the shareholders. The rights of the holders of the
common stock will be subject to, and may be adversely affected by, the rights of
the holders of any preferred stock that may be issued in the future. The
issuance of preferred stock may have the effect of delaying, deferring or
preventing a change in control of Netro without further action by the
shareholders and may adversely affect the voting and other rights of the holders
of common stock. At present, we have no plans to issue any shares of preferred
stock. Furthermore, the preferred stock may have other rights, including
economic rights senior to the common stock, and, as a result, the issuance of
preferred stock could have a material adverse effect on the market value of the
common stock. We have no present plan to issue shares of preferred stock.
REGISTRATION RIGHTS OF CERTAIN HOLDERS
The holders of 30,990,671 shares of common stock referred to in this
prospectus as Registrable Securities, or their transferees are entitled to
certain rights with respect to the registration of these shares under the
Securities Act. These rights are provided under the terms of an agreement
between Netro and the holders of Registrable Securities dated June 21, 1999.
Subject to certain limitations in this agreement, the holders of the Registrable
Securities may require, on two occasions at any time after six months from the
effective date of this offering, that Netro use its best efforts to register the
Registrable Securities for public resale. If we register any of our common stock
either for our own account or for the account of other security holders, the
holders of Registrable Securities are entitled to include their shares of common
stock in the registration. A holder's right to include shares in an underwritten
registration is subject to the ability of the underwriters to limit the number
of shares included in this offering. All fees, costs and expenses of such
registrations must be borne by Netro, and all selling expenses, including
underwriting
56
<PAGE> 61
discounts, selling commissions and stock transfer taxes, relating to Registrable
Securities must be borne by the holders of the securities being registered.
Additionally, holders of Registrable Securities may require on no more
than one occasion in a twelve-month period, that we register their shares for
public resale on Form S-3 or similar short-form registration, provided Netro is
eligible to use Form S-3 or similar short-form registration and provided further
that the value of the securities to be registered is at least $500,000. All
fees, costs and expenses of such registrations on Form S-3 and all selling
expenses, including underwriting discounts, selling commissions and stock
transfer taxes, relating to Registrable Securities must be borne by the holders
of the securities being registered.
ANTI-TAKEOVER PROVISIONS
Upon completion of this offering, certain provisions of our charter
documents, including a provision eliminating the ability of shareholders to take
actions by written consent, may have the effect of delaying or preventing
changes in control or management of Netro, which could have an adverse effect on
the market price of our common stock. Our stock option and purchase plans
generally provide for assumption of our benefit plans or substitution of an
equivalent option of a successor corporation or, alternatively, at the
discretion of the board of directors, exercise of some or all of the options,
including those for non-vested shares, or acceleration of vesting of shares
issued pursuant to stock grants, upon a change of control or similar event. The
board of directors will have authority to issue up to 5,000,000 shares of
preferred stock and to fix the rights, preferences, privileges and restrictions,
including voting rights, of these shares without any further vote or action by
the shareholders. See " -- Preferred Stock."
WARRANTS
As of March 31, 1999, warrants were outstanding to purchase an aggregate
of 57,028 shares of preferred stock at a weighted average exercise price of
$7.39 per share. Warrants to purchase 23,750 shares at $7.00 per share will
expire either two years from the date of an initial public offering or five
years from the date the warrants were granted, whichever is later. Warrants to
purchase 5,000 shares at $7.00 per share will expire either two years from the
date of an initial public offering or five years from the date the warrants were
granted, whichever is later. Warrants to purchase 8,997 shares at $7.78 per
share will expire either two years from the date of an initial public offering
or five years from the date the warrants were granted, whichever is later.
Warrants to purchase 19,281 shares at $7.78 per share will expire either three
years from the closing of an initial public offering or seven years from the
date the warrants were granted, whichever is later. The warrants to purchase
shares of preferred stock outstanding following this offering will convert into
warrants to purchase shares of common stock on the closing of this offering on a
one-to-one basis. Generally, each warrant contains provisions for the adjustment
of the exercise price and the aggregate number of shares issuable upon the
exercise of the warrant under certain circumstances, including stock dividends,
stock splits, reorganizations, reclassifications, consolidations and certain
dilutive issuances of securities at prices below the then existing warrant
exercise price. In addition, pursuant to a manufacturing and engineering
services agreement with MTI, Netro will issue stock to MTI as consideration for
engineering services upon the achievement by MTI of certain milestones, provided
that following Netro's initial public offering of common stock, Netro may elect
to pay such consideration in cash.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is American Stock
Transfer & Stock Company.
LISTING
We have applied to list our common stock on the Nasdaq National Market
under the trading symbol "NTRO."
57
<PAGE> 62
SHARES ELIGIBLE FOR FUTURE SALE
Upon the closing of this offering, we will have shares of common
stock outstanding, assuming no exercise of the underwriters' over-allotment
option and no exercise of outstanding options to purchase common stock after
June 11, 1999. All of our directors and executive officers and some of our
shareholders, holding in the aggregate shares of our common stock,
have agreed that they will not, without the prior written consent of Merrill
Lynch on behalf of the underwriters, offer, sell or otherwise dispose of any
shares of common stock or options to acquire shares of common stock during the
180-day period following the date of this prospectus. See "Underwriting."
All of the shares of common stock being sold in this offering will be
freely tradeable without restriction or further registration under the
Securities Act, except for shares held by our "affiliates," as defined in Rule
144 under the Securities Act, which may generally only be sold in compliance
with the limitation of Rule 144, described below. The remaining 19,106,416
shares were issued and sold by us in private transactions and are deemed
restricted securities under Rule 144. These shares may be sold in the public
market only if registered under the Securities Act or if exempt from
registration under Rules 144, 144(k) or 701 under the Securities Act, which
rules are summarized below. Subject to the agreements between our shareholders
and the underwriters, described above, and the provisions of Rules 144, 144(k)
and 701, additional shares will be available for sale in the public market,
subject in the case of shares held by affiliates to compliance with volume
restrictions, as follows:
- shares will be available for immediate sale in the public
market on the date of this prospectus;
- no shares will be available for sale beginning 90 days after the date
of this prospectus; and
- 37,739,356 shares will be available for sale under Rules 144 and 701
upon the expiration of agreements between our shareholders and the
underwriters at varying dates beginning 180 days after the date of
this prospectus.
In general, under Rule 144, beginning 90 days after the date of this
prospectus, a person or persons whose shares are aggregated, including an
affiliate, who has beneficially owned restricted shares for at least one year,
is entitled to sell within any three-month period a number of shares that does
not exceed the greater of 1% of the then outstanding shares of common stock,
approximately shares immediately after this offering, or the average
weekly trading volume of our common stock on the Nasdaq National Market during
the four calendar weeks preceding the date of the sale. Sales under Rule 144
also are subject to requirements pertaining to the manner and notice of the
sales and the availability of current public information concerning Netro.
Under Rule 144(k), a person who is not deemed to have been an affiliate of
Netro at any time during the 90 days before a sale and who has beneficially
owned the shares proposed to be sold for at least two years would be entitled to
sell these shares without regard to the requirements described above. To the
extent that shares were acquired from an affiliate of Netro, the transferee's
holding period for the purpose of effecting a sale under Rule 144(k) commences
on the date of transfer from the affiliate.
Rule 701 provides that, beginning 90 days after the date of this
prospectus, persons other than affiliates may sell shares of common stock
acquired from us in connection with written compensatory benefit plans,
including our stock option plans, subject only to the manner of sale provisions
of Rule 144. Beginning 90 days after the date of this prospectus, affiliates may
sell these shares of common stock subject to all provisions of Rule 144 except
the one-year minimum holding period.
Shortly after the closing of this offering, we intend to file a
registration statement on Form S-8 under the Securities Act to register all
shares of common stock issuable under the 1995 Stock Option Plan, the 1996 Stock
Option Plan, the 1997 Directors' Stock Option Plan, the 1999 Executive Stock
Plan and the 1999 Employee Stock Purchase Plan. See "Management--Stock Plans."
This Form S-8 registration statement is expected to become effective immediately
upon filing and shares covered by that registration statement will then be
eligible for sale in the public markets, subject to the Rule 144 limitations
applicable to affiliates.
58
<PAGE> 63
Prior to this offering, there has been no public market for our common
stock, and no predictions can be made regarding the effect, if any, that sales
of shares in the open market or the availability of shares for sale will have on
the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of our common stock in the public market could adversely
affect the prevailing market price.
After the closing of this offering, the holders of 30,990,671 shares of
our common stock will be entitled to rights with respect to the registration of
these shares under the Securities Act. Registration of these shares under the
Securities Act would result in these shares becoming freely tradeable without
restriction under the Securities Act, except for shares purchased by affiliates,
immediately upon the effectiveness of registration. For a discussion of these
rights, see "Description of Capital Stock--Registration Rights of Certain
Holders."
59
<PAGE> 64
UNDERWRITING
GENERAL
Merrill Lynch, Pierce, Fenner & Smith Incorporated, BancBoston Robertson
Stephens Inc., and Dain Rauscher Wessels, a division of Dain Rauscher
Incorporated, are acting as representatives of each of the underwriters named
below. Subject to the terms and conditions set forth in a purchase agreement, we
have agreed to sell to each of the underwriters, and each of the underwriters,
severally and not jointly, has agreed to purchase from us, the number of shares
of our common stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER
OF SHARES
UNDERWRITERS ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
BancBoston Robertson Stephens Inc...........................
Dain Rauscher Wessels.......................................
--------
Total..........................................
========
</TABLE>
Subject to the terms and conditions set forth in the purchase agreement,
each of the underwriters is committed to purchase all of the shares of our
common stock being sold pursuant to the purchase agreement if any shares of our
common stock are purchased. Under certain circumstances, under the terms of the
purchase agreement, the commitments of the non-defaulting underwriters may be
increased or the purchase agreement may be terminated. We have agreed to
indemnify the underwriters against some liabilities, including some liabilities
under the Securities Act, or to contribute to payments the underwriters may be
required to make in respect of those liabilities.
The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the underwriters and certain
other conditions. The underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part.
COMMISSIONS AND DISCOUNTS
The representatives have advised us that they propose initially to offer
the shares of our common stock to the public at the initial public offering
price set forth on the cover page of this prospectus, and to certain dealers at
such price less a concession not in excess of $ per share of common
stock. The underwriters may allow, and such dealers may reallow, a discount not
in excess of $ per share of common stock on sales to certain other
dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
The following table shows the per share and total public offering price,
underwriting discount to be paid by us to the underwriters and the proceeds
before expenses to us. This information is presented assuming either no exercise
or full exercise by the underwriters of their over-allotment options.
<TABLE>
<CAPTION>
PER SHARE WITHOUT OPTION WITH OPTION
--------- -------------- -----------
<S> <C> <C> <C>
Public offering price.................. $ $ $
Underwriting discount.................. $ $ $
Proceeds, before expenses, to Netro.... $ $ $
</TABLE>
The expenses of the offering, exclusive of the underwriting discount, are
estimated at $ million and are payable by us.
60
<PAGE> 65
OVER-ALLOTMENT OPTION
We have granted to the underwriters an option, exercisable for 30 days
after the date of this prospectus, to purchase up to an aggregate of
additional shares of common stock at the public offering price set forth on the
cover of this prospectus, less the underwriting discount. The underwriters may
exercise this option solely to cover over-allotments, if any, made on the sale
of our common stock offered hereby. To the extent that the underwriters exercise
this option, each underwriter will be obligated, subject to certain conditions,
to purchase a number of additional shares of our common stock proportionate to
such underwriter's initial amount reflected in the foregoing table.
DIRECTED SHARES
At our request, the underwriters have reserved approximately
shares of our common stock for sale at the public offering price to
our directors, consultants and certain other persons with relationships to
Netro. The number of shares of our common stock available for sale to the
general public will be reduced to the extent such persons purchase such reserved
shares. Any reserved shares which are not so orally confirmed for purchase
within one day of the pricing of the offering will be offered by the
underwriters to the general public on the same basis as the other shares offered
by this prospectus.
NO SALES OF SIMILAR SECURITIES
We, our executive officers and directors, and most of our existing
shareholders have agreed, with certain exceptions, not to directly or
indirectly:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of, or otherwise dispose of or transfer
any shares of our common stock or any securities convertible into or
exchangeable or exercisable for our common stock, whether now owned
or later acquired by the person executing the agreement or with
respect to which the person executing the agreement later acquires
the power of disposition, or file any registration statement under
the Securities Act relating to any shares of our common stock for a
period of 180 days after the date of this prospectus; or
- enter into any swap or other agreement that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership
of our common stock, whether any such swap or transaction is to be
settled by delivery of our common stock or other securities, in cash
or otherwise, without the prior written consent of Merrill Lynch on
behalf of the underwriters for a period of 180 days after the date of
this prospectus. See "Shares Eligible for Future Sale."
QUOTATION ON THE NASDAQ NATIONAL MARKET
Before this offering, there has been no public market for our common
stock. The initial public offering price will be determined through negotiations
among us and the representatives. Among the factors to be considered by us and
the representatives in determining the public offering price of our common
stock, in addition to prevailing market conditions, will be the trading
multiples of publicly traded companies that the representatives believe to be
comparable to us, certain of our financial information, the history of, and the
prospects for, our company and the industry in which we compete, and an
assessment of our management, our past and present operations, the prospects
for, and timing of, our future revenue, the present state of our development,
the percentage interest of Netro being sold as compared to the valuation for the
entire company and the above factors in relation to market values and various
valuation measures of other companies engaged in activities similar to ours.
There can be no assurance that an active trading market will develop for our
common stock or that our common stock will trade in the public market subsequent
to the offering at or above the public offering price.
We have applied for a listing of our common stock on the Nasdaq National
Market under the symbol "NTRO."
61
<PAGE> 66
The underwriters have advised us that they do not expect sales to accounts
over which the underwriters exercise discretionary authority to exceed five
percent of the total number of shares of our common stock offered by them.
PRICE STABILIZATION, SHORT POSITIONS AND PENALTY BIDS
Until the distribution of our common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters and
certain selling group members to bid for and purchase our common stock. As an
exception to these rules, the representatives are permitted to engage in certain
transactions that stabilize the price of our common stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of our common stock.
If the underwriters create a short position in our common stock in
connection with the offering, that is, if they sell more shares of common stock
than are set forth on the cover page of this prospectus, the representatives may
reduce that short position by purchasing common stock in the open market. The
representatives may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.
The representatives may also impose a penalty bid on certain underwriters
and selling group members. This means that, if the representatives purchase
shares of our common stock in the open market to reduce the underwriters' short
position or to stabilize the price of our common stock, they may reclaim the
amount of the selling concession from the underwriters and selling group members
that sold those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of our common stock to the extent that it
discourages resales of our common stock.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our common stock. In addition, neither
we nor any of the underwriters makes any representation that the representatives
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.
OTHER RELATIONSHIPS
ML IBK Positions, an affiliate of Merrill Lynch, holds 642,674 shares of
our common stock. DRW Investors LLC, an affiliate of Dain Rauscher Wessels, a
division of Dain Rauscher Incorporated, holds 64,267 shares of our common stock.
BancBoston Robertson Stephens Inc. holds 28,572 shares of our common stock.
62
<PAGE> 67
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Netro by Venture Law Group, A Professional Corporation, Menlo Park, California.
Certain legal matters in connection with this offering will be passed upon for
the underwriters by Fenwick & West LLP, Palo Alto, California. Tae Hea Nahm, a
director of Venture Law Group, is the Secretary of Netro, and Sanjay Khare, an
attorney at Venture Law Group, is Assistant Secretary. Tae Hea Nahm and other
attorneys of Venture Law Group, together with an entity affiliated with Venture
Law Group, hold an aggregate of 153,963 shares of our common stock and options
to purchase 15,000 shares of our common stock.
EXPERTS
The audited consolidated financial statements and schedule included in
this prospectus and elsewhere in the registration statement to the extent and
for the periods indicated in their reports have been audited by Arthur Andersen
LLP, independent public accountants, and are included herein in reliance upon
the authority of said firm as experts in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement (which term shall include any amendments thereto) on Form S-1 under
the Securities Act with respect to the common stock offered hereby. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement, certain
items of which are contained in exhibits to the registration statement as
permitted by the rules and regulations of the Commission. For further
information with respect to Netro and the common stock offered hereby, reference
is made to the registration statement, including the exhibits thereto, and the
financial statements and notes filed as a part thereof. Statements made in this
prospectus concerning the contents of any document referred to herein are not
necessarily complete. With respect to each document filed with the Commission as
an exhibit to the registration statement, reference is made to the exhibit for a
more complete description of the matter involved. The registration statement,
including exhibits thereto and the financial statements and notes filed as a
part thereof, as well as such reports and other information filed with the
Commission, may be inspected without charge at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the Commission located at Seven World Trade
Center, 13th Floor, New York, NY 10048, and the Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any
part thereof may be obtained from the Commission upon payment of certain fees
prescribed by the Commission. These reports and other information may also be
inspected without charge at a Web site maintained by the Commission at
http://www.sec.gov.
63
<PAGE> 68
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants.................... F-2
Financial Statements:
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Operations and Comprehensive
Loss................................................... F-4
Consolidated Statements of Shareholders' Equity........... F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>
F-1
<PAGE> 69
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Netro Corporation:
We have audited the accompanying consolidated balance sheets of Netro
Corporation (a California corporation) and subsidiaries as of December 31, 1997
and 1998, and the related consolidated statements of operations and
comprehensive loss, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Netro Corporation and
subsidiaries as of December 31, 1997 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
San Jose, California
March 4, 1999
F-2
<PAGE> 70
NETRO CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
SHAREHOLDERS'
DECEMBER 31, EQUITY
-------------------- MARCH 31, AT MARCH 31,
1997 1998 1999 1999 (NOTE 9)
-------- -------- ----------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................. $ 15,668 $ 6,094 $ 7,954
Short-term investments................................ 10,038 9,034 14,894
Trade accounts receivable, net of allowance of $47,
$509 and $120, respectively........................ 2,157 1,150 1,770
Inventory............................................. 3,927 4,315 4,004
Prepaid expenses and other............................ 361 243 467
-------- -------- --------
Total current assets.......................... 32,151 20,836 29,089
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net............... 5,516 5,634 5,325
OTHER ASSETS............................................ 41 318 348
-------- -------- --------
Total assets.................................. $ 37,708 $ 26,788 $ 34,762
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital
leases............................................. $ 1,487 $ 3,872 $ 5,134
Trade accounts payable................................ 2,870 1,327 2,454
Accrued liabilities................................... 2,137 3,114 3,486
-------- -------- --------
Total current liabilities..................... 6,494 8,313 11,074
LONG-TERM DEBT AND CAPITAL LEASES, net of current
portion............................................... 4,209 4,547 4,763
DEFERRED FACILITIES RENT................................ -- 35 44
-------- -------- --------
Total liabilities............................. 10,703 12,895 15,881
-------- -------- --------
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY:
Convertible Preferred Stock, no par value:
Authorized -- 31,192,517 shares
Outstanding -- 25,711,771 shares, 27,732,235 shares
and 29,250,875 shares at December 31, 1997,
December 31, 1998 and March 31, 1999 (unaudited),
respectively; none outstanding pro forma at March
31, 1999 (unaudited); aggregate liquidation
preference at March 31, 1999 (unaudited) of
$93,060.......................................... 65,437 81,073 92,853 $ --
Common Stock, no par value:
Authorized -- 50,000,000 shares
Outstanding -- 8,078,957 shares, 8,530,238 shares
and 8,560,775 shares at December 31, 1997,
December 31, 1998 and March 31, 1999 (unaudited),
respectively; 37,811,650 shares outstanding pro
forma at March 31, 1999 (unaudited).............. 344 1,224 3,409 96,262
Notes receivable from shareholders.................... -- (800) (800) (800)
Deferred stock compensation........................... -- -- (1,955) (1,955)
Accumulated deficit................................... (38,776) (67,604) (74,626) (74,626)
-------- -------- -------- --------
Total shareholders' equity.................... 27,005 13,893 18,881 $ 18,881
-------- -------- -------- ========
Total liabilities and shareholders' equity.... $ 37,708 $ 26,788 $ 34,762
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 71
NETRO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------- ------------------
1996 1997 1998 1998 1999
-------- -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES.............................. $ 731 $ 5,601 $ 5,438 $ 996 $ 2,142
COST OF REVENUES...................... 619 8,273 9,640 1,310 1,649
-------- -------- -------- ------- -------
GROSS PROFIT (LOSS)................... 112 (2,672) (4,202) (314) 493
-------- -------- -------- ------- -------
OPERATING EXPENSES:
Research and development............ 10,446 15,289 16,143 4,257 4,224
Sales and marketing................. 1,293 3,776 4,819 1,051 1,332
General and administrative.......... 1,189 3,500 3,968 913 1,752
Amortization of deferred stock
compensation..................... -- -- -- -- 168
-------- -------- -------- ------- -------
Total operating expenses.... 12,928 22,565 24,930 6,221 7,476
-------- -------- -------- ------- -------
LOSS FROM OPERATIONS.................. (12,816) (25,237) (29,132) (6,535) (6,983)
-------- -------- -------- ------- -------
OTHER INCOME (EXPENSE):
Interest income..................... 669 1,001 1,260 412 233
Interest expense.................... (26) (298) (956) (194) (272)
-------- -------- -------- ------- -------
Total other income
(expense)................. 643 703 304 218 (39)
-------- -------- -------- ------- -------
NET LOSS AND COMPREHENSIVE LOSS....... $(12,173) $(24,534) $(28,828) $(6,317) $(7,022)
======== ======== ======== ======= =======
Basic and diluted net loss per
share............................... $ (4.66) $ (5.11) $ (4.07) $ (1.05) $ (0.86)
======== ======== ======== ======= =======
Shares used to compute basic and
diluted net loss per share.......... 2,610 4,798 7,087 6,039 8,205
======== ======== ======== ======= =======
Pro forma basic and diluted net loss
per share (unaudited)............... $ (0.84) $ (0.19)
======== =======
Shares used to compute pro forma basic
and diluted net loss per share
(unaudited)......................... 34,391 37,266
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 72
NETRO CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
CONVERTIBLE NOTES
PREFERRED STOCK COMMON STOCK RECEIVABLE DEFERRED TOTAL
-------------------- ------------------ FROM STOCK ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT SHAREHOLDERS COMPENSATION DEFICIT EQUITY
---------- ------- --------- ------ ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1995.................... 18,716,660 $16,541 7,851,284 $ 69 $ (3) $ -- $ (2,069) $ 14,538
Exercise of stock options
for cash................ -- -- 170,000 34 -- -- -- 34
Repurchase of Common Stock
for cash................ -- -- (207,878) (9) -- -- -- (9)
Issuance of Series C
convertible Preferred
Stock for cash, net of
issuance costs of $36... 1,967,106 13,734 -- -- -- -- -- 13,734
Repayment of notes
receivable from
shareholders............ -- -- -- -- 3 -- -- 3
Net loss.................. -- -- -- -- -- -- (12,173) (12,173)
---------- ------- --------- ------ ----- ------- -------- --------
BALANCE, DECEMBER 31,
1996.................... 20,683,766 30,275 7,813,406 94 -- -- (14,242) 16,127
Exercise of stock options
for cash................ -- -- 111,301 15 -- -- -- 15
Issuance of Common Stock
for cash................ -- -- 158,000 235 -- -- -- 235
Repurchase of Common Stock
for cash................ -- -- (3,750) -- -- -- -- --
Issuance of Series C
convertible Preferred
Stock for cash, net of
issuance costs of $36... 5,028,005 35,162 -- -- -- -- -- 35,162
Net loss.................. -- -- -- -- -- -- (24,534) (24,534)
---------- ------- --------- ------ ----- ------- -------- --------
BALANCE, DECEMBER 31,
1997.................... 25,711,771 65,437 8,078,957 344 -- -- (38,776) 27,005
Exercise of stock options
for cash................ -- -- 389,677 226 -- -- -- 226
Issuance of Common Stock
for cash................ -- -- 5,396 11 -- -- -- 11
Repurchase of Common Stock
for cash................ -- -- (343,792) (157) -- -- -- (157)
Issuance of Common Stock
for notes receivable.... -- -- 400,000 800 (800) -- -- --
Issuance of Series D
convertible Preferred
Stock for cash, net of
issuance costs of $84... 2,020,464 15,636 -- -- -- -- -- 15,636
Net loss.................. -- -- -- -- -- -- (28,828) (28,828)
---------- ------- --------- ------ ----- ------- -------- --------
BALANCE, DECEMBER 31,
1998.................... 27,732,235 81,073 8,530,238 1,224 (800) -- (67,604) 13,893
Exercise of stock options
for cash................ -- -- 51,370 66 -- -- -- 66
Deferred stock
compensation............ -- -- -- 2,123 -- (2,123) -- --
Repurchase of Common Stock
for cash................ -- -- (20,833) (4) -- -- -- (4)
Issuance of Series D
convertible Preferred
Stock for cash, net of
issuance costs of $35... 1,518,640 11,780 -- -- -- -- -- 11,780
Amortization of deferred
stock compensation...... -- -- -- -- -- 168 -- 168
Net loss.................. -- -- -- -- -- -- (7,022) (7,022)
---------- ------- --------- ------ ----- ------- -------- --------
BALANCE, MARCH 31, 1999
(UNAUDITED)............. 29,250,875 $92,853 8,560,775 $3,409 $(800) $(1,955) $(74,626) $ 18,881
========== ======= ========= ====== ===== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 73
NETRO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------ ------------------
1996 1997 1998 1998 1999
-------- -------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................... $(12,173) $(24,534) $(28,828) $(6,317) $ (7,022)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization........... 761 1,968 3,065 646 864
Provision for doubtful accounts......... -- 47 462 -- --
Loss on disposal of fixed assets........ 194 258 -- -- --
Amortization of deferred stock
compensation.......................... -- -- -- -- 168
Changes in operating assets and
liabilities:
Trade accounts receivable............. (543) (1,717) 545 1,419 (620)
Inventory............................. (1,257) (2,670) (388) (1,590) 311
Prepaid expenses and other............ (108) (191) (159) (447) (254)
Trade accounts payable and accrued
liabilities........................ 2,277 2,282 (566) (634) 1,508
-------- -------- -------- ------- --------
Net cash used in operating
activities....................... (10,849) (24,557) (25,869) (6,923) (5,045)
-------- -------- -------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and leasehold
improvements............................ (3,104) (2,530) (3,183) (794) (555)
Purchases of short-term investments........ (17,944) (18,796) (34,085) (7,211) (14,935)
Maturities of short-term investments....... 8,208 18,494 35,089 -- 9,075
-------- -------- -------- ------- --------
Net cash used in investing
activities....................... (12,840) (2,832) (2,179) (8,005) (6,415)
-------- -------- -------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable and
sale-leaseback transactions............. -- 4,577 4,553 213 2,265
Payments on notes payable and capital
leases.................................. (246) (1,109) (1,795) (429) (787)
Proceeds from issuance of Preferred Stock,
net of issuance costs................... 13,734 35,162 15,636 9,993 11,780
Proceeds from issuance of Common Stock..... 34 250 237 46 66
Repurchases of Common Stock................ (9) -- (157) -- (4)
Repayment of notes receivable from
shareholders............................ 3 -- -- -- --
-------- -------- -------- ------- --------
Net cash provided by financing
activities....................... 13,516 38,880 18,474 9,823 13,320
-------- -------- -------- ------- --------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS................................ (10,173) 11,491 (9,574) (5,105) 1,860
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD..................................... 14,350 4,177 15,668 15,668 6,094
-------- -------- -------- ------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD..... $ 4,177 $ 15,668 $ 6,094 $10,563 $ 7,954
======== ======== ======== ======= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest..................... $ 21 $ 360 $ 802 $ 169 $ 254
Non-cash transactions:
Notes receivable from the issuance of
common stock.......................... $ -- $ -- $ 800 $ -- $ --
Equipment acquired under capital
leases................................ $ 891 $ 1,083 $ -- $ -- $ --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 74
NETRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1999 IS UNAUDITED)
1. ORGANIZATION AND OPERATIONS OF THE COMPANY:
Netro Corporation (the "Company") was incorporated in California on
November 14, 1994 to develop, manufacture and sell broadband wireless access
systems.
During 1997, the Company commenced volume shipments of its products and
emerged from the development stage. Although no longer in the development stage,
the Company continues to be subject to a number of risks similar to other
companies in a comparable stage of development, including reliance on key
personnel, successful marketing of its products in an emerging market,
competition from substitute products and other companies, successful development
of new products and the ability to secure adequate financing to support future
growth.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
UNAUDITED INTERIM FINANCIAL DATA
The unaudited interim consolidated financial statements for the three
months ended March 31, 1998 and 1999, were prepared on the same basis as the
audited consolidated financial statements and, in the opinion of management,
include all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial information set forth therein, in
accordance with generally accepted accounting principles.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiary in Germany and a wholly-owned, dormant subsidiary in
Israel.
FOREIGN CURRENCY TRANSLATION
The functional currency of the Company's subsidiaries is the local
currency. Gains and losses resulting from the translation of the financial
statements have not been material to date.
Foreign exchange gains and losses resulting from foreign currency
transactions were not material in any of the periods presented.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of short-term, highly liquid investments
with original maturities of less than three months.
SHORT-TERM INVESTMENTS
The Company classifies its investments in debt securities as
"held-to-maturity." Accordingly, these investments, which mature at various
dates through August 1999, are valued using the amortized cost
F-7
<PAGE> 75
NETRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
method. The fair value of the investments approximates amortized cost and, as
such, the gross unrealized holding gains and losses at December 31, 1997 and
1998 were not material.
The carrying value of the Company's investments by major security type
consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
DESCRIPTION 1997 1998
- ----------- ------- -------
<S> <C> <C>
United States Treasury Bills............................. $10,042 $ 1,996
Other federal agency securities.......................... 12,046 6,945
Commercial paper......................................... -- 5,064
------- -------
$22,088 $14,005
======= =======
</TABLE>
Approximately $12,050,000 and $4,971,000 of the total investments in debt
securities as of December 31, 1997 and 1998, respectively, are included in cash
and cash equivalents. The remaining balance is classified as short-term
investments.
INVENTORY
Inventory includes materials and labor, is stated at the lower of cost
(first-in, first-out) or market and consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1997 1998 1999
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials.............................................. $1,188 $3,204 $1,581
Work-in-process............................................ 1,657 474 781
Finished goods............................................. 1,082 637 1,642
------ ------ ------
$3,927 $4,315 $4,004
====== ====== ======
</TABLE>
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment is recorded at cost and depreciated using the straight-line
method based upon the estimated useful lives of the assets, which range from
three to five years. Leasehold improvements are recorded at cost and are
amortized over the estimated lives of the improvements or the term of the lease,
whichever is shorter. Maintenance and repairs that do not improve or extend the
life of assets are expensed as incurred.
SOFTWARE DEVELOPMENT COSTS
Under the criteria set forth in Statement of Financial Accounting Standards
("SFAS") No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed," capitalization of software development costs
begins upon the establishment of technological feasibility of the product. The
establishment of technological feasibility and the ongoing assessment of the
recoverability of these costs requires considerable judgment by management with
respect to certain external factors, including, but not limited to, anticipated
future gross product revenues, estimated economic life and changes in software
and hardware technology. Amounts that could have been capitalized under this
statement after consideration of the above factors were immaterial and,
therefore, no software development costs have been capitalized by the Company to
date.
F-8
<PAGE> 76
NETRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REVENUE RECOGNITION
Revenues from product sales are generally recognized when all of the
following conditions are met: the product has shipped, the Company has the right
to invoice the customer, collection of the receivable is probable and the
Company has fulfilled all of its contractual obligations to the customer.
Provisions are made at the time of revenue recognition for estimated warranty
costs.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred and consist
primarily of payroll costs, other direct expenses and overhead. The Company
received third-party research and development funding of $900,000 in 1998. The
Company offset research and development expenses with the funding when agreed
upon milestones were met.
COMPUTATION OF HISTORICAL NET LOSS PER SHARE AND PRO FORMA NET LOSS PER SHARE
Historical net loss per share was calculated under SFAS No. 128, "Earnings
per Share." Basic and diluted net loss per share on a historical basis is
computed using the weighted average number of shares of common stock
outstanding. Potential common shares from conversion of convertible preferred
stock, stock options and warrants are excluded from diluted net loss per share
as they are antidilutive. The total number of shares excluded from diluted net
loss per share relating to these securities was 22,260,942 shares, 29,777,846
shares, and 32,453,093 shares for 1996, 1997 and 1998, respectively, and
33,481,134 shares and 33,946,641 shares for the three months ended March 31,
1998 and 1999, respectively.
Pursuant to the Securities and Exchange Commission Staff Accounting
Bulletin No. 98, convertible preferred stock and common stock issued or granted
for nominal consideration prior to the anticipated effective date of the initial
public offering must be included in the calculation of basic and diluted net
loss per share as if they had been outstanding for all periods presented. To
date, the Company has not had any issuances or grants for nominal consideration.
Pro forma basic and diluted net loss per share is calculated assuming the
conversion of convertible preferred stock into an equivalent number of common
shares, as if the shares had converted on the dates of their issuance.
F-9
<PAGE> 77
NETRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents the calculation of historical and pro forma
net loss per share (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------- ------------------
1996 1997 1998 1998 1999
-------- -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss.............................. $(12,173) $(24,534) $(28,828) $(6,317) $(7,022)
======== ======== ======== ======= =======
HISTORICAL:
Weighted average shares of common
stock outstanding................... 7,880 8,021 8,227 8,152 8,554
Less: Weighted average shares of
common stock subject to
repurchase.......................... (5,270) (3,223) (1,140) (2,113) (349)
-------- -------- -------- ------- -------
Weighted average shares used to
compute basic and diluted net loss
per share........................... 2,610 4,798 7,087 6,039 8,205
======== ======== ======== ======= =======
Basic and diluted net loss per
share............................... $ (4.66) $ (5.11) $ (4.07) $ (1.05) $ (0.86)
======== ======== ======== ======= =======
PRO FORMA:
Net loss.............................. $(28,828) $(7,022)
======== =======
Shares used above..................... 7,087 8,205
Pro forma adjustment to reflect
weighted average effect of assumed
conversion of convertible preferred
stock (unaudited)................... 27,304 29,061
-------- -------
Weighted average shares used to
compute pro forma basic and diluted
net loss per share (unaudited)...... 34,391 37,266
======== =======
Pro forma basic and diluted net loss
per share (unaudited)............... $ (0.84) $ (0.19)
======== =======
</TABLE>
COMPREHENSIVE LOSS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," which the Company adopted beginning on January
1, 1998. SFAS No. 130 establishes standards for the reporting and display of
comprehensive income (loss) and its components in a full set of general purpose
financial statements. The objective of SFAS No. 130 is to report a measure of
all changes in equity of an enterprise that result from transactions and other
economic events of the period other than transactions with shareholders.
Comprehensive income (loss) is the total of net income (loss) and all other
non-owner changes in equity. For each of the periods presented, the Company had
no such transactions, therefore the comprehensive loss was equal to net loss.
STOCK-BASED COMPENSATION PLANS
Effective January 1, 1996, the Company adopted the disclosure provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation." In accordance with the
provisions of SFAS No. 123, the Company applies Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for stock options.
F-10
<PAGE> 78
NETRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which requires
companies to value derivative financial instruments, including those used for
hedging foreign currency exposures, at current market value with the impact of
any change in market value being charged against earnings in each period. SFAS
No. 133 will be effective for and adopted by the Company in the first quarter of
the fiscal year ending December 31, 2000. The Company anticipates that SFAS No.
133 will not have a material impact on its consolidated financial statements. To
date, the Company has not entered into any derivative financial instrument
contracts.
3. CONCENTRATIONS OF CREDIT RISK:
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of trade receivables and cash
investments. As of December 31, 1998 and March 31, 1999, approximately 71% and
71%, respectively, of the Company's trade accounts receivable balance was
represented by two customers. The Company does not require collateral on
accounts receivable, as the majority of the Company's customers are large,
well-established companies. The Company provides reserves for credit losses and
such losses are insignificant in all periods presented in the accompanying
consolidated financial statements. With respect to cash investments, the Company
has cash investment policies that limit the amount of credit exposure to any one
issuer and restrict placement of these investments to issuers evaluated as
credit worthy.
4. EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Equipment and leasehold improvements consisted of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Engineering and test equipment........................... $ 5,975 $ 7,997
Office and computer equipment............................ 1,931 2,743
Furniture and fixtures................................... 202 345
Leasehold improvements................................... -- 206
------- -------
8,108 11,291
Less: Accumulated depreciation and amortization.......... (2,592) (5,657)
------- -------
Equipment and leasehold improvements, net................ $ 5,516 $ 5,634
======= =======
</TABLE>
5. ACCRUED LIABILITIES:
Accrued liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Accrued payroll and related benefits..................... $ 584 $ 935
Accrued moving expenses.................................. 387 --
Warranty reserve......................................... 171 1,250
Customer deposits........................................ -- 315
Other.................................................... 995 614
------- -------
Total.......................................... $ 2,137 $ 3,114
======= =======
</TABLE>
F-11
<PAGE> 79
NETRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. DEBT AND CAPITAL LEASES:
The following table summarizes obligations under long-term debt and capital
leases (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Borrowings under bank line of credit..................... $ -- $ 1,839
Secured note payable to lender, due in monthly
installments of $90,942 with interest at 12.5%......... 3,447 2,746
Capital leases, due through 2002......................... 2,249 3,834
------- -------
5,696 8,419
Less: current portion.................................... (1,487) (3,872)
------- -------
$ 4,209 $ 4,547
======= =======
</TABLE>
In January 1998, the Company entered into a new bank line of credit under
which up to $6,000,000 is available for borrowings and letters of credit. This
arrangement was renewed in January 1999 and expires in January 2000. Borrowings
are limited to an aggregate amount equaling approximately 80% and 90% of
domestic and foreign eligible trade accounts receivables, respectively, and 50%
of eligible foreign inventories. The line of credit is secured by the Company's
outstanding trade accounts receivable and inventory. The borrowings under the
line are due in January 2000 and accrue interest at the 30-day LIBOR rate plus
2.25% or the bank's prime rate, at the Company's option. Under the agreement,
the Company must comply with certain financial and other covenants. As of
December 31, 1998, borrowings outstanding under this agreement were $1,839,000
and amounts utilized for outstanding letters of credit were $500,000. Through
the three months ended March 31, 1999, the Company borrowed an additional
$1,035,000 under the existing bank line of credit.
In 1997, the Company borrowed $3,750,000 from a lender to finance purchases
of fixed assets. The loan accrues interest at 12.5% per annum from the date of
borrowing, and is secured by a purchase money lien on the equipment financed.
Principal payments due under the loan at December 31, 1998 are as follows (in
thousands):
<TABLE>
<S> <C>
1999................................................ $ 793
2001................................................ 898
2002................................................ 1,055
------
Total..................................... $2,746
======
</TABLE>
A significant portion of the Company's machinery and equipment is leased
under agreements accounted for as capital leases. The cost of equipment under
capital leases included in property and equipment at December 31, 1997 and 1998
was approximately $3,122,000 and $5,754,000, respectively.
F-12
<PAGE> 80
NETRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under all noncancelable capital lease
agreements as of December 31, 1998 are summarized as follows (in thousands):
<TABLE>
<S> <C>
1999................................................ $1,652
2000................................................ 1,241
2001................................................ 1,078
2002................................................ 755
------
Total minimum lease payments........................ 4,726
Less: amount representing interest at 10.0% to
13.3%......................................... (892)
------
Present value of lease payments..................... $3,834
======
</TABLE>
In March 1999, the Company entered into a new equipment lease agreement,
under which the Company can finance equipment purchases of up to $3,000,000. As
of March 31, 1999, the Company had borrowed approximately $990,000 against this
agreement. See Note 9 for information regarding warrants issued as part of this
agreement.
7. COMMITMENTS AND CONTINGENCIES:
COMMITMENTS
The Company leases its facilities and certain equipment under noncancelable
operating lease agreements expiring at various dates through September 2001.
Future minimum lease payments under all noncancelable operating lease agreements
as of December 31, 1998 are summarized as follows (in thousands):
<TABLE>
<S> <C>
1999................................................ $1,347
2000................................................ 1,384
2001................................................ 1,005
------
$3,736
======
</TABLE>
Rent expense for the operating leases was approximately $224,000, $538,000
and $922,000 in 1996, 1997 and 1998, respectively.
The Company issued a standby letter of credit of $500,000 to secure certain
of the Company's warranty obligations to one customer related to possible
damages resulting from downtime due to product performance issues. The letter of
credit is secured by a certificate of deposit for $125,000. The letter of credit
is subject to draw if the Company fails to meet its obligation for liquidated
damages to the customer.
CONTINGENCIES
In March 1999, one of the Company's former contract manufacturers filed for
binding arbitration in Santa Clara County, California with respect to a dispute
with the Company. The arbitration involves claims for approximately $950,000 for
amounts allegedly owed by the Company for inventory purchased by the plaintiff
in anticipation of the Company's projected demand. In June 1999, the Company
filed an answer and counterclaim alleging damages of approximately $275,000 for
product failures. The Company believes it has meritorious defenses to its claim,
and intends to defend this arbitration vigorously.
F-13
<PAGE> 81
NETRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. EMPLOYEE BENEFIT PLAN:
The Company maintains an employee savings plan for all of its full-time
employees. This plan qualifies under Section 401(k) of the Internal Revenue Code
(the "Code"). The plan allows employees to make pre-tax contributions in
specified percentages up to the maximum dollar limitations prescribed by the
Code. The Company has the option to contribute to the plan, but has not made
contributions to date.
9. CAPITAL STOCK:
STOCK SPLIT
In December 1996, the Company's Board of Directors effected a two-for-one
stock split payable in the form of a dividend of one additional share of the
Company's capital stock for every share owned by shareholders. Accordingly, all
share data was adjusted to retroactively reflect the stock split.
CAPITAL STOCK
The Company's capital stock is divided into two classes: Common Stock and
Convertible Preferred Stock. Convertible Preferred Stock consists of Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock and Series D Convertible Preferred Stock.
At December 31, 1998, 33,014,597 shares of Common Stock were reserved,
including 5,244,615 shares for issuance under the Company's stock option plans,
27,732,235 shares for conversion of the outstanding Convertible Preferred Stock
and 37,747 for Convertible Preferred Stock warrants.
During 1998, the Company issued 400,000 shares of Common Stock in exchange
for a full recourse note in the amount of $800,000. The note bears interest at
5.44% percent and is due in April 2002.
STOCK OPTION PLANS
1997 Directors' Stock Option Plan
The 1997 Directors' Stock Option Plan (the "Directors' Plan") was adopted
by the Board of Directors in December 1997 and amended in June 1999. A total of
300,000 shares of common stock has been reserved for issuance under the
Directors' Plan. Under the Directors' Plan, as amended, each non-employee
director who first becomes a non-employee director after the effective date of
the amendment receives an automatic initial grant of an option to purchase
10,000 shares of common stock upon appointment or election. Initial grants to
non-employee directors are vested and exercisable in full as of the date of
grant. The Directors' Plan also provides for annual grants of options to
purchase 10,000 shares of common stock on the first day of each fiscal year to
each non-employee director who has served on the Board of Directors for at least
six months, provided that a non-employee director who received a 20,000 share
initial grant under the original version of the Directors' Plan shall be
eligible to receive an annual grant of an option to purchase 5,000 shares of
common stock until the first day of the fiscal year following the date on which
the initial option has fully vested under the terms of that option after which
date each director shall be eligible to receive an annual grant of an option to
purchase 10,000 shares of common stock. The annual grants to non-employee
directors are vested and exercisable in full as of the date of grant. The
exercise price of all stock options granted under the Directors' Plan shall be
equal to the fair market value of a share of the Company's common stock on the
date of grant of the option. Options granted under the Directors' Plan have a
term of ten years. However, unvested options will terminate when the optionee
ceases to serve as a director and vested options will terminate if they are not
exercised within 12 months after the director's death or disability or within 90
days after the director ceases to serve as a director for any other reason.
F-14
<PAGE> 82
NETRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1995 and 1996 Stock Option Plans
During 1996, the Company established the 1996 Stock Option Plan (the "1996
Plan"). All shares previously available for issuance under the Company's 1995
Stock Option Plan are reserved for issuance under the 1996 Plan. As of December
31, 1998, 6,679,716 shares of Common Stock have been reserved for issuance under
the 1996 Plan. Under the 1996 Plan, the Company may grant incentive stock
options or nonstatutory stock options to employees, officers, directors and
consultants at an exercise price of not less than 100% of the fair market value
of the Common Stock on the date of grant, except that nonstatutory stock options
may be granted at 85% of such fair market value. Options granted generally
become exercisable at a rate of one-fourth of the shares subject to the option
at the end of the first year and 1/48 of the shares subject to the option at the
end of each calendar month thereafter. However, at the discretion of management,
the optionee may have the immediate right to exercise the option subject to a
restricted stock agreement that gives the Company the right to repurchase
unvested shares at the original issuance price in the event of termination of
employment. The maximum term of a stock option under the plans is ten years, but
if the optionee at the time of grant has voting power of more than 10% of the
Company's outstanding capital stock, the maximum term is five years.
The following table summarizes option activity under all option plans:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------------
WEIGHTED
OPTIONS AVERAGE
AVAILABLE SHARES EXERCISE PRICE
---------- --------- --------------
<S> <C> <C> <C>
Balance at December 31, 1995................... 2,104,716 41,000 $0.045
Authorized................................... 1,500,000 -- --
Granted...................................... (2,288,800) 2,288,800 0.47
Exercised.................................... -- (170,000) 0.20
Terminated................................... 63,800 (63,800) 0.27
Unvested shares repurchased.................. 197,460 -- 0.045
---------- ---------
Balance at December 31, 1996................... 1,577,176 2,096,000 0.490
Authorized................................... 1,320,000 -- --
Granted...................................... (2,557,550) 2,557,550 1.980
Exercised.................................... -- (111,301) 0.213
Terminated................................... 504,924 (504,924) 1.022
Unvested shares repurchased.................. 3,750 -- 0.045
---------- ---------
Balance at December 31, 1997................... 848,300 4,037,325 1.360
Authorized................................... 500,000 -- --
Granted...................................... (1,605,800) 1,605,800 2.00
Exercised.................................... -- (389,677) 0.579
Terminated................................... 570,337 (570,337) 1.555
Unvested shares repurchased.................. 248,667 -- 0.064
---------- ---------
Balance at December 31, 1998................... 561,504 4,683,111 1.621
Granted...................................... (652,250) 652,250 2.00
Exercised.................................... -- (51,370) 1.285
Terminated................................... 645,253 (645,253) 1.591
Unvested shares repurchased.................. 20,833 -- 0.200
---------- ---------
Balance at March 31, 1999 (unaudited).......... 575,340 4,638,738 $1.682
========== =========
</TABLE>
F-15
<PAGE> 83
NETRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of March 31, 1999, 52,875 shares exercised under the Plans are subject
to repurchase.
The following table summarizes information about stock options outstanding
at March 31, 1999 (unaudited):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
- ---------------------------------- NUMBER
EXERCISE CONTRACTUAL VESTED AND
PRICES NUMBER LIFE EXERCISABLE
- -------- --------- ----------- -----------
<S> <C> <C> <C>
0$.045.. 21,000 6.37 years 20,625
0$.200.. 676,753 7.54 years 532,778
1$.000.. 22,636 7.37 years 14,566
1$.500.. 258,229 7.70 years 158,279
2$.000.. 3,660,120 8.97 years 664,504
--------- ---------
4,638,738 1,390,752
========= =========
</TABLE>
In January 1996, the Company adopted the provisions of SFAS No. 123, which
calls for companies to measure employee stock compensation expense based on the
fair value method of accounting. As allowed by SFAS No. 123, the Company elected
the continued use of APB Opinion No. 25, with pro forma disclosure of net loss
determined as if the fair value method had been applied in measuring
compensation cost. Had compensation cost been determined under the fair value
method consistent with SFAS No. 123, the Company's net loss would have resulted
in the following pro forma amounts:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Net loss (in thousands):
As reported...................................... $(12,173) $(24,534) $(28,828)
Pro forma........................................ (12,197) (24,670) (29,079)
Pro forma basic and diluted net loss per share... (4.67) (5.14) (4.10)
</TABLE>
The weighted average fair values of options granted during 1996, 1997 and
1998 were $0.58, $2.47 and $2.48 per share, respectively. The fair value of each
option grant was estimated on the date of grant using the Black-Scholes option
valuation model with the following assumptions:
<TABLE>
<S> <C>
Risk free interest rate...................... 5.03% - 6.70%
Average expected life of option.............. 5 years
Dividend yield............................... 0%
Volatility of Common Stock................... 0.01%
</TABLE>
DEFERRED STOCK COMPENSATION (UNAUDITED)
In connection with the grant of stock options to purchase 2,223,050 shares
of common stock with a weighted average exercise price of $2.00 per share to
employees during 1998 and the three months ended March 31, 1999, the Company
recorded deferred compensation of $2,123,000, representing the difference
between the estimated fair value of the common stock and the option exercise
price of such options at the date of grant. Such amount is presented as a
reduction of shareholders' equity and amortized ratably over the vesting period
of the applicable options (generally four years). Amortization expense related
to fiscal 1998 was immaterial. Amortization expense of $168,000 was recorded
during the three months ended March 31, 1999. Compensation expense is decreased
in the period of forfeiture for any accrued but unvested compensation arising
from the early termination of an option holder's services.
F-16
<PAGE> 84
NETRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In April and May of 1999, the Company recorded an additional $3,725,000 of
deferred stock compensation in connection with the grant of additional options
to purchase an aggregate of 1,516,000 shares of common stock with a weighted
average exercise price of $3.96 per share. The Company will amortize this
deferred stock compensation amount over the option vesting period of four years.
CONVERTIBLE PREFERRED STOCK
The Company has authorized shares of each series of convertible Preferred
Stock as follows:
<TABLE>
<CAPTION>
OUTSTANDING
---------------------------------------
DECEMBER 31,
------------------------ MARCH 31,
AUTHORIZED 1997 1998 1999
---------- ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Series A.......................... 13,466,660 13,466,660 13,466,660 13,466,660
Series B.......................... 5,250,000 5,250,000 5,250,000 5,250,000
Series C.......................... 8,475,857 6,995,111 6,995,111 6,995,111
Series D.......................... 4,000,000 -- 2,020,464 3,539,104
</TABLE>
The rights and preferences of the Series A, B, C and D Convertible
Preferred Stock are as follows:
- The holders of Series A, B, C and D Preferred Stock are entitled to
dividends of $0.036, $0.16, $0.56 and $0.62 per share, respectively,
payable annually, as and if declared by the Board of Directors. Dividends
declared are prior and in preference to payment of dividends on Common
Stock. No dividends had been declared as of December 31, 1998.
- In the event of a liquidation or winding up of the Company, the holders
of Series A, B, C and D Preferred Stock shall be entitled to receive, in
preference to holders of Common Stock, an amount that is equal to $0.45,
$2.00, $7.00 and $7.78 per share, respectively, plus any declared but
unpaid dividends on such shares. If amounts are not available to satisfy
the full preferential amounts, the entire assets of the Company will be
distributed to the preferred shareholders in proportion to the aggregate
liquidation preferences of the shares of Preferred Stock held.
- Each share of Preferred Stock is convertible, at the option of the holder
at any time after the date of issuance of such shares, into Common Stock
at the initial conversion rate of one fully paid and non-assessable share
of Common Stock. The conversion rate is subject to adjustments upon the
occurrence of certain events.
- Each share of Preferred Stock will convert into shares of Common Stock
immediately upon the consummation of an underwritten public offering
pursuant to an effective registration statement under the Securities Act
of 1933.
- Each holder of Preferred Stock has the right to one vote for each share
of Common Stock into which the Preferred Stock could then be converted.
Holders of Preferred Stock vote with holders of Common Stock except (i)
on matters required by law or otherwise to be voted upon by class and
(ii) for the election of members of the Board of Directors. Holders of
Preferred Stock as a group are entitled to elect three members of the
Board of Directors.
- Holders of at least a majority of the Preferred Stock are required to
consent to any action that: (i) alters or changes the rights, preferences
or privileges of that class of Preferred Stock; (ii) increases the
authorized number of shares of Preferred Stock; (iii) creates any class
of stock with preferences or priorities superior to or on a parity with
the preferences and priority of the Preferred Stock; or (iv) affects the
sale of all or substantially all of the assets of the Company, or any
consolidation or merger, or any sale of more than 50% of the Company's
capital stock.
F-17
<PAGE> 85
NETRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
WARRANTS
In connection with one of the Company's capital lease financing
arrangements, the Company issued warrants to its lessor as follows:
<TABLE>
<CAPTION>
YEAR SHARE EXERCISE
CLASS OF STOCK GRANTED AMOUNT PRICE
- -------------- ------- ------ --------
<S> <C> <C> <C>
Series C Preferred Stock............................... 1997 28,750 $7.00
Series D Preferred Stock............................... 1998 8,997 $7.78
</TABLE>
The warrants are exercisable immediately upon issuance and expire two years
from the closing of an initial public offering or five years from the date the
warrants were granted, whichever is later. The fair value of the warrants was
estimated at the date of grant using the Black-Scholes model and the value was
determined to be immaterial.
In March 1999, as part of a new equipment loan agreement, the Company
issued warrants to purchase 19,281 shares of Series D Preferred Stock at an
exercise price of $7.78 per share. The warrants are exercisable immediately upon
issuance and expire three years from the closing of an initial public offering
or seven years from the date the warrants were granted, whichever is later. The
fair value of the warrants was estimated at the date of grant using the
Black-Scholes model and the value was determined to be immaterial.
PRO FORMA SHAREHOLDERS' EQUITY (UNAUDITED)
In May 1999, the Board of Directors authorized the filing of a registration
statement with the Securities and Exchange Commission to register shares of the
Company's Common Stock in connection with a proposed initial public offering
("IPO"). If the offering is consummated under the terms presently anticipated,
all of the currently outstanding Convertible Preferred Stock will convert to
29,250,875 shares of common stock upon the closing of the IPO. The effect of
this conversion has been reflected as unaudited pro forma shareholders' equity
in the accompanying consolidated balance sheet as of March 31, 1999.
10. INCOME TAXES:
The Company provides for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes." SFAS No. 109 requires an asset and liability
based approach in accounting for income taxes. Deferred income tax assets and
liabilities are recorded to reflect the tax consequences on future years of
temporary differences of revenue and expense items for financial statement and
income tax purposes. Valuation allowances are provided against assets that are
not likely to be realized.
The provision for income taxes differs from the expected tax benefit amount
computed by applying the statutory federal income tax rate of 35% to loss before
income taxes as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Federal statutory rate...................................... (35)% (35)% (35)%
State taxes, net of federal benefit......................... (6) (6) (6)
Change in valuation allowance............................... 41 41 41
---- ---- ----
0% 0% 0%
==== ==== ====
</TABLE>
F-18
<PAGE> 86
NETRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The major components of the net deferred tax asset are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
-------- --------
<S> <C> <C>
Net operating losses:
Federal.............................................. $ 11,017 $ 20,363
State................................................ 750 1,176
Tax credit carryforwards............................... 1,535 2,842
Cumulative temporary differences:
Reserves............................................. 1,376 1,774
Research and development costs....................... 848 1,653
Start-up costs....................................... 847 621
Other................................................ 295 457
-------- --------
Total deferred tax asset..................... 16,668 28,886
Valuation allowance.................................... (16,668) (28,886)
-------- --------
Net deferred tax asset....................... $ -- $ --
======== ========
</TABLE>
The Company has established a valuation allowance for the total deferred
tax asset because, given the Company's limited operating history and accumulated
deficit, it is uncertain that the deferred tax asset will be realized.
As of December 31, 1998, the Company had Federal and State net operating
loss carryforwards of approximately $59,891,000 and $20,160,000, respectively.
The Company's net operating loss carryforwards expire at various dates through
2018. Under current tax law, the net operating loss and tax credit carryforwards
available for use in any given year may be limited upon the occurrence of
certain events, including significant changes in ownership interest.
11. SEGMENT REPORTING
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information." The
Company adopted SFAS No. 131 in fiscal 1998. SFAS No. 131 establishes standards
for disclosures about operating segments, products and services, geographic
areas and significant customers. The Company is organized and operates as one
operating segment: the design, development, manufacturing, marketing and selling
of broadband wireless point-to-multipoint access systems.
The Company markets its products in the United States and in other foreign
countries through worldwide system integrators, its direct sales force and local
resellers. Revenue by country was as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
United States............................................... 8% 1% 24%
Germany..................................................... 92% 61% 2%
Austria..................................................... -- 13% 27%
United Kingdom.............................................. -- -- 16%
Italy....................................................... -- -- 15%
Israel...................................................... -- 21% 10%
Other....................................................... -- 4% 6%
</TABLE>
F-19
<PAGE> 87
NETRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following customers accounted for 10% or more of revenues in the
periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Customer A.................................................. 79% 39% *
Customer B.................................................. 13% 18% *
Customer C.................................................. -- 23% 10%
Customer D.................................................. -- 12% 27%
Customer E.................................................. -- -- 16%
Customer F.................................................. -- -- 15%
Customer G.................................................. -- -- 10%
</TABLE>
- ---------------
* Customer below 10% in 1998
12. SUBSEQUENT EVENTS:
In April and June 1999, the Company issued 630,614 additional shares of
Series D Convertible Preferred Stock at $7.78 per share for net proceeds of
approximately $4,906,000.
In January 1999, the Company entered into an agreement with one of its
vendors to issue up to approximately 100,000 shares of Preferred Stock for
engineering work performed. The number of shares to be issued will be determined
by dividing the dollar amount specified for the achievement of agreed-upon
milestones by the price per share of such series of Preferred Stock most
recently issued. In June 1999, the Company issued 20,794 shares of Series D
Convertible Preferred Stock pursuant to the terms of this agreement.
In April 1999, the Board of Directors approved the 1999 Executive Stock
Plan (the "Executive Plan"). A total of 1,195,000 shares of common stock were
reserved for issuance under the plan. In June 1999, options to purchase
1,195,000 shares of common stock at an exercise price of $3.50 per share had
been issued under the Executive Plan and no further options will be granted.
In April 1999, the Board of Directors approved an increase in the total
number of shares of Common Stock reserved for issuance under the 1996 Stock
Option Plan of 2,120,284 shares.
In June 1999, the Board of Directors adopted the 1999 Employee Stock
Purchase Plan (the "Purchase Plan"). The Purchase Plan is intended to qualify
under Section 423 of the Internal Revenue Code. A total of 1,000,000 shares of
common stock have been reserved for issuance under the Purchase Plan. The price
of shares purchased under the plan will be equal to 85% of the fair market value
of the Common Stock on the first or last day of the offering period, whichever
is lower.
F-20
<PAGE> 88
[INSIDE FRONT COVER PAGE]
PHOTOGRAPHS, DESCRIPTIONS AND CAPTIONS
1. Top Caption: AirStar Enabled Deployments.
2. Top: Color photo of three AirStar Base Radio Units and a Base Station
Shelf with Base Sector Controllers with a Base Modem Unit (together, a Base
Station), some of the Company's products.
Caption: AirStar, hub equipment -- Base Station, Base Radio Units.
AirStar's Base Station, or hub equipment aggregates traffic and interfaces with
the various public wide area networks at rates from 34 (E3) or 45 mbps (DS3) to
155 mbps (OC-3/STM-1). The Base Radio Unit is a radio transceiver with a single
built-in sector antenna covering a 90 degrees sector. The Base Station controls
activity within each sector by shaping, policing and grooming traffic received
from multiple subscribers.
3. Center: Color photo of the AirStar Subscriber Access Unit and Subscriber
Radio Unit, some of the Company's products.
Caption: AirStar Customer Premises Equipment, Subscriber Access System,
Subscriber Radio Unit.
AirStar's Customer premises equipment provides the Subscriber premises and
translates voice and data traffic to ATM Cells for air transmission. The
Subscriber Radio Unit is a radio tranceiver with a single directional antenna
and is designed with a plug-and-play feature, resulting from automatic frequency
tuning. It is compact, lightweight, has a low profile and is easy to install and
align.
4. Bottom: Color photo of a computer monitor with a picture of an AirView
LE screen on its screen.
Caption: AirView LE Network Management Software.
All components of the AirStar network are managed remotely by the AirView
Link Explorer Software, using SNMP. With AirView LE, an SRV, once installed, can
"self-admit" into the network, saving configuration and installation time, and
SA5 software upgrades can be supported remotely.
[INTERIOR FOLD-OUT OF FRONT COVER PAGE]
IMAGES, DIAGRAM, DIAGRAM DESCRIPTIONS AND CAPTIONS
1. Top Caption: Broadband Wireless Networks Today.
2. Center: Diagram of a communications network of a metropolitan broadband
wireless point-to-multipoint deployment with our AirStar with a Central office
of a Telecom Carrier/Service Provider, connecting through the Public Switched
Telephone Network to the Internet, PSTN/TDM, Mobile Switching Center, ATM
network or frame relay network as well as the use of the Airview LE Network
Management Software (one of the Company's products) in that location.
The Central Office is connected through fiber to a building which houses
the AirStar Base Station. On the roof of that building are AirStar Base Radio
Units covering a small business (with a Subscriber Radio Unit and a Subscriber
Access System), a mid-sized business (with the same subscriber equipment) and a
multiple tenant building (with the same subscriber equipment). The Base Station
and Base Radio Units transmit and receive packets to and from the three
subscribers, described above, with transmission depicted by arrows.
3. Top Left Corner: Three drawings of buildings with AirStar equipment
covering a cell, with sector coverage depicted as a pyramid consisting of five
cones.
4. Captions: By installing a single AirStar base station, a service
provider can attain coverage of many potential subscribers. A typical cell at 10
GHz or 26 GHz can cover ranges from 110 to 275 square miles
<PAGE> 89
or 5 to 15 square miles, respectively, depending on local conditions, and has
transmission capacity equivalent to approximately 400 to 450 T1 lines, or an
aggregate capacity of over 600 Mbps.
5. On the Left-hand Side:
- Service Integration and Bandwidth on Demand. Service Providers using
AirStar's intelligent wireless transport can support both voice and
high-speed packet data services on the same system, enabling them to
increase revenue from their licensed spectrum.
- Cost Effective Deployment and Operation. AirStar allows competitive service
providers to compete effectively in the broadband access market because it
is designed to provide for low overall system costs and enable success-based
capital deployment by directly linking network buildout expenditures to
subscriber growth. Additionally, AirStar's statistical multiplexing allows a
service provider to optimize spectrum use and equipment deployment by
expanding effective transmission capacity.
- Quality of Service. Using our AirStar system, service providers can deploy
voice and high-speed packet data services at different price points to
different market segments with the option for guaranteed quality of service
levels and up to 99.999% availability. These capabilities allow a service
provider to match and guarantee delivered bandwidth to a particular
business' requirements and budget.
- Rapid Time to Market. Service providers using AirStar can achieve rapid time
to market for integrated voice and high speed data services through
AirStar's efficient installation, end-to-end network management integration
and intelligent wireless transport. By installing a single AirStar base
station, the service provider can attain coverage of many potential
subscribers.
6. Bottom: our Logo
[ BACK COVER (INSIDE PAGE) ]
IMAGES, A MAP AND CAPTIONS
1. Top: AirStar trials worldwide.
2. Map with flags depicting the location of AirStar trials worldwide.
<PAGE> 90
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Through and including , 1999 (the 25(th) day after the date
of this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
SHARES
[NETRO LOGO]
COMMON STOCK
----------------------
PROSPECTUS
----------------------
MERRILL LYNCH & CO.
BANCBOSTON ROBERTSON STEPHENS
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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 the
underwriting discounts, payable by the Registrant in connection with the sale of
common stock being registered. All amounts are estimates except the SEC
registration fee, and the NASD filing fee and the Nasdaq National Market listing
fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
SEC registration fee........................................ $15,985
NASD filing fee............................................. 6,250
Nasdaq National Market listing fee..........................
Printing and engraving expenses.............................
Legal fees and expenses.....................................
Accounting fees and expenses................................
Blue Sky fees and expenses..................................
Transfer Agent and Registrar fees...........................
Miscellaneous fees and expenses.............................
Total.............................................
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 317 of the California General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Act").
Article VI of the Registrant's Amended and Restated Articles of Incorporation,
to be filed and effective upon completion of this offering (Exhibit 3.3 hereto),
provides for indemnification of its directors and officers to the maximum extent
permitted by the California General Corporation Law and Section 6.1 of the
Registrant's Bylaws, to be filed and effective upon completion of this offering
(Exhibit 3.4 hereto), provides for indemnification of its directors, officers,
employees and other agents to the maximum extent permitted by the California
General Corporation Law. In addition, the Registrant has entered into
Indemnification Agreements (Exhibit 10.1 hereto) with its directors and officers
containing provisions that are in some respects broader than the specific
indemnification provisions contained in the California General Corporation Law.
The indemnification agreements may require the Registrant, among other things,
to indemnify its directors against certain liabilities that may arise by reason
of their status or service as directors (other than liabilities arising from
willful misconduct of culpable nature), to advance their expenses incurred as a
result of any proceeding against them as to which they could be indemnified, and
to obtain directors' insurance if available on reasonable terms. Reference is
also made to Section 6(b) of the Underwriting Agreement contained in Exhibit 1.1
hereto, indemnifying officers and directors of the Registrant against certain
liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) Since January 1, 1996, the Registrant has issued and sold (without
payment of any selling commission to any person) the following unregistered
securities:
- An aggregate of 4,125,678 shares of Series C preferred stock at $7.00 per
share in July, October and November 1996, and January, February and April
1997;
- Warrants to purchase an aggregate of 28,750 shares of Series C preferred
stock in June and September 1997;
II-1
<PAGE> 92
- An aggregate of 2,869,433 shares of Series C preferred stock at $7.00 per
share in July and November 1997;
- An aggregate of 1,285,347 shares of Series D preferred stock at $7.78 per
share in January 1998;
- Warrants to purchase an aggregate of 8,997 shares of Series D preferred
stock in January 1998;
- An aggregate of 2,253,757 shares of Series D preferred stock at $7.78 per
share in April, July and October 1998 and January and February 1999;
- Warrants to purchase an aggregate of 19,281 shares of Series D preferred
stock in March 1999.
- An aggregate of 630,614 shares of Series D preferred stock at $7.78 per
share in April and June 1999; and
- An aggregate of 20,794 shares of Series D preferred stock for engineering
services upon the achievement by MTI of certain milestones in June 1999.
(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).
The issuances described in Items 15(a) were deemed to be exempt from
registration under the Securities Act in reliance upon Section 4(2) thereof as
transactions by an issuer not involving any public offering. The recipients of
securities in each such transaction represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends affixed to the securities
issued in such transactions. All recipients had adequate access, through their
relationships with the Registrant, to information about the Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Articles of Incorporation of the
Registrant.
3.2 Bylaws of the Registrant, and amendments.
3.3 Form of Amended and Restated Articles of Incorporation of
the Registrant, to be filed and effective upon completion of
this offering.
3.4 Form of Amended and Restated Bylaws of the Registrant, to be
filed and effective upon completion of this offering.
4.1* Form of the Registrant's common stock certificate.
5.1* Opinion of Venture Law Group, A Professional Corporation.
10.1 Form of Indemnification Agreement.
10.2* 1996 Stock Option Plan, as amended, and form of stock option
agreement and restricted stock purchase agreement.
10.3 1999 Executive Stock Plan and form of subscription
agreement.
10.4 1999 Employee Stock Purchase Plan and form of subscription
agreement.
10.5* 1997 Directors' Stock Option Plan and form of stock option
agreement.
10.6 Lease between Sobrato Interests II et al. and Pyramid
Technology Corporation dated August 29, 1979, and first
amendment.
10.6.1 Sublease between Registrant and Siemens Pyramid Information
Systems, Inc. dated December 15, 1997 and amendment.
10.6.2 Landlord's consent to sublease.
10.7(+) Global OEM Purchase Agreement between Registrant and Lucent
Technologies Inc.
10.8(+) Frame Agreement between Registrant and Italtel s.p.a.
</TABLE>
II-2
<PAGE> 93
<TABLE>
<C> <S>
10.8.1(+) Non-Exclusive OEM Supplemental Agreement between Registrant
and Italtel s.p.a.
10.8.2(+) Joint Development Agreement between Registrant and Italtel
s.p.a.
10.9(+) Manufacturing Agreement between Registrant and Solectron
California Corporation, dated May 31, 1998.
10.10(+) Manufacturing and Engineering Services Agreement between
Registrant and Microelectronics Technology Inc., dated
January 11, 1999 and first amendment.
10.11(+) OEM Agreement between Registrant and Cisco Systems, Inc.,
dated as of December 7, 1998.
10.11.1(+) Technology Agreement between Registrant and Cisco Systems,
Inc., dated as of December 7, 1998.
10.12 Employment Agreement between Registrant and Gideon
Ben-Efraim, and amendment.
10.13 Form of Change of Control Agreement.
10.14 Amended and Restated Rights Agreement by and among
Registrant and certain of its shareholders, dated June 21,
1999.
23.1 Consent of Arthur Andersen LLP, Independent Public
Accountants.
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-4).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be supplied by amendment.
+ Confidential Treatment Requested
(b) FINANCIAL STATEMENT SCHEDULES
Schedule II -- Valuation and Qualifying Accounts and Reserves (see page
S-2).
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be a part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-3
<PAGE> 94
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of San
Jose, State of California, on June 22, 1999.
NETRO CORPORATION
By: /s/ GIDEON BEN-EFRAIM
------------------------------------
Gideon Ben-Efraim, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Gideon Ben-Efraim and Michael Everett,
and each one of them, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any and all amendments
to this Registration Statement (including post-effective amendments), and any
and all registration statements filed pursuant to Rule 462 under the Securities
Act of 1933, as amended, in connection with or related to the offering
contemplated by this Registration Statement and its amendments, if any, and to
file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof. This Power of Attorney
may be signed in several counterparts.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Chairman of the Board of June , 1999
- --------------------------------------------------- Directors
(Richard Moley)
/s/ GIDEON BEN-EFRAIM President, Chief Executive June 22, 1999
- --------------------------------------------------- Officer and Director (Principal
(Gideon Ben-Efraim) Executive Officer)
/s/ MICHAEL T. EVERETT Executive Vice President and June 22, 1999
- --------------------------------------------------- Chief Financial Officer
(Michael T. Everett) (Principal Financial and
Accounting Officer)
/s/ THOMAS BARUCH Director June 22, 1999
- ---------------------------------------------------
(Thomas Baruch)
/s/ NEAL DOUGLAS Director June 22, 1999
- ---------------------------------------------------
(Neal Douglas)
</TABLE>
II-4
<PAGE> 95
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Director June , 1999
- ---------------------------------------------------
(Irwin Federman)
/s/ JOHN WALECKA Director June 22, 1999
- ---------------------------------------------------
(John Walecka)
</TABLE>
II-5
<PAGE> 96
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Board of Directors and Shareholders of
Netro Corporation:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Netro Corporation (a California
corporation) and subsidiaries included in this registration statement and have
issued our report thereon dated March 4, 1999. Our audits were made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. The schedule listed in the exhibit index above is the responsibility of
the Company's management, is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ ARTHUR ANDERSEN LLP
--------------------------------------
San Jose, California
March 4, 1999
S-1
<PAGE> 97
NETRO CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
THE BEGINNING CHARGED TO END OF THE
OF THE YEAR EXPENSES DEDUCTIONS YEAR
------------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
Year ended December 31, 1996............ $ -- $ 11 $ 8 $ 3
Year ended December 31, 1997............ 3 219 175 47
Year ended December 31, 1998............ $ 47 $ 462 $ -- $ 509
Reserve for Warranty:
Year ended December 31, 1996............ $ -- $ 133 $ 58 $ 75
Year ended December 31, 1997............ 75 320 224 171
Year ended December 31, 1998............ $ 171 $1,833 $754 $1,250
</TABLE>
S-2
<PAGE> 98
EXHIBIT INDEX
(a) EXHIBITS
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Articles of Incorporation of the
Registrant.
3.2 Bylaws of the Registrant, and amendments.
3.3 Form of Amended and Restated Articles of Incorporation of
the Registrant, to be filed and effective upon completion of
this offering.
3.4 Form of Amended and Restated Bylaws of the Registrant, to be
filed and effective upon completion of this offering.
4.1* Form of the Registrant's common stock certificate.
5.1* Opinion of Venture Law Group, A Professional Corporation.
10.1 Form of Indemnification Agreement.
10.2* 1996 Stock Option Plan, as amended, and form of stock option
agreement and restricted stock purchase agreement.
10.3 1999 Executive Stock Plan and form of subscription
agreement.
10.4 1999 Employee Stock Purchase Plan and form of subscription
agreement.
10.5* 1997 Directors' Stock Option Plan and form of stock option
agreement.
10.6 Lease between Sobrato Interests II et al. and Pyramid
Technology Corporation dated August 29, 1979, and first
amendment.
10.6.1 Sublease between Registrant and Siemens Pyramid Information
Systems, Inc. dated December 15, 1997 and amendment.
10.6.2 Landlord's consent to sublease.
10.7(+) Global OEM Purchase Agreement between Registrant and Lucent
Technologies Inc.
10.8(+) Frame Agreement between Registrant and Italtel s.p.a.
10.8.1(+) Non-Exclusive OEM Supplemental Agreement between Registrant
and Italtel s.p.a.
10.8.2(+) Joint Development Agreement between Registrant and Italtel
s.p.a.
10.9(+) Manufacturing Agreement between Registrant and Solectron
California Corporation, dated May 31, 1998
10.10(+) Manufacturing and Engineering Services Agreement between
Registrant and Microelectronics Technology Inc., dated
January 11, 1999 and first amendment.
10.11(+) OEM Agreement between Registrant and Cisco Systems, Inc.,
dated as of December 7, 1998.
10.11.1(+) Technology Agreement between Registrant and Cisco Systems,
Inc., dated as of December 7, 1998.
10.12 Employment Agreement between Registrant and Gideon
Ben-Efraim, and amendment.
10.13 Form of Change of Control Agreement.
10.14 Amended and Restated Rights Agreement by and among
Registrant and certain of its shareholders, dated June 21,
1999.
23.1 Consent of Arthur Andersen LLP, Independent Public
Accountants.
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-4).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be supplied by amendment.
+ Confidential Treatment Requested
S-3
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
NETRO CORPORATION
The undersigned, Gideon Ben-Efraim and Tae Hea Nahm certify that:
1. They are the duly elected President and Secretary of Netro Corporation,
a California corporation.
2. The Articles of Incorporation of this corporation are amended and
restated to read in full as follows:
"I
The name of this corporation is Netro Corporation.
II
The purpose of this corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III
(A) Classes of Stock. This corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the corporation is authorized to issue is
92,692,517 shares, of which 60,000,000 shares shall be Common Stock and
32,692,517 shares shall be Preferred Stock, each with a par value of $0.001.
(B) Rights, Preferences and Restrictions of Preferred Stock. The Preferred
Stock authorized by these Articles of Incorporation may be issued from time to
time in series. The first series of Preferred Stock shall be designated "Series
A Preferred Stock" and shall consist of 13,466,660 shares. The second series of
Preferred Stock shall be designated "Series B Preferred Stock" and shall consist
of 5,250,000 shares. The third series of Preferred Stock shall be designated
"Series C Preferred Stock" and shall consist of 8,475,857 shares. The fourth
series of Preferred Stock shall be designated "Series D Preferred Stock" and
shall consist of 5,500,000 shares. The rights, preferences, privileges, and
restrictions granted to and imposed on the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock are as
follows:
<PAGE> 2
(1) Dividends.
(aa) The holders of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be
entitled to receive in any fiscal year, when and as declared by the Board of
Directors, out of any assets at the time legally available therefor, dividends
in cash at the rate of $0.036, $0.160, $0.560 and $0.618, respectively, per
share per annum, before any cash dividend is paid on Common Stock. Such
dividends or distributions may be payable annually or otherwise as the Board of
Directors may from time to time determine. Dividends or distributions (other
than dividends payable solely in shares of Common Stock) may be declared and
paid upon shares of Common Stock in any fiscal year of the corporation only if
dividends shall have been paid on or declared and set apart upon all shares of
the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock at the respective annual rates prescribed herein;
and no further dividends shall be paid to holders of shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock in excess of such annual rates in any fiscal year unless at the
same time equivalent dividends are paid to holders of shares of Common Stock.
The right to such dividends on shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock shall not
be cumulative and no right shall accrue to holders of shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock by reason of the fact that dividends on said shares are not
declared in any prior year, nor shall any undeclared or unpaid dividend bear or
accrue interest.
(bb) In the event this corporation shall declare a
distribution payable in securities of other persons, evidences of indebtedness
issued by this corporation or other persons, assets (including cash dividends in
excess of the amount paid in such fiscal year to holders of shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock) or options or rights to purchase any such securities or
evidences of indebtedness, then, in each such case the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though the holders of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock were the
holders of the number of shares of Common Stock of the corporation into which
their respective shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock are convertible as of the
record date fixed for the determination of the holders of Common Stock of the
corporation entitled to receive such distribution.
(2) Voting Rights.
(aa) In General. Subject to subsection (bb) hereof and except
as otherwise required by law, the holders of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock and the
holders of Common
-2-
<PAGE> 3
Stock shall be entitled to notice of any shareholders' meeting and to vote
together as a single class upon any matter submitted to the shareholders for a
vote, as follows: (A) each holder of Series A Preferred Stock shall have one
vote for each full share of Common Stock into which its shares of Series A
Preferred Stock would be convertible on the record date for the vote, (B) each
holder of Series B Preferred Stock shall have one vote for each full share of
Common Stock into which its shares of Series B Preferred Stock would be
convertible on the record date for the vote, (C) each holder of Series C
Preferred Stock shall have one vote for each full share of Common Stock into
which its shares of Series C Preferred Stock would be convertible on the record
date for the vote, (D) each holder of Series D Preferred Stock shall have one
vote for each full share of Common Stock into which its shares of Series D
Preferred Stock would be convertible on the record date for the vote and (E) the
holders of Common Stock shall have one vote per share of Common Stock.
(bb) Voting for Board of Directors. The Board of Directors of
this corporation shall consist of seven members. The holders of shares of Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series
D Preferred Stock, voting together as a single class, shall elect three members
of the Board of Directors of the corporation. The holders of shares of Common
Stock, voting separately as a class, shall elect three members of the Board of
Directors of the corporation. The remaining member of the Board of Directors
shall be elected by the holders of shares of Common Stock, Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock, voting together as a single class. If a vacancy on the Board of Directors
is to be filled by the Board of Directors, only a director or directors elected
by the same class of shareholders as those who would be entitled to vote to fill
such vacancy, if any, shall vote to fill such vacancy. No action by members of
the Board of Directors filling a vacancy on the Board of Directors shall be
effective until 10 days after all Board members who do not have a right to vote
on such appointment have received notice thereof. A majority of the Board
members entitled to receive such notice may waive such notice requirement on
behalf of all such Board members. A director may be removed from the Board of
Directors with or without cause by the vote or consent of the holders of the
outstanding class or series with voting power to elect him or her in accordance
with the California General Corporation Law and these Articles of Incorporation.
(3) Conversion. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(aa) Right to Convert.
(i) Each share of Series A Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the corporation or any transfer agent
for the Series A Preferred Stock, into Common Stock at the initial conversion
rate of one fully paid and non-assessable share of Common Stock for each share
of Series A Preferred Stock,
-3-
<PAGE> 4
subject, however, to the adjustments described below. (The number of shares of
Common Stock into which each share of Series A Preferred Stock may be converted
is hereafter referred to as the "Series A Conversion Rate.")
(ii) Each share of Series B Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the corporation or any transfer agent
for the Series B Preferred Stock, into Common Stock at the initial conversion
rate of one fully paid and non-assessable share of Common Stock for each share
of Series B Preferred Stock, subject, however, to the adjustments described
below. (The number of shares of Common Stock into which each share of Series B
Preferred Stock may be converted is hereafter referred to as the "Series B
Conversion Rate.")
(iii) Each share of Series C Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the corporation or any transfer agent
for the Series C Preferred Stock, into Common Stock at the initial conversion
rate of one fully paid and non-assessable share of Common Stock for each share
of Series C Preferred Stock, subject, however, to the adjustments described
below. (The number of shares of Common Stock into which each share of Series C
Preferred Stock may be converted is hereafter referred to as the "Series C
Conversion Rate.")
(iv) Each share of Series D Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the corporation or any transfer agent
for the Series D Preferred Stock, into Common Stock at the initial conversion
rate of one fully paid and non-assessable share of Common Stock for each share
of Series D Preferred Stock, subject, however, to the adjustments described
below. (The number of shares of Common Stock into which each share of Series D
Preferred Stock may be converted is hereafter referred to as the "Series D
Conversion Rate.")
(v) No fractional shares of Common Stock shall be issued
upon conversion of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock and any shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock surrendered for conversion which would otherwise result in a
fractional share of Common Stock shall be redeemed for the then fair market
value thereof as determined by the corporation's Board of Directors, payable as
promptly as possible whenever funds are legally available therefor. If more than
one share of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock is surrendered for conversion at any
one time by the same holder, the number of full shares of Common Stock to be
issued upon conversion shall be computed on the basis of the aggregate number of
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock so surrendered.
-4-
<PAGE> 5
(vi) Automatic Conversion. Each share of Preferred Stock
of any series shall automatically be converted into shares of Common Stock at
the then effective Conversion Rate for that series (A) in the event of, and
contingent upon, the consummation of a firm commitment underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock for the
account of the corporation to the public, resulting in gross proceeds to the
Company of at least $10,000,000 and at a price per share no less than the fair
market value (as determined in good faith by the Company's Board of Directors)
of a share of the Company's Common Stock as of the date thereof, or (B) by
consent of the holders of not less than a majority in voting interest of the
then outstanding shares of Preferred Stock.
(bb) Mechanics of Conversion. Before any holder of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the corporation or of any transfer agent for the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock, as applicable, and shall give written notice to the
corporation at such office that such holder elects to convert the same and shall
state therein the name or names in which such holder wishes the certificate or
certificates for the number of shares of Common Stock to be issued. The
corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock, or to such holder's
nominee or nominees, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock to be converted, and the person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock on such date.
(cc) Adjustment of Conversion Rate For Combinations or
Consolidations of Common Stock. In the event the corporation, at any time or
from time to time after the effective date of a written agreement by the
corporation for the initial sale of Preferred Stock (hereinafter referred to as
the "Original Issue Date"), effects a subdivision or combination of its
outstanding Common Stock into a greater or lesser number of shares without a
proportionate and corresponding subdivision or combination of its outstanding
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock, then and in each such event the Series A Conversion
Rate, Series B Conversion Rate, Series C Conversion Rate and Series D Conversion
Rate shall be increased or decreased proportionately.
(dd) Adjustments for Reorganization, Reclassification,
Exchange and Substitution. If the Common Stock issuable upon conversion of the
Series
-5-
<PAGE> 6
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series
D Preferred Stock shall be changed into the same or a different number of shares
of any other class or classes of stock or other securities or property, whether
by reorganization (unless such reorganization is deemed a liquidation under
Section 4(bb) hereof), reclassification or otherwise (other than a subdivision
or combination of shares provided for above), the Series A Conversion Rate,
Series B Conversion Rate, Series C Conversion Rate and Series D Conversion Rate
then in effect shall, concurrently with the effectiveness of such reorganization
or reclassification, be proportionately adjusted such that the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock shall be convertible into, in lieu of the number of shares of
Common Stock which the holders would otherwise have been entitled to receive, a
number of shares of such other class or classes of stock or other securities or
property equivalent to the number of shares of Common Stock that would have been
subject to receipt by the holders upon conversion of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock, respectively, immediately before such event; and, in any such case,
appropriate adjustment shall be made in the application of the provisions herein
set forth with respect to the rights and interest thereafter of the holders of
the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock, to the end that the provisions set forth herein
(including provisions with respect to changes in and other adjustments of the
Series A Conversion Rate, Series B Conversion Rate, Series C Conversion Rate and
Series D Conversion Rate) shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares of stock or other property
thereafter deliverable upon the conversion of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock.
(ee) Adjustment of Conversion Rate for Dividends,
Distributions and Common Stock Equivalents. In the event the corporation at any
time or from time to time after the Original Issue Date shall make or issue, or
fix a record date for the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in additional shares of Common
Stock or other securities or rights (hereinafter referred to as "Common Stock
Equivalents") convertible into or entitling the holder thereof to receive
additional shares of Common Stock without payment of any consideration by such
holder for such Common Stock Equivalents or the additional shares of Common
Stock, then and in each such event the maximum number of shares (as set forth in
the instrument relating thereto without regard to any provisions contained
therein for a subsequent adjustment of such number) of Common Stock issuable in
payment of such dividend or distribution or upon conversion or exercise of such
Common Stock Equivalents shall be deemed to be issued and outstanding as of the
time of such issuance or, in the event such a record date shall have been fixed,
as of the close of business on such record date. In each such event, the Series
A Conversion Rate, Series B Conversion Rate, Series C Conversion Rate and Series
D Conversion Rate for the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock, respectively, shall be
increased as of the time of such issuance or, in the event such a record date
shall have been fixed, as of the close of business on such record
-6-
<PAGE> 7
date, by multiplying the Series A Conversion Rate, Series B Conversion Rate,
Series C Conversion Rate or Series D Conversion Rate, as applicable, by a
fraction,
(i) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding or deemed to be issued and
outstanding immediately prior to the time of such issuance on the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution or upon conversion or exercise of
such Common Stock Equivalents and
(ii) the denominator of which shall be the total number
of shares of Common Stock issued and outstanding or deemed to be issued and
outstanding immediately prior to the time of such issuance on the close of
business on such record date provided, however, (A) if such record date shall
have been fixed and such dividend is not fully paid or if such distribution is
fully made on the date fixed therefor, the Series A Conversion Rate, Series B
Conversion Rate, Series C Conversion Rate and Series D Conversion Rate shall be
recomputed accordingly as of the close of business on such record date and
thereafter the Series A Conversion Rate, Series B Conversion Rate, Series C
Conversion Rate and Series D Conversion Rate shall be adjusted pursuant to this
paragraph (B)(3)(ee) as of the time of actual payment of such dividends or
distribution; (B) if such Common Stock Equivalents provide, with the passage of
time or otherwise, for any decrease in the number of shares of Common Stock
issuable upon conversion or exercise thereof, the Series A Conversion Rate,
Series B Conversion Rate, Series C Conversion Rate and Series D Conversion Rate
for such series shall, upon any such decrease becoming effective, be recomputed
to reflect such decrease insofar as it affects the rights of conversion or
exercise of the Common Stock Equivalents then outstanding; and (C) upon the
expiration of any rights of conversion or exercise under any unexercised Common
Stock Equivalents, the Series A Conversion Rate, Series B Conversion Rate,
Series C Conversion Rate and Series D Conversion Rate computed upon the original
issue thereof shall, upon such expiration, be recomputed as if the only
additional shares of Common Stock issued were the shares of such stock, if any,
actually issued upon the conversion or exercise of such Common Stock
Equivalents.
(ff) No Impairment. The corporation will not, by amendment of
its Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this paragraph (B)(3) and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock against impairment.
(gg) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Series A Conversion Rate, Series B
Conversion Rate, Series C Conversion Rate or Series D Conversion Rate pursuant
to this paragraph (B)(3),
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<PAGE> 8
the corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of affected Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock and Series D Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Series A Conversion Rate, Series B Conversion Rate,
Series C Conversion Rate or Series D Conversion Rate at the time in effect, as
appropriate, and (iii) the number of shares of Common Stock and the amount, if
any, of the property which at the time would be received upon the conversion of
such holder's shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock.
(hh) Notices of Record Date. In the event of the establishment
by the corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any Common Stock
Equivalents or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right, the corporation shall mail to each holder of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock, at least twenty (20) days prior to the date specified therein, notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
(ii) Reservation of Stock Issuable Upon Conversion. The
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all then outstanding shares of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock;
and if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all of the then outstanding
shares of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock, the corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
(jj) Notices. Any notices required by the provisions of this
paragraph (B)(3) to be given to the holders of shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock shall be deemed
-8-
<PAGE> 9
given if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at such holder's address appearing on the books of the
corporation.
(kk) Status of Converted Stock. All converted shares of
Preferred Stock shall be deemed cancelled and shall not be issued again by
the Company.
(4) Liquidation Preference.
(aa) In the event of any liquidation, dissolution or winding
up of the corporation, either voluntary or involuntary, the holders of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock shall be entitled to receive, prior and in preference
to any distribution of any of the assets or surplus funds of the corporation to
the holders of the Common Stock by reason of their ownership thereof, the amount
of $0.45, $2.00, $7.00 and $7.78 per share, respectively, and in addition, an
amount equal to all declared but unpaid dividends on the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock respectively. If, upon the occurrence of such event, the assets and funds
thus distributed among the holders of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be
insufficient to permit the payment to such holders of the full preferential
amount, then the entire assets and funds of the corporation legally available
for distribution shall be distributed ratably among the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock as between such series, in proportion to the product of the
respective preference amount of each shares multiplied by the number of shares
of such stock owned by each such holder. After payment has been made to the
holders of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock of the full amounts to which they
shall be entitled as aforesaid, any remaining assets shall be distributed
ratably to the holders of the corporation's Common Stock.
(bb) A merger of the corporation with or into any other
corporation or corporations, or the merger of any other corporation or
corporations into the corporation, in which consolidation or merger the
shareholders of the corporation receive distributions in cash or securities of
another corporation or corporations as a result of such consolidation or merger,
or a sale of all or substantially all of the assets of the corporation, shall be
treated as a liquidation, dissolution or winding up for purposes of this
paragraph (B)(4), unless the shareholders of this corporation hold at least 50%
of the outstanding voting equity securities of the surviving corporation;
provided that nothing contained in this subsection (bb) shall limit the right of
a holder of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock to convert such shares into Common
Stock prior to the effective date of any such transaction.
(5) Protective Provisions. In addition to any other rights provided
by law, so long as 15,000,000 shares of Series A Preferred Stock, Series B
Preferred Stock,
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<PAGE> 10
Series C Preferred Stock and Series D Preferred Stock taken together shall be
outstanding, this corporation shall not, without first obtaining the affirmative
vote or written consent of the holders of not less than a majority in voting
interest of such outstanding shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, voting
together as a single class:
(aa) amend or repeal any provision of, or add any provision
to, this corporation's Articles of Incorporation or Bylaws if such action would
alter or change the preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of, the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock;
(bb) authorize shares of any class of stock having any
preference or priority as to dividends or assets superior to or on a parity with
any such preference or priority of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock, or
authorize shares of stock of any class or any bonds, debentures, notes or other
obligations convertible into or exchangeable for, or having option rights to
purchase, any shares of stock of this corporation having any preference or
priority as to dividends or assets superior to or on a parity with any such
preference or priority of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock;
(cc) effect in any transaction or series of transactions a
sale or other conveyance of all or substantially all of the assets of the
corporation or any of its subsidiaries, or any consolidation or merger involving
the corporation or any of its subsidiaries where the corporation or such
subsidiary is not the surviving corporation, or any sale of more than 50% of the
corporation's capital stock; or
(dd) increase the authorized number of shares of Preferred
Stock.
(C) Common Stock.
(1) Dividend Rights. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
(2) Liquidation Rights. Upon the liquidation, dissolution or winding
up of the corporation, the assets of the corporation shall be distributed as
provided in paragraph III(B)(4) hereof.
(3) Voting Rights. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any shareholders'
meeting in
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<PAGE> 11
accordance with the Bylaws of this corporation, and shall be entitled to vote
upon such matters and in such manner as may be provided by law.
IV
(A) Limitation on Directors' Liability. The liability of the directors of
the corporation for monetary damages shall be eliminated to the fullest extent
permissible under California law.
(B) Indemnification of Corporate Agents. The corporation is authorized to
provide indemnification of agents (as defined in Section 317 of the California
General Corporation law) through Bylaw provisions, agreements with agents, vote
of shareholders or disinterested directors or otherwise, in excess of the
indemnification otherwise permitted by Section 317 of the California General
Corporation law, subject only to the applicable limits set forth in Section 204
of the California General Corporation Law with respect to actions for breach of
duty to the corporation and its shareholders.
(C) Repeal or Modification. Any repeal or modification of the foregoing
provisions of this Article IV by the shareholders of the corporation shall not
adversely affect any right or protection of a director of the corporation
existing at the time of such repeal or modification."
3. The foregoing amendment of the Articles of Incorporation has been duly
approved by the Board of Directors.
4. The foregoing Amended and Restated Articles of Incorporation have been
duly approved by the required vote of shareholders in accordance with Sections
902 and 903 of the Corporations Code. The total number of outstanding shares of
the Corporation is 8,658,710 shares of Common Stock, 13,466,660 shares of Series
A Preferred Stock, 5,250,000 shares of Series B Preferred Stock, 6,995,111
shares of Series C Preferred stock and 3,809,823 shares of Series D Preferred
Stock. The number of shares voting in favor of the amendment equaled or exceeded
the vote required. The percentage vote required was more than 50% of the Common
Stock, voting as a separate class, and more than 50% of the Preferred Stock,
voting together as a separate class.
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<PAGE> 12
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
Date: June __, 1999
--------------------------------------
Gideon Ben-Efraim, President
--------------------------------------
Tae Hea Nahm, Secretary
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<PAGE> 1
Exhibit 3.2
BYLAWS
OF
NETRO CORPORATION
<PAGE> 2
BYLAWS
OF
NETRO CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I - CORPORATE OFFICES..............................................................1
1.1 PRINCIPAL OFFICE............................................................1
1.2 OTHER OFFICES...............................................................1
ARTICLE II - MEETINGS OF SHAREHOLDERS......................................................1
2.1 PLACE OF MEETINGS...........................................................1
2.2 ANNUAL MEETING..............................................................1
2.3 SPECIAL MEETING.............................................................1
2.4 NOTICE OF SHAREHOLDERS' MEETINGS............................................2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE................................3
2.6 QUORUM......................................................................3
2.7 ADJOURNED MEETING; NOTICE...................................................3
2.8 VOTING......................................................................4
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT...........................5
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING...................................................................5
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING
CONSENTS..................................................................6
2.12 PROXIES.....................................................................7
2.13 INSPECTORS OF ELECTION......................................................7
ARTICLE III - DIRECTORS....................................................................8
3.1 POWERS......................................................................8
3.2 NUMBER OF DIRECTORS.........................................................8
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS....................................9
3.4 RESIGNATION AND VACANCIES...................................................9
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE....................................9
3.6 REGULAR MEETINGS...........................................................10
3.7 SPECIAL MEETINGS; NOTICE...................................................10
3.8 QUORUM.....................................................................10
3.9 WAIVER OF NOTICE...........................................................11
3.10 ADJOURNMENT................................................................11
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
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<S> <C>
3.11 NOTICE OF ADJOURNMENT......................................................11
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING..........................11
3.13 FEES AND COMPENSATION OF DIRECTORS.........................................11
3.14 APPROVAL OF LOANS TO OFFICERS*.............................................12
ARTICLE IV - COMMITTEES...................................................................12
4.1 COMMITTEES OF DIRECTORS....................................................12
4.2 MEETINGS AND ACTION OF COMMITTEES..........................................13
ARTICLE V - OFFICERS......................................................................13
5.1 OFFICERS...................................................................13
5.2 ELECTION OF OFFICERS.......................................................13
5.3 SUBORDINATE OFFICERS.......................................................14
5.4 REMOVAL AND RESIGNATION OF OFFICERS........................................14
5.5 VACANCIES IN OFFICES.......................................................14
5.6 CHAIRMAN OF THE BOARD......................................................14
5.7 PRESIDENT..................................................................14
5.8 VICE PRESIDENTS............................................................15
5.9 SECRETARY..................................................................15
5.10 CHIEF FINANCIAL OFFICER....................................................15
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS........................................................16
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS..................................16
6.2 INDEMNIFICATION OF OTHERS..................................................16
6.3 PAYMENT OF EXPENSES IN ADVANCE.............................................16
6.4 INDEMNITY NOT EXCLUSIVE....................................................17
6.5 INSURANCE INDEMNIFICATION..................................................17
6.6 CONFLICTS..................................................................17
ARTICLE VII - RECORDS AND REPORTS.........................................................17
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER...............................17
7.2 MAINTENANCE AND INSPECTION OF BYLAWS.......................................18
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE
RECORDS..................................................................18
7.4 INSPECTION BY DIRECTORS....................................................19
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER......................................19
7.6 FINANCIAL STATEMENTS.......................................................19
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.............................20
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE VIII - GENERAL MATTERS............................................................20
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND
VOTING...................................................................20
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS..................................21
8.3 CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED.........................21
8.4 CERTIFICATES FOR SHARES....................................................21
8.5 LOST CERTIFICATES..........................................................21
8.6 CONSTRUCTION; DEFINITIONS..................................................22
ARTICLE IX - AMENDMENTS...................................................................22
9.1 AMENDMENT BY SHAREHOLDERS..................................................22
9.2 AMENDMENT BY DIRECTORS.....................................................22
</TABLE>
(iii)
<PAGE> 5
BYLAWS
OF
NETRO CORPORATION
ARTICLE I
CORPORATE OFFICES
1.1 PRINCIPAL OFFICE
The board of directors shall fix the location of the principal executive
office of the corporation at any place within or outside the State of
California. If the principal executive office is located outside such state and
the corporation has one or more business offices in such state, then the board
of directors shall fix and designate a principal business office in the State of
California.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 PLACE OF MEETINGS
Meetings of shareholders shall be held at any place within or outside
the State of California designated by the board of directors. In the absence of
any such designation, shareholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of shareholders shall be held each year on a date and
at a time designated by the board of directors. In the absence of such
designation, the annual meeting of shareholders shall be held on the First day
of April in each year at 11:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected, and
any other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the shareholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or by
one or more shareholders holding
<PAGE> 6
shares in the aggregate entitled to cast not less than ten percent (10%) of the
votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice president or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the shareholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of shareholders called by action of the board of directors may be held.
2.4 NOTICE OF SHAREHOLDERS' MEETINGS
All notices of meetings of shareholders shall be sent or otherwise given
in accordance with Section 2.5 of these bylaws not less than ten (10) (or, if
sent by third-class mail pursuant to Section 2.5 of these bylaws, thirty (30))
nor more than sixty (60) days before the date of the meeting. The notice shall
specify the place, date, and hour of the meeting and (i) in the case of a
special meeting, the general nature of the business to be transacted (no
business other than that specified in the notice may be transacted) or (ii) in
the case of the annual meeting, those matters which the board of directors, at
the time of giving the notice, intends to present for action by the shareholders
(but subject to the provisions of the next paragraph of this Section 2.4 any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California (the
"Code"), (ii) an amendment of the articles of incorporation, pursuant to Section
902 of the Code, (iii) a reorganization of the corporation, pursuant to Section
1201 of the Code, (iv) a voluntary dissolution of the corporation, pursuant to
Section 1900 of the Code, or (v) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, pursuant to Section
2007 of the Code, then the notice shall also state the general nature of that
proposal.
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<PAGE> 7
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of shareholders shall be given either (i)
personally or (ii) by first-class mail or (iii) by third-class mail but only if
the corporation has outstanding shares held of record by five hundred (500) or
more persons (determined as provided in Section 605 of the Code) on the record
date for the shareholders' meeting, or (iv) by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the shareholder at the address of that shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that shareholder by mail or telegraphic or other written communication
to the corporation's principal executive office, or if published at least once
in a newspaper of general circulation in the county where that office is
located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, then all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available to the
shareholder on written demand of the shareholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.6 QUORUM
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote thereat constitutes a quorum for the transaction of
business at all meetings of shareholders. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
2.7 ADJOURNED MEETING; NOTICE
Any shareholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the vote of the majority of the
shares represented at that meeting, either in person or by proxy. In the absence
of a quorum, no other business may be transacted at that meeting except as
provided in Section 2.6 of these bylaws.
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<PAGE> 8
When any meeting of shareholders, either annual or special, is adjourned
to another time or place, notice need not be given of the adjourned meeting if
the time and place are announced at the meeting at which the adjournment is
taken. However, if a new record date for the adjourned meeting is fixed or if
the adjournment is for more than forty-five (45) days from the date set for the
original meeting, then notice of the adjourned meeting shall be given. Notice of
any such adjourned meeting shall be given to each shareholder of record entitled
to vote at the adjourned meeting in accordance with the provisions of Sections
2.4 and 2.5 of these bylaws. At any adjourned meeting the corporation may
transact any business which might have been transacted at the original meeting.
2.8 VOTING
The shareholders entitled to vote at any meeting of shareholders shall
be determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 702 through 704 of the Code (relating to
voting shares held by a fiduciary, in the name of a corporation or in joint
ownership).
The shareholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if demanded by any
shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8, or as may
be otherwise provided in the articles of incorporation, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to a
vote of the shareholders. Any shareholder entitled to vote on any matter may
vote part of the shares in favor of the proposal and refrain from voting the
remaining shares or, except when the matter is the election of directors, may
vote them against the proposal; but, if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
all shares which the shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the
shares represented and voting at a duly held meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act of the shareholders, unless the vote of a greater number or a vote by
classes is required by the Code or by the articles of incorporation.
At a shareholders' meeting at which directors are to be elected, a
shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such shareholder normally
is entitled to cast) if the candidates' names have been placed in nomination
prior to commencement of the voting and the shareholder has given notice prior
to commencement of the voting of the shareholder's intention to cumulate votes.
If any shareholder has given such a notice, then every shareholder entitled to
vote may cumulate votes for candidates in nomination either (i) by giving one
candidate a number of votes equal to the
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<PAGE> 9
number of directors to be elected multiplied by the number of votes to which
that shareholder's shares are normally entitled or (ii) by distributing the
shareholder's votes on the same principle among any or all of the candidates, as
the shareholder thinks fit. The candidates receiving the highest number of
affirmative votes, up to the number of directors to be elected, shall be
elected; votes against any candidate and votes withheld shall have no legal
effect.
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions of any meeting of shareholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though they had been taken at a meeting duly held after regular call and notice,
if a quorum be present either in person or by proxy, and if, either before or
after the meeting, each person entitled to vote, who was not present in person
or by proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of shareholders, except that if action is taken
or proposed to be taken for approval of any of those matters specified in the
second paragraph of Section 2.4 of these bylaws, the waiver of notice or consent
or approval shall state the general nature of the proposal. All such waivers,
consents, and approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the Code to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be effective
only if signed by the holders of all outstanding shares entitled to vote for the
election of directors. However, a director may be elected at any time to fill
any vacancy on the board of directors, provided that it was not created by
removal of a director and that it has not been filled by the directors, by the
written
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consent of the holders of a majority of the outstanding shares entitled to vote
for the election of directors.
All such consents shall be maintained in the corporate records. Any
shareholder giving a written consent, or the shareholder's proxy holders, or a
transferee of the shares, or a personal representative of the shareholder, or
their respective proxy holders, may revoke the consent by a writing received by
the secretary of the corporation before written consents of the number of shares
required to authorize the proposed action have been filed with the secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders has not been received, then the secretary shall give prompt notice
of the corporate action approved by the shareholders without a meeting. Such
notice shall be given to those shareholders entitled to vote who have not
consented in writing and shall be given in the manner specified in Section 2.5
of these bylaws. In the case of approval of (i) a contract or transaction in
which a director has a direct or indirect financial interest, pursuant to
Section 310 of the Code, (ii) indemnification of a corporate "agent," pursuant
to Section 317 of the Code, (iii) a reorganization of the corporation, pursuant
to Section 1201 of the Code, and (iv) a distribution in dissolution other than
in accordance with the rights of outstanding preferred shares, pursuant to
Section 2007 of the Code, the notice shall be given at least ten (10) days
before the consummation of any action authorized by that approval.
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS
For purposes of determining the shareholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of any such meeting nor more than sixty (60) days before any such
action without a meeting, and in such event only shareholders of record on the
date so fixed are entitled to notice and to vote or to give consents, as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date, except as otherwise provided in the Code.
If the board of directors does not so fix a record date:
(a) the record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the business day next preceding
the day on which the meeting is held; and
(b) the record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, (i) when no prior
action by the
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board has been taken, shall be the day on which the first written consent is
given, or (ii) when prior action by the board has been taken, shall be at the
close of business on the day on which the board adopts the resolution relating
to that action, or the sixtieth (60th) day before the date of such other action,
whichever is later.
The record date for any other purpose shall be as provided in Article
VIII of these bylaws.
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation. A proxy shall be deemed signed if the shareholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the shareholder or the shareholder's
attorney-in-fact. A validly executed proxy which does not state that it is
irrevocable shall continue in full force and effect unless (i) the person who
executed the proxy revokes it prior to the time of voting by delivering a
writing to the corporation stating that the proxy is revoked or by executing a
subsequent proxy and presenting it to the meeting or by voting in person at the
meeting, or (ii) written notice of the death or incapacity of the maker of that
proxy is received by the corporation before the vote pursuant to that proxy is
counted; provided, however, that no proxy shall be valid after the expiration of
eleven (11) months from the date of the proxy, unless otherwise provided in the
proxy. The dates contained on the forms of proxy presumptively determine the
order of execution, regardless of the postmark dates on the envelopes in which
they are mailed. The revocability of a proxy that states on its face that it is
irrevocable shall be governed by the provisions of Sections 705(e) and 705(f) of
the Code.
2.13 INSPECTORS OF ELECTION
Before any meeting of shareholders, the board of directors may appoint
an inspector or inspectors of election to act at the meeting or its adjournment.
If no inspector of election is so appointed, then the chairman of the meeting
may, and on the request of any shareholder or a shareholder's proxy shall,
appoint an inspector or inspectors of election to act at the meeting. The number
of inspectors shall be either one (l) or three (3). If inspectors are appointed
at a meeting pursuant to the request of one (l) or more shareholders or proxies,
then the holders of a majority of shares or their proxies present at the meeting
shall determine whether one (l) or three (3) inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
then the chairman of the meeting may, and upon the request of any shareholder or
a shareholder's proxy shall, appoint a person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, and the authenticity, validity, and effect of proxies;
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(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the Code and any limitations in the
articles of incorporation and these bylaws relating to actions required to be
approved by the shareholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The authorized number of directors shall be seven (7). The authorized
number may be changed by a duly adopted amendment to the articles of
incorporation or by an amendment to this bylaw adopted by the vote or written
consent of holders of a majority of the outstanding shares entitled to vote;
provided, however, that an amendment reducing the fixed number or the minimum
number of directors to a number less than five (5) cannot be adopted if the
votes cast against its adoption at a meeting, or the shares not consenting in
the case of an action by written consent, are equal to more than sixteen and
two-thirds percent (16-2/3%) of the outstanding shares entitled to vote thereon.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Directors shall be elected at each annual meeting of shareholders to
hold office until the next annual meeting. Each director, including a director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
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3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
board of directors may elect a successor to take office when the resignation
becomes effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote or
written consent of the shareholders or by court order may be filled only by the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute a majority of the required quorum), or by the unanimous written
consent of all shares entitled to vote thereon. Each director so elected shall
hold office until the next annual meeting of the shareholders and until a
successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to
exist (i) in the event of the death, resignation or removal of any director,
(ii) if the board of directors by resolution declares vacant the office of a
director who has been declared of unsound mind by an order of court or convicted
of a felony, (iii) if the authorized number of directors is increased, or (iv)
if the shareholders fail, at any meeting of shareholders at which any director
or directors are elected, to elect the number of directors to be elected at that
meeting.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election
other than to fill a vacancy created by removal, if by written consent, shall
require the consent of the holders of a majority of the outstanding shares
entitled to vote thereon.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place
within or outside the State of California that has been designated from time to
time by resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the
State of California that has been designated in the notice of the meeting or, if
not stated in the notice or if there is no notice, at the principal executive
office of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
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3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice if
the times of such meetings are fixed by the board of directors.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.8 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in Section
3.10 of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of
Section 310 of the Code (as to approval of contracts or transactions in which a
director has a direct or indirect material financial interest), Section 311 of
the Code (as to appointment of committees), Section 317(e) of the Code (as to
indemnification of directors), the articles of incorporation, and other
applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commence-
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ment, the lack of notice to such director. All such waivers, consents, and
approvals shall be filed with the corporate records or made part of the minutes
of the meeting. A waiver of notice need not specify the purpose of any regular
or special meeting of the board of directors.
3.10 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
3.11 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not be
given unless the meeting is adjourned for more than twenty-four (24) hours. If
the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.7 of these bylaws, to
the directors who were not present at the time of the adjournment.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors
may be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board.
3.13 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.13 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.14 APPROVAL OF LOANS TO OFFICERS*
The corporation may, upon the approval of the board of directors alone,
make loans of money or property to, or guarantee the obligations of, any officer
of the corporation or its parent or subsidiary, whether or not a director, or
adopt an employee benefit plan or plans authorizing such loans or guaranties
provided that (i) the board of directors determines that such a loan or guaranty
or plan may reasonably be expected to benefit the corporation, (ii) the
corporation has
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* This section is effective only if it has been approved by the
shareholders in accordance with Sections 315(b) and 152 of the Code.
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outstanding shares held of record by 100 or more persons (determined as provided
in Section 605 of the Code) on the date of approval by the board of directors,
and (iii) the approval of the board of directors is by a vote sufficient without
counting the vote of any interested director or directors.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (l) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one (l) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the authorized number of directors. Any committee, to the
extent provided in the resolution of the board, shall have all the authority of
the board, except with respect to:
(a) the approval of any action which, under the Code, also
requires shareholders' approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in any
committee;
(c) the fixing of compensation of the directors for serving on
the board or any committee;
(d) the amendment or repeal of these bylaws or the adoption of
new bylaws;
(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except
at a rate or in a periodic amount or within a price range determined by the
board of directors; or
(g) the appointment of any other committees of the board of
directors or the members of such committees.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum),
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Section 3.9 (waiver of notice), Section 3.10 (adjournment), Section 3.11 (notice
of adjournment), and Section 3.12 (action without meeting), with such changes in
the context of those bylaws as are necessary to substitute the committee and its
members for the board of directors and its members; provided, however, that the
time of regular meetings of committees may be determined either by resolution of
the board of directors or by resolution of the committee, that special meetings
of committees may also be called by resolution of the board of directors, and
that notice of special meetings of committees shall also be given to all
alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of any
committee not inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary, and a
chief financial officer. The corporation may also have, at the discretion of the
board of directors, a chairman of the board, one or more vice presidents, one or
more assistant secretaries, one or more assistant treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 5.3 of
these bylaws. Any number of offices may be held by the same person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board, subject to the rights, if any, of an
officer under any contract of employment. Any contract of employment with an
officer shall be unenforceable unless in writing and specifically authorized by
the board of directors.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special
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meeting of the board or, except in case of an officer chosen by the board of
directors, by any officer upon whom such power of removal may be conferred by
the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board
of directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the shareholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation, and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for
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them respectively by the board of directors, these bylaws, the president or the
chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors and shareholders. The minutes shall show the time and place of each
meeting, whether regular or special (and, if special, how authorized and the
notice given), the names of those present at directors' meetings or committee
meetings, the number of shares present or represented at shareholders' meetings,
and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required to be given by law or
by these bylaws. He shall keep the seal of the corporation, if one be adopted,
in safe custody and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables
in the name and to the credit of the corporation with such depositories as may
be designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
ARTICLE VI
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INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted
by the Code, indemnify each of its directors and officers against expenses (as
defined in Section 317(a) of the Code), judgments, fines, settlements, and other
amounts actually and reasonably incurred in connection with any proceeding (as
defined in Section 317(a) of the Code), arising by reason of the fact that such
person is or was an agent of the corporation. For purposes of this Article VI, a
"director" or "officer" of the corporation includes any person (i) who is or was
a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner
permitted by the Code, to indemnify each of its employees and agents (other than
directors and officers) against expenses (as defined in Section 317(a) of the
Code), judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding (as defined in Section 317(a) of the
Code), arising by reason of the fact that such person is or was an agent of the
corporation. For purposes of this Article VI, an "employee" or "agent" of the
corporation (other than a director or officer) includes any person (i) who is or
was an employee or agent of the corporation, (ii) who is or was serving at the
request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending any civil or criminal action or
proceeding for which indemnification is required pursuant to Section 6.1 or for
which indemnification is permitted pursuant to Section 6.2 following
authorization thereof by the Board of Directors shall be paid by the corporation
in advance of the final disposition of such action or proceeding upon receipt of
an undertaking by or on behalf of the indemnified party to repay such amount if
it shall ultimately be determined that the indemnified party is not entitled to
be indemnified as authorized in this Article VI.
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6.4 INDEMNITY NOT EXCLUSIVE
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the articles of
incorporation.
6.5 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation against any liability asserted against or incurred by such
person in such capacity or arising out of such person's status as such, whether
or not the corporation would have the power to indemnify him against such
liability under the provisions of this Article VI.
6.6 CONFLICTS
No indemnification or advance shall be made under this Article VI,
except where such indemnification or advance is mandated by law or the order,
judgment or decree of any court of competent jurisdiction, in any circumstance
where it appears:
(1) That it would be inconsistent with a provision of the
articles of incorporation, these bylaws, a resolution of the shareholders or an
agreement in effect at the time of the accrual of the alleged cause of the
action asserted in the proceeding in which the expenses were incurred or other
amounts were paid, which prohibits or otherwise limits indemnification; or
(2) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER
The corporation shall keep either at its principal executive office or
at the office of its transfer agent or registrar (if either be appointed), as
determined by resolution of the board of directors, a record of its shareholders
listing the names and addresses of all shareholders and the number and class of
shares held by each shareholder.
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A shareholder or shareholders of the corporation who holds at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who holds at least one percent (l%) of such voting shares and has
filed a Schedule 14B with the Securities and Exchange Commission relating to the
election of directors, may (i) inspect and copy the records of shareholders'
names, addresses, and shareholdings during usual business hours on five (5)
days' prior written demand on the corporation, (ii) obtain from the transfer
agent of the corporation, on written demand and on the tender of such transfer
agent's usual charges for such list, a list of the names and addresses of the
shareholders who are entitled to vote for the election of directors, and their
shareholdings, as of the most recent record date for which that list has been
compiled or as of a date specified by the shareholder after the date of demand.
Such list shall be made available to any such shareholder by the transfer agent
on or before the later of five (5) days after the demand is received or five (5)
days after the date specified in the demand as the date as of which the list is
to be compiled.
The record of shareholders shall also be open to inspection on the
written demand of any shareholder or holder of a voting trust certificate, at
any time during usual business hours, for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate.
Any inspection and copying under this Section 7.1 may be made in person
or by an agent or attorney of the shareholder or holder of a voting trust
certificate making the demand.
7.2 MAINTENANCE AND INSPECTION OF BYLAWS
The corporation shall keep at its principal executive office or, if its
principal executive office is not in the State of California, at its principal
business office in California the original or a copy of these bylaws as amended
to date, which bylaws shall be open to inspection by the shareholders at all
reasonable times during office hours. If the principal executive office of the
corporation is outside the State of California and the corporation has no
principal business office in such state, then the secretary shall, upon the
written request of any shareholder, furnish to that shareholder a copy of these
bylaws as amended to date.
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS
The accounting books and records and the minutes of proceedings of the
shareholders, of the board of directors, and of any committee or committees of
the board of directors shall be kept at such place or places as are designated
by the board of directors or, in absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written form,
and the accounting books and records shall be kept either in written form or in
any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to inspection
upon the written demand of any shareholder or holder of a voting trust
certificate, at any reasonable time
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<PAGE> 23
during usual business hours, for a purpose reasonably related to the holder's
interests as a shareholder or as the holder of a voting trust certificate. The
inspection may be made in person or by an agent or attorney and shall include
the right to copy and make extracts. Such rights of inspection shall extend to
the records of each subsidiary corporation of the corporation.
7.4 INSPECTION BY DIRECTORS
Every director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind as well as the physical
properties of the corporation and each of its subsidiary corporations. Such
inspection by a director may be made in person or by an agent or attorney. The
right of inspection includes the right to copy and make extracts of documents.
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER
The board of directors shall cause an annual report to be sent to the
shareholders not later than one hundred twenty (120) days after the close of the
fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days)
before the annual meeting of shareholders to be held during the next fiscal year
and in the manner specified in Section 2.5 of these bylaws for giving notice to
shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the end of the
fiscal year, (ii) an income statement, (iii) a statement of changes in financial
position for the fiscal year, and (iv) any report of independent accountants or,
if there is no such report, the certificate of an authorized officer of the
corporation that the statements were prepared without audit from the books and
records of the corporation.
The foregoing requirement of an annual report shall be waived so long as
the shares of the corporation are held by fewer than one hundred (100) holders
of record.
7.6 FINANCIAL STATEMENTS
If no annual report for the fiscal year has been sent to shareholders,
then the corporation shall, upon the written request of any shareholder made
more than one hundred twenty (120) days after the close of such fiscal year,
deliver or mail to the person making the request, within thirty (30) days
thereafter, a copy of a balance sheet as of the end of such fiscal year and an
income statement and statement of changes in financial position for such fiscal
year.
If a shareholder or shareholders holding at least five percent (5%) of
the outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and for a
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<PAGE> 24
balance sheet of the corporation as of the end of that period, then the chief
financial officer shall cause that statement to be prepared, if not already
prepared, and shall deliver personally or mail that statement or statements to
the person making the request within thirty (30) days after the receipt of the
request. If the corporation has not sent to the shareholders its annual report
for the last fiscal year, the statements referred to in the first paragraph of
this Section 7.6 shall likewise be delivered or mailed to the shareholder or
shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or by the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the shareholders entitled to receive payment
of any dividend or other distribution or allotment of any rights or the
shareholders entitled to exercise any rights in respect of any other lawful
action (other than action by shareholders by written consent without a meeting),
the board of directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action. In that case, only
shareholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the Code.
If the board of directors does not so fix a record date, then the record
date for determining shareholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.
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<PAGE> 25
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.4 CERTIFICATES FOR SHARES
A certificate or certificates for shares of the corporation shall be
issued to each shareholder when any of such shares are fully paid. The board of
directors may authorize the issuance of certificates for shares partly paid
provided that these certificates shall state the total amount of the
consideration to be paid for them and the amount actually paid. All certificates
shall be signed in the name of the corporation by the chairman of the board or
the vice chairman of the board or the president or a vice president and by the
chief financial officer or an assistant treasurer or the secretary or an
assistant secretary, certifying the number of shares and the class or series of
shares owned by the shareholder. Any or all of the signatures on the certificate
may be facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed on a certificate ceases to be that officer,
transfer agent or registrar before that certificate is issued, it may be issued
by the corporation with the same effect as if that person were an officer,
transfer agent or registrar at the date of issue.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or
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<PAGE> 26
liability, on account of the alleged loss, theft or destruction of the
certificate or the issuance of the replacement certificate.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Code shall govern the construction of these
bylaws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
9.1 AMENDMENT BY SHAREHOLDERS
New bylaws may be adopted or these bylaws may be amended or repealed by
the vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that if the articles of incorporation of
the corporation set forth the number of authorized directors of the corporation,
then the authorized number of directors may be changed only by an amendment of
the articles of incorporation.
9.2 AMENDMENT BY DIRECTORS
Subject to the rights of the shareholders as provided in Section 9.1 of
these bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing the
authorized number of directors (except to fix the authorized number of directors
pursuant to a bylaw providing for a variable number of directors), may be
adopted, amended or repealed by the board of directors.
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<PAGE> 27
CERTIFICATE OF AMENDMENT OF BYLAWS
The undersigned, Craig W. Johnson, hereby certifies that:
1. He is the duly elected and incumbent Secretary of Netro Corporation
(the "Company").
2. By action of the Board of Directors of the Company duly adopted at a
meeting held January 10, 1995, the second sentence of Article III, Section 3.2
of the Bylaws of the Company was amended to read as follows:
"The exact number of directors shall be four (4) until changed, within
the limits specified above, by a bylaw amending this Section 3.2, duly adopted
by the board of directors or by the shareholders."
3. The matters set forth in this certificate are true and correct of my
own knowledge.
Date: January 10, 1995
-----------------------------
Craig W. Johnson, Secretary
<PAGE> 28
CERTIFICATE OF AMENDMENT OF BYLAWS
The undersigned, Craig W. Johnson, hereby certifies that:
1. He is the duly elected and incumbent Secretary of Netro
Corporation (the "Company").
2. By action of the shareholders of the Company duly adopted by Action
by Written Consent effective April 17 1995, Article III, Section 3.2 of the
Bylaws of the Company was amended to read in its entirety as follows:
"The authorized number of directors shall be seven (7). The
authorized number may be changed by a duly adopted amendment to the articles of
incorporation or by an amendment to this bylaw adopted by the vote or written
consent of holders of a majority of the outstanding shares entitled to vote;
provided, however, that an amendment reducing the fixed number or the minimum
number of directors to a number less than five (5) cannot be adopted if the
votes cast against its adoption at a meeting, or the shares not consenting in
the case of an action by written consent, are equal to more than sixteen and
two-thirds percent (16-2/3%) of the outstanding shares entitled to vote
thereon."
3. The matters set forth in this certificate are true and correct of my
own knowledge.
Date: _____________, 1995
------------------------------
Craig W. Johnson, Secretary
<PAGE> 29
CERTIFICATE OF AMENDMENT OF BYLAWS
The undersigned, Tae Hea Nahm, hereby certifies that:
1. He is the duly elected and incumbent Assistant Secretary of Netro
Corporation (the "Company").
2. By action of the Board of Directors of the Company duly adopted at a
meeting held April 10, 1995, and by action of the Shareholders of the Company
duly adopted by written consent on April 17, 1995, Section 3.2 of Article III of
the Bylaws of the Company was amended to read in its entirety as follows:
"The authorized number of directors shall be seven (7). The authorized
number may be changed by a duly adopted amendment to the articles of
incorporation or by an amendment to this bylaw adopted by the vote or written
consent of holders of a majority of the outstanding shares entitled to vote;
provided, however, that an amendment reducing the fixed number or the minimum
number of directors to a number less than five (5) cannot be adopted if the
votes cast against its adoption at a meeting, or the shares not consenting in
the case of an action by written consent, are equal to more than sixteen and
two-thirds percent (16-2/3%) of the outstanding shares entitled to vote
thereon."
3. The matters set forth in this certificate are true and correct of my
own knowledge.
Date: November 20, 1997
-----------------------------
Tae Hea Nahm, Asst. Secretary
<PAGE> 1
Exhibit 3.3
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
NETRO CORPORATION
The undersigned, Gideon Ben-Efraim and Tae Hea Nahm, hereby certify that:
1. They are the duly elected and acting President and Secretary,
respectively, of Netro Corporation, a California corporation.
2. The Articles of Incorporation of this Corporation shall be amended and
restated to read in full as follows:
"ARTICLE I
The name of this corporation is Netro Corporation, (the "Corporation").
ARTICLE II
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
(A) CLASSES OF STOCK. The Corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the Corporation is authorized to issue is one
hundred five million (105,000,000) shares, each with a par value of $0.001 per
share. One hundred million (100,000,000) shares shall be Common Stock and five
million (5,000,000) shares shall be Preferred Stock.
(B) The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in these Articles of Incorporation, to determine or alter
the rights, preferences, privileges and restrictions granted to or imposed upon
any wholly unissued series of Preferred Stock and the number of shares
constituting any such series and the designation thereof, or any of them; and to
increase or decrease the number of shares of any series subsequent to the
issuance of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
<PAGE> 2
ARTICLE IV
No action shall be taken by the shareholders of the Corporation other than
at an annual or special meeting of the shareholders, upon due notice and in
accordance with the provisions of the Corporation's bylaws.
ARTICLE V
"Listing Event" as used in these Amended and Restated Articles of
Incorporation shall mean the Corporation becoming a "Listed Corporation" within
the meaning of Section 301.5 of the California Corporations Code.
Effective upon the occurrence of the Listing Event:
(A) The Board of Directors of the Corporation shall divide the directors
into two classes, as nearly equal in number as reasonably possible, with the
term of office of the first class to expire at the first annual meeting of
shareholders (or any special meeting in lieu thereof) following the effective
date of the Listing Event (the "Effective Date"), and the term of office of the
second class to expire at the second annual meeting of shareholders after the
Effective Date (or any special meeting in lieu thereof). At each annual meeting
of shareholders or special meeting in lieu thereof following such initial
classification, directors elected to succeed those directors whose terms expire
shall be elected for a term of office to expire at the third succeeding annual
meeting of shareholders or special meeting in lieu thereof after their election
and until their successors are duly elected and qualified.
(B) Subject to the rights of the holders of any series of Preferred Stock
then outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
then in office even though less than a quorum, or by a sole remaining director.
In the event of any increase or decrease in the authorized number of directors,
(i) each director then serving as such shall nevertheless continue as a director
of the class of which he or she is a member until the expiration of his or her
current term or his or her prior death, retirement, removal or resignation and
(ii) the newly created or eliminated directorships resulting from such increase
or decrease shall if reasonably possible be apportioned by the Board of
Directors among the two classes of directors so as to ensure that no one class
has more than one director more than any other class. To the extent reasonably
possible, consistent with the foregoing rule, any newly created directorships
shall be added to those classes whose terms of office are to expire at the
latest dates following such allocation and newly eliminated directorships shall
be subtracted from those classes whose terms of office are to expire at the
earliest dates following such allocation, unless otherwise provided for from
time to time by resolution adopted by a majority of the directors then in
office, although less than a quorum. In the event of a vacancy in the Board of
Directors, the remaining directors, except as otherwise provided by law, may
exercise the powers of the full Board of Directors until the vacancy is filled.
Notwithstanding the foregoing provisions of this Article V, each director shall
serve until his or her successor is duly elected and
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<PAGE> 3
qualified or until his or her death, resignation, or removal. No decrease in
the number of directors constituting the Board of Directors shall shorten the
term of any incumbent director.
(C) In the election of directors, each holder of shares of any class or
series of capital stock of the Corporation shall be entitled to one vote for
each share held. No shareholder shall be permitted to cumulate votes at any
election of directors.
(D) Vacancies in the Board of Directors and newly created directorships
resulting from any increase in the authorized number of directors shall be
filled by a vote of the majority of the directors then in office, though less
than a quorum, or by a sole remaining director.
ARTICLE VI
(A) The liability of the directors of the Corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
(B) The Corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) to the fullest
extent permissible under California law.
(C) Any amendment or repeal or modification of the foregoing provisions of
this Article VI by the shareholders of the Corporation shall not adversely
affect any right or protection of a director of the Corporation existing at the
time of such repeal or modification."
* * *
3. The foregoing amendment has been approved by the Board of Directors of
this Corporation.
4. The foregoing amendment was approved by the holders of the requisite
number of shares of this Corporation in accordance with Sections 902 and 903 of
the California General Corporation Law. The total number of outstanding shares
entitled to vote with respect to the foregoing amendment was [__________] shares
of Common Stock. The number of shares voting in favor of the foregoing amendment
equaled or exceeded the vote required. The percentage vote required was a
majority of the outstanding shares of Common Stock. There are no shares of
Preferred Stock outstanding.
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<PAGE> 4
The undersigned certify under penalty of perjury under the laws of the
State of California that the matters set forth in this Certificate are true and
correct of our own knowledge.
Executed at __________, California, on ___________ __ 1999.
-----------------------------------
Gideon Ben-Efraim, President
-----------------------------------
Tae Hea Nahm, Secretary
<PAGE> 1
Exhibit 3.4
AMENDED AND RESTATED BYLAWS
OF
NETRO CORPORATION
(EFFECTIVE AS OF ___________ __, 1999)
<PAGE> 2
AMENDED AND RESTATED BYLAWS
OF
NETRO CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE I - CORPORATE OFFICES............................................................. 1
1.1 PRINCIPAL OFFICE........................................................ 1
1.2 OTHER OFFICES........................................................... 1
ARTICLE II - MEETINGS OF SHAREHOLDERS..................................................... 1
2.1 PLACE OF MEETINGS....................................................... 1
2.2 ANNUAL MEETING.......................................................... 1
2.3 SPECIAL MEETING......................................................... 3
2.4 NOTICE OF SHAREHOLDERS' MEETINGS........................................ 4
2.5 ADVANCE NOTICE OF SHAREHOLDER NOMINEES.................................. 4
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE............................ 5
2.7 QUORUM.................................................................. 5
2.8 ADJOURNED MEETING; NOTICE............................................... 6
2.9 VOTING.................................................................. 6
2.10 CUMULATIVE VOTING....................................................... 7
2.11 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING................. 7
2.12 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT....................... 7
2.13 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING.............................. 7
2.14 PROXIES................................................................. 8
2.15 INSPECTORS OF ELECTION.................................................. 8
ARTICLE III - DIRECTORS................................................................... 9
3.1 POWERS.................................................................. 9
3.2 NUMBER OF DIRECTORS..................................................... 9
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS................................ 10
3.4 RESIGNATION AND VACANCIES............................................... 10
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE................................ 11
3.6 REGULAR MEETINGS........................................................ 11
3.7 SPECIAL MEETINGS; NOTICE................................................ 11
3.8 QUORUM.................................................................. 11
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
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<S> <C> <C>
3.9 WAIVER OF NOTICE........................................................ 12
3.10 ADJOURNMENT............................................................. 12
3.11 NOTICE OF ADJOURNMENT................................................... 12
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
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<S> <C> <C>
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING....................... 12
3.13 FEES AND COMPENSATION OF DIRECTORS...................................... 12
3.14 APPROVAL OF LOANS TO OFFICERS........................................... 13
ARTICLE IV - COMMITTEES................................................................... 13
4.1 COMMITTEES OF DIRECTORS................................................. 13
4.2 MEETINGS AND ACTION OF COMMITTEES....................................... 14
ARTICLE V - OFFICERS...................................................................... 14
5.1 OFFICERS................................................................ 14
5.2 ELECTION OF OFFICERS.................................................... 14
5.3 SUBORDINATE OFFICERS.................................................... 14
5.4 REMOVAL AND RESIGNATION OF OFFICERS..................................... 15
5.5 VACANCIES IN OFFICES.................................................... 15
5.6 CHAIRMAN OF THE BOARD................................................... 15
5.7 PRESIDENT............................................................... 15
5.8 VICE PRESIDENTS......................................................... 15
5.9 SECRETARY............................................................... 16
5.10 CHIEF FINANCIAL OFFICER................................................. 16
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS.......... 17
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS............................... 17
6.2 INDEMNIFICATION OF OTHERS............................................... 17
6.3 PAYMENT OF EXPENSES IN ADVANCE.......................................... 17
6.4 INDEMNITY NOT EXCLUSIVE................................................. 17
6.5 INSURANCE INDEMNIFICATION............................................... 18
6.6 CONFLICTS............................................................... 18
ARTICLE VII - RECORDS AND REPORTS......................................................... 18
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER............................ 18
7.2 MAINTENANCE AND INSPECTION OF BYLAWS.................................... 19
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS................... 19
7.4 INSPECTION BY DIRECTORS................................................. 19
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER................................... 20
7.6 FINANCIAL STATEMENTS.................................................... 20
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.......................... 20
</TABLE>
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<PAGE> 5
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE VIII - GENERAL MATTERS............................................................ 21
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING................... 21
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS............................... 21
8.3 CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED....................... 21
8.4 CERTIFICATES FOR SHARES................................................. 22
8.5 LOST CERTIFICATES....................................................... 22
8.6 CONSTRUCTION; DEFINITIONS............................................... 22
ARTICLE IX - AMENDMENTS................................................................... 22
9.1 AMENDMENT BY SHAREHOLDERS............................................... 22
9.2 AMENDMENT BY DIRECTORS.................................................. 23
</TABLE>
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<PAGE> 6
AMENDED AND RESTATED BYLAWS
OF
NETRO CORPORATION
ARTICLE I
CORPORATE OFFICES
1.1 PRINCIPAL OFFICE
The board of directors shall fix the location of the principal executive
office of the corporation at any place within or outside the State of
California. If the principal executive office is located outside such state and
the corporation has one or more business offices in such state, then the board
of directors shall fix and designate a principal business office in the State of
California.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 PLACE OF MEETINGS
Meetings of shareholders shall be held at any place within or outside
the State of California designated by the board of directors. In the absence of
any such designation, shareholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
(a) The annual meeting of shareholders shall be held each year on a date
and at a time designated by the board of directors. In the absence of such
designation, the annual meeting of shareholders shall be held on the third
Tuesday of May in each year at 10:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected, and
any other proper business may be transacted.
(b) Nominations of persons for election to the board of directors of the
corporation and the proposal of business to be transacted by the shareholders
may be made at an annual meeting of shareholders (i) pursuant to the
corporation's notice with respect to such meeting, (ii)
1
<PAGE> 7
by or at the direction of the board of directors or (iii) by any shareholder of
the corporation who was a shareholder of record at the time of giving of the
notice provided for in this Section 2.2, who is entitled to vote at the meeting
and who has complied with the notice procedures set forth in this Section 2.2.
(c) For nominations or other business to be properly brought before an
annual meeting by a shareholder pursuant to clause (iii) of paragraph (b) of
this Section 2.2, the shareholder must have given timely notice thereof in
writing to the secretary of the corporation and such business must be a proper
matter for shareholder action under the Corporations Code of California (the
"Code"). To be timely, a shareholder's notice shall be delivered to the
secretary at the principal executive offices of the corporation not less than
twenty (20) days nor more than ninety (90) days prior to the first anniversary
of the preceding year's annual meeting of shareholders; provided, however, that
in the event that the date of the annual meeting is more than thirty (30) days
prior to or more than sixty (60) days after such anniversary date, notice by the
shareholder to be timely must be so delivered not earlier than the ninetieth
(90th) day prior to such annual meeting and not later than the close of business
on the later of the twentieth (20th) day prior to such annual meeting or the
tenth (10th) day following the day on which public announcement of the date of
such meeting is first made. Such shareholder's notice shall set forth (i) as to
each person whom the shareholder proposes to nominate for election or reelection
as a director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (ii) as to any other business that the shareholder
proposes to bring before the meeting, a brief description of such business, the
reasons for conducting such business at the meeting and any material interest in
such business of such shareholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (iii) as to the shareholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination or proposal is
made (A) the name and address of such shareholder, as they appear on the
corporation's books, and of such beneficial owner and (B) the class and number
of shares of the corporation which are owned beneficially and of record by such
shareholder and such beneficial owner.
(d) Only persons nominated in accordance with the procedures set forth
in this Section 2.2 shall be eligible to serve as directors and only such
business shall be conducted at an annual meeting of shareholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this Section 2.2. The chairman of the meeting shall determine whether a
nomination or any business proposed to be transacted by the shareholders has
been properly brought before the meeting and, if any proposed nomination or
business has not been properly brought before the meeting, the chairman shall
declare that such proposed business or nomination shall not be presented for
shareholder action at the meeting.
(e) For purposes of this Section 2.2, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or a comparable national news service.
2
<PAGE> 8
(f) Nothing in this Section 2.2 shall be deemed to affect any rights of
shareholders to request inclusion of proposals in the corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
2.3 SPECIAL MEETING
(a) A special meeting of the shareholders may be called at any time by
the board of directors, or by the chairman of the board, or by the president, or
by one or more shareholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting.
(b) If a special meeting is called by any person or persons other than
the board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice president or
the secretary of the corporation. No business may be transacted at such special
meeting otherwise than specified in such notice. The officer receiving the
request shall cause notice to be promptly given to the shareholders entitled to
vote, in accordance with the provisions of Sections 2.4 and 2.5 of these bylaws,
that a meeting will be held at the time requested by the person or persons
calling the meeting, so long as that time is not less than thirty-five (35) nor
more than sixty (60) days after the receipt of the request. If the notice is not
given within twenty (20) days after receipt of the request, then the person or
persons requesting the meeting may give the notice. Nothing contained in this
paragraph of this Section 2.3 shall be construed as limiting, fixing or
affecting the time when a meeting of shareholders called by action of the board
of directors may be held.
(c) Only such business shall be conducted at a special meeting of
shareholders as shall have been brought before the meeting pursuant to the
notice of meeting given in accordance with the provisions of Section 2.3(b).
Nominations of persons for election to the board of directors may be made at a
special meeting of shareholders at which directors are to be selected pursuant
to such notice of meeting (i) by or at the direction of the board of directors
or (ii) by any shareholder of the corporation who is a shareholder of record at
the time of giving of notice provided for in this Section 2.3(c), who shall be
entitled to vote at the meeting and who complies with the notice procedures set
forth in this Section 2.3(c). Nominations by shareholders of persons for
election to the board of directors may be made at such a special meeting of
shareholders if the shareholder's notice required by Section 2.2(c) shall be
delivered to the secretary at the principal executive offices of the corporation
not earlier than the ninetieth (90th) day prior to such special meeting and not
later than the close of business on the later of the twentieth (20th) day prior
to such special meeting or the tenth (10th) day following the day on which
public announcement is first made of the date of the special meeting and of the
nominees proposed by the board of directors to be selected at such meeting.
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2.4 NOTICE OF SHAREHOLDERS' MEETINGS
All notices of meetings of shareholders shall be sent or otherwise given
in accordance with Section 2.5 of these bylaws not less than ten (10) (or, if
sent by third-class mail pursuant to Section 2.5 of these bylaws, thirty (30))
nor more than sixty (60) days before the date of the meeting. The notice shall
specify the place, date, and hour of the meeting and (i) in the case of a
special meeting, the general nature of the business to be transacted (no
business other than that specified in the notice may be transacted) or (ii) in
the case of the annual meeting, those matters which the board of directors, at
the time of giving the notice, intends to present for action by the shareholders
(but subject to the provisions of the next paragraph of this Section 2.4 any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Code, (ii) an amendment of the articles
of incorporation, pursuant to Section 902 of the Code, (iii) a reorganization of
the corporation, pursuant to Section 1201 of the Code, (iv) a voluntary
dissolution of the corporation, pursuant to Section 1900 of the Code, or (v) a
distribution in dissolution other than in accordance with the rights of
outstanding preferred shares, pursuant to Section 2007 of the Code, then the
notice shall also state the general nature of that proposal.
2.5 ADVANCE NOTICE OF SHAREHOLDER NOMINEES
Only persons who are nominated in accordance with the procedures set
forth in this Section 2.5 shall be eligible for election as directors.
Nominations of persons for election to the board of directors of the corporation
may be made at a meeting of shareholders by or at the direction of the board of
directors or by any shareholder of the corporation entitled to vote for the
election of directors at the meeting who complies with the notice procedures set
forth in this Section 2.5. Such nominations, other than those made by or at the
direction of the board of directors, shall be made pursuant to timely notice in
writing to the secretary of the corporation. To be timely, a shareholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the corporation not less than twenty (20) days nor more than ninety
(90) days prior to the meeting; provided, however, that in the event that less
than thirty (30) days' notice or prior public disclosure of the date of the
meeting is given or made to shareholders, notice by the shareholder to be timely
must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. Such shareholder's notice shall set forth (a)
as to each person whom the shareholder proposes to nominate for election or
re-election as a Director, (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of the corporation which are
beneficially owned by such person and (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as
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amended (including, without limitation, such person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected); and (b) as to the shareholder giving the notice (1) the name and
address, as they appear on the corporation's books, of such shareholder and (2)
the class and number of shares of the corporation which are beneficially owned
by such shareholder. At the request of the board of directors any person
nominated by the board of directors for election as a director shall furnish to
the secretary of the corporation that information required to be set forth in a
shareholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless nominated
in accordance with the procedures set forth in this Section 2.5. The Chairman of
the meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the procedures prescribed by
the Bylaws, and if he or she should so determine, he or she shall so declare to
the meeting and the defective nomination shall be disregarded.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of shareholders shall be given either (i)
personally or (ii) by first-class mail or (iii) by third-class mail but only if
the corporation has outstanding shares held of record by five hundred (500) or
more persons (determined as provided in Section 605 of the Code) on the record
date for the shareholders' meeting, or (iv) by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the shareholder at the address of that shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that shareholder by mail or telegraphic or other written communication
to the corporation's principal executive office, or if published at least once
in a newspaper of general circulation in the county where that office is
located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, then all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available to the
shareholder on written demand of the shareholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.7 QUORUM
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote thereat constitutes a quorum for the transaction of
business at all meetings of shareholders.
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The shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum.
2.8 ADJOURNED MEETING; NOTICE
Any shareholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the vote of the majority of the
shares represented at that meeting, either in person or by proxy. In the absence
of a quorum, no other business may be transacted at that meeting except as
provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is adjourned
to another time or place, notice need not be given of the adjourned meeting if
the time and place are announced at the meeting at which the adjournment is
taken. However, if a new record date for the adjourned meeting is fixed or if
the adjournment is for more than forty-five (45) days from the date set for the
original meeting, then notice of the adjourned meeting shall be given. Notice of
any such adjourned meeting shall be given to each shareholder of record entitled
to vote at the adjourned meeting in accordance with the provisions of Sections
2.4 and 2.5 of these bylaws. At any adjourned meeting the corporation may
transact any business which might have been transacted at the original meeting.
2.9 VOTING
The shareholders entitled to vote at any meeting of shareholders shall
be determined in accordance with the provisions of Section 2.10 of these bylaws,
subject to the provisions of Sections 702 through 704 of the Code (relating to
voting shares held by a fiduciary, in the name of a corporation or in joint
ownership).
The shareholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if demanded by any
shareholder at the meeting and before the voting has begun.
Except as may be otherwise provided in the articles of incorporation,
each outstanding share, regardless of class, shall be entitled to one vote on
each matter submitted to a vote of the shareholders. Any shareholder entitled to
vote on any matter may vote part of the shares in favor of the proposal and
refrain from voting the remaining shares or, except when the matter is the
election of directors, may vote them against the proposal; but, if the
shareholder fails to specify the number of shares which the shareholder is
voting affirmatively, it will be conclusively presumed that the shareholder's
approving vote is with respect to all shares which the shareholder is entitled
to vote.
If a quorum is present, the affirmative vote of the majority of the
shares represented and voting at a duly held meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act of the shareholders, unless the vote of a greater number or a vote by
classes is required by the Code or by the articles of incorporation.
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2.10 CUMULATIVE VOTING
Shareholders shall not be entitled to cumulate votes for the election of
directors of this corporation.
This Article shall become effective only when the corporation becomes,
and only for so long as the corporation remains, a listed corporation within the
meaning of Section 301.5 of the California Corporations Code.
2.11 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
No action shall be taken by the shareholders of the corporation other
than at an annual or special meeting of the shareholders, upon due notice and in
accordance with the other provisions of these Bylaws.
2.12 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions of any meeting of shareholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though they had been taken at a meeting duly held after regular call and notice,
if a quorum be present either in person or by proxy, and if, either before or
after the meeting, each person entitled to vote, who was not present in person
or by proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of shareholders, except that if action is taken
or proposed to be taken for approval of any of those matters specified in the
second paragraph of Section 2.4 of these bylaws, the waiver of notice or consent
or approval shall state the general nature of the proposal. All such waivers,
consents, and approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the Code to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.13 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING
For purposes of determining the shareholders entitled to notice of any
meeting or to vote thereat, the board of directors may fix, in advance, a record
date, which shall not be more than sixty (60) days nor less than ten (10) days
before the date of any such meeting, and in such event only shareholders of
record on the date so fixed are entitled to notice and to vote, notwithstanding
any transfer of any shares on the books of the corporation after the record
date, except as otherwise provided in the Code.
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If the board of directors does not so fix a record date the record date
for determining shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the close
of business on the business day next preceding the day on which the meeting is
held; and
The record date for any other purpose shall be as provided in Article
VIII of these bylaws.
2.14 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation. A proxy shall be deemed signed if the shareholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the shareholder or the shareholder's
attorney-in-fact. A validly executed proxy which does not state that it is
irrevocable shall continue in full force and effect unless (i) the person who
executed the proxy revokes it prior to the time of voting by delivering a
writing to the corporation stating that the proxy is revoked or by executing a
subsequent proxy and presenting it to the meeting or by voting in person at the
meeting, or (ii) written notice of the death or incapacity of the maker of that
proxy is received by the corporation before the vote pursuant to that proxy is
counted; provided, however, that no proxy shall be valid after the expiration of
eleven (11) months from the date of the proxy, unless otherwise provided in the
proxy. The dates contained on the forms of proxy presumptively determine the
order of execution, regardless of the postmark dates on the envelopes in which
they are mailed. The revocability of a proxy that states on its face that it is
irrevocable shall be governed by the provisions of Sections 705(e) and 705(f) of
the Code.
2.15 INSPECTORS OF ELECTION
Before any meeting of shareholders, the board of directors may appoint
an inspector or inspectors of election to act at the meeting or its adjournment.
If no inspector of election is so appointed, then the chairman of the meeting
may, and on the request of any shareholder or a shareholder's proxy shall,
appoint an inspector or inspectors of election to act at the meeting. The number
of inspectors shall be either one (1) or three (3). If inspectors are appointed
at a meeting pursuant to the request of one (1) or more shareholders or proxies,
then the holders of a majority of shares or their proxies present at the meeting
shall determine whether one (1) or three (3) inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
then the chairman of the meeting may, and upon the request of any shareholder or
a shareholder's proxy shall, appoint a person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, and the authenticity, validity, and effect of proxies;
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(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the Code and any limitations in the
articles of incorporation and these bylaws relating to actions required to be
approved by the shareholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall be not less than four
(4) nor more than seven (7). The exact number of directors shall be six (6)
until changed, within the limits specified above, by a bylaw amending this
Section 3.2, duly adopted by the board of directors or by the shareholders. The
indefinite number of directors may be changed, or a definite number may be fixed
without provision for an indefinite number, by a duly adopted amendment to the
articles of incorporation or by an amendment to this bylaw duly adopted by the
vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that an amendment reducing the fixed number
or the minimum number of directors to a number less than six (6) cannot be
adopted if the votes cast against its adoption at a meeting, or the shares not
consenting in the case of an action by written consent, are equal to more than
sixteen and two-thirds percent (16-2/3%) of the outstanding shares entitled to
vote thereon. No amendment may change the stated maximum number of authorized
directors to a number greater than two (2) times the stated minimum number of
directors minus one (1).
No reduction of the authorized number of directors shall have the effect
of removing any director before that director's term of office expires.
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3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Directors shall be elected at each annual meeting of the shareholders to
hold office until the next annual meeting. Each director, including a director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
board of directors may elect a successor to take office when the resignation
becomes effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote of
the shareholders or by court order may be filled only by the affirmative vote of
a majority of the shares represented and voting at a duly held meeting at which
a quorum is present (which shares voting affirmatively also constitute a
majority of the required quorum). Each director so elected shall hold office for
a term expiring at the annual meeting of shareholders at which the term of
office of the class to which they have been elected expires, if applicable, and
if no such classes shall have been established, at the next annual meeting of
the shareholders and until a successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to
exist (i) in the event of the death, resignation or removal of any director,
(ii) if the board of directors by resolution declares vacant the office of a
director who has been declared of unsound mind by an order of court or convicted
of a felony, (iii) if the authorized number of directors is increased, or (iv)
if the shareholders fail, at any meeting of shareholders at which any director
or directors are elected, to elect the number of directors to be elected at that
meeting.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election
other than to fill a vacancy created by
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removal shall require the consent of the holders of a majority of the
outstanding shares entitled to vote thereon.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place
within or outside the State of California that has been designated from time to
time by resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the
State of California that has been designated in the notice of the meeting or, if
not stated in the notice or if there is no notice, at the principal executive
office of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice if
the times of such meetings are fixed by the board of directors.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.8 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in Section
3.10 of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of
Section 310 of the Code (as to approval of contracts or transactions in which a
director has a
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direct or indirect material financial interest), Section 311 of the Code (as to
appointment of committees), Section 317(e) of the Code (as to indemnification of
directors), the articles of incorporation, and other applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such director. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the board of directors.
3.10 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
3.11 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not be
given unless the meeting is adjourned for more than twenty-four (24) hours. If
the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.7 of these bylaws, to
the directors who were not present at the time of the adjournment.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors
may be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board.
3.13 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.13 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
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3.14 APPROVAL OF LOANS TO OFFICERS*
The corporation may, upon the approval of the board of directors alone,
make loans of money or property to, or guarantee the obligations of, any officer
of the corporation or its parent or subsidiary, whether or not a director, or
adopt an employee benefit plan or plans authorizing such loans or guaranties
provided that (i) the board of directors determines that such a loan or guaranty
or plan may reasonably be expected to benefit the corporation, (ii) the
corporation has outstanding shares held of record by 100 or more persons
(determined as provided in Section 605 of the Code) on the date of approval by
the board of directors, and (iii) the approval of the board of directors is by a
vote sufficient without counting the vote of any interested director or
directors.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the authorized number of directors. Any committee, to the
extent provided in the resolution of the board, shall have all the authority of
the board, except with respect to:
(a) the approval of any action which, under the Code, also
requires shareholders' approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in any
committee;
(c) the fixing of compensation of the directors for serving on
the board or any committee;
(d) the amendment or repeal of these bylaws or the adoption of
new bylaws;
(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation,
except at a rate or in a periodic amount or within a price range determined by
the board of directors; or
- ----------
* This section is effective only if it has been approved by the
shareholders in accordance with Sections 315(b) and 152 of the Code.
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(g) the appointment of any other committees of the board of
directors or the members of such committees.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice),
Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section
3.12 (action without meeting), with such changes in the context of those bylaws
as are necessary to substitute the committee and its members for the board of
directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the board of directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary, and a
chief financial officer. The corporation may also have, at the discretion of the
board of directors, a chairman of the board, one or more vice presidents, one or
more assistant secretaries, one or more assistant treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 5.3 of
these bylaws. Any number of offices may be held by the same person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board, subject to the rights, if any, of an
officer under any contract of employment. Any contract of employment with an
officer shall be unenforceable unless in writing and specifically authorized by
the board of directors.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
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5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board or, except in
case of an officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board
of directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the shareholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation, and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for
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them respectively by the board of directors, these bylaws, the president or the
chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors and shareholders. The minutes shall show the time and place of each
meeting, whether regular or special (and, if special, how authorized and the
notice given), the names of those present at directors' meetings or committee
meetings, the number of shares present or represented at shareholders' meetings,
and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required to be given by law or
by these bylaws. He shall keep the seal of the corporation, if one be adopted,
in safe custody and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables
in the name and to the credit of the corporation with such depositories as may
be designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
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ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted
by the Code, indemnify each of its directors and officers against expenses (as
defined in Section 317(a) of the Code), judgments, fines, settlements, and other
amounts actually and reasonably incurred in connection with any proceeding (as
defined in Section 317(a) of the Code), arising by reason of the fact that such
person is or was an agent of the corporation. For purposes of this Article VI, a
"director" or "officer" of the corporation includes any person (i) who is or was
a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner
permitted by the Code, to indemnify each of its employees and agents (other than
directors and officers) against expenses (as defined in Section 317(a) of the
Code), judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding (as defined in Section 317(a) of the
Code), arising by reason of the fact that such person is or was an agent of the
corporation. For purposes of this Article VI, an "employee" or "agent" of the
corporation (other than a director or officer) includes any person (i) who is or
was an employee or agent of the corporation, (ii) who is or was serving at the
request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending any civil or criminal action or
proceeding for which indemnification is required pursuant to Section 6.1 or for
which indemnification is permitted pursuant to Section 6.2 following
authorization thereof by the board of directors shall be paid by the corporation
in advance of the final disposition of such action or proceeding upon receipt of
an undertaking by or on behalf of the indemnified party to repay such amount if
it shall ultimately be determined that the indemnified party is not entitled to
be indemnified as authorized in this Article VI.
6.4 INDEMNITY NOT EXCLUSIVE
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement,
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vote of shareholders or disinterested directors or otherwise, both as to action
in an official capacity and as to action in another capacity while holding such
office, to the extent that such additional rights to indemnification are
authorized in the articles of incorporation.
6.5 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation against any liability asserted against or incurred by such
person in such capacity or arising out of such person's status as such, whether
or not the corporation would have the power to indemnify him against such
liability under the provisions of this Article VI.
6.6 CONFLICTS
No indemnification or advance shall be made under this Article VI,
except where such indemnification or advance is mandated by law or the order,
judgment or decree of any court of competent jurisdiction, in any circumstance
where it appears:
(1) That it would be inconsistent with a provision of the articles of
incorporation, these bylaws, a resolution of the shareholders or an agreement in
effect at the time of the accrual of the alleged cause of the action asserted in
the proceeding in which the expenses were incurred or other amounts were paid,
which prohibits or otherwise limits indemnification; or
(2) That it would be inconsistent with any condition expressly imposed
by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER
The corporation shall keep either at its principal executive office or
at the office of its transfer agent or registrar (if either be appointed), as
determined by resolution of the board of directors, a record of its shareholders
listing the names and addresses of all shareholders and the number and class of
shares held by each shareholder.
A shareholder or shareholders of the corporation who holds at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who holds at least one percent (1%) of such voting shares and has
filed a Schedule 14B with the Securities and Exchange Commission relating to the
election of directors, may (i) inspect and copy the records of shareholders'
names, addresses, and shareholdings during usual business hours on five (5)
days' prior written demand on the corporation, (ii) obtain from the transfer
agent of the corporation, on written demand and on the tender of such transfer
agent's usual charges for such list, a list of the names and addresses of the
shareholders who are entitled to vote for the election of directors, and their
shareholdings, as of the most recent record date for which that list has been
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compiled or as of a date specified by the shareholder after the date of demand.
Such list shall be made available to any such shareholder by the transfer agent
on or before the later of five (5) days after the demand is received or five (5)
days after the date specified in the demand as the date as of which the list is
to be compiled.
The record of shareholders shall also be open to inspection on the
written demand of any shareholder or holder of a voting trust certificate, at
any time during usual business hours, for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate.
Any inspection and copying under this Section 7.1 may be made in person
or by an agent or attorney of the shareholder or holder of a voting trust
certificate making the demand.
7.2 MAINTENANCE AND INSPECTION OF BYLAWS
The corporation shall keep at its principal executive office or, if its
principal executive office is not in the State of California, at its principal
business office in California the original or a copy of these bylaws as amended
to date, which bylaws shall be open to inspection by the shareholders at all
reasonable times during office hours. If the principal executive office of the
corporation is outside the State of California and the corporation has no
principal business office in such state, then the secretary shall, upon the
written request of any shareholder, furnish to that shareholder a copy of these
bylaws as amended to date.
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS
The accounting books and records and the minutes of proceedings of the
shareholders, of the board of directors, and of any committee or committees of
the board of directors shall be kept at such place or places as are designated
by the board of directors or, in absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written form,
and the accounting books and records shall be kept either in written form or in
any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to inspection
upon the written demand of any shareholder or holder of a voting trust
certificate, at any reasonable time during usual business hours, for a purpose
reasonably related to the holder's interests as a shareholder or as the holder
of a voting trust certificate. The inspection may be made in person or by an
agent or attorney and shall include the right to copy and make extracts. Such
rights of inspection shall extend to the records of each subsidiary corporation
of the corporation.
7.4 INSPECTION BY DIRECTORS
Every director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind as well as the physical
properties of the corporation and each of its subsidiary corporations. Such
inspection by a director may be made in person or by an agent or attorney. The
right of inspection includes the right to copy and make extracts of documents.
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7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER
The board of directors shall cause an annual report to be sent to the
shareholders not later than one hundred twenty (120) days after the close of the
fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days)
before the annual meeting of shareholders to be held during the next fiscal year
and in the manner specified in Section 2.5 of these bylaws for giving notice to
shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the end of the
fiscal year, (ii) an income statement, (iii) a statement of changes in financial
position for the fiscal year, and (iv) any report of independent accountants or,
if there is no such report, the certificate of an authorized officer of the
corporation that the statements were prepared without audit from the books and
records of the corporation.
The foregoing requirement of an annual report shall be waived so long as
the shares of the corporation are held by fewer than one hundred (100) holders
of record.
7.6 FINANCIAL STATEMENTS
If no annual report for the fiscal year has been sent to shareholders,
then the corporation shall, upon the written request of any shareholder made
more than one hundred twenty (120) days after the close of such fiscal year,
deliver or mail to the person making the request, within thirty (30) days
thereafter, a copy of a balance sheet as of the end of such fiscal year and an
income statement and statement of changes in financial position for such fiscal
year.
If a shareholder or shareholders holding at least five percent (5%) of
the outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and for a
balance sheet of the corporation as of the end of that period, then the chief
financial officer shall cause that statement to be prepared, if not already
prepared, and shall deliver personally or mail that statement or statements to
the person making the request within thirty (30) days after the receipt of the
request. If the corporation has not sent to the shareholders its annual report
for the last fiscal year, the statements referred to in the first paragraph of
this Section 7.6 shall likewise be delivered or mailed to the shareholder or
shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or by the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the
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board of directors or the president or a vice president, is authorized to vote,
represent, and exercise on behalf of this corporation all rights incident to any
and all shares of any other corporation or corporations standing in the name of
this corporation. The authority herein granted may be exercised either by such
person directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the shareholders entitled to receive payment
of any dividend or other distribution or allotment of any rights or the
shareholders entitled to exercise any rights in respect of any other lawful
action (other than action by shareholders by written consent without a meeting),
the board of directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action. In that case, only
shareholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the Code.
If the board of directors does not so fix a record date, then the record
date for determining shareholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
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8.4 CERTIFICATES FOR SHARES
A certificate or certificates for shares of the corporation shall be
issued to each shareholder when any of such shares are fully paid. The board of
directors may authorize the issuance of certificates for shares partly paid
provided that these certificates shall state the total amount of the
consideration to be paid for them and the amount actually paid. All certificates
shall be signed in the name of the corporation by the chairman of the board or
the vice chairman of the board or the president or a vice president and by the
chief financial officer or an assistant treasurer or the secretary or an
assistant secretary, certifying the number of shares and the class or series of
shares owned by the shareholder. Any or all of the signatures on the certificate
may be facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed on a certificate ceases to be that officer,
transfer agent or registrar before that certificate is issued, it may be issued
by the corporation with the same effect as if that person were an officer,
transfer agent or registrar at the date of issue.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Code shall govern the construction of these
bylaws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
9.1 AMENDMENT BY SHAREHOLDERS
New bylaws may be adopted or these bylaws may be amended or repealed by
the vote of holders of a majority of the outstanding shares entitled to vote;
provided, however, that if the articles of incorporation of the corporation set
forth the number of authorized directors of the
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corporation, then the authorized number of directors may be changed only by an
amendment of the articles of incorporation.
9.2 AMENDMENT BY DIRECTORS
Subject to the rights of the shareholders as provided in Section 9.1 of
these bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing the
authorized number of directors (except to fix the authorized number of directors
pursuant to a bylaw providing for a variable number of directors), may be
adopted, amended or repealed by the board of directors.
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CERTIFICATE OF ADOPTION OF AMENDED AND RESTATED BYLAWS
OF
NETRO CORPORATION
Certificate by Secretary of Adoption
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of Netro Corporation (the "Company"), and that the
foregoing Bylaws, comprising twenty-three (23) pages, were adopted by the board
of directors of the Company as the Amended and Restated Bylaws of the
corporation on June __, 1999.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this ____
day of June, 1999.
------------------------------------
Tae Hea Nahm, Secretary
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EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of
_____________, by and between Netro Corporation, a California corporation (the
"Company"), and _________ ("Indemnitee").
WHEREAS, the Company and Indemnitee recognize the difficulty in
obtaining directors' and officers' liability insurance, the cost of such
insurance and the limited scope of coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited;
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other officers and
directors of the Company may not be willing to continue to serve as officers and
directors without additional protection; and
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve as officers and
directors of the Company and to indemnify its officers and directors so as to
provide them with the maximum protection permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Third Party Proceedings. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner which Indemnitee reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that Indemnitee's
<PAGE> 2
conduct was unlawful.
(b) Proceedings By or in the Right of the Company. The Company
shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Company or any subsidiary of the Company to procure a judgment
in its favor by reason of the fact that Indemnitee is or was a director,
officer, employee or agent of the Company, or any subsidiary of the Company, by
reason of any action or inaction on the part of Indemnitee while an officer or
director or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) and, to the fullest extent permitted by
law, amounts paid in settlement, in each case to the extent actually and
reasonably incurred by Indemnitee in connection with the defense or settlement
of such action or suit if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company and its shareholders, except that no indemnification shall be made
in respect of any claim, issue or matter as to which Indemnitee shall have been
adjudged to be liable to the Company in the performance of Indemnitee's duty to
the Company and its shareholders unless and only to the extent that the court in
which such action or suit is or was pending shall determine upon application
that, in view of all the circumstances of the case, Indemnitee is fairly and
reasonably entitled to indemnity for expenses and then only to the extent that
the court shall determine.
(c) Mandatory Payment of Expenses. To the extent that Indemnitee
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Subsections (a) and (b) of this Section 1 or the
defense of any claim, issue or matter therein, Indemnitee shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
Indemnitee in connection therewith.
2. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company may advance all
expenses incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action, suit or proceeding
referenced in Section l(a) or (b) hereof (but not amounts actually paid in
settlement of any such action, suit or proceeding). Indemnitee hereby undertakes
to repay such amounts advanced only if, and to the extent that, it shall
ultimately be determined that Indemnitee is not entitled to be indemnified by
the Company as authorized hereby. Any advances made hereunder shall be paid by
the Company to Indemnitee within twenty (20) days following delivery of a
written request therefor by Indemnitee to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to his or her right to be indemnified under this Agreement,
give the Company notice in writing as soon as practicable of any claim made
against Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company at the address shown on the signature page of this
Agreement (or such other address as the Company shall designate in writing to
Indemnitee). Notice shall be deemed received three business days after the date
postmarked if sent by domestic certified or
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<PAGE> 3
registered mail, properly addressed, otherwise notice shall be deemed received
when such notice shall actually be received by the Company. In addition,
Indemnitee shall give the Company such information and cooperation as it may
reasonably require and as shall be within Indemnitee's power.
(c) Procedure. Any indemnification and advances provided for in
Section 1 shall be made no later than forty-five (45) days after receipt of the
written request of Indemnitee. If a claim under this Agreement, under any
statute, or under any provision of the Company's Articles of Incorporation or
Bylaws providing for indemnification, is not paid in full by the Company within
forty-five (45) days after a written request for payment thereof has first been
received by the Company, Indemnitee may, but need not, at any time thereafter
bring an action against the Company to recover the unpaid amount of the claim
and, subject to Section 13 of this Agreement, Indemnitee shall also be entitled
to be paid for the expenses (including attorneys' fees) of bringing such action.
It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in connection with any action, suit or
proceeding in advance of its final disposition) that Indemnitee has not met the
standards of conduct which make it permissible under applicable law for the
Company to indemnify Indemnitee for the amount claimed. Indemnitee shall be
entitled to receive interim payments of expenses pursuant to Subsection 2(a)
unless and until such defense may be finally adjudicated by court order or
judgment from which no further right of appeal exists. It is the parties'
intention that if the Company contests Indemnitee's right to indemnification,
the question of Indemnitee's right to indemnification shall be for the court to
decide, and neither the failure of the Company (including its Board of
Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its shareholders) to have made a determination that
indemnification of Indemnitee is proper in the circumstances because Indemnitee
has met the applicable standard of conduct required by applicable law, nor an
actual determination by the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its shareholders) that Indemnitee has not met such applicable standard of
conduct, shall create a presumption that Indemnitee has or has not met the
applicable standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a
notice of a claim pursuant to Section 2(b) hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be
obligated under Section 2(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, upon the
delivery to Indemnitee of written notice of its election so to do. After
delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently incurred by
Indemnitee with respect to the same proceeding, provided that (i) Indemnitee
shall have the right to employ his or her counsel in any such proceeding at
Indemnitee's expense; and (ii) if (A) the employment of counsel by Indemnitee
has been previously
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<PAGE> 4
authorized by the Company, (B) Indemnitee shall have reasonably concluded that
there may be a conflict of interest between the Company and Indemnitee in the
conduct of any such defense, or (C) the Company shall not, in fact, have
employed counsel to assume the defense of such proceeding, then the fees and
expenses of Indemnitee's counsel shall be at the expense of the Company.
3. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. Notwithstanding any other provision of this
Agreement, the Company hereby agrees to indemnify the Indemnitee to the fullest
extent permitted by law, notwithstanding that such indemnification is not
specifically authorized by the other provisions of this Agreement, the Company's
Articles of Incorporation, the Company's Bylaws or by statute. In the event of
any change in any applicable law, statute or rule which narrows the right of a
California corporation to indemnify a member of its board of directors or an
officer, such changes, to the extent not otherwise required by such law, statute
or rule to be applied to this Agreement shall have no effect on this Agreement
or the parties' rights and obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which Indemnitee may be
entitled under the Company's Articles of Incorporation, its Bylaws, any
agreement, any vote of shareholders or disinterested Directors, the Corporation
Law of the State of California, or otherwise, both as to action in Indemnitee's
official capacity and as to action in another capacity while holding such
office. The indemnification provided under this Agreement shall continue as to
Indemnitee for any action taken or not taken while serving in an indemnified
capacity even though he or she may have ceased to serve in such capacity at the
time of any action, suit or other covered proceeding.
4. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him or her in the investigation, defense, appeal or settlement of
any civil or criminal action, suit or proceeding, but not, however, for the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
the portion of such expenses, judgments, fines or penalties to which Indemnitee
is entitled.
5. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the Securities and
Exchange Commission to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
6. Officer and Director Liability Insurance. The Company may, from time
to time, make the good faith determination whether or not it is practicable for
the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
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<PAGE> 5
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or of the Company's officers, if Indemnitee is not a
director of the Company, but is an officer; or of the Company's key employees,
if Indemnitee is not an officer or director, but is a key employee.
Notwithstanding the foregoing, the Company shall have no obligation to obtain or
maintain such insurance if the Company determines in good faith that such
insurance is not reasonably available, if the premium costs for such insurance
are disproportionate to the amount of coverage provided, if the coverage
provided by such insurance is limited by exclusions so as to provide an
insufficient benefit, or if Indemnitee is covered by similar insurance
maintained by a subsidiary or parent of the Company. However, the Company's
decision whether or not to adopt and maintain such insurance shall not affect in
any way its obligations to indemnify its officers and directors under this
Agreement or otherwise.
7. Severability. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 7. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
8. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance
expenses to Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by Indemnitee and not by way of defense, except with respect
to proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 317 of the California Corporation Law, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors has approved the initiation or bringing of such suit.
(b) Lack of Good Faith. To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous.
(c) Insured Claims. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company.
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<PAGE> 6
(d) Claims Under Section 16(b). To indemnify Indemnitee for
expenses and the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
9. Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the "Company"
shall include any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that if Indemnitee is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, Indemnitee shall stand in the same position under the
provisions of this Agreement with respect to the resulting or surviving
corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises," shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan, Indemnitee shall be deemed to have acted in a
manner "not opposed to the best interests of the Company" as referred to in this
Agreement.
10. Effectiveness.This Agreement shall be deemed to be effective as of
the commencement date of Indemnitee's employment as an Officer or Director of
the Company.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
13. Attorneys Fees. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys, fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees,
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<PAGE> 7
incurred by Indemnitee in defense of such action (including with respect to
Indemnitee's counterclaims and cross-claims made in such action), unless as a
part of such action the court determines that each of Indemnitee's material
defenses to such action were made in bad faith or were frivolous.
14. Notice. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice to either party are as shown on the signature page of this Agreement, or
as subsequently modified by written notice.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of California
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of California.
16. Choice of Law. This Agreement shall be governed by and its
provisions construed in accordance with the laws of the State of California, as
applied to contracts between California residents entered into and to be
performed entirely within California.
17. Modification. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof. All prior
negotiations, agreements and understandings between the parties with respect
thereto are superseded hereby. This Agreement may not be modified or amended
except by an instrument in writing signed by or on behalf of the parties hereto.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
NETRO CORPORATION
By: ________________________________
Title: _____________________________
AGREED TO AND ACCEPTED:
INDEMNITEE
__________________________________
[Indemnitee]
__________________________________
__________________________________
__________________________________
(address)
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<PAGE> 1
EXHIBIT 10.3
NETRO CORPORATION
1999 EXECUTIVE STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1999 Executive Stock Plan
are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to senior management
personnel of the Company and its Subsidiaries and to promote the success of the
Company's business. Options granted under the Plan may be Incentive Stock
Options (as defined under Section 422 of the Code) or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant of an Option
and subject to the applicable provisions of Section 422 of the Code, as amended,
and the regulations promulgated thereunder.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or its Committee appointed
pursuant to Section 4 of the Plan.
(b) "AFFILIATE" means an entity other than a Subsidiary in which
the Company owns an equity interest or which, together with the Company, is
under common control of a third person or entity.
(c) "APPLICABLE LAWS" means the legal requirements relating to
the administration of stock option plans under applicable U.S. state corporate
laws, U.S. federal and applicable state securities laws, the Code, any Stock
Exchange rules and regulations and the applicable laws of any other country or
jurisdiction where Options are granted under the Plan, as such laws, rules,
regulations and requirements shall be in place from time to time.
(d) "BOARD" means the Board of Directors of the Company.
(e) "CODE" means the Internal Revenue Code of 1986, as amended.
(f) "COMMITTEE" means one or more committees or subcommittees of
the Board appointed by the Board to administer the Plan in accordance with
Section 4 below.
(g) "COMMON STOCK" means the Common Stock of the Company.
(h) "COMPANY" means Netro Corporation, a California corporation.
(i) "CONSULTANT" means any person, including an advisor, who
renders services to the Company, or any Parent, Subsidiary or Affiliate, and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(j) "CONTINUOUS SERVICE STATUS" means the absence of any
interruption or termination of service as an Employee or Consultant to the
Company or a Parent, Subsidiary or
<PAGE> 2
Affiliate. Continuous Service Status shall not be considered interrupted in the
case of: (i) sick leave; (ii) military leave; (iii) any other leave of absence
approved by the Administrator, provided that such leave is for a period of not
more than 90 days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or (iv) in the case of transfers
between locations of the Company or between the Company, its Parents,
Subsidiaries or Affiliates or their respective successors. Unless otherwise
determined by the Administrator, a change in status from an Employee to a
Consultant or from a Consultant to an Employee will not constitute an
interruption of Continuous Service Status.
(k) "CORPORATE TRANSACTION" means a sale of all or substantially
all of the Company's assets, or a merger, consolidation or other capital
reorganization of the Company with or into another corporation.
(l) "DIRECTOR" means a member of the Board.
(m) "EMPLOYEE" means any person, including officers and
Directors, employed by the Company or any Parent, Subsidiary or Affiliate of the
Company. The payment by the Company of a director's fee to a Director shall not
be sufficient to constitute "employment" of such Director by the Company.
(n) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(o) "FAIR MARKET VALUE" means, as of any date, the fair market
value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported), as quoted
on such system or exchange on the date of determination, or if no trading
occurred on the date of determination, on the last market trading day prior to
the time of determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System
(but not on the National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
for the last market trading day prior to the time of determination, as reported
in The Wall Street Journal or such other source as the Administrator deems
reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
(p) "INCENTIVE STOCK OPTION" means an Option intended to qualify
as an
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<PAGE> 3
incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable Option Agreement.
(q) "LISTED SECURITY" means any security of the Company that is
listed or approved for listing on a national securities exchange or designated
or approved for designation as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc.
(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option, as designated in the applicable Option
Agreement.
(s) "OPTION" means a stock option granted pursuant to the Plan.
(t) "OPTION AGREEMENT" means a written document, the form(s) of
which shall be approved from time to time by the Administrator, reflecting the
terms of an Option granted under the Plan and includes any documents attached to
or incorporated into such Option Agreement, including, but not limited to, a
notice of stock option grant and a form of exercise notice.
(u) "OPTION EXCHANGE PROGRAM" means a program approved by the
Administrator whereby outstanding Options are exchanged for Options with a lower
exercise price.
(v) "OPTIONED STOCK" means the Common Stock subject to an Option.
(w) "OPTIONEE" means an Employee or Consultant who receives an
Option.
(x) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code, or any successor
provision.
(y) "PARTICIPANT" means any holder of one or more Options, or of
the Shares issuable or issued upon exercise of such Options, under the Plan.
(z) "PLAN" means this 1999 Executive Stock Plan.
(aa) "REPORTING PERSON" means an officer, Director, or greater
than 10% shareholder of the Company within the meaning of Rule 16a-2 under the
Exchange Act, who is required to file reports pursuant to Rule 16a-3 under the
Exchange Act.
(bb) "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange
Act, as the same may be amended from time to time, or any successor provision.
(cc) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(dd) "STOCK EXCHANGE" means any stock exchange or consolidated
stock price reporting system on which prices for the Common Stock are quoted at
any given time.
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<PAGE> 4
(ee) "SUBSIDIARY" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code, or any
successor provision.
(ff) "TEN PERCENT HOLDER" means a person who owns stock
representing more than 10% of the voting power of all classes of stock of the
Company or any Parent or Subsidiary.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares that may be sold under the Plan
is 1,195,000 Shares of Common Stock. The Shares may be authorized, but unissued,
or reacquired Common Stock. If an Option expires or becomes unexercisable for
any reason without having been exercised in full, or is surrendered pursuant to
an Option Exchange Program, the unpurchased Shares that were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan. In addition, any Shares of Common Stock that are retained
by the Company upon exercise of an Option in order to satisfy the exercise or
purchase price for such Option or any withholding taxes due with respect to such
exercise shall be treated as not issued and shall continue to be available under
the Plan. Shares issued under the Plan and later repurchased by the Company
pursuant to any repurchase right that the Company may have shall not be
available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) GENERAL. The Plan shall be administered by the Board or a
Committee, or a combination thereof, as determined by the Board. The Plan may be
administered by different administrative bodies with respect to different
classes of Optionees and, if permitted by the Applicable Laws, the Board may
authorize one or more officers to grant Options or Stock Purchase Rights under
the Plan.
(b) ADMINISTRATION WITH RESPECT TO REPORTING PERSONS. With
respect to Options granted to Reporting Persons and Named Executives, the Plan
may (but need not) be administered so as to permit such Options to qualify for
the exemption set forth in Rule 16b-3 and to qualify as performance-based
compensation under Section 162(m) of the Code.
(c) COMMITTEE COMPOSITION. If a Committee has been appointed
pursuant to this Section 4, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time the
Board may increase the size of any Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies (however caused) and remove all members of
a Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws and, in the case of a Committee administering
the Plan pursuant to Section 4(b) above, to the extent permitted or required by
Rule 16b-3 and Section 162(m) of the Code.
(d) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the Administrator
shall have the authority, in its discretion:
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<PAGE> 5
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(o) of the Plan;
(ii) to select the Consultants and Employees to whom
Options may from time to time be granted;
(iii) to determine whether and to what extent Options are
granted;
(iv) to determine the number of Shares of Common Stock to
be covered by each such Option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option granted hereunder, which
terms and conditions include but are not limited to the exercise price, the time
or times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or any Optioned Stock, based
in each case on such factors as the Administrator, in its sole discretion, shall
determine;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under Section 9(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option has declined since the date the Option was granted and to
make any other amendments or adjustments to any Option that the Administrator
determines, in its discretion and under the authority granted to it under the
Plan, to be necessary or advisable, provided however that no amendment or
adjustment to an Option that would materially and adversely affect the rights of
any Optionee shall be made without the prior written consent of the Optionee;
(ix) to initiate an Option Exchange Program;
(x) to construe and interpret the terms of the Plan and
Options granted under the Plan; and
(xi) in order to fulfill the purposes of the Plan and
without amending the Plan, to modify grants of Options to Participants who are
foreign nationals or employed outside of the United States in order to recognize
differences in local law, tax policies or customs.
(e) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Participants.
5. ELIGIBILITY.
(a) RECIPIENTS OF GRANTS. Nonstatutory Stock Options may be
granted to
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<PAGE> 6
Employees and Consultants. Incentive Stock Options may be granted
only to Employees; provided however that Employees of Affiliates shall not be
eligible to receive Incentive Stock Options. An Employee or Consultant who has
been granted an Option may, if he or she is otherwise eligible, be granted
additional Options.
(b) TYPE OF OPTION. Each Option shall be designated in the Option
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares subject to an Incentive Stock Option shall
be determined as of the date of the grant of such Option.
(c) AT-WILL RELATIONSHIP. The Plan shall not confer upon any
Participant any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with such
Optionee's right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon its adoption by
the Board. It shall continue in effect for a term of ten years unless sooner
terminated under Section 14 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than ten
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement. However, in the case of an Incentive Stock Option granted
to an Optionee who, at the time the Option is granted, is a Ten Percent Holder,
the term of such Option shall be five years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per Share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Administrator and set forth in the applicable Option Agreement, but shall be
subject to the following:
(i) In the case of an Incentive Stock Option that is:
(A) granted to an Employee who, at the time of
grant is a Ten Percent Holder, the per Share exercise price shall be no less
than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
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(ii) In the case of a Nonstatutory Stock Option that is:
(A) granted prior to the date, if any, on which the
Common Stock becomes a Listed Security to a person who at the time of grant is a
Ten Percent Holder, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of the grant if required by the
Applicable Laws and, if not so required, shall be such price as is determined by
the Administrator.
(B) granted prior to the date, if any, on which
the Common Stock becomes a Listed Security to any other eligible person, the per
Share exercise price shall be no less than 85% of the Fair Market Value per
Share on the date of grant if required by the Applicable Laws and, if not so
required, shall be such price as is determined by the Administrator.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price other than as required above pursuant to
a merger or other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash; (2)
check; (3) delivery of Optionee's promissory note with such recourse, interest,
security and redemption provisions as the Administrator determines to be
appropriate ; (4) cancellation of indebtedness; (5) other Shares that (x) in the
case of Shares acquired upon exercise of an Option, either have been owned by
the Optionee for more than six months on the date of surrender or such other
period as may be required to avoid a charge to the Company's earnings or were
not acquired, directly or indirectly, from the Company, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which such Option shall be exercised; (6) authorization for the
Company to retain from the total number of Shares as to which the Option is
exercised that number of Shares having a Fair Market Value on the date of
exercise equal to the exercise price for the total number of Shares as to which
the Option is exercised; (7) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect exercise of the Option and prompt delivery
to the Company of the sale or loan proceeds required to pay the exercise price
and any applicable withholding taxes; (8) any combination of the foregoing
methods of payment; or (9) such other consideration and method of payment for
the issuance of Shares to the extent permitted under the Applicable Laws. In
making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company, and the Administrator may refuse to
accept a particular form of consideration at the time of any Option exercise if,
in its sole discretion, acceptance of such form of consideration is not in the
best interests of the Company at such time.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted
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<PAGE> 8
hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, consistent with the term of the Plan and
reflected in the Option Agreement, including vesting requirements and/or
performance criteria with respect to the Company and/or the Optionee; provided
however, that, if required by the Applicable Laws, any Option granted prior to
the date, if any, upon which the Common Stock becomes a Listed Security shall
become exercisable at the rate of at least 20% per year over five years from the
date the Option is granted. In the event that any of the Shares issued upon
exercise of an Option (which exercise occurs prior to the date, if any, upon
which the Common Stock becomes a Listed Security) should be subject to a right
of repurchase in the Company's favor, such repurchase right shall, if required
by the Applicable Laws, lapse at the rate of at least 20% per year over five
years from the date the Option is granted. Notwithstanding the above, in the
case of an Option granted to an officer, Director or Consultant of the Company
or any Parent, Subsidiary or Affiliate of the Company, the Option may become
fully exercisable, or a repurchase right, if any, in favor of the Company shall
lapse, at any time or during any period established by the Administrator. The
Administrator shall have the discretion to determine whether and to what extent
the vesting of Options shall be tolled during any leave of absence.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when written notice of such exercise
has been given to the Company in accordance with the terms of the Option by the
person entitled to exercise the Option and the Company has received full payment
for the Shares with respect to which the Option is exercised. Full payment may,
as authorized by the Administrator, consist of any consideration and method of
payment allowable under Section 8(b) of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, not withstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly upon exercise of the Option. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 11 of the
Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares that thereafter may be available, both for purposes of the Plan
and for sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. In the
event of termination of an Optionee's Continuous Service Status with the
Company, such Optionee may, but only within three months (or such other period
of time, not less than 30 days, as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option) after the date of such termination (but in no event later
than the expiration date of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that the Optionee was
entitled to exercise it at the date of such termination. To the extent that the
Optionee was not entitled to exercise the Option at the date of such
termination, or if the Optionee does not exercise the Option to the
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<PAGE> 9
extent so entitled within the time specified above, the Option shall terminate
and the Optioned Stock underlying the unexercised portion of the Option shall
revert to the Plan. Unless otherwise determined by the Administrator, no
termination shall be deemed to occur and this Section 9(b) shall not apply if
(i) the Optionee is a Consultant who becomes an Employee, or (ii) the Optionee
is an Employee who becomes a Consultant.
(c) DISABILITY OF OPTIONEE.
(i) Notwithstanding Section 9(b) above, in the event of
termination of an Optionee's Continuous Service Status as a result of his or her
total and permanent disability (within the meaning of Section 22(e)(3) of the
Code), such Optionee may, but only within twelve months (or such other period of
time as is determined by the Administrator, with such determination in the case
of an Incentive Stock Option made at the time of grant of the Option) from the
date of such termination (but in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement), exercise the Option
to the extent otherwise entitled to exercise it at the date of such termination.
To the extent that the Optionee was not entitled to exercise the Option at the
date of termination, or if the Optionee does not exercise such Option to the
extent so entitled within the time specified above, the Option shall terminate
and the Optioned Stock underlying the unexercised portion of the Option shall
revert to the Plan.
(ii) In the event of termination of an Optionee's
Continuous Service Status as a result of a disability which does not fall within
the meaning of total and permanent disability (as set forth in Section 22(e)(3)
of the Code), such Optionee may, but only within twelve months (or such other
period of time as is determined by the Administrator, with such determination in
the case of an Incentive Stock Option made at the time of grant of the Option)
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. However, to the extent that such Optionee fails to exercise an
Option that is an Incentive Stock Option (within the meaning of Section 422 of
the Code) within three months of the date of such termination, the Option will
not qualify for Incentive Stock Option treatment under the Code. To the extent
that the Optionee was not entitled to exercise the Option at the date of
termination, or if the Optionee does not exercise such Option to the extent so
entitled within the time period specified above, the Option shall terminate and
the Optioned Stock underlying the unexercised portion of the Option shall revert
to the Plan.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee
during the period of Continuous Service Status since the date of grant of the
Option, or within 30 days following termination of the Optionee's Continuous
Service Status, the Option may be exercised, at any time within twelve months
following the date of death (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), by such
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the date of death or, if earlier, the date of termination of the
Optionee's Continuous Service Status. To the extent that the Optionee was not
entitled to exercise the Option at the date of death or termination, as the
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<PAGE> 10
case may be, or if the Optionee does not exercise such Option to the extent so
entitled within the time specified above, the Option shall terminate and the
Optioned Stock underlying the unexercised portion of the Option shall revert to
the Plan.
(e) EXTENSION OF EXERCISE PERIOD. The Administrator shall have
full power and authority to extend the period of time for which an Option is to
remain exercisable following termination of an Optionee's Continuous Status as
an Employee or Consultant from the periods set forth in Sections 9(b), 9(c) and
9(d) above or in the Option Agreement to such greater time as the Board shall
deem appropriate, provided, that in no event shall such Option be exercisable
later than the date of expiration of the term of such Option as set forth in the
Option Agreement.
(f) BUY-OUT PROVISIONS. The Administrator may at any time offer
to buy out for a payment in cash or Shares an Option previously granted under
the Plan, based on such terms and conditions as the Administrator shall
establish and communicate to the Optionee at the time such offer is made.
10. TAXES.
(a) As a condition of the exercise of an Option or Stock Purchase
Right granted under the Plan, the Participant (or in the case of the
Participant's death, the person exercising the Option) shall make such
arrangements as the Administrator may require for the satisfaction of any
applicable federal, state, local or foreign withholding tax obligations that may
arise in connection with the exercise of an Option or Stock Purchase Right and
the issuance of Shares. The Company shall not be required to issue any Shares
under the Plan until such obligations are satisfied.
(b) In the case of an Employee and in the absence of any other
arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from his or her compensation an amount sufficient to satisfy
such tax obligations from the next payroll payment otherwise payable after the
date of an exercise of the Option.
(c) This Section 10(c) shall apply only after the date, if any,
upon which the Common Stock becomes a Listed Security. In the case of a
Participant other than an Employee (or in the case of an Employee where the next
payroll payment is not sufficient to satisfy such tax obligations, with respect
to any remaining tax obligations), in the absence of any other arrangement and
to the extent permitted under the Applicable Laws, the Participant shall be
deemed to have elected to have the Company withhold from the Shares to be issued
upon exercise of the Option or Stock Purchase Right that number of Shares having
a Fair Market Value determined as of the applicable Tax Date (as defined below)
equal to the amount required to be withheld. For purposes of this Section 10,
the Fair Market Value of the Shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined under the
Applicable Laws (the "Tax Date").
(d) If permitted by the Administrator, in its discretion, a
Participant may satisfy his or her tax withholding obligations upon exercise of
an Option or Stock Purchase Right by surrendering to the Company Shares that (i)
in the case of Shares previously acquired from
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<PAGE> 11
the Company, have been owned by the Participant for more than six months on the
date of surrender, and (ii) have a Fair Market Value determined as of the
applicable Tax Date equal to the amount required to be withheld.
(e) Any election or deemed election by a Participant to have
Shares withheld to satisfy tax withholding obligations under Section 10(c) or
(d) above shall be irrevocable as to the particular Shares as to which the
election is made and shall be subject to the consent or disapproval of the
Administrator. Any election by a Participant under Section 10(d) above must be
made on or prior to the applicable Tax Date.
(f) In the event an election to have Shares withheld is made by a
Participant and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Participant shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised but such Participant shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.
11. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Options
and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws of
descent or distribution; provided however that, after the date, if any, upon
which the Common Stock becomes a Listed Security, the Administrator may in its
discretion grant transferable Nonstatutory Stock Options pursuant to Option
Agreements specifying (i) the manner in which such Nonstatutory Stock Options
are transferable and (ii) that any such transfer shall be subject to the
Applicable Laws. The designation of a beneficiary by an Optionee will not
constitute a transfer. An Option or Stock Purchase Right may be exercised,
during the lifetime of the holder of the Option or Stock Purchase Right, only by
such holder or a transferee permitted by this Section 11.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, CORPORATE TRANSACTIONS
AND CERTAIN OTHER TRANSACTIONS.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or that have been returned to the Plan upon cancellation or expiration
of an Option, as well as the price per Share of Common Stock covered by each
such outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination, recapitalization or
reclassification of the Common Stock (including any change in the number of
Shares of Common Stock effected in connection with a change of domicile of the
Company), or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; provided
however that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Administrator, whose determination in that
respect shall be final, binding and
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<PAGE> 12
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares of Common Stock subject to an Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the dissolution
or liquidation of the Company, each outstanding Option will terminate
immediately prior to the consummation of such action, unless otherwise provided
by the Administrator.
(c) CORPORATE TRANSACTIONS. In the event of a Corporate
Transaction, each outstanding Option shall be assumed or an equivalent option
shall be substituted by the successor corporation (or a Parent or Subsidiary of
such successor corporation), unless the successor corporation does not agree to
assume the outstanding Options or substitute equivalent options, in which case
the outstanding Options shall terminate upon the consummation of the
transaction..
For purposes of this Section 12(c), an Option shall be considered
assumed, without limitation, if, at the time of issuance of the stock or other
consideration upon a Corporate Transaction, each Optionee would be entitled to
receive upon exercise of an Option the same number and kind of shares of stock
or the same amount of property, cash or securities as the Optionee would have
been entitled to receive upon the occurrence of such transaction if the Optionee
had been, immediately prior to the transaction, the holder of the number of
Shares of Common Stock covered by the Option at such time (after giving effect
to any adjustments in the number of Shares covered by the Option as provided for
in this Section 12); provided however that if such consideration received in the
transaction is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon exercise of the Option to be
solely common stock of the successor corporation or its Parent equal to the Fair
Market Value of the per Share consideration received by holders of Common Stock
in the transaction.
(d) CERTAIN DISTRIBUTIONS. In the event of any distribution to
the Company's shareholders of securities of any other entity or other assets
(other than dividends payable in cash or stock of the Company) without receipt
of consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per Share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
13. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator;
provided however that in the case of any Incentive Stock Option, the grant date
shall be the later of the date on which the Administrator makes the
determination granting such Incentive Stock Option or the date of commencement
of the Optionee's employment relationship with the Company. Notice of the
determination shall be given to each Employee or Consultant to whom an Option is
so granted within a reasonable time after the date of such grant.
14. AMENDMENT AND TERMINATION OF THE PLAN.
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<PAGE> 13
(a) AUTHORITY TO AMEND OR TERMINATE. The Board may at any time
amend, alter, suspend, discontinue or terminate the Plan, but no amendment,
alteration, suspension, discontinuation or termination (other than an adjustment
made pursuant to Section 13 above) shall be made that would materially and
adversely affect the rights of any Optionee under any outstanding grant, without
his or her consent. In addition, to the extent necessary and desirable to comply
with the Applicable Laws, the Company shall obtain shareholder approval of any
Plan amendment in such a manner and to such a degree as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. No amendment or
termination of the Plan shall materially and adversely affect Options already
granted, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company.
15. CONDITIONS UPON ISSUANCE OF SHARES. Notwithstanding any other
provision of the Plan or any agreement entered into by the Company pursuant to
the Plan, the Company shall not be obligated, and shall have no liability for,
failure to issue or deliver any Shares under the Plan unless such issuance or
delivery would comply with the Applicable Laws, with such compliance determined
by the Company in consultation with its legal counsel.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by law.
16. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
17. OPTION AGREEMENTS. Options shall be evidenced by Option Agreements
in such form(s) as the Administrator shall from time to time approve.
18. SHAREHOLDER APPROVAL. If required by the Applicable Laws,
continuance of the Plan shall be subject to approval by the shareholders of the
Company within twelve months before or after the date the Plan is adopted. Such
shareholder approval shall be obtained in the degree and manner required under
the Applicable Laws.
19. INFORMATION AND DOCUMENTS TO OPTIONEES. Prior to the date, if any,
upon which the Common Stock becomes a Listed Security and if required by the
Applicable Laws, the Company shall provide financial statements at least
annually to each Optionee during the period such Optionee has one or more
Options outstanding, and in the case of an individual who acquired Shares
pursuant to the Plan, during the period such individual owns such Shares. The
Company shall not be required to provide such information if the issuance of
Options under the Plan is limited to key employees whose duties in connection
with the Company assure their access to equivalent information. In addition, at
the time of issuance of any securities under the Plan, the Company shall provide
to the Optionee a copy of the Plan and any agreement(s) pursuant to which
securities granted under the Plan are issued.
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EXHIBIT 10.4
NETRO CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1999 Employee Stock
Purchase Plan of Netro Corporation
1. PURPOSE. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Code. The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. DEFINITIONS.
(a) "BOARD" means the Board of Directors of the Company.
(b) "CODE" means the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" means the Common Stock of the Company.
(d) "COMPANY" means Netro Corporation, a California corporation.
(e) "COMPENSATION" means total cash compensation received by an
Employee from the Company or a Designated Subsidiary. By way of illustration,
but not limitation, Compensation includes regular compensation such as salary,
wages, overtime, shift differentials, bonuses, commissions and incentive
compensation, but excludes relocation, expense reimbursements, tuition or other
reimbursements and income realized as a result of participation in any stock
option, stock purchase, or similar plan of the Company or any Designated
Subsidiary.
(f) "CONTINUOUS STATUS AS AN EMPLOYEE" means the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of (i) sick leave; (ii)
military leave; (iii) any other leave of absence approved by the Administrator,
provided that such leave is for a period of not more than 90 days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the Company and its Designated Subsidiaries.
(g) "CONTRIBUTIONS" means all amounts credited to the account of
a participant pursuant to the Plan.
(h) "CORPORATE TRANSACTION" means a sale of all or substantially
all of the Company's assets, or a merger, consolidation or other capital
reorganization of the Company with or into another corporation.
<PAGE> 2
(i) "DESIGNATED SUBSIDIARIES" means the Subsidiaries which have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan; provided however that the Board shall only
have the discretion to designate Subsidiaries if the issuance of options to such
Subsidiary's Employees pursuant to the Plan would not cause the Company to incur
adverse accounting charges.
(j) "EMPLOYEE" means any person, including an Officer, who is
customarily employed for at least twenty (20) hours per week and more than five
(5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(l) "OFFERING DATE" means the first business day of each
Offering Period of the Plan.
(m) "OFFERING PERIOD" means a period of twenty-four (24) months
commencing on February 1 and August 1 of each year, except for the first
Offering Period as set forth in Section 4(a).
(n) "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(o) "PLAN" means this Employee Stock Purchase Plan.
(p) "PURCHASE DATE" means the last day of each Purchase Period
of the Plan.
(q) "PURCHASE PERIOD" means a period of six (6) months within an
Offering Period, except for the first Purchase Period as set forth in Section
4(b).
(r) "PURCHASE PRICE" means with respect to a Purchase Period an
amount equal to 85% of the Fair Market Value (as defined in Section 7(b) below)
of a Share of Common Stock on the Offering Date or on the Purchase Date,
whichever is lower; provided, however, that in the event (i) of any increase in
the number of Shares available for issuance under the Plan as a result of a
stockholder-approved amendment to the Plan, and (ii) all or a portion of such
additional Shares are to be issued with respect to one or more Offering Periods
that are underway at the time of such increase ("Additional Shares"), and (iii)
the Fair Market Value of a Share of Common Stock on the date of such increase
(the "Approval Date Fair Market Value") is higher than the Fair Market Value on
the Offering Date for any such Offering Period, then in such instance the
Purchase Price with respect to Additional Shares shall be 85% of the Approval
Date Fair Market Value or the Fair Market Value of a Share of Common Stock on
the Purchase Date, whichever is lower.
(s) "SHARE" means a share of Common Stock, as adjusted in
accordance with Section 19 of the Plan.
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<PAGE> 3
(t) "SUBSIDIARY" means a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
3. ELIGIBILITY.
(a) Any person who is an Employee as of the Offering Date of a
given Offering Period shall be eligible to participate in such Offering Period
under the Plan, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code; provided however that eligible Employees
may not participate in more than one Offering Period at a time.
(b) Any provisions of the Plan to the contrary notwithstanding,
no Employee shall be granted an option under the Plan (i) if, immediately after
the grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own capital stock of
the Company and/or hold outstanding options to purchase stock possessing five
percent (5%) or more of the total combined voting power or value of all classes
of stock of the Company or of any subsidiary of the Company, or (ii) if such
option would permit his or her rights to purchase stock under all employee stock
purchase plans (described in Section 423 of the Code) of the Company and its
Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) of the Fair Market Value (as defined in Section 7(b) below) of such
stock (determined at the time such option is granted) for each calendar year in
which such option is outstanding at any time.
4. OFFERING PERIODS AND PURCHASE PERIODS.
(a) OFFERING PERIODS. The Plan shall be implemented by a series
of Offering Periods of twenty-four (24) months' duration, with new Offering
Periods commencing on or about February 1 and August 1 of each year (or at such
other time or times as may be determined by the Board of Directors). The first
Offering Period shall commence on the beginning of the effective date of the
Registration Statement on Form S-1 for the initial public offering of the
Company's Common Stock (the "IPO Date") and continue until july 31, 2001. The
Plan shall continue until terminated in accordance with Section 19 hereof. The
Board of Directors of the Company shall have the power to change the duration
and/or the frequency of Offering Periods with respect to future offerings
without stockholder approval if such change is announced at least five (5) days
prior to the scheduled beginning of the first Offering Period to be affected.
(b) PURCHASE PERIODS. Each Offering Period shall consist of four
(4) consecutive purchase periods of six (6) months' duration. The last day of
each Purchase Period shall be the "Purchase Date" for such Purchase Period. A
Purchase Period commencing on February 1 shall end on the next July 31. A
Purchase Period commencing on August 1 shall end on the next January 31. The
first Purchase Period shall commence on the IPO Date and shall end on January
31, 2000. The Board of Directors of the Company shall have the power to change
the duration and/or frequency of Purchase Periods with respect to future
purchases without stockholder approval if such change is announced at least five
(5) days prior to the scheduled beginning of the first Purchase Period to be
affected.
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<PAGE> 4
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement on the form provided by the Company and
filing it with the Company's payroll office prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by the
Board for all eligible Employees with respect to a given Offering Period. The
subscription agreement shall set forth the percentage of the participant's
Compensation (subject to Section 6(a) below) to be paid as Contributions
pursuant to the Plan.
(b) Payroll deductions shall commence on the first payroll
following the Offering Date and shall end on the last payroll paid on or prior
to the last Purchase Period of the Offering Period to which the subscription
agreement is applicable, unless sooner terminated by the participant as provided
in Section 10.
6. METHOD OF PAYMENT OF CONTRIBUTIONS.
(a) A participant shall elect to have payroll deductions made on
each payday during the Offering Period in an amount not less than one percent
(1%) and not more than fifteen percent (15%) (or such greater percentage as the
Board may establish from time to time before an Offering Date) of such
participant's Compensation on each payday during the Offering Period. All
payroll deductions made by a participant shall be credited to his or her account
under the Plan. A participant may not make any additional payments into such
account.
(b) A participant may discontinue his or her participation in
the Plan as provided in Section 10, or, on one occasion only during a Purchase
Period may increase and on one occasion only during a Purchase Period may
decrease the rate of his or her Contributions with respect to the Offering
Period by completing and filing with the Company a new subscription agreement
authorizing a change in the payroll deduction rate. The change in rate shall be
effective as of the beginning of the next calendar month following the date of
filing of the new subscription agreement, if the agreement is filed at least ten
(10) business days prior to such date and, if not, as of the beginning of the
next succeeding calendar month.
(c) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) herein, a
participant's payroll deductions may be decreased during any Purchase Period to
0%. Payroll deductions shall re-commence at the rate provided in such
participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10.
7. GRANT OF OPTION.
(a) On the Offering Date of each Offering Period, each eligible
Employee participating in such Offering Period shall be granted an option to
purchase on each Purchase Date a number of Shares of the Company's Common Stock
determined by dividing such Employee's Contributions accumulated prior to such
Purchase Date and retained in the participant's account as of the Purchase Date
by the applicable Purchase Price; provided however
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<PAGE> 5
that the maximum number of Shares an Employee may purchase during each Purchase
Period shall be 2,000 Shares (subject to any adjustment pursuant to Section 19
below), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 13.
(b) The fair market value of the Company's Common Stock on a
given date (the "Fair Market Value") shall be determined by the Board in its
discretion based on the closing sales price of the Common Stock for such date
(or, in the event that the Common Stock is not traded on such date, on the
immediately preceding trading date), as reported by the National Association of
Securities Dealers Automated Quotation (Nasdaq) National Market or, if such
price is not reported, the mean of the bid and asked prices per share of the
Common Stock as reported by Nasdaq or, in the event the Common Stock is listed
on a stock exchange, the Fair Market Value per share shall be the closing sales
price on such exchange on such date (or, in the event that the Common Stock is
not traded on such date, on the immediately preceding trading date), as reported
in The Wall Street Journal. For purposes of the Offering Date under the first
Offering Period under the Plan, the Fair Market Value of a share of the Common
Stock of the Company shall be the Price to Public as set forth in the final
prospectus filed with the Securities and Exchange Commission pursuant to Rule
424 under the Securities Act of 1933, as amended.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in Section 10, his or her option for the purchase of Shares will be
exercised automatically on each Purchase Date of an Offering Period, and the
maximum number of full Shares subject to the option will be purchased at the
applicable Purchase Price with the accumulated Contributions in his or her
account. No fractional Shares shall be issued. The Shares purchased upon
exercise of an option hereunder shall be deemed to be transferred to the
participant on the Purchase Date. During his or her lifetime, a participant's
option to purchase Shares hereunder is exercisable only by him or her.
9. DELIVERY. As promptly as practicable after each Purchase Date of each
Offering Period, the Company shall arrange the delivery to each participant, as
appropriate, the Shares purchased upon exercise of his or her option. No
fractional Shares shall be purchased; any payroll deductions accumulated in a
participant's account which are not sufficient to purchase a full Share shall be
retained in the participant's account for the subsequent Purchase Period or
Offering Period, subject to earlier withdrawal by the participant as provided in
Section 10 below. Any other amounts left over in a participant's account after a
Purchase Date shall be returned to the participant.
10. VOLUNTARY WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time prior to
each Purchase Date by giving written notice to the Company. All of the
participant's Contributions credited to his or her account will be paid to him
or her promptly after receipt of his or her notice of withdrawal and his or her
option for the current period will be automatically terminated, and no further
Contributions for the purchase of Shares will be made during the Offering
Period.
-5-
<PAGE> 6
(b) Upon termination of the participant's Continuous Status as
an Employee prior to the Purchase Date of an Offering Period for any reason,
including retirement or death, the Contributions credited to his or her account
will be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under Section 14, and his or her option will
be automatically terminated.
(c) In the event an Employee fails to remain in Continuous
Status as an Employee of the Company for at least twenty (20) hours per week
during the Offering Period in which the employee is a participant, he or she
will be deemed to have elected to withdraw from the Plan and the Contributions
credited to his or her account will be returned to him or her and his or her
option terminated.
(d) A participant's withdrawal from an offering will not have
any effect upon his or her eligibility to participate in a succeeding offering
or in any similar plan which may hereafter be adopted by the Company.
11. AUTOMATIC WITHDRAWAL. If the Fair Market Value of the Shares on any
Purchase Date of an Offering Period is less than the Fair Market Value of the
Shares on the Offering Date for such Offering Period, then every participant
shall automatically (i) be withdrawn from such Offering Period at the close of
such Purchase Date and after the acquisition of Shares for such Purchase Period,
and (ii) be enrolled in the Offering Period commencing on the first business day
subsequent to such Purchase Period.
12. INTEREST. No interest shall accrue on the Contributions of a
participant in the Plan.
13. STOCK.
(a) Subject to adjustment as provided in Section 19, the maximum
number of Shares which shall be made available for sale under the Plan shall be
1,000,000 Shares, plus an annual increase on the first day of each of the
Company's fiscal years beginning in 2001, 2002, 2003, 2004 and 2005 equal to the
lesser of (i) 250,000 Shares, (ii) one percent (1%) of the Shares outstanding on
the last day of the immediately preceding fiscal year, or (iii) such lesser
number of Shares as is determined by the Board. If the Board determines that, on
a given Purchase Date, the number of shares with respect to which options are to
be exercised may exceed (i) the number of shares of Common Stock that were
available for sale under the Plan on the Offering Date of the applicable
Offering Period, or (ii) the number of shares available for sale under the Plan
on such Purchase Date, the Board may in its sole discretion provide (x) that the
Company shall make a pro rata allocation of the Shares of Common Stock available
for purchase on such Offering Date or Purchase Date, as applicable, in as
uniform a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Purchase Date, and continue all Offering Periods then in
effect, or (y) that the Company shall make a pro rata allocation of the shares
available for purchase on such Offering Date or Purchase Date, as applicable, in
as uniform a manner as shall be practicable and as it shall determine in its
sole discretion to be equitable among all participants exercising options to
purchase Common Stock on such Purchase Date, and terminate any or all Offering
Periods then in effect pursuant to Section 20 below. The Company may make pro
rata allocation
-6-
<PAGE> 7
of the Shares available on the Offering Date of any applicable Offering Period
pursuant to the preceding sentence, notwithstanding any authorization of
additional Shares for issuance under the Plan by the Company's stockholders
subsequent to such Offering Date.
(b) The participant shall have no interest or voting right in
Shares covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will
be registered in the name of the participant or in the name of the participant
and his or her spouse.
14. ADMINISTRATION. The Board, or a committee named by the Board, shall
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to construe and interpret the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan.
15. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a
beneficiary who is to receive any Shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to the end of a Purchase Period but prior to delivery to him or her
of such Shares and cash. In addition, a participant may file a written
designation of a beneficiary who is to receive any cash from the participant's
account under the Plan in the event of such participant's death prior to the
Purchase Date of an Offering Period. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant (and his or her spouse, if any) at any time by written notice. In
the event of the death of a participant and in the absence of a beneficiary
validly designated under the Plan who is living at the time of such
participant's death, the Company shall deliver such Shares and/or cash to the
executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such Shares and/or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
16. TRANSFERABILITY. Neither Contributions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive Shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 15) by the participant. Any such attempt
at assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Section 10.
-7-
<PAGE> 8
17. USE OF FUNDS. All Contributions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such Contributions.
18. REPORTS. Individual accounts will be maintained for each participant
in the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of Contributions,
the per Share Purchase Price, the number of Shares purchased and the remaining
cash balance, if any.
19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
(a) ADJUSTMENT. Subject to any required action by the
stockholders of the Company, the number of Shares covered by each option under
the Plan which has not yet been exercised and the number of Shares which have
been authorized for issuance under the Plan but have not yet been placed under
option (collectively, the "Reserves"), as well as the maximum number of shares
of Common Stock which may be purchased by a participant in a Purchase Period,
the number of shares of Common Stock set forth in Section 13(a)(i) above, and
the price per Share of Common Stock covered by each option under the Plan which
has not yet been exercised, shall be proportionately adjusted for any increase
or decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common Stock
(including any such change in the number of Shares of Common Stock effected in
connection with a change in domicile of the Company), or any other increase or
decrease in the number of Shares effected without receipt of consideration by
the Company; provided however that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of Shares subject to an option.
(b) CORPORATE TRANSACTIONS. In the event of a dissolution or
liquidation of the Company, any Purchase Period and Offering Period then in
progress will terminate immediately prior to the consummation of such action,
unless otherwise provided by the Board. In the event of a Corporate Transaction,
each option outstanding under the Plan shall be assumed or an equivalent option
shall be substituted by the successor corporation or a parent or Subsidiary of
such successor corporation. In the event that the successor corporation refuses
to assume or substitute for outstanding options, each Purchase Period and
Offering Period then in progress shall be shortened and a new Purchase Date
shall be set (the "New Purchase Date"), as of which date any Purchase Period and
Offering Period then in progress will terminate. The New Purchase Date shall be
on or before the date of consummation of the transaction and the Board shall
notify each participant in writing, at least ten (10) days prior to the New
Purchase Date, that the Purchase Date for his or her option has been changed to
the New Purchase Date and that his or her option will be exercised automatically
on the New Purchase Date, unless prior to such date he or she has withdrawn from
the Offering Period as provided in Section 10. For purposes of this Section 19,
an option granted under the Plan shall be deemed to be assumed, without
limitation, if, at the time of issuance of the stock or other consideration upon
a Corporate Transaction, each
-8-
<PAGE> 9
holder of an option under the Plan would be entitled to receive upon exercise of
the option the same number and kind of shares of stock or the same amount of
property, cash or securities as such holder would have been entitled to receive
upon the occurrence of the transaction if the holder had been, immediately prior
to the transaction, the holder of the number of Shares of Common Stock covered
by the option at such time (after giving effect to any adjustments in the number
of Shares covered by the option as provided for in this Section 19); provided
however that if the consideration received in the transaction is not solely
common stock of the successor corporation or its parent (as defined in Section
424(e) of the Code), the Board may, with the consent of the successor
corporation, provide for the consideration to be received upon exercise of the
option to be solely common stock of the successor corporation or its parent
equal in Fair Market Value to the per Share consideration received by holders of
Common Stock in the transaction.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per Share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of Shares of its outstanding Common
Stock, and in the event of the Company's being consolidated with or merged into
any other corporation.
20. AMENDMENT OR TERMINATION.
(a) The Board may at any time and for any reason terminate or
amend the Plan. Except as provided in Section 19, no such termination of the
Plan may affect options previously granted, provided that the Plan or an
Offering Period may be terminated by the Board on a Purchase Date or by the
Board's setting a new Purchase Date with respect to an Offering Period and
Purchase Period then in progress if the Board determines that termination of the
Plan and/or the Offering Period is in the best interests of the Company and the
stockholders or if continuation of the Plan and/or the Offering Period would
cause the Company to incur adverse accounting charges as a result of a change
after the effective date of the Plan in the generally accepted accounting rules
applicable to the Plan. Except as provided in Section 19 and in this Section 20,
no amendment to the Plan shall make any change in any option previously granted
which adversely affects the rights of any participant. In addition, to the
extent necessary to comply with Rule 16b-3 under the Exchange Act, or under
Section 423 of the Code (or any successor rule or provision or any applicable
law or regulation), the Company shall obtain stockholder approval in such a
manner and to such a degree as so required.
(b) Without stockholder consent and without regard to whether
any participant rights may be considered to have been adversely affected, the
Board (or its committee) shall be entitled to change the Offering Periods and
Purchase Periods, limit the frequency and/or number of changes in the amount
withheld during an Offering Period, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a participant in order to
adjust for delays or mistakes in the Company's processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts applied toward
the purchase of Common Stock for each participant properly correspond with
-9-
<PAGE> 10
amounts withheld from the participant's Compensation, and establish such other
limitations or procedures as the Board (or its committee) determines in its sole
discretion advisable which are consistent with the Plan.
21. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such Shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, applicable state securities laws and the requirements of
any stock exchange upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective upon
the IPO Date. It shall continue in effect for a term of twenty (20) years unless
sooner terminated under Section 20.
24. ADDITIONAL RESTRICTIONS OF RULE 16b-3. The terms and conditions of
options granted hereunder to, and the purchase of Shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the Shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
-10-
<PAGE> 11
NETRO CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
New Election ______
Change of Election ______
1. I, ________________________, hereby elect to participate in the Netro
Corporation 1999 Employee Stock Purchase Plan (the "Plan") for the Offering
Period ______________, ____ to _______________, ____, and subscribe to purchase
shares of the Company's Common Stock in accordance with this Subscription
Agreement and the Plan.
2. I elect to have Contributions in the amount of ____% of my
Compensation, as those terms are defined in the Plan, applied to this purchase.
I understand that this amount must not be less than 1% and not more than 15% of
my Compensation during the Offering Period. (Please note that no fractional
percentages are permitted).
3. I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Item 2 of this Subscription Agreement. I
understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on the Purchase
Date of each Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company for such purpose.
4. I understand that I may discontinue at any time prior to the Purchase
Date my participation in the Plan as provided in Section 10 of the Plan. I also
understand that I can increase or decrease the rate of my Contributions on one
occasion only with respect to any increase and one occasion only with respect to
any decrease during any Purchase Period by completing and filing a new
Subscription Agreement with such increase or decrease taking effect as of the
beginning of the calendar month following the date of filing of the new
Subscription Agreement, if filed at least ten (10) business days prior to the
beginning of such month. Further, I may change the rate of deductions for future
Offering Periods by filing a new Subscription Agreement, and any such change
will be effective as of the beginning of the next Offering Period. In addition,
I acknowledge that, unless I discontinue my participation in the Plan as
provided in Section 10 of the Plan, my election will continue to be effective
for each successive Offering Period.
-11-
<PAGE> 12
5. I have received a copy of the Company's most recent description of
the Plan and a copy of the complete "Netro Corporation 1999 Employee Stock
Purchase Plan." I understand that my participation in the Plan is in all
respects subject to the terms of the Plan.
6. Shares purchased for me under the Plan should be issued in the
name(s) of (name of employee or employee and spouse only):
____________________________________
____________________________________
7. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:
NAME: (Please print) ____________________________________
(First) (Middle) (Last)
____________________ ____________________________________
(Relationship) (Address)
____________________________________
8. I understand that if I dispose of any shares received by me pursuant
to the Plan within 2 years after the Offering Date (the first day of the
Offering Period during which I purchased such shares) or within 1 year after the
Purchase Date, I will be treated for federal income tax purposes as having
received ordinary compensation income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares on the
Purchase Date over the price which I paid for the shares, regardless of whether
I disposed of the shares at a price less than their fair market value at the
Purchase Date. The remainder of the gain or loss, if any, recognized on such
disposition will be treated as capital gain or loss.
I hereby agree to notify the Company in writing within 30 days after the
date of any such disposition, and I will make adequate provision for federal,
state or other tax withholding obligations, if any, which arise upon the
disposition of the Common Stock. The Company may, but will not be obligated to,
withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.
9. If I dispose of such shares at any time after expiration of the
2-year and 1-year holding periods, I understand that I will be treated for
federal income tax purposes as having received compensation income only to the
extent of an amount equal to the lesser of (1) the excess of the fair market
value of the shares at the time of such disposition over the purchase price
which I paid for the shares under the option, or (2) 15% of the fair market
value of the
-2-
<PAGE> 13
shares on the Offering Date. The remainder of the gain or loss, if any,
recognized on such disposition will be treated as capital gain or loss.
I understand that this tax summary is only a summary and is subject to
change. I further understand that I should consult a tax advisor concerning the
tax implications of the purchase and sale of stock under the Plan.
10. I hereby agree to be bound by the terms of the Plan. The
effectiveness of this Subscription Agreement is dependent upon my eligibility to
participate in the Plan.
SIGNATURE: ________________________________________
SOCIAL SECURITY #: ________________________________
DATE: _____________________________________________
SPOUSE'S SIGNATURE (necessary if beneficiary is not spouse):
__________________________________
(Signature)
__________________________________
(Print name)
-3-
<PAGE> 14
NETRO CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I, __________________________, hereby elect to withdraw my participation
in the Netro Corporation 1999 Employee Stock Purchase Plan (the "Plan") for the
Offering Period that began on _________ ___, _____. This withdrawal covers all
Contributions credited to my account and is effective on the date designated
below.
I understand that all Contributions credited to my account will be paid
to me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.
The undersigned further understands and agrees that he or she shall be
eligible to participate in succeeding offering periods only by delivering to the
Company a new Subscription Agreement.
Dated:___________________ ____________________________________
Signature of Employee
____________________________________
Social Security Number
<PAGE> 1
Exhibit 10.6
LEASE AGREEMENT
(PHASE I)
(ROTUNDA BUILDING 3)
BETWEEN
SOBRATO INTERESTS II
ET AL.
AND
PYRAMID TECHNOLOGY CORPORATION,
A DELAWARE CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. PARTIES............................................................................... 1
2. PREMISES.............................................................................. 1
A. Premises........................................................................... 1
B. Remeasurement...................................................................... 1
3. USE................................................................................... 1
4. TERM AND RENTAL....................................................................... 1
A. Rental Adjustment.................................................................. 2
5. SECURITY DEPOSIT...................................................................... 2
A. Cash Security Deposit.............................................................. 2
B. Letter of Credit................................................................... 3
6. LATE CHARGES.......................................................................... 3
7. CONSTRUCTION AND POSSESSION........................................................... 3
A. Construction of Improvements....................................................... 3
B. Failure to Deliver Possession...................................................... 4
C. Tenant Delays...................................................................... 4
8. ACCEPTANCE OF PREMISES AND COVENANTS TO SURRENDER..................................... 4
A. Punch List......................................................................... 4
B. Correction of Defects.............................................................. 4
C. Surrender.......................................................................... 5
9. USES PROHIBITED....................................................................... 5
10. ALTERATIONS AND ADDITIONS............................................................ 6
A. Construction of Alterations........................................................ 6
B. Ownership of Alterations........................................................... 6
11. MAINTENANCE OF PREMISES.............................................................. 6
A. Tenant Maintenance................................................................. 6
B. Excluded Costs..................................................................... 7
12. INSURANCE AND DEDUCTIBLES............................................................ 8
Tenant's Use.......................................................................... 8
B. Landlord's Insurance............................................................... 8
C. Tenant's Insurance................................................................. 9
D. Insurance Deductibles.............................................................. 9
E. Waiver............................................................................. 9
13. TAXES................................................................................ 10
A. Payment of Taxes................................................................... 10
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
B. Assessments........................................................................ 10
C. Change of Ownership................................................................ 11
14. UTILITIES............................................................................ 11
15. ABANDONMENT.......................................................................... 11
16. FREE FROM LIENS...................................................................... 11
17. COMPLIANCE WITH GOVERNMENTAL REGULATIONS............................................. 11
18. TOXIC WASTE AND ENVIRONMENTAL DAMAGE................................................. 12
A. Tenant's Responsibility............................................................ 12
B. No Responsibility.................................................................. 13
C. Indemnity by Landlord.............................................................. 13
D. Representation by Landlord......................................................... 14
E. Notification....................................................................... 14
F. Environmental Studies.............................................................. 14
19. INDEMNITY............................................................................ 14
20. ADVERTISEMENTS AND SIGNS............................................................. 15
21. ATTORNEY'S FEES...................................................................... 15
22. TENANT'S DEFAULT..................................................................... 15
A. Remedies........................................................................... 16
B. Right to Re-enter.................................................................. 16
C. Abandonment........................................................................ 16
D. No Termination..................................................................... 16
23. SURRENDER OF LEASE................................................................... 17
24. RIGHT OF FIRST OFFER TO PURCHASE..................................................... 17
A. Grant of First Right............................................................... 17
B. Term............................................................................... 17
C. Notice of Intent to Sell........................................................... 17
D. Exercise of Right of First Offer................................................... 17
E. Terms of Sale...................................................................... 17
F. Landlord's Right to Sell........................................................... 18
25. LANDLORD'S DEFAULT................................................................... 18
26. NOTICES.............................................................................. 18
27. ENTRY BY LANDLORD.................................................................... 19
28. DESTRUCTION OF PREMISES.............................................................. 20
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
A. Obligation to Restore.............................................................. 20
B. Tenant's Right to Terminate........................................................ 20
29. ASSIGNMENT OR SUBLEASE............................................................... 21
A. Permitted Transfers................................................................ 21
B. Consent by Landlord................................................................ 21
C. Assignment or Subletting Consideration............................................. 21
D. No Release......................................................................... 22
E. Effect of Default.................................................................. 22
30. CONDEMNATION......................................................................... 22
31. EFFECTS OF CONVEYANCE................................................................ 23
32. SUBORDINATION........................................................................ 23
A. Subordination to Future Obligations................................................ 23
B. Existing Obligations............................................................... 23
33. WAIVER............................................................................... 24
34. HOLDING OVER......................................................................... 24
35. SUCCESSORS AND ASSIGNS............................................................... 24
36. ESTOPPEL CERTIFICATES................................................................ 24
37. OPTION TO EXTEND..................................................................... 25
38. APPRAISAL............................................................................ 25
39. COMMON AREA COSTS AND PARKING........................................................ 27
A. Initial Occupancy.................................................................. 27
B. Subdivision........................................................................ 27
C. Common Area Costs.................................................................. 27
D. Maintenance........................................................................ 27
E. Payment of Common Area Costs....................................................... 27
F. Proportionate Share................................................................ 28
G. Proration.......................................................................... 28
H. Parking............................................................................ 28
40. QUIET ENJOYMENT...................................................................... 28
41. BROKERS/PREVIOUS DEALINGS............................................................ 28
42. AUTHORITY OF PARTIES................................................................. 28
A. Authority of Tenant................................................................ 28
B. Landlord's Authority............................................................... 28
43. MISCELLANEOUS PROVISIONS............................................................. 28
</TABLE>
iii
<PAGE> 5
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
A. Rights and Remedies................................................................ 28
B. Severability....................................................................... 29
C. Choice of Law...................................................................... 29
D. Interest........................................................................... 29
E. Time............................................................................... 29
F. Headings........................................................................... 29
G. Performance by Landlord............................................................ 29
H. Representations.................................................................... 29
I. Rent............................................................................... 29
J. Interference....................................................................... 29
K. Approvals.......................................................................... 30
L. Reasonable Expenditures............................................................ 30
M. Exhibits........................................................................... 30
N. Light and View..................................................................... 30
O. Memorandum of Lease................................................................ 30
</TABLE>
-iv-
<PAGE> 6
LEASE AGREEMENT
(PHASE I)
1. PARTIES: This Lease Agreement ("Lease") is entered into on this 6th
day of May, 1990, between JOHN A. SOBRATO, Trustee Under Trust Agreement Dated
August 29, 1979, as Amended, SOBRATO INTERESTS II, a California general
partnership, and JOHN MICHAEL SOBRATO or his Successor, Trustee Under Revocable
Trust Agreement dated April 28, 1989, as amended, FBO Ann Sobrato (collectively,
"Landlord") and PYRAMID TECHNOLOGY CORPORATION, a Delaware corporation
("Tenant").
2. PREMISES:
A. Premises: Landlord hereby leases to Tenant, and Tenant
leases from Landlord, those certain Premises with the appurtenances, situated in
the City of San Jose, County of Santa Clara, State of California, and more
particularly described as follows:
A one-story building to be constructed by Landlord consisting of
101,552 square feet ("Building") on a portion of a site
consisting of three buildings totaling 280,784 square feet (the
"Project") on that certain real property at the southeast corner
of North First Street and Rose Orchard Way whose assessor's
parcel numbers are 097-03-043 and APN 097-03-044 and more
particularly described in Exhibit "A" attached hereto and
incorporated herein by reference. During that period of time
which Tenant has the exclusive right to occupy the Project,
Tenant shall have the exclusive use, without charge, of
approximately 975 parking spaces in the Project as may be
decreased due to a reconfiguration of the dock area (which
constitute all of the parking spaces in the Project).
B. Remeasurement: Upon Substantial Completion of the Premises
(as described in the Construction Addendum to Lease attached to the Lease as
Exhibit B" and incorporated herein by reference), Tenant may elect to have the
Premises measured by Tenant's Interior Improvement Architect, as defined in the
Construction Addendum (measured from the exterior of the exterior walls of the
Building and including one-half of the covered loading docks but excluding any
other outside areas or canopies). If the actual square footage differs from the
amount stated above, the monthly rent hereunder shall be adjusted by multiplying
One and 10/100 Dollars ($1.10) times the actual square feet of the Building and
the Tenant Improvement Allowance shall be adjusted by multiplying Thirty-Seven
and No/100 Dollars ($37.00) times the actual square feet of the Building. The
square footage, if so remeasured by Tenant, shall be substituted for that set
forth herein for purposes of this Lease.
3. USE: Tenant shall use the Premises only for legally permitted uses.
4. TERM AND RENTAL: The term of this Lease ("Lease Term") shall commence
on the "Commencement Date" (as defined in Paragraph 7 hereof). The Lease Term
shall expire on September 14, 2001. The monthly rent shall be paid without
deduction or offset (except as otherwise set forth herein), in monthly
installments of One Hundred Eleven Thousand Seven
<PAGE> 7
Hundred Seven and 20/100 Dollars ($111,707.20) due on or before the first day of
each calendar month during the Lease Term. Said rental shall be paid in lawful
money of the United States of America, and shall be paid to Landlord at such
place or places as may be designated from time to time by Landlord. Rent for any
period less than a calendar month shall be prorated based on a thirty (30) day
month.
A Rental Adjustment: On that date that is thirty (30) months
after the Commencement Date of the Lease, and on each date which is thirty (30)
months after the first adjustment date (each of the foregoing is referred to as
the "Adjustment Date"), the then payable monthly rent shall be subject to
adjustment based on the increase, if any, in the Consumer Price Index. The basis
for computing the adjustment shall be the U.S. Department of Labor, Bureau of
Labor Statistic's Consumer Price Index for All Urban Consumers, All Items,
1982-84=100, for the San Francisco-Oakland-San Jose area ("Index"). The Index
most recently published preceding the commencement of the Lease shall be
considered the "Base Index." If the Index most recently published preceding the
Adjustment Date ("Comparison Index") is greater than the Base Index, the then
payable monthly rent shall be increased by multiplying the initial monthly rent
by a fraction, the numerator of which is the Comparison Index and the
denominator of which is the Base Index. Within thirty (30) days after each
adjustment as set forth herein, Landlord shall furnish a statement to Tenant
setting forth the rental adjustment determined by reference to the foregoing,
and the method by which Landlord has calculated the same. Landlord's calculation
of the rent escalation shall be conclusive and binding unless Tenant objects to
said calculation within a sixty (60) day period after Tenant's receipt of such
written statement. If the Index base year is changed so that it differs from
1982-84=100, the Index shall be converted in accordance with the conversion
factor published by the United States Department of Labor, Bureau of Labor
Statistics. If the Index is discontinued or revised during the term, such other
government index or computation with which it is replaced shall be used in order
to obtain substantially the same result as would be obtained if the index had
not been discontinued or revised. In no event shall the monthly rent immediately
after the Adjustment Date be less than one hundred seven and one-half percent
(107 1/2%) nor more than one hundred twenty percent (120%) than the monthly rent
immediately before the Adjustment Date.
5. SECURITY DEPOSIT:
A. Cash Security Deposit: Within three (3) business days after
both parties' execution of this Lease, Tenant shall deposit with Landlord the
sum of One Hundred Eleven Thousand Seven Hundred Seven and 20/100 Dollars
($111,707.20) as a security deposit. If Tenant defaults with respect to any
provisions of this Lease, including, but not limited to, the provisions relating
to payment of rent or other charges, Landlord may, to the extent reasonably
necessary to remedy Tenant's default, use all or any part of said deposit for
the payment of rent or other charges in default or the payment of any reasonable
amount which Landlord may spend or become obligated to spend by reason of
Tenant's default or to compensate Landlord for any other loss or damage which
Landlord may suffer by reason of Tenant's default. If any portion of said
deposit is so used or applied, Tenant shall, within ten (10) days after written
demand therefor, deposit cash with Landlord in an amount sufficient to restore
said deposit to the full amount hereinabove stated and shall pay to Landlord
such other sums as shall be necessary to
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<PAGE> 8
reimburse Landlord for any sums paid by Landlord. Said deposit shall be returned
to Tenant within thirty (30) days after the expiration of the Lease Term less
any amount deducted in accordance with this paragraph, together with Landlord's
written notice itemizing the amounts and purposes for such retention. In the
event of termination of Landlord's interest in this Lease, Landlord shall
transfer said deposit to Landlord's successor in interest.
B. Letter of Credit: Notwithstanding the foregoing provisions
of this paragraph 5, Landlord agrees that in lieu of a cash security deposit,
Tenant may deposit a letter of credit in a form reasonably acceptable to
Landlord. Landlord shall be entitled to draw against the letter of credit at any
time that Tenant has committed a default under this Lease, provided that
Landlord certifies to the issuer of the letter of credit under penalty of
perjury that Tenant is in default under the Lease (as default is defined in
paragraph 22 of this Lease). Tenant shall keep the letter of credit in effect
during the entire Lease Term, as the same may be extended, plus a period of four
(4) weeks thereafter. At least thirty (30) days prior to expiration of any
letter of credit, the term thereof shall be renewed or extended. Subject to
Tenant's cure rights under Paragraph 22, Tenant's failure to so renew or extend
the letter of credit shall be a material default of this Lease by Tenant. If
Landlord draws against the letter of credit, Tenant shall replenish the existing
letter of credit or cause a new letter of credit to be issued such that the
aggregate amount of letters of credit available to Landlord at all times during
the Lease Term is the amount of the security deposit originally required.
6. LATE CHARGES: Tenant hereby acknowledges that late payment by Tenant
to Landlord of rent and other sums due hereunder will cause Landlord to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
administrative, processing, accounting charges, and late charges, which may be
imposed on Landlord by the terms of any contract, revolving credit, mortgage or
trust deed covering the Premises. Accordingly, if any installment of rent or any
other sum due from Tenant shall not be received by Landlord or Landlord's
designee within ten (10) days after Tenant's receipt of written notice that such
amount is delinquent, Tenant shall pay to Landlord a late charge equal to four
percent (4%) of such overdue amount which shall be due and payable with the
payment then delinquent. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of late payment by Tenant. Acceptance of such late charge by Landlord
shall in no event constitute a waiver of Tenant's default with respect to such
overdue amount, nor prevent Landlord from exercising any of the other rights and
remedies granted hereunder.
7. CONSTRUCTION AND POSSESSION:
A. Construction of Improvements: The "Building Shell" and
"Interior Improvements" shall be constructed by Landlord under the terms and
conditions of that certain Construction Addendum to Lease attached hereto as
Exhibit "B" (the "Construction Addendum") The term of the Lease shall not
commence (the "Commencement Date") until the later of December 15, 1990, or the
date on which the Premises are "substantially Completed" as defined in the
Construction Addendum. Notwithstanding the foregoing, Tenant may elect to occupy
the Premises for the conduct of its business prior to December 15, 1990 if the
Premises are
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<PAGE> 9
Substantially Completed before such date. In the event of such early occupancy,
and provided the Premises are Substantially Completed, Tenant shall begin paying
rent as of the date of such occupancy for the conduct of its business, and
Tenant's occupancy shall be subject to the terms and conditions of this Lease.
B. Failure to Deliver Possession: If Landlord, for any reason
whatsoever, cannot deliver possession of the Premises to Tenant on the scheduled
commencement date of December 15, 1990, this Lease shall not be void or
voidable, nor shall Landlord be liable to Tenant for any loss or damage
resulting therefrom if due to circumstances beyond Landlord's control; but in
that event the commencement and termination dates of the Lease and all other
dates affected thereby shall be revised to conform to the date of Landlord's
delivery of possession. If the Premises are not Substantially Completed on or
before December 15, 1990, then, Tenant, at its election and in addition to its
other rights and remedies, shall be entitled to receive free rent equal to Ten
Thousand Dollars ($10,000) for each day beyond December 15, 1990 that the
Premises are not so Substantially Completed (the "Free Rent Amount"). Moreover
if the Premises are not Substantially Completed on or before July 15, 1991,
Tenant, at its election and in addition to its other remedies, shall have the
right to terminate this Lease and, at Tenant's election, any other lease between
Landlord and Tenant ("Other Lease") covering other space in the Project (the
"Other Space"). In the event Tenant elects to terminate this Lease as provided
herein, Landlord shall pay to Tenant the amount of the accrued Free Rent Amount
as of the date of termination.
C. Tenant Delays: Notwithstanding the foregoing, if there is
an actual delay in Substantial Completion of the Premises as a result of "Tenant
Delays" (as that term is defined in the Construction Addendum), then the
foregoing dates on which Tenant is entitled to free rent and to terminate this
Lease or any Other Lease on account of Landlord's failure to Substantially
Complete the Premises shall be postponed one (1) day for each day of the actual
delay in Substantial Completion caused by the Tenant Delay. Further, the date
Tenant is otherwise obligated to commence paying rent shall occur one day sooner
for each day of such actual delay in Substantial Completion caused by the Tenant
Delay; provided, however, that the Commencement Date shall in no event be prior
to December 15, 1990 regardless of any Tenant Delay.
8. ACCEPTANCE OF PREMISES AND COVENANTS TO SURRENDER:
A. Punch List: As soon as Landlord reasonably believes that
the Premises are Substantially Completed, as defined in the Construction
Addendum, Landlord and Tenant shall together walk through and inspect the work
and prepare a written "punch list" of incomplete or defective construction.
Landlord shall use its best efforts to complete and/or repair any items on the
"punch list" within thirty (30) days after the parties have prepared the "punch
list" or as soon thereafter as practicable.
B. Correction of Defects: Notwithstanding anything to the
contrary in the Lease, Tenant's acceptance of the Premises or submission of a
"punch list" shall not be deemed a waiver of Tenant's right to have construction
or design defects in the Interior Improvements and
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<PAGE> 10
the Premises repaired at Landlord's sole expense. Tenant shall give notice to
Landlord whenever any such defect becomes reasonably apparent, and Landlord
shall repair such defect as soon as practicable. Landlord also hereby assigns to
Tenant all warranties with respect to the Premises which would reduce Tenant's
maintenance obligations hereunder and shall cooperate with Tenant to enforce all
such warranties. Landlord warrants that it will obtain a two (2) year warranty
from its contractors and suppliers on the roof membrane and, without limiting
any other obligation of Landlord hereunder, Landlord shall correct any defect or
problem in the roof membrane (except for routine maintenance items as set forth
in paragraph 11) for a period of two (2) years after the Commencement Date.
Further, without limiting any obligation of Landlord under this Lease, Landlord
warrants that it will obtain an express one (1) year warranty from its
contractors and suppliers on all other items and will not waive the protection
of any statute or case law providing for a longer period to assert a claim for
defects in the Premises or any item therein.
C. Surrender: Tenant agrees on the last day of the Lease
Term, or promptly following any sooner termination of this Lease, to surrender
the Premises to Landlord in the condition delivered to Tenant, reasonable wear
and tear, acts of God, casualties, condemnation, Hazardous Materials, as defined
in paragraph 18 hereof (other than those stored, used or disposed of by Tenant
in or about the Premises in violation of Law, as "Law" defined in paragraph
11(a)), and Alterations (as defined in paragraph 10) made by Tenant which
Landlord has not required Tenant to remove, excepted. Tenant shall ascertain
from Landlord within thirty (30) days before the expiration of the Lease Term or
promptly following any sooner termination whether Landlord will require Tenant
to remove any Alterations made by Tenant at the Premises; provided that Landlord
shall not require Tenant to remove any Alteration which Landlord has previously
indicated may remain at the Premises. If Landlord shall so require, then Tenant
shall remove such Alterations as Landlord may designate and shall repair any
damage to the Premises occasioned by the removal before the expiration of the
Lease Term or promptly following any earlier termination at Tenant's sole cost
and expense. On or before the end of the Lease Term or promptly following sooner
termination of the Lease Term, Tenant shall remove all of its personal property
and trade fixtures from the Premises, and all property not so removed shall be
deemed to be abandoned by Tenant.
9. USES PROHIBITED: Tenant shall not commit, or suffer to be committed,
any waste or nuisance upon the Premises, or allow any sale by auction upon the
Premises, or allow the Premises to be used for any unlawful purpose, or place
any loads upon the floor, walls, or ceiling which endanger the structure, or use
any machinery or apparatus which will vibrate or shake the Premises or the
Building of which it is a part so as to damage the Premises other than ordinary
wear and tear or otherwise in violation of applicable Law, or place any harmful
liquids, waste materials, or Hazardous Materials in the drainage system of, or
upon or in the soils surrounding the Building so as to damage the Premises or
otherwise in violation of applicable Law. No materials, supplies, equipment,
finished products or semi-finished products, raw materials or articles of any
nature or any waste materials, refuse, scrap or debris shall be stored upon or
permitted to remain on any portion of the Premises outside of the Building
proper in violation of Law.
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<PAGE> 11
10. ALTERATIONS AND ADDITIONS:
A. Construction of Alterations: Tenant may construct
non-structural alterations, additions and improvements ("Alterations") in the
Premises without Landlord's prior approval, if the cost of such work does not
exceed Fifty Thousand Dollars ($50,000.00). In the event Tenant desires to make
Alterations costing more than Fifty Thousand Dollars ($50,000.00) or structural
Alterations, Landlord's consent shall not be unreasonably withheld and, if
Landlord does not notify Tenant in writing of its reasonable disapproval of such
Alteration within fourteen (14) days following Tenant's written request for
approval and delivery to Landlord of the proposed plans, then Landlord shall be
deemed to have approved the proposed Alteration. Upon the request of Tenant,
Landlord shall within the above-stated fourteen (14) day period advise Tenant in
writing as to whether Landlord shall require removal of any Alteration in
question upon the expiration or earlier termination of the Lease. After having
obtained Landlord's consent, Tenant agrees that it will not proceed to make
Alterations until three (3) days from the receipt (or deemed receipt) of such
consent, in order that Landlord may post appropriate notices to avoid any
liability to contractors or material suppliers for payment for Tenant's
Alterations. Tenant will at all times permit such notices to be posted and to
remain posted until the completion of work.
B. Ownership of Alterations: All Alterations, trade fixtures
and personal property installed in the Premises at Tenant's expense ("Tenant's
Property") shall at all times remain Tenant's property and Tenant shall be
entitled to all depreciation, amortization and other tax benefits with respect
thereto. Except for Alterations which cannot be removed without structural
injury to the Premises, Tenant may remove Tenant's Property from the Premises at
any time, provided Tenant repairs any damage caused by such removal. Landlord
shall have no lien or other interest whatsoever in any item of Tenant's Property
located in the Premises or elsewhere, or any portion thereof or interest
therein, and Landlord hereby waives all such liens and interests. Within ten
(10) days following Tenant's request, Landlord shall execute documents in
reasonable form to evidence Landlord's waiver of any right, title, lien or
interest in Tenant's Property located in the Premises.
11. MAINTENANCE OF PREMISES:
A. Tenant Maintenance: Subject to Landlord's obligations as
set forth in this Lease, and the amortization of capital items as described
below, Tenant shall, at its sole cost, keep and maintain, repair and replace,
the Premises and appurtenances, including, but not limited to, interior non-load
bearing walls, the roof membrane, sidewalks, parking areas, plumbing, electrical
and HVAC systems, and all the Interior Improvements in good and sanitary order,
condition, and repair. Notwithstanding the foregoing, Landlord shall repair and
maintain, at its sole cost, the structural portions of the Premises at all times
during the Lease Term, including the foundation, exterior walls, load-bearing
walls, roof structure and windows. Tenant shall provide Landlord with a copy of
a service contract between Tenant and a licensed air-conditioning and heating
contractor which contract shall provide for maintenance of all air conditioning
and heating equipment at the Premises at such intervals as may be reasonably
required by the manufacturer of such equipment. Subject to the obligations of
Landlord hereunder and the
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<PAGE> 12
amortization of capital items as set forth below, Tenant shall pay the cost of
all air-conditioning and heating equipment repairs or replacements. Tenant shall
be responsible for the preventive maintenance of the membrane of the roof, which
responsibility shall be deemed properly discharged if: (i) Tenant contracts with
a licensed roof contractor who is reasonably satisfactory to both Tenant and
Landlord, at Tenant's sole cost, to inspect the roof membrane at least every six
months, with the first inspection due the sixth (6th) month after the
Commencement Date; and (ii) Tenant performs, at Tenant's sole cost, all routine
preventive maintenance recommendations made by such contractor within a
reasonable time after such recommendations are made. Such preventive maintenance
might include acts such as clearing storm gutters and drains, removing debris
from the roof membrane, trimming trees overhanging the roof membrane, applying
coating materials to seal roof penetrations, repairing blisters, and other
routine measures. Tenant shall provide to Landlord a copy of such preventive
maintenance contract and paid invoices for the recommended work for which Tenant
is responsible. Subject to Landlord's obligations hereunder and to the
amortization of capital items set forth below, Tenant agrees to water, maintain
and replace, when necessary, any shrubbery and landscaping.
B. Excluded Costs: Notwithstanding anything to the contrary
in this Lease, in no event shall Tenant have any obligation to perform or to pay
directly, or to reimburse Landlord for, all or any portion of the following
repairs, maintenance, improvements, replacements, premiums, claims, losses,
fees, charges, costs and expenses (collectively "Costs") nor shall any portion
of the Interior Improvement Costs (as defined in the Construction Addendum)
consist of the following items, all of which shall be the responsibility of
Landlord:
(1) Losses Caused By Others: Costs occasioned by the act
or omission or violation of covenants, statutes, laws, orders, rules,
underwriter's requirement, regulations, private restrictions, building codes or
ordinances (collectively, "Laws"), misrepresentation, or breach of this Lease,
by Landlord or its agents, employees, contractors, subcontractors or tenants.
(2) Casualties and Condemnations: Costs occasioned by
fire, acts of God, or other casualties or by the exercise of the power of
eminent domain, provided that Tenant will pay insurance deductibles but only to
the extent expressly provided for in paragraph 12.D of this Lease.
(3) Reimbursable Expenses: Costs for which Landlord has a
right of reimbursement from others or for which Landlord actually receives
reimbursement.
(4) Construction Defects and Compliance with Law: Costs
(i) relating to a failure of the Premises to conform to all CC&Rs, underwriter's
requirements or Laws as of the Commencement Date; (ii) relating to construction
defects; and (iii) required to conform the Premises to the Building Plans as
defined in the Construction Addendum.
(5) Hazardous Materials: Except to the extent caused by
the disposal, release, emission or storage of the Hazardous Material in question
by Tenant, its agents, employees, invitees or contractors in violation of Law,
Costs incurred to investigate the presence of any Hazardous Materials, Costs to
respond to any claim of Hazardous Material contamination
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<PAGE> 13
or damage, Costs to remove any Hazardous Material from the Premises, judgments
or other Costs incurred in connection with any Hazardous Materials exposure or
releases, and any other Cost associated with a Hazardous Material.
(6) Capital Improvements: If Tenant's maintenance or
repair obligations as set forth in this Lease would require Tenant to perform or
pay for any item which would be properly be capitalized under generally accepted
accounting principles, and the cost of any such individual item exceeds Ten
Thousand Dollars ($10,000), then Tenant shall perform such repair or make such
replacement and the cost of such item or improvement shall be allocated as
follows. Landlord and Tenant shall establish the useful life of the item in
question based upon generally accepted accounting principles. Tenant shall pay a
proportion of the cost equal to the actual cost of such improvement or item
times a fraction, the numerator of which is the number of months remaining in
the initial Lease Term, and the denominator of which is the useful life of the
improvement in months. Landlord shall pay to Tenant the balance of such cost
within five (5) days after written demand by Tenant. For purposes hereof,
Tenant's remodeling of finishes (such as wallpaper or carpeting) shall not be
considered a capital item toward which Landlord shall be required to contribute.
(7) Parking Lot: Costs relating to the repaving or
resurfacing of the parking area if such repaving or resurfacing is required more
frequently than once every five (5) years.
12. INSURANCE AND DEDUCTIBLES:
A. Tenant's Use: Tenant shall not use, or permit any part of
the Premises, to be used for any unlawful purpose and no use shall be made or
permitted to be made of the Premises, nor acts done, which will cause an
increase in insurance premiums for the insurance to be maintained by Landlord
(unless Tenant agrees to pay for the cost of such increase) or a cancellation of
any insurance policy covering the Building. Tenant shall, at its sole cost and
expense, comply with any and all requirements, pertaining to the Premises, of
any insurance organization or company, necessary for the maintenance of
reasonable fire and public liability insurance covering the Building and
appurtenances, excluding structural improvements not related to Tenant's
specific and particular use.
B. Landlord's Insurance: Landlord agrees to purchase and keep
in force fire and extended coverage insurance in so-called "all risk" form
covering the Premises and all of the Interior Improvements (as defined in the
Construction Addendum) paid for by Landlord in the amount of their full
replacement value. Tenant agrees to pay to the Landlord as additional rent, on
demand, the cost of said insurance as evidenced by insurance billings to
Landlord. Payment shall be due to Landlord on the later of: (i) thirty (30) days
after written invoice to Tenant; or (ii) twenty (20) days prior to the due date
of such premiums. Tenant's obligation under this paragraph will be prorate to
reflect the commencement and termination dates of this Lease. With respect to
earthquake insurance, Landlord agrees to purchase earthquake coverage and Tenant
agrees to reimburse Landlord for the additional cost of such insurance provided
such insurance is commercially available, and provided further: (i) Tenant
requests such coverage and agrees to
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<PAGE> 14
pay for the same; or (ii) such insurance is required by Landlord's lender and is
customarily required by institutional lenders on comparable buildings in Santa
Clara County, and in such case the premium for such earthquake coverage shall be
shared equally between Landlord and Tenant and payable by Tenant in the manner
set forth above for casualty insurance. If the Project is located in a flood
zone, Landlord shall also maintain flood insurance insuring the Building and
Interior Improvements paid for by Landlord for their full replacement value, and
Tenant shall pay for flood insurance premiums in the manner set forth herein,
unless Tenant indicates to Landlord in writing that Tenant does not elect for
Landlord to carry such coverage.
C. Tenant's Insurance: Tenant agrees to insure its personal
property, Interior Improvements paid for by Tenant and Alterations for their
full replacement value and to obtain worker's compensation insurance as required
by Law. Tenant shall also maintain comprehensive general liability insurance for
occurrences within the Premises of $5,000,000.00 combined single limit for
bodily injury and property damage. Tenant shall name Landlord as an additional
insured under such comprehensive general liability policy, and shall deliver a
copy of such policy and renewal certificates to Landlord within thirty (30) days
after the Commencement Date. Tenant's comprehensive general liability policy
shall provide for thirty (30) days' prior written notice to Landlord of any
cancellation or termination.
D. Insurance Deductibles: Tenant shall have the right to
specify the deductible of any insurance policy to be carried by Landlord under
this Lease and shall reimburse Landlord, in the manner set forth in subparagraph
12.B, for the premiums payable with respect to insurance policies for which
Tenant is responsible under subparagraph 12.B containing the deductible so
specified by Tenant or on insurance policies for which Tenant fails to specify a
deductible amount within thirty (30) days following Landlord's written demand
for such deductible specification. In the event of damage to the Premises
covered by Landlord's "all risk" casualty policy (and not caused by the
negligence or willful misconduct of Landlord or Landlord's employees, agents,
contractors or invitees), Tenant shall pay the amount of any deductible under
such policy if this Lease is not terminated in connection with such casualty as
provided in paragraph 28 hereof, provided Tenant has approved in writing in
advance the amount of such deductible. Tenant shall in no event be required to
pay for any flood or earthquake insurance deductibles; however, if flood or
earthquake deductibles (as approved or deemed approved by Tenant) exceed ten
percent (10%) of the replacement value of the Premises, in the event of a flood
or earthquake, such casualty shall be treated as an "Uninsured Casualty" under
paragraph 28 hereof.
E. Waiver: Notwithstanding anything to the contrary in this
Lease, Landlord and Tenant hereby waive any rights each may have against the
other on account of any loss or damage that is caused or results from a risk
which is actually insured against, which is required to be insured against under
this Lease, or which would normally be covered by a standard form of full
replacement value "all risk extended coverage" casualty insurance, regardless of
whether such loss or damage is due to the negligence of Landlord or Tenant or of
their respective agents, employees, subtenants, contractors, assignees, invitees
or any other cause. Each party shall use its best efforts to obtain from their
respective insurance companies a waiver of any right of subrogation which said
insurance company may have against the Landlord or the Tenant, as the
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case may be. If such insurance policy cannot be obtained with such waiver of
subrogation, or if such waiver of subrogation is only available at additional
cost and the party for whose benefit the waiver is not obtained does not pay
such additional cost, then the party obtaining such insurance shall immediately
notify the other party of that fact.
13. TAXES:
A. Payment of Taxes: Tenant shall be liable for all taxes
levied against Tenant's personal property and trade or business fixtures, and
agrees to pay, as additional rental, all real estate taxes and special
assessment installments levied on the Premises or upon the occupancy of the
Premises. Tenant shall pay such taxes on the later of: (i) twenty (20) days
after written notice from Landlord (which notice shall contain a copy of the tax
bill in question) or (ii) ten (10) days before the tax delinquency date. It is
understood and agreed that Tenant's obligation under this paragraph will be
prorated to reflect the commencement and termination dates of this Lease Term.
If at any time during the term of this Lease a tax, excise on rents, business
license tax, or any other tax, however described, is levied or assessed against
Landlord, as a substitute or addition in whole or in part for taxes described
herein, Tenant shall pay such tax within the time period set forth above. In the
event that a tax that is the obligation of Tenant to pay hereunder is placed,
levied, or assessed against Landlord and the taxing authority takes the position
that Tenant cannot pay and discharge the tax in question, then at the sole
election of Landlord, Landlord may increase the rental charged hereunder by the
exact amount of such tax. Notwithstanding anything to the contrary herein,
Tenant shall not be required to pay any portion of any tax or assessment: (i)
levied on Landlord's rental income, unless such tax or assessment is imposed in
lieu of real property taxes; (ii) in excess of the amount which would be payable
if such tax or assessment were paid in installments over the longest possible
term; (iii) imposed on land and improvements other than the Premises; (iv)
occasioned by a change of ownership or other conveyance of the Premises or any
interest in the Premises or Landlord except as otherwise set forth in
subparagraph 13.C below; or (v) attributable to Landlord's net income,
inheritance, gift, transfer, franchise or estate taxes. Tenant may in good faith
contest any real property taxes provided that it indemnifies Landlord from any
loss or liability in connection therewith.
B. Assessments: Landlord represents and warrants to Tenant
that as of the date of this Lease and again as of the Commencement Date, the
only tax assessment that encumbers the Premises or Project is that certain
assessment levied under San Jose Assessment Number 23E-971-OLD and that in no
event shall Tenant's obligation to pay such assessment exceed (i) on the
average, more than Two and Five-Tenths Cents ($.025) per square of the Building
per month during the Lease Term; or (ii) more than Three and Two-Tenths Cents
($.032) per square foot of the Building per month during any month of the Lease
Term. If any other tax assessments exist with respect to the Premises or the
Project as of the date of this Lease or on the Commencement Date, or if the
amount of the foregoing assessment exceeds that set forth herein, Landlord shall
pay the amount of such assessment or excess, as the case may be, without
contribution by Tenant. Landlord represents that as of the date of this Lease,
Landlord is not aware of any pending future assessments affecting the Project.
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C. Change of Ownership: If property taxes increase as a
result of reassessment after change of ownership under Proposition 13 or any
successor Law, Tenant's liability for property taxes during each of the twelve
(12) month periods following the change of ownership, commencing as of the date
of the change of ownership, shall be limited as follows: Tenant's liability in
the first twelve (12) months following the transfer of ownership shall be
limited to one hundred thirty-three and one-third percent (133 1/3%) of the
property taxes payable hereunder by Tenant with respect to the twelve (12)
months paid immediately preceding the transfer, and in the second twelve (12)
month period one hundred sixty-six and two-thirds percent (166 2/3%) of the
property taxes paid by Tenant with respect to the twelve month period preceding
the transfer. Commencing on the second anniversary of the change in ownership,
Tenant shall be liable for the entire amount of property taxes for which Tenant
is otherwise responsible under this Lease levied against the Premises with
respect to each period after the second anniversary. If the reassessment occurs
as of a date other than July 1 (i.e. the commencement of a tax year), Tenant's
liability for property taxes shall be prorated on the basis of a 365-day year
for the purpose of calculating the amounts payable by Tenant during the two
years following the transfer.
14. UTILITIES: Tenant shall pay directly to the providing utility for
all service charges pertaining to water, gas, heat, light, power, telephone and
other utilities supplied to the Premises. Landlord shall not be liable for a
loss of or injury to property, however occurring, through or in connection with
or incidental to furnishing or failure to furnish any of utilities to the
Premises and Tenant shall not be entitled to abatement or reduction of any
portion of the rent, so long as any failure to provide and furnish the utilities
to the Premises is due to a cause beyond Landlord's reasonable control.
Notwithstanding the foregoing, if utilities are not available to the Premises
for a period of fifteen (15) days or more and such failure does not result from
Tenant's failure to make the payments required herein, Tenant shall be entitled
to an abatement of rent to the extent of the interference with Tenant's use of
the Premises occasioned thereby. If such interference is not corrected so that
the Premises are reasonably suitable for Tenant's intended use within three
hundred sixty-five (365) days following the interference or interruption, then
Tenant shall be entitled to terminate this Lease and, at Tenant's election, any
Other Lease by delivery of written notice to Landlord.
15. ABANDONMENT: Tenant shall not abandon the Premises at any time
during the term; and if Tenant shall abandon or surrender the Premises, or be
dispossessed by process of law, any personal property belonging to Tenant and
left on the Premises shall be deemed to be abandoned, at the option of Landlord.
16. FREE FROM LIENS: Tenant shall keep the Premises and the property on
which the Premises are situated, free from any liens arising out of any work
performed, materials furnished, or obligations incurred by Tenant; provided,
however that if Tenant, in good faith, elects to contest such lien, Tenant shall
furnish a bond or other security reasonably acceptable to Landlord and Tenant
shall not then be deemed in default under this Lease.
17. COMPLIANCE WITH GOVERNMENTAL REGULATIONS: Tenant shall, at its sole
cost and expense, comply with all of the requirements of all municipal, state
and
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federal authorities now in force, or which may hereafter be in force, pertaining
to Tenant's particular and specific use of the Premises, and shall faithfully
observe in the use of the Premises all municipal ordinances and state and
federal statutes now in force or which may hereafter be in force. The judgment
of any court of competent jurisdiction, or the admission of Tenant or Landlord
in any action or proceeding, that Landlord or Tenant, as the case may be, has
violated any ordinance or statute, shall be conclusive of that fact as between
Landlord and Tenant. At the Commencement Date, the Premises shall conform to all
requirements of covenants, conditions, restrictions and encumbrances ("CC&Rs"),
all underwriters' requirements, and all Laws applicable thereto. Tenant shall
not be required to construct or pay the cost of complying with any CC&Rs,
underwriters' requirements or Laws requiring construction of improvements in the
Premises which are properly capitalized under generally accepted accounting
principles, unless such compliance is necessitated solely because of Tenant's
particular and specific use of the Premises. Any structural requirements or
Costs necessitated by CC&R's, underwriters' requirements or Laws which are
imposed on buildings or real estate generally (as opposed to the Premises
because of Tenant's specific and particular use) shall be performed or paid by
Landlord without reimbursement by Tenant.
18. TOXIC WASTE AND ENVIRONMENTAL DAMAGE:
A. Tenant's Responsibility: Tenant shall not bring, allow, or
use upon the Premises, or generate or create at or emit or dispose from the
Premises any chemicals, toxic or hazardous gaseous, liquid or solid materials or
waste, including without limitation, material or substance having
characteristics of ignitability, corrosivity, reactivity, or toxicity or
substances or materials which are listed on any of the Environmental Protection
Agency's lists of hazardous wastes or which are identified in Sections 66680
through 66685 of Title 22 of the California Administrative Code as the same may
be amended from time to time (which are referred to in this Lease as "Hazardous
Materials") in violation of Law. Tenant shall comply, at its sole cost, with all
Laws pertaining to, and shall indemnify and hold Landlord harmless from any
claims, liabilities, costs or expenses incurred or suffered by Landlord arising
from the bringing, using, generating, creating, or emitting or disposing of any
Hazardous Materials by Tenant. Tenant's indemnification and hold harmless
obligations as hereinbefore specified include, without limitation, (i) claims,
liability, costs or expenses resulting from or based upon administrative,
judicial (civil or criminal) or other action, legal or equitable, brought by any
private or public person under common law or under the Comprehensive
Environmental Response, compensation and Liability Act of 1980 ("CERCLA"), the
Resource Conservation and Recovery Act of 1980 ("RCRA") or any other Federal,
State, County or Municipal law, ordinance or regulation; (ii) claims,
liabilities, costs or expenses pertaining to the cleanup or containment of
wastes, the identification of the pollutants in the waste, the identification of
scope of any environmental contamination, the removal of pollutants from soils,
riverbeds or aquifers, the provision of an alternative public drinking water
source, or the long term monitoring of ground water and surface waters, all to
the extent required by applicable Law, and (iii) all costs of defending such
claims. Tenant further agrees to properly close the facility with regard to
Hazardous Materials and obtain a Closure Certificate from the local
administering agency for any Hazardous Material used, generated, emitted or
disposed of by Tenant in or about the Premises if so required by Law upon the
expiration or earlier termination of the Lease.
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<PAGE> 18
B. No Responsibility: Notwithstanding the foregoing or
anything in this Lease, Tenant shall have no responsibility to Landlord,
Landlord's employees, contractors, officers, agents or partners or to any third
party for any Hazardous Material which was not released, stored, disposed of,
emitted, or discharged by Tenant, its agents, invitees, employees and
contractors in or about the Premises and which is or comes to be, present on or
about the Premises, or the soil or groundwater thereof, at any time. Landlord,
at its sole expense, shall promptly comply with all Laws, orders, injunctions,
judgments, mandates and directives of any applicable governmental authority
concerning the investigation, removal, monitoring or remediation of any
Hazardous Materials present on the Premises or the groundwater thereof, except
to the extent that the Hazardous Material in question was released, stored,
disposed of, emitted or discharged by Tenant or its employees, invitees, agents,
or contractors in or about the Premises. Landlord hereby waives all claims,
liabilities, costs, expenses or obligations, known or unknown, against Tenant
with respect to Hazardous Materials present on the Premises as of the
Commencement Date or which come to be present on the Premises after the
Commencement Date, except to the extent that the Hazardous Materials in question
were released, emitted, or discharged onto the Premises or Project by Tenant or
its employees, agents, contractors or invitees In this regard, Landlord
acknowledges that it is aware of and hereby waives the provisions of California
Civil Code Section 1542 (or any similar or successor Law) which provides as
follows:
"A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor, at the time of
executing the release, which if known by him must have materially
affected the settlement with the debtor."
C. Indemnity by Landlord: Landlord shall indemnify, defend
and hold harmless Tenant from all claims, losses, liabilities, fines, penalties,
damages, costs or expenses (including, without limitation, attorneys' and
consultants' fees and costs) arising out of or in connection with Hazardous
Material that come to be present at or about the Premises through the acts or
omissions of Landlord or its employees, tenants (including subtenants and
assignees), invitees, agents or contractors. Further, if Tenant terminates this
Lease in connection with or arising out of Hazardous Materials present at or
about the Premises or Project or the soil or groundwater thereof on the
Commencement Date, in addition to Landlord's other obligations hereunder,
Landlord shall be obligated to reimburse Tenant for the unamortized cost of the
Interior Improvements at the Premises paid for by Tenant. Further, Landlord
shall indemnify, defend and hold harmless Tenant from: (i) all costs and
expenses (including attorney's and consultants fees and costs) associated with
the investigation, removal, monitoring or remediation of Hazardous Materials not
released, stored, disposed of, emitted or discharged by Tenant, its agents,
employees, contractors or invitees in or about the Premises; and (iii) all
claims, liabilities or obligations (including, without limitation, any
attorneys' and consultants' fees incurred in connection with the same) by or to
any third party, including, without limitation, any governmental entity or body,
associated with Hazardous Materials present on the Premises or the soil or
groundwater thereof through no act of Tenant or Tenant's agents, employees,
contractors or invitees. The obligations of Landlord and Tenant hereunder shall
survive the expiration or earlier termination of the Lease Term.
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<PAGE> 19
D. Representation by Landlord: Landlord hereby represents and
warrants to Tenant, except as outlined in the Levine Fricke report dated
12/21/88 & 3/17/89 to the best of Landlord's knowledge: (i) the Premises and all
operations conducted thereon prior to the Commencement Date are in compliance
with all Laws regarding Hazardous Materials ("Hazardous Materials Laws"), and
(ii) any handling, transportation, storage, treatment, disposal, release or use
of Hazardous Materials that has occurred on or about the Premises prior to the
Commencement Date has been in compliance with all Hazardous Materials Laws.
Tenant acknowledges reviewing the correspondence dated March 1, 1990 from the
Department of Health Services concerning the "mixing" that occurred with respect
to DDT at the Project. Landlord further represents and warrants that no
litigation has been brought or threatened, nor any settlements reached with any
governmental or private party, concerning the actual or alleged presence of
Hazardous Materials on or about the Premises, nor has Landlord received any
notice of any violation, or any alleged violation of any Hazardous Materials
Laws, pending claims or pending investigations with respect to the presence of
Hazardous Materials on or about the Premises.
E. Notification: Landlord and Tenant shall notify the other
of the existence of any reports, recommendations or studies prepared in
connection with any investigation for the presence of Hazardous Materials on or
about the Premises and shall give written notice to the other as soon as
reasonably practicable of (i) any communication received from any governmental
authority concerning any Hazardous Materials which relates to the Premises; and
(ii) any contamination of the Premises by Hazardous Materials which constitutes
a violation of any Hazardous Materials Laws.
F. Environmental Studies: Tenant shall have the right, at
Tenant's expense, to conduct a baseline environmental study at the Project,
including the right to bore holes and take soils samples, if Tenant so elects,
provided Tenant obtains Landlord's advance written consent, which consent shall
not be unreasonably withheld.
19. INDEMNITY: As a material part of the consideration to be rendered to
Landlord, Tenant hereby waives all claims against Landlord for damages to goods,
wares and merchandise, and all other personal property in, upon or about said
Premises and for injuries to persons in or about said Premises, from any cause
arising at any time, and Tenant will indemnify, defend and hold harmless
Landlord from any damage or injury to any person, or to the goods, wares and
merchandise and all other personal property of any person, arising from the use
of the Premises by Tenant, or from the failure of Tenant to keep the Premises in
good condition and repair, as herein provided. Further, in the event Landlord is
made party to any litigation due to the acts or omissions of Tenant, Tenant will
indemnify and hold Landlord harmless from any such claim or liability including
Landlord's costs and expenses and reasonable attorneys' fees incurred in
defending such claims except to the extent of the negligence or willful
misconduct of Landlord or its agents, employees or contractors or a breach of
this Lease by Landlord. Notwithstanding anything to the contrary in this Lease,
Tenant shall neither release Landlord from, nor indemnify, defend or hold
harmless Landlord with respect to: (i) the negligence or willful misconduct of
Landlord, or its agents, employees, tenants, contractors, subcontractors or
invitees; (ii) a breach of Landlord's obligations or representations under this
Lease; or (iii) any
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<PAGE> 20
Hazardous Material which was not released, emitted, or discharged by Tenant, its
agents, employees, invitees or contractors and which is or comes to be, present
on or about the Premises, or the soil or groundwater thereof, at any time.
Landlord shall indemnify, defend and hold Tenant harmless from any claim, loss,
expense, obligation damage or liability (including, without limitation, Tenant's
costs and expenses and reasonable attorney's fees) arising from or in connection
with: (i) the negligence or willful misconduct of Landlord or its employees,
agents, contractors or invitees; or (ii) a breach of Landlord's obligations or
representations under this Lease.
20. ADVERTISEMENTS AND SIGNS: Tenant will not place or permit to be
placed, in, upon or about the said Premises unless such signs comply with all
Laws. Landlord agrees that Tenant may erect a monument sign or other signage on
the exterior of the Building that Tenant deems appropriate; provided, however,
that Tenant shall obtain Landlord's advance written approval of any signage
visible from the exterior of the Building, which consent shall not be
unreasonably withheld or delayed. Any sign so placed on the Premises shall be so
placed upon the understanding and agreement that Tenant will remove the same
before the expiration or promptly following any earlier termination of the Lease
Term and repair any damage or injury to the Premises caused thereby, and if not
so removed by Tenant then Landlord may have same so removed at Tenant's expense.
Landlord shall cooperate with and assist Tenant in acquiring permits for the
signage desired by Tenant; provided, however, that Landlord shall not be
required to incur additional out-of-pocket costs in connection therewith.
21. ATTORNEY'S FEES: In case suit should be brought for the possession
of the Premises, for the recovery of any sum due hereunder, or because of the
breach of any other covenant herein, or in connection with any matter relating
to this Lease, the losing party shall pay to the prevailing party reasonable
attorneys' fees and court costs which shall be enforceable whether or not such
action is prosecuted to judgment.
22. TENANT'S DEFAULT: The occurrence of any of the following shall
constitute a default under this Lease by Tenant: (a) any failure by Tenant to
pay the rental or to make any other payment required to be made by Tenant
hereunder, where such failure continues for ten (10) days after receipt by
Tenant of written notice of Landlord's failure to receive such payment; (b) the
abandonment of the Premises by Tenant; (c) failure by Tenant to observe and
perform any other provision of this Lease to be observed or performed by Tenant,
where such failure continues for thirty (30) days after written notice thereof
by Landlord to Tenant; provided, however, that if the nature of such failure is
such that the same cannot reasonably be cured within such thirty (30) day period
Tenant shall not be deemed to be in default if Tenant shall within such period
commence such cure and thereafter diligently prosecute the same to completion;
(d) the making by Tenant of any general assignment for the benefit of creditors;
the filing by or against Tenant of a petition to have Tenant adjudged a bankrupt
or of a petition for reorganization or arrangement under any law relating to
bankruptcy (unless, in the case of a petition filed against Tenant, the same is
dismissed within sixty (60) days after the filing); the appointment of a trustee
or receiver to take possession of substantially all of Tenant's assets located
at the Premises or of Tenant's interest in this Lease, where possession is not
restored to Tenant within sixty (60) days; or the attachment, execution or other
judicial seizure of
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substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where such seizure is not discharged within sixty (60)
days. The notice requirements set forth herein are in lieu of and not in
addition to the notices required by California Code of Civil Procedure Section
1161, provided that such notices are given in the manner required by such
statute.
A. Remedies: In the event of any such default by Tenant, then
in addition to any other remedies available to Land-lord at law or in equity,
Landlord shall have the immediate option to terminate this Lease and all rights
of Tenant hereunder by giving written notice of such intention to terminate. In
the event that Landlord shall elect to so terminate this Lease then Landlord may
recover from Tenant: (a) the worth at the time of award of any unpaid rent which
had been earned at the time of such termination; plus (b) the worth at the time
of award of the amount by which the unpaid rent which would have been earned
after termination until the time of award exceeds the amount of such rental loss
Tenant proves could have been reasonably avoided; plus (c) the worth at the time
of award of the amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of such rental loss that Tenant
proves could be reasonably avoided; plus (d) any other amount necessary to
compensate Landlord for all the detriment proximately caused by Tenant's failure
to perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom. The term "rent", as used herein,
shall be deemed to be and to mean the minimum monthly installments of rent and
all other sums required to be paid by Tenant pursuant to the terms of this
Lease, all other such sums being deemed to be additional rent due hereunder. As
used in (a) and (b) above, the "worth at the time of award" is computed by
allowing interest at the rate of the discount rate of the Federal Reserve Bank
of San Francisco plus five (5%) percent per annum. As used in (c) above, the
"worth at the time of award" is computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one (1%) percent.
B. Right to Re-enter: In the event of any default by Tenant
that results in the termination of the Lease, Landlord shall also have the right
to re-enter the Premises and remove all persons and property from the Premises;
such property may be removed and stored in a public warehouse or elsewhere at
the cost of and for the account of Tenant.
C. Abandonment: In the event of the abandonment of the
Premises by Tenant or in the event that Landlord shall elect to re-enter as
provided in Paragraph 22.B above or shall take possession of the Premises
pursuant to legal proceedings, then if Landlord does not elect to terminate this
Lease as provided in Paragraph 22.A above, then the provisions of California
Civil Code Section 1951.4, as amended from time to time, shall apply and
Landlord may from time to time, recover all rental as it becomes due.
D. No Termination: No re-entry or taking possession of the
Premises by Landlord pursuant to 22.B or 22.C of this Article 22 shall be
construed as an election to terminate this Lease unless a written notice of such
intention be given to Tenant or unless the termination thereof be decreed by a
court of competent jurisdiction.
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<PAGE> 22
23. SURRENDER OF LEASE: The voluntary or other surrender of this Lease
by Tenant, or a mutual cancellation thereof, shall not automatically effect a
merger of the Lease with Landlord's ownership of the Premises. Instead, at the
option of Landlord, Tenant's surrender may terminate all or any existing
sublease or subtenancies, or may operate as an assignment to Landlord of any or
all such subleases or subtenancies, thereby creating a direct relationship
between Landlord and any subtenants.
24. RIGHT OF FIRST OFFER TO PURCHASE:
A. Grant of First Right: Landlord hereby grants to Tenant a
right of first offer (the "Right of First Offer") to purchase the Project or any
portion thereof or interest therein. If Landlord proposes to sell or otherwise
transfer the Project, or any portion thereof, or interest therein, to a third
party, Landlord may do so only after first offering to sell the Project, or such
portion thereof or interest therein, as Landlord proposes to transfer to the
third party, to Tenant on the terms and conditions set forth in this paragraph.
B. Term: The term of this Right of First Offer shall commence
on the date both parties have executed this Lease, and shall continue until the
expiration or earlier termination of the Lease in accordance with its terms.
C. Notice of Intent to Sell: Landlord shall give written
notice of its intent to sell or transfer the Project or portion thereof to
Tenant ("Landlord's Notice"). The Landlord's Notice shall include a current
preliminary title report and the following "Basic Business Terms" upon which
Landlord is willing to sell the Premises: (i) the sales price and the terms upon
which such sales price is payable, (ii) the amount and terms of any seller
financing, (iii) the amount and terms of any assumable third party financing,
(iv) the state of title to be transferred by Landlord, (v) the date for close of
escrow, (vi) the proration of closing expenses, (vii) any Hazardous Materials
indemnities to be included in the purchase and sale agreement and (viii) any
other material business terms. A copy of any written offer to purchase the
Project by any third party shall be attached to Landlord's Notice.
D. Exercise of Right of First Offer: Tenant may elect to
exercise its Right of First Offer by giving Landlord written notice of such
election on or before the tenth (10th) day following actual receipt of
Landlord's Notice.
E. Terms of Sale: Upon Tenant's exercise of the Right of
First Offer, Landlord shall sell to Tenant the Project or portion thereof on the
Basic Business Terms stated in Landlord's Notice, except the purchase price to
be paid by Tenant shall be reduced by the brokerage commission contained in the
offer, if any. Tenant shall purchase the Project or portion thereof
substantially on the same terms and conditions stated in Landlord's Notice,
including without limitation any indemnities specified therein and on such other
terms as are reasonable and customary in comparable sales of comparable
properties in Santa Clara County to institutional buyers of or investors in real
property. The parties also shall execute a written sales agreement incorporating
the Basic Business Terms (as modified pursuant to this paragraph) and such other
reasonable and customary terms within twenty (20) days after the Tenant
exercises its
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Right of First Offer; provided, however, that the failure of the parties to
execute a formal contract shall not affect Tenant's rights hereunder.
F. Landlord's Right to Sell: If Tenant does not indicate in
writing its election to exercise its Right of First Offer within the allowed
time period, Landlord thereafter shall have the right to sell the portion of or
interest in the Project specified in Landlord's Notice to any third party;
provided (i) the sale is consummated on the same Basic Business Terms set forth
in Landlord's Notice, including, without limitation, at the same purchase price
and on terms no more favorable than those set forth in the Landlord's Notice;
and (ii) escrow for the sale closes on or before the one hundred eightieth
(180th) day following delivery of Landlord's Notice. Any sales transaction,
other than a sale complying with the foregoing, shall be deemed a new
determination by Landlord to sell the Project and no such sale may be
consummated, unless Tenant is first offered the right to purchase the Project in
accordance with the provisions of this Right of First Offer. The rights granted
by this paragraph 24 shall not apply to any exercise of private power of sale,
judicial foreclosure, deed in lieu of foreclosure or other proceedings to
enforce a mortgage or deed of trust encumbering the Project.
25. LANDLORD'S DEFAULT: In the event of Landlord's failure to perform
any of its covenants or agreements under this Lease, Tenant shall give Landlord
written notice of such failure and shall give Landlord thirty (30) days or such
longer time as may be reasonably required by Landlord to cure said failure in
the exercise of reasonable diligence provided Landlord commences the cure within
said thirty (30) day period and thereafter diligently prosecutes such cure to
completion prior to pursuing its remedies on account of such default. If
Landlord so fails to perform its obligations under this Lease, then, in addition
to its other rights and remedies, Tenant shall have the right to cure Landlord's
default and (i) to recover from Landlord the cost of the cure together with
interest thereon at the prime rate charged by Union Bank, main San Francisco
branch, plus two percent (2%) per annum from the date of the expenditure until
the date of the repayment; or (ii) for the period during which Landlord or any
other individual or entity affiliated or related to Landlord owns the Project or
any portion thereof or interest therein, to deduct the cost of cure together
with interest thereon at the prime rate charged by Union Bank, main San
Francisco branch, plus two percent (2%) per annum from the date of the
expenditure from the sums otherwise payable by Tenant hereunder. Even if the
foregoing entities or individuals do not have an interest in the Project, Tenant
shall, in addition to Tenant's other rights or remedies, have the right to
deduct the cost of cure together with interest thereon at the above-stated rate,
provided that the total amount of such deduction shall not exceed One Hundred
Eleven Thousand Seven Hundred Dollars ($111,700.00).
26. NOTICES: All notices required or permitted to be given by this Lease
shall be in writing and shall be personally delivered or delivered by reputable
commercial overnight courier to the parties at the following addresses, or such
other addresses as the parties shall designate by three (3) days' prior written
notice to the other party:
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If to Tenant:
Pyramid Technology Corporation
1295 Charleston Road, P.O. Box 7295
Mountain View, CA 94039
Attn: Kent Robertson
Chief Financial Officer
With a copy to:
Pyramid Technology Corporation
1295 Charleston Road, P.O. Box 7295
Mountain View, CA 94039
Attn: General Counsel
With a further copy to:
Wilson, Sonsini, Goodrich & Rosati
Two Palo Alto Square, Suite 900
Palo Alto, CA 95306
Attn: Debra Summers
If to Landlord:
Sobrato Interests II
c/o Sobrato Development Companies
10600 North De Anza Blvd. Suite 200
Cupertino, CA 95014
Attn: John Michael Sobrato, Jr.
Notices given by personal delivery shall be deemed effective upon signed
acknowledgment of receipt or, if delivered by courier, one (1) day after deposit
with the courier.
27. ENTRY BY LANDLORD: Upon twenty-four (24) hours advance written
notice (except in the event of any emergency) and provided that Landlord does
not unreasonably interfere with Tenant's use of the Premises, Tenant shall
permit Landlord and its agents to enter upon said Premises at all reasonable
times subject to any security or safety regulations of Tenant for the purpose of
inspecting the same or for the purpose of maintaining the Premises or for the
purpose of making repairs or alterations of the Premises as may be required to
fulfill Landlord's obligations hereunder, without any rebate of rent or without
any liability to Tenant for any loss of occupation or quiet enjoyment of the
Premises thereby occasioned; and Tenant shall permit Landlord and his agents, at
any time within one hundred twenty (120) days prior to the expiration of this
Lease, to: (i) place upon said Premises any "For Sale" or "For Lease" signs
provided Landlord obtains Tenant's advance consent of the design and location of
such signs, which
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consent by Tenant shall not be unreasonably withheld or delayed; and (ii)
exhibit the Premises to prospective tenants at reasonable hours upon reasonable
prior notice.
28. DESTRUCTION OF PREMISES:
A. Obligation to Restore: In the event of damage or
destruction to the Building or Premises or any portion thereof by any casualty
during the Lease Term, Landlord shall forthwith repair the same to the condition
the Building or Premises was in immediately before the destruction, provided
such casualty is of a type required to be insured against by Landlord under the
terms of this Lease or actually insured against by Landlord (herein collectively
referred to as an "Insured Casualty"). In the event of damage or destruction of
the Premises by a casualty of a type which is not required to be insured against
by Landlord under this Lease, and which is not actually insured against by
Landlord (herein referred to as an "Uninsured Casualty"), Landlord shall restore
the Premises to the same condition as they were in immediately before such
destruction and this Lease shall not terminate; provided, that if in the case of
such Uninsured Casualty the cost of restoration exceeds ten percent (10%) of the
then replacement value of the Building, Landlord may elect to terminate this
Lease by giving written notice to Tenant within fifteen (15) days after
determining the replacement value and furnishing reasonable evidence thereof to
Tenant. If Landlord so elects to terminate this Lease, Tenant, within fifteen
(15) days after receiving Landlord's notice to terminate, can elect to pay to
Landlord at the time Tenant notifies Landlord of its election, the difference
between ten percent (10%) of the replacement cost of the Premises and the actual
cost of restoration, in which case Landlord shall restore the Premises and this
Lease shall not terminate. If Landlord so elects to terminate this Lease and
Tenant does not elect to contribute the cost of restoration as provided herein,
this Lease shall terminate. In all events Landlord shall not be required to
restore Tenant's Alterations or replace Tenant's fixtures or personal property.
Tenant shall be entitled to a proportionate reduction of rent during the period
of damage and restoration, such proportionate reduction to be based upon the
extent to which the damage and making of repairs shall interfere with Tenant's
use of the Premises.
B. Tenant's Right to Terminate: In the event of damage or
destruction either to the Premises or to any Other Space within the Project
leased by Tenant from Landlord, Landlord shall furnish to Tenant a good faith
written estimate from Landlord's architect or construction consultant of the
time period needed to restore the Premises or Other Space, as the case may be,
within thirty (30) days after the date of the damage or destruction in question.
If such estimate indicates that the repair or restoration of the Premises or
Other Space, as the case may be, cannot be made within three hundred sixty-five
(365) days after the date of damage or destruction, Tenant may, at its option,
terminate this Lease and, at Tenant's election, any Other Lease between Landlord
or Tenant by giving written notice to Landlord of such election within thirty
(30) days after receipt of Landlord's estimate. Tenant shall also have the right
to terminate this Lease and, at Tenant's election, any Other Lease if the actual
restoration of the Premises or Other Space, as the case may be, is not
effectuated within three hundred sixty-five (365) days after the date of the
casualty. Further, Tenant shall have the right to terminate this Lease if the
Building is damaged by any peril within twelve (12) months of the last day of
the Lease Term to such an extent that more than thirty percent (30%) of the
floor area of the Building is rendered
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unusable by Tenant for a period of more than sixty (60) days. The provision of
Section 1932, Subdivision 2, and of Section 1933, Subdivision 4, of the Civil
Code of the State of California are waived by Tenant to the extent inconsistent
with the provisions of this Lease.
29. ASSIGNMENT OR SUBLEASE:
A. Permitted Transfers: Tenant may, without Landlord's prior
written consent and without any participation by Landlord in assignment or
subletting proceeds, sublet the Premises or assign the Lease to the following
(herein called "Permitted Transferees"): (i) a subsidiary, affiliate, division
or corporation controlled by or under common control with Tenant; (ii) a
successor corporation related to Tenant by merger, consolidation, or
non-bankruptcy reorganization; or (iii) a purchaser of substantially all of
Tenant's assets located in the Premises. For the purpose of this Lease, sale of
Tenant's capital stock shall not be deemed an assignment, subletting, or any
other transfer of the Lease or the Premises.
B. Consent by Landlord: In the event Tenant desires to assign
this Lease or any interest therein including, without limitation, a pledge,
mortgage or other hypothecation, or sublet the Premises or any part thereof
except as set forth above with respect to Permitted Transferees, Tenant shall
deliver to Landlord copies of the proposed assignment or sublease, the financial
statements of the assignee or subtenant, and any additional information as
reasonably required by Landlord. Landlord shall then have a period of ten (10)
days following receipt of such notice within which to notify Tenant in writing
that Landlord elects (i) to permit Tenant to assign or sublet such space to the
named assignee/subtenant; or (ii) to refuse consent, provided Landlord shall not
unreasonably refuse such consent. If Landlord should fail to notify Tenant in
writing of such election within said ten (10) day period, Landlord shall be
deemed to have elected option (i) above. No assignment or subletting by Tenant
shall relieve Tenant of any obligation under this Lease. Landlord's consent to
the proposed assignment or sublease shall not be unreasonably withheld or
delayed, provided and upon the following conditions:
A. The proposed uses shall not violate Laws;
B. The proposed assignee or subtenant has sufficient
financial worth to undertake the responsibility involved under the assignment or
sublease, and Landlord has been furnished with reasonable proof thereof; and
C. Any proposed assignment shall be in form reasonably
satisfactory to Landlord.
C. Assignment or Subletting Consideration: Any rent actually
received by Tenant under any such sublease or assignment in excess of the rent
payable hereunder, after deducting the unamortized cost of the Interior
Improvements paid by Tenant and Alterations installed at Tenant's expense, and
subletting and assignment costs incurred by Tenant in connection with the
assignment or sublease (including, without limitation, attorneys' fees,
brokerage commissions, and remodeling costs), any vacancy costs incurred by
Tenant, and Tenant's costs in performing under such assignment or sublease,
shall be paid by Tenant fifty
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percent (50%) to Landlord. Tenant's obligation to pay such consideration shall
constitute an obligation for additional rent hereunder.
D. No Release: Any assignment except to Permitted Transferees
shall be made only if and shall not be effective until the assignee shall
execute, acknowledge and deliver to Landlord an agreement, in form and substance
reasonably satisfactory to Landlord, whereby the assignee shall assume all of
the obligations of this Lease on the part of Tenant to be performed or observed
and shall be subject to all of the covenants, agreements, terms, provisions and
conditions contained in this Lease. Notwithstanding any such sublease or
assignment and the acceptance of rent or additional rent by Landlord from any
subtenant or assignee, Tenant shall and will remain fully liable for the payment
of the rent and additional rent due, and to become due hereunder, for the
performance of all of the covenants, agreements, terms, provisions and
conditions contained in this Lease on the part of Tenant to be performed and for
all acts and omissions of any licensee, subtenant, assignee or any other person
claiming under or through any subtenant that shall be in violation of any of the
obligations of this Lease, and any such violation shall be deemed to be a
violation by Tenant. Tenant shall further indemnify, defend and hold Landlord
harmless from and against any and all losses, liabilities, damages, costs and
expenses (including reasonable attorney fees) resulting from any claims that may
be made against Landlord by any real estate brokers or other persons claiming a
commission or similar compensation in connection with the proposed assignment or
sublease.
E. Effect of Default: In the event of Tenant's default,
Tenant hereby assigns all rents due from any assignment or subletting to
Landlord as security for performance of its obligations under this Lease and
Landlord may collect such rents as Tenant's attorney-in-fact, except that Tenant
may collect and retain such rents unless a default occurs as described in
Paragraph 22 above. The termination of this Lease due to Tenant's default shall
not automatically terminate any assignment or sublease then in existence. At the
election of Landlord, the assignee or subtenant shall attorn to Landlord and
Landlord shall undertake the obligations of the Tenant under the sublease or
assignment; provided the Landlord shall not be liable for prepaid rent, security
deposits or other defaults of the Tenant to the subtenant or assignee.
30. CONDEMNATION: If any part of the Premises, Other Space leased by
Tenant from Landlord, or the Project shall be taken for any public or
quasi-public use, under any statute or by right of eminent domain or private
purchase in lieu thereof, and a part thereof remains which is susceptible of
occupation hereunder, this Lease shall as to the part so taken, terminate as of
the date title shall vest in the condemnor or purchaser, and the rent payable
hereunder shall be adjusted so that Tenant shall be required to pay for the
remainder of the Lease Term only such portion of such rent as the value of the
part of the Premises remaining after such taking bears to the value of the
entire Premises prior to such taking; but in such event Tenant shall have the
option to terminate this Lease and, at Tenant's election, any Other Lease as of
the date when title to the part so taken vests in the condemnor or purchaser if
the taking or condemnation of the Premises, Other Space or Project is such that
the remaining space or Project unaffected by the condemnation or taking is not
reasonably suitable for Tenant's continued use or the conduct of Tenant's
business. If a part or all of the Premises be taken, all compensation awarded
upon such
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taking shall go to the Landlord and the Tenant shall have no claim thereto;
provided, however, that nothing contained herein shall be deemed to waive or
release Tenant's interest in any award for (i) loss of or damage to Tenant's
trade fixtures, Alterations, or personal property; (ii) interruption of Tenant's
business; (iii) Tenant's loss of goodwill; (iv) Tenant's moving cost; (v)
Tenant's interest in any Interior Improvements; (vi) or any separate award made
to Tenant for whatever purpose. In the event that this Lease is not terminated
by reason of the condemnation, Landlord at its expense shall repair any damage
to the Premises caused by such condemnation. Tenant hereby waives the provisions
of California Code of Civil Procedures Section 1265.130 to the extent
inconsistent with the provisions of this Lease.
31. EFFECTS OF CONVEYANCE: The term "Landlord" as used in this Lease,
means only the owner for the time being of the Premises, so that, in the event
of any sale of the Premises, the Landlord shall be and hereby is entirely freed
and relieved of all covenants and obligations of the Landlord hereunder accruing
after the date of the conveyance. Notwithstanding the foregoing, Landlord shall
not be relieved of its obligations under this Lease, unless and until Landlord
transfers the cash security deposit or original letter of credit to its
successor and the successor assumes in writing the obligations of Landlord
accruing on and after the effective date of the transfer. Furthermore, Landlord
shall not be relieved of its obligations hereunder accruing after the date of
the transfer unless the assignee or successor in question has the requisite net
worth to perform the obligations of Landlord hereunder, and Landlord furnishes
reasonable evidence thereof to Tenant.
32. SUBORDINATION:
A. Subordination to Future Obligations: If Landlord notifies
Tenant in writing, this Lease shall be subordinate to any ground Lease, deed of
trust, or other hypothecation for security now or hereafter placed upon the real
property of which the Premises are a part and to any and all advances made on
the security thereof and to renewals, modifications, replacements and extensions
thereof. Tenant agrees to promptly execute any reasonable documents which may be
required to effectuate such subordination. Notwithstanding such subordination,
Tenant's right to quiet possession of the Premises and other rights shall not be
disturbed if Tenant is not in default and so long as Tenant shall pay the rent
and observe and perform all of the provisions of this Lease. Notwithstanding
anything to the contrary in the Lease, subordination of Tenant's leasehold
interest to a mortgage, deed of trust, ground lease or instrument of security,
and Tenant's attornment to any party is conditioned upon (i) Tenant's concurrent
receipt from the lender or ground lessor in question of an express written
agreement in form reasonably satisfactory to Tenant providing for recognition of
all of the terms and conditions of this Lease and providing for continuation of
this Lease upon foreclosure of the deed of trust, mortgage or security interest
or termination of the ground lease; and (ii) the written agreement by such
successor to perform all of the obligations to be performed by Landlord under
the Lease on and after the date of the foreclosure or termination.
B. Existing Obligations: Landlord represents and warrants
that the Project is not encumbered by a mortgage, deed of trust or ground lease
as of the date of both parties' execution of this Lease, except for a certain
loan in favor of Union Bank ("Union"). As a
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condition precedent to Tenant's obligations under this lease or any Other Lease,
Landlord shall furnish to Tenant within fourteen (14) days of the date of both
parties' execution of this Lease with a written agreement in form satisfactory
to Tenant providing for: (i) recognition by Union of all of the terms and
conditions of this Lease and any Other Lease; and (ii) continuation of this
Lease and any Other Lease upon foreclosure of Union's security interest in the
Project.
33. WAIVER: The waiver by Landlord or Tenant of any breach of any term,
covenant or condition, herein contained shall not be deemed to be a waiver of
such term, covenant or condition or any subsequent breach of the same or any
other term, covenant or condition herein contained. The subsequent acceptance of
rent hereunder by Landlord shall not be deemed to be a waiver of any preceding
breach by Tenant of any term, covenant or condition of this Lease, other than
the failure of Tenant to pay the particular rental so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent.
34. HOLDING OVER: Tenant shall have the right to hold ever under the
terms of this Lease for a period of up to eighteen (18) months by providing
Landlord written notice ("Holdover Notice") at least one hundred twenty (120)
days prior to the expiration of the Lease Term or extension thereof. Included in
the Notice shall be Tenant's determination of the holdover term required up to
eighteen (18) months. Rent during this period shall be at fair market rent as
defined in paragraph 38 below. Any holding over beyond the period elected in the
Notice, or after the Lease Term expires if no such Holdover Notice is given,
shall be construed to be a holdover tenancy and Tenant shall pay rent to
Landlord at a rate equal to one hundred twenty-five percent (125%) (prorated on
a daily basis) of the fair market rent as determined in accordance with
paragraph 38 for such period and shall otherwise be on the terms and conditions
herein specified. Furthermore, no holding over shall be deemed or construed to
exercise any option to extend or renew this Lease in lieu of full and timely
exercise of any such option as required hereunder. In establishing "fair market
rent" for purposes hereof, the parties (and the appraisers, if applicable) shall
take into account that Landlord shall not incur brokerage commissions, vacancy
costs, and costs for the installation of new interior improvements (including
recarpeting and repaving).
35. SUCCESSORS AND ASSIGNS: The covenants and conditions herein
contained shall, subject to the provisions as to assignment, apply to and bind
the heirs, successors, executors, administrators and assigns of all the parties
hereto; and all of the parties hereto shall be jointly and severally liable
hereunder.
36. ESTOPPEL CERTIFICATES: Each party shall at any time during the Lease
Term, upon not less than ten (10) business days prior written notice from the
other, execute and deliver to the requesting party a statement in writing
certifying that this Lease is unmodified and in full force and effect (or, if
modified, stating the nature of such modification) and the date to which the
rent and other charges are paid in advance, if any, and acknowledging that there
are not, to the party's knowledge, any uncured defaults on the part of the other
party hereunder or specifying such defaults if they are claimed. Any such
statement may be conclusively relied upon by any prospective purchaser or
encumbrancer of the Premises or a purchaser of Tenant's assets or leasehold
interest. Landlord's or Tenant's failure to deliver such statement within such
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time shall be conclusive upon the party not providing the statement that: (a)
this Lease is in full force and effect, without modification except as may be
represented by the requesting party; (b) there are not uncured defaults in the
requesting party's performance.
37. OPTION TO EXTEND: Tenant shall have the option and right to extend
the term of this Lease for three (3) separate additional and consecutive option
periods of five (5) years each (each such period being referred to as the
"Renewal Term") commencing with rent at ninety percent (90%) of the fair market
monthly rent only under the following conditions precedent: (i) that no material
event of default exists on the date of Tenant's exercise (i.e., Tenant has
failed to remedy any material breach in its performance within the time periods
set forth in paragraph 22); and (ii) Tenant has delivered written notice to
Landlord not less than one hundred and twenty (120) days prior to the expiration
of the then existing term of the Lease of Tenant's intention to extend the term
of the Lease. Tenant may exercise its option as to the premises whether or not
Tenant elects to exercise Tenant's option with respect to any Other Space. The
parties acknowledge that they have agreed to so set the rent at ninety percent
(90%) of the then fair market monthly rent for the premises in recognition of
and in consideration for, the fact that Landlord shall not incur brokerage
commissions, vacancy costs, and costs for the installation of new tenant
improvements (including recarpeting and repainting), along with other savings,
if Tenant elects to extend the term of this Lease, and that such discount of the
full fair market rent is a reasonable estimate of the savings to be so realized
by Landlord.
38. APPRAISAL: If the parties are unable to agree upon the fair market
monthly rent for the Premises for the Renewal Term in question at least ninety
(90) days prior to the commencement of such Renewal Term, then the fair market
monthly rent shall be determined by appraisal conducted pursuant to this
paragraph 38. In the event it becomes necessary to determine by appraisal the
fair market rent for the Premises for the purpose of establishing the monthly
rent pursuant to paragraph 38 or for purposes of any other provision of this
Lease, then such fair market monthly rent shall be determined by three (3) real
estate appraisers, all of whom shall be members of the American Institute of
Real Estate Appraisers with not less than five (5) years experience appraising
commercial and industrial real property located in Santa Clara County,
California, in accordance with the following procedures:
A. The party demanding an appraisal (the "Notifying Party")
shall notify the other party (the "Non-Notifying Party") thereof by delivering a
written demand for appraisal, which demand, to be effective, must give the name,
address and qualifications of an appraiser selected by the Notifying Party.
Within ten (10) days of receipt of said demand, the Non-Notifying Party shall
select its appraiser and notify the Notifying Party, in writing, of the name,
address and qualifications of an appraiser selected by it. Failure by the
Non-Notifying Party to select a qualified appraiser within said ten (10) day
period shall be deemed a waiver of its right to select a second appraiser on its
own behalf and the Notifying Party shall select a second appraiser on behalf of
the Non-Notifying Party within five (5) days after the expiration of said ten
(10) day period. Within ten (10) days from the date the second appraiser shall
have been appointed, the two (2) appraisers so selected shall appoint a third
appraiser. In the event the two appraisers fail to select a third qualified
appraiser, the third appraiser shall be appointed by the then Presiding
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Judge of the Superior Court of the State of California for the County of Santa
Clara or the head of the most local chapter of the American Institute of Real
Estate Appraisers.
B. The three (3) appraisers so selected shall meet in Santa
Clara County, California, not later than twenty (20) days following the
selection of the third appraiser. At said meeting the appraisers so selected
shall attempt to determine the fair market monthly rent of the Premises for the
Renewal Term in question.
C. If the appraisers so selected are unable to complete their
determinations in one meeting, they may continue to consult at such times as
they deem necessary for a fifteen (15) day period from the date of the first
meeting, in an attempt to have at least two (2) of them agree. If at the initial
meeting or at any time during said fifteen (15) day period two (2) or more of
the appraisers so selected agree on the fair market rent for the Premises, such
agreement shall be determinative and binding on the parties hereto, and the
agreeing appraisers shall, in simple letter form executed by the agreeing
appraisers, forthwith notify both Landlord and Tenant of the amount set by such
agreement.
D. In the event two (2) or more appraisers do not so agree
within said fifteen (15) day period, then each appraiser shall, within five (5)
days after the expiration of said fifteen (15) day period, submit his or her
independent appraisal in simple letter form to Landlord and Tenant stating his
or her determination of the fair market rent for the Premises for the Renewal
Term in question. The parties shall then determine the fair market rent for the
Premises by determining the average of the fair market rent set by each of the
appraisers; provided, however, that (i) if the lowest appraisal is less than
eighty-five percent (85%) of the middle appraisal, then such lowest appraisal
shall be disregarded; and/or (ii) if the highest appraisal is greater than one
hundred fifteen percent (115%) of the middle appraisal, then such highest
appraisal shall be disregarded. If any appraisal is so disregarded, then the
average shall be determined by computing the average set by the other appraisals
that have not been disregarded.
E. Each party shall bear the fees and expenses of the
appraiser selected by or for it, and the fees and expenses of the third
appraiser (or the joint appraiser if one joint appraiser is used) shall be borne
fifty percent (50%) by Landlord and fifty percent (50%) by Tenant.
F. Any determination of fair market rent of the Premises made
pursuant to any provision of this Lease, whether by agreement of the parties or
by appraisal pursuant to this paragraph, shall be based upon the following: (i)
that the Premises would be leased for five (5) years on the same terms as
contained in this Lease, particularly with regard to Tenant's obligation to pay
additional rent and its obligation to repair and maintain; (ii) the condition,
size, age and location of the Premises; and (iii) the fair market rent for the
Premises shall not include any part of the rental value added to the Premises as
a consequence of construction of Alterations or improvements made by Tenant or
at Tenant's expense.
G. Tenant shall have the right to rescind its exercise of the
option if it does not approve in writing the fair market rent determined by
appraisal, but in such case, Tenant shall pay the costs of the appraisals. In
the event Tenant rescinds its exercise of the option, the Lease shall be
automatically extended for a period of one hundred twenty (120) days from the
date of
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Tenant's written rescission at the rent then payable under this Lease until the
expiration of the Lease Term or Renewal Term in question, and thereafter at the
rate established by appraisal until the end of the one hundred twenty (120) day
period.
39. COMMON AREA COSTS AND PARKING:
A. Initial Occupancy: Landlord shall, subject to
reimbursement by Tenant as provided in Section 39(E) below, maintain in good
condition and repair all areas outside of the Building, except for any
landscaping located immediately adjacent to the Building, until Tenant occupies
all of the buildings in the Project.
B. Subdivision: Promptly following Landlord and Tenant's
execution of this Lease, Landlord shall commence and use its best efforts to
effectuate a subdivision of the Project into three legal parcels complying with
the Subdivision Map Act and all Laws. Landlord shall obtain Tenant's advance
written approval of the boundaries of the proposed parcels and all material
aspects of the subdivision. Landlord shall pay all costs arising out of or in
connection with the subdivision. Furthermore, if Landlord becomes legally
required to subdivide the Project at any time during the Lease Term (for
example, if such subdivision is required by Law if the Project becomes a
multi-tenant Project), Landlord shall at its sole cost effectuate such
subdivision with Tenant's advance approval as indicated above.
C. Common Area Costs: The parties acknowledge that if at any
time during the Lease Term Tenant no longer leases all of the buildings in the
Project, there will need to be an adjustment in the maintenance responsibilities
of the parties and a provision for the payment of costs pertaining to the
maintenance of those areas within the Project that are not designed for the
exclusive use of Tenant or other tenants such as the parking areas, sidewalks,
and landscaped areas (hereinafter "Common Area").
D. Maintenance: If Tenant ceases to occupy all of the
buildings of the Project, Landlord shall be required to maintain the Common Area
and every part thereof in good and sanitary order, condition and repair.
Further, Landlord shall furnish utilities to such Common Areas.
E. Payment of Common Area Costs: Tenant shall pay its
"Proportionate Share" of "Common Area Costs" as defined herein, within thirty
(30) days of written invoice from Landlord documenting such Common Area Costs.
Landlord shall not bill Tenant for such Common Area Costs more frequently than
once every three (3) months. For purposes hereof, the term "Common Area Costs"
shall mean the following:
(1) Service charges incurred by Landlord in furnishing
water and electricity to the Common Area; and
(2) The reasonable costs incurred by Landlord for routine
maintenance and repair of the Common Area, such as the reasonable costs paid by
Landlord to third party contractors for the routine maintenance of the
sidewalks, parking areas, driveways and landscaping.
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F. Proportionate Share: Tenant's "Proportionate Share" of
Common Area Costs shall be computed by multiplying the total Common Area Costs
by a fraction, the numerator of which is the square footage of the Building and
the denominator of which is the total square footage of all of the buildings in
the Project.
G. Proration: It is understood and agreed that Tenant's
obligation to share in Common Area Costs shall be adjusted to reflect the
commencement and termination dates of the Lease Term.
H. Parking: In the event Tenant does not occupy all of the
Project, Tenant shall be entitled to the non-exclusive use of a minimum number
of number of parking spaces equal to Tenant's Proportionate Share of all parking
spaces in the Project. Landlord agrees that in no event shall Landlord (i)
allocate exclusive parking spaces to any other tenant or occupant; (ii)
oversubscribe parking; or (iii) allocate to any other tenant or occupant more
than its proportionate share (based on the square footage occupied) of available
Project parking.
40. QUIET ENJOYMENT: Tenant shall quietly have and hold the Premises for
the term and any extensions thereof subject to the provisions of this Lease
without interference by Landlord or any party claiming by or through Landlord.
41. BROKERS/PREVIOUS DEALINGS: Landlord shall pay any commission due to
any broker, agent or finder claiming a fee or commission in connection with this
transaction without reimbursement by Tenant. Landlord shall indemnify, defend,
and hold Tenant harmless against any claim, cost, expense, liability, damage or
cause of action (including, without limitation, attorneys' fees and costs) in
connection with any claim or assertion by Coldwell Banker Commercial or any
party claiming through Coldwell Banker in connection with this Lease or any
Other Lease between Landlord or Tenant.
42. AUTHORITY OF PARTIES:
A. Authority of Tenant: This Lease and any Other Lease is
conditioned upon approval and ratification of this Lease and the Other Leases by
Tenant's Board of Directors pursuant to a duly adopted resolution of such Board
of Directors. If such approval pursuant to such resolution is not obtained on or
before May 25, 1990, this Lease and any Other Lease shall be of no force or
effect.
B. Landlord's Authority: The individual(s) executing this
Lease on Landlord's behalf represent and warrant that they have the requisite
authority to sign this Lease and that this Lease is binding on Landlord.
43. MISCELLANEOUS PROVISIONS:
A. Rights and Remedies: All rights and remedies hereunder are
cumulative and not alternatives to the extent permitted by law and are in
addition to all other rights and remedies in law and in equity.
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B. Severability: If any term or provision of this Lease is
held unenforceable or invalid by a court of competent jurisdiction, the
remainder of the Lease shall not be invalidated thereby but shall be enforceable
in accordance with its terms, omitting the invalid or unenforceable term.
C. Choice of Law: This Lease shall be governed by and construed
in accordance with California law.
D. Interest: All sums due hereunder, including rent and
additional rent, if not paid within ten (10) days after written notice of the
delinquency, shall bear interest at the prime rate charged by Union Bank, main
San Francisco branch, plus two percent (2%) per annum from time to time or, if
lower, at the maximum rate permitted under California law accruing from the date
due until the date paid.
E. Time: Time is of the essence hereunder.
F. Headings: The headings or titles to the paragraphs of this
Lease are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part thereof. This instrument contains all
of the agreements and conditions made between the parties hereto and may not be
modified orally or in any other manner than by an agreement in writing signed by
all of the parties hereto or their respective successors in interest.
G. Performance by Landlord: If Tenant defaults in its
performance of any obligation required under this Lease after expiration of any
applicable cure period, Landlord, in its sole discretion, may, without further
notice, perform such obligation, in which event Tenant shall pay Landlord as
additional rent all reasonable sums paid by Landlord in connection with such
substitute performance within ten (10) days following Landlord's written notice
for such payment.
H. Representations: Tenant acknowledges that, except as set
forth herein, neither Landlord or its affiliates or agents have made any
agreements, representations, warranties or promises with respect to the
Premises.
I. Rent: All monetary sums due from Tenant to Landlord under this
Lease shall be deemed to be rent.
J. Interference: If the Premises or any Other Space leased by
Tenant from Landlord should become unsuitable for Tenant's use as a consequence
of the presence of any Hazardous Material which does not result from Tenant's
use, storage or disposal of such material in violation of applicable Law or by
consequence of legal restrictions preventing Tenant's use of the Premises for
manufacturing and assembly ("Interfering Event"), which, in the case of the
foregoing Interfering Events persists for thirty (30) continuous business days,
then Tenant shall be entitled to an abatement of rent to the extent of the
interference with Tenant's use of the Premises or Other Space occasioned thereby
from the date of the Interfering Event, and, if such interference cannot be
corrected or the damage resulting therefrom repaired so that the Premises or any
Other Space leased by Tenant from Landlord will be reasonably suitable for
Tenant's
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intended use within one hundred eighty (180) days following the occurrence of
the Interfering Event, then Tenant shall be entitled to terminate this Lease
and, at Tenant's election, any Other Lease by delivery of written notice to
Landlord at any time after occurrence of the Interfering Event.
K. Approvals: Whenever the Lease requires an approval,
consent, designation, determination or judgment by either Landlord or Tenant,
such approval, consent, designation, determination or judgment (including,
without limiting the generality of the foregoing, those required in connection
with assignment and subletting) shall not be unreasonably withheld or delayed
and in exercising any right or remedy hereunder, each party shall at all times
act reasonably and in good faith.
L. Reasonable Expenditures: Any expenditure by a party
permitted or required under the Lease, for which such party is entitled to
demand and does demand reimbursement from the other party, shall be limited to
the fair market value of the goods and services involved, shall be reasonably
incurred, and shall be substantiated by documentary evidence available for
inspection and review by the other party or its representative during normal
business hours.
M. Exhibits: All exhibits are incorporated herein by reference.
N. Light and View: Landlord shall not construct any structure
or improvement or do any other act that will impede Tenant's light, air or view.
O. Memorandum of Lease: At Tenant's option, a memorandum of
this Lease shall be recorded in a form acceptable to Tenant in the Official
Records of Santa Clara County, California. Landlord agrees to execute such
memorandum.
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<PAGE> 36
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on the
date set forth below.
<TABLE>
<S> <C>
LANDLORD: TENANT:
John Michael Sobrato, or his Successor Trustee PYRAMID TECHNOLOGY CORPORATION, a Delaware
Under Revocable Trust Agreement dated April 28, corporation
1989, as amended, FBO Ann Sobtato:
By:
--------------------------------------
Its:
-------------------------------------
By:
----------------------------------------
Date:
-------------------------------------
Its:
----------------------------------------
Date:
----------------------------------------
John A. Sobrato, Trustee Under Trust Agreement
Dated August 29, 1979
By:
----------------------------------------
Its
----------------------------------------
Date:
----------------------------------------
SOBRATO INTERESTS II,
California general partnership
By:
----------------------------------------
Its: Managing General Partner
Date:
----------------------------------------
</TABLE>
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<PAGE> 37
EXHIBIT B
CONSTRUCTION ADDENDUM TO LEASE
(101,552 Square Feet)
(Phase I)
(Rotunda Building 3)
THIS CONSTRUCTION ADDENDUM TO LEASE ("Addendum") is dated for reference
purposes only as May 6th, 1990 and is made by and between JOHN SOBRATO, Trustee
Under Trust Agreement dated August 29, 1979, as Amended, SOBRATO INTERESTS II, a
California general partnership, and JOHN MICHAEL SOBRATO, or his Successors,
Trustee Under Revocable Trust Agreement dated April 28, 1989, as Amended, FBO
Ann Sobrato (collectively, "Landlord"), and PYRAMID TECHNOLOGY CORPORATION, a
Delaware corporation ("Tenant"), and is made a part of that certain Lease
Agreement ("Lease") of even date herewith between Landlord and Tenant affecting
certain real property to be improved with a building of approximately 101,552
square feet and land and improvements associated therewith, in the City of San
Jose, County of Santa Clara, State of California. The following provisions are
hereby added to the Lease:
1. DEFINITIONS: Throughout this Addendum, the following terms shall have
the following meanings:
A. Shell Architect: The term "Shell Architect" shall mean Kenneth
Rodrigues and Associates.
B. Building: The term "Building" shall mean the Building Shell
and the Interior Improvements.
C. Building Plans: The term "Building Plans" shall mean the
Final Building Shell Plans and Final Interior Improvement Plans, as the same may
be modified from time to time by change orders issued and approved by the
parties in accordance with this Addendum.
D. Building Shell: The term "Building Shell" shall mean (i) a
one story tilt-up building containing approximately one hundred one thousand
five hundred fifty-two (101,552) square feet of floor space (measured from the
exterior of the exterior walls, doors and windows and including one-half of the
covered loading docks) which shall be constructed by Landlord for Tenant in the
location and configuration shown on the Final Building Shell Plans; (ii) all
parking areas, driveways, sidewalks, utility installations, exterior lighting,
decorative water facilities, irrigation systems, landscaping, and other outside
area improvements specified on the Building Plans; (iii) all other on-site and
off-site improvements required by any governmental agency as a condition of its
issuance of any approval for construction of the Building Shell or the Interior
Improvements; and (iv) those items, changes and improvements set forth in
Schedule 1 attached hereto and incorporated herein by this reference.
<PAGE> 38
E. Business Days: The term "Business Days" shall mean Monday
through Friday, excluding legal holidays.
F. Final Building Shell Plans: The term "Final Building Shell
Plans" shall mean those certain plans, specifications, and working drawings for
the Building Shell for Rotunda Building 3 prepared by Shell Architect dated June
1, 1989 (as revised November 6, 1989), and approved by the parties, as
supplemented and modified by: (i) those certain items, changes, and improvements
described in Schedule 1; and (ii) change orders approved by the parties pursuant
to the terms hereof.
G. Final Interior Improvement Plans: The term "Final Interior
Improvement Plans" shall mean those plans, specifications, and working drawings
for the Interior Improvements prepared and approved by the parties in accordance
with this Addendum.
H. Interior Improvements: The term "Interior Improvements"
shall mean all partitions, windows, walls, wall coverings, HVAC equipment,
lighting, ceilings, utility fixtures, and other improvements and fixtures,
installed in the Building Shell to the extent that such improvements and
fixtures are specified on the Final Interior Improvement Plans. The Interior
Improvements shall not include the cost of Tenant's environmental chambers.
I. Interior Improvement Allowance: The term "Interior
Improvement Allowance" shall mean Three Million Seven Hundred Fifty-Seven
Thousand Four Hundred Twenty-Four Dollars ($3,757,424.00), or Thirty-Seven
Dollars ($37.00) per square foot, which Landlord must contribute for
construction of Interior Improvements.
J. Additional Interior Improvement Allowance: The term
"Additional Interior Improvement Allowance" shall mean that product obtained by
multiplying Seven Dollars ($7.00) by the aggregate square footage of the other
buildings leased by Tenant from Landlord in the Project. It is currently
anticipated that such aggregate square footage shall be One Hundred Seventy-Nine
Thousand Two Hundred Thirty-Two (179,232) (or Eighty-Nine Thousand Six Hundred
Sixteen (89,616) square feet per building) so that the anticipated Additional
Interior Improvement Allowance shall be One Million Two Hundred Fifty-Four
Thousand Six Hundred Twenty-Four Dollars ($1,254,624.00). At Tenant's election,
Landlord shall contribute all or any portion of the Additional Interior
Improvement Allowance for the payment of Interior Improvement Costs. If Landlord
contributes all or any portion of such Additional Interior Improvement
Allowance, this will deplete the available interior improvement allowance for
such other buildings.
K. Interior Improvement Architect: The term "Interior
Improvement Architect" shall mean the architect selected by Tenant pursuant to
paragraph 2.B hereof. Tenant currently anticipates that the Interior Improvement
Architect shall be CAS Architects, and Landlord hereby approves such Architect.
L. Interior Improvement Costs: The term "Interior Improvement
Costs" shall mean the lesser of (a) the Interior Improvement Cost Estimate, or
(b) the sum of the following: (i) payments to third party contractors,
subcontractors and materialman for the construction of
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<PAGE> 39
the Interior Improvements; (ii) reasonable fees paid to architects, engineers
and other construction professionals (other than employees of Landlord or of
entities in any way affiliated with Landlord) for services required in
connection with the design and construction of the Interior Improvements; (iii)
fees paid by Tenant to architects, space planners, designers, inspectors and
other construction professionals; (iv) utility connection charges incurred by
Tenant; (V) permit and license fees paid by Tenant for use and occupancy permits
required for Tenant to occupy the Premises; (vi) the amounts paid to
governmental authorities or agencies for inspections and issuance of building
permits and approvals for the Interior Improvements (but not that portion of
such amounts applicable to, or based on the value of, the Building Shell); and
(vii) a development fee (in lieu of any general conditions, overhead, profit or
other fee) equal to seven percent (7%) of Interior Improvement Costs (excluding
any such cost that Tenant elects to pay directly and as to hard costs, any item
for which Tenant pays directly and Landlord does not handle the construction
thereof). In no event shall Interior Improvement Costs include (herein "Excluded
Costs"): (i) charges and expenses for changes to the Building Plans which have
not been approved by Tenant in writing; (ii) wages, labor and overhead for
overtime and premium tine unless approved by Tenant in writing in Tenant's
discretion; (iii) additional costs and expenses incurred by Landlord on account
of any contractor's or subcontractor's default or construction defects; (iv)
interest and fees for construction financing; (v) off-site management or other
general overhead costs incurred by Landlord; (vi) bond premiums; (vii) costs for
which Landlord has a right of reimbursement from others (including, without
limitation, insurers and warrantors); (viii) the cost of bringing the Building
Shell and surrounding lot into compliance with applicable building codes,
environmental laws, or other statutes, laws, rules and regulations; (ix) costs
of management, design and all other services provided by employees or affiliates
of Landlord and the cost of any administration, profit and overhead for Landlord
or any of its employees or affiliates in excess of the developer's fee mentioned
above; (x) costs incurred as a result of delays caused by the acts or omissions
of Landlord or its employees, agents, contractors or subcontractors; (xi) any
expense or cost which is not required to be incurred in order to complete
construction of the Interior Improvements; (xii) any costs associated with the
design or construction of the Building Shell; (xiii) any cost associated with a
casualty or Act of God. All of the foregoing "Excluded Costs" shall be the sole
obligation of Landlord.
M. Interior Improvement Cost Estimate: The term "Interior
Improvement Cost Estimate" shall mean the total estimated cost of constructing
the Interior Improvements prepared and approved by Landlord and Tenant in
accordance with this Addendum, as modified by change orders issued in accordance
with this Addendum. The Interior Improvement Cost Estimate may contain a
contingency reserve of three percent (3%) of the Interior Improvement Costs. If
such contingency reserve is not used by Landlord to pay costs incurred by
Landlord due to unforeseen conditions pertaining to the construction of the
Interior Improvements, such contingency reserve shall not be a part of Interior
Improvement Costs.
N. Preliminary Interior Improvement Plans: The term
"Preliminary Interior Improvement Plans" shall mean those plans and
specifications for the Interior Improvements prepared and approved by the
parties in accordance with this Addendum.
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<PAGE> 40
0. Substantial Completion: The term "Substantial Completion"
shall mean that (i) all necessary governmental approvals for occupancy of the
Building have been obtained (including, if applicable, a Certificate of
Occupancy); (ii) the Premises fully meet the Building Plans approved by Tenant;
(iii) the Premises are in a "broom clean" finish condition; (iv) all utilities
be supplied to the Premises are hooked up and available for use by Tenant; (v)
Tenant has had thirty (30) days to install its trade fixtures in the Building
pursuant to paragraph 6 below; (vi) the Shell Architect and the Interior
Improvement Architect have certified that the Premises have been completed in
accordance with the Building Plans; (vii) all incomplete or defective
construction which interferes with Tenant's use of the Premises has been
remedied and repaired, subject only to the completion of minor "punch list"
items not interfering with Tenant's use of the Premises; and (viii) Landlord has
offered to deliver possession of the Premises to Tenant.
2. PLANS:
A. Preliminary Plans For Interior Improvements: On or before
July 25, 1990, Tenant shall attempt to cause to be prepared and delivered to
Landlord a preliminary space plan for the Interior Improvements for Landlord's
approval, which approval shall not be unreasonably withheld. If Landlord fails
to approve or disapprove the proposed space plan within seven (7) days following
delivery of the proposed plan to Landlord, the space plan proposed by Tenant
shall be deemed to be the approved Preliminary Interior Improvement Plans for
the purposes of this Addendum. If Landlord disapproves the proposed space plan
in any respect, it shall deliver to Tenant its written proposal for required
changes and the parties shall negotiate in good faith to reach agreement on the
Preliminary Interior Improvement Plans. At Tenant's request, Landlord shall
confer with Tenant to obtain a preliminary cost estimate based upon the
Preliminary Interior Improvement Plans. Tenant shall have no obligation to
submit a preliminary space plan to Landlord, and if Tenant so elects, Tenant may
eliminate such intermediate procedure and proceed with the preparation of final
plans and specifications and working drawings in accordance with the procedures
set forth below.
B. Final Interior Improvement Plans and Cost Estimate: On the
later of (i) that date that is fourteen (14) days after approval by both parties
of the Preliminary Interior Improvement Plans if Tenant elects to submit a
preliminary space plan to Landlord, or (ii) August 15, 1990, Tenant shall cause
the Interior Improvement Architect selected by Tenant and approved by Landlord
to prepare and deliver to Landlord proposed final plans, specifications and
working drawings for the Interior Improvements. Landlord shall submit any
reasonable objections to the proposed final plans, specifications and working
drawings to Tenant in writing within seven (7) days after Landlord's receipt of
same and shall submit a proposed Interior Improvement Cost Estimate for the
Interior Improvements shown on the proposed final plans, specifications and
working drawings, as amended by the changes reasonably made by Landlord. If
Tenant disapproves the cost estimate or the proposed final plans with Landlord's
modifications in any respect, then within seven (7) days following receipt of
the proposed final plans and cost estimate, Tenant may deliver to Landlord its
written proposal for the changes necessary, in Tenant's opinion, to satisfy
Tenant's objections or to reduce costs. If Tenant fails to approve or disapprove
the final plans within the allowed time period, the final plans proposed by
Tenant, with Landlord's reasonable modifications, shall be deemed to be the
approved Final Interior
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<PAGE> 41
Improvement Plans for the purpose of this Addendum. If Tenant fails to approve
or disapprove the proposed cost estimate within the allowed time period, the
cost estimate proposed by Landlord shall be deemed to be the approved Interior
Improvement Cost Estimate for the purposes of this Addendum. If Tenant proposes
changes to the proposed final plans for the Interior Improvements, Landlord
shall not unreasonably withhold its approval of such change and the parties
shall confer and negotiate in good faith to reach agreement on specific required
modifications to the proposed final plans and costs estimate as a consequence of
such change. If Tenant believes that the cost estimate is incorrect, it may
require that all or any portion of the work be submitted for competitive bids.
The final plans, modified for changes proposed by Tenant and approved by
Landlord pursuant to this paragraph, shall be the approved Final Interior
Improvement Plans and cost estimate approved by Tenant shall be the Interior
Improvement Cost Estimate for the purposes of this Addendum.
C. Application For Approvals: As soon as the Final Interior
Improvement Plans are approved by Landlord and Tenant, Landlord shall submit the
approved Building Plans to all appropriate governmental agencies for their
approval and issuance of all required permits. Landlord shall use its best
efforts to obtain all governmental approvals and permits necessary for
construction of the Premises in accordance with the Building Plans on or before
October 15, 1990. Landlord and Tenant shall initial the Building Plans
immediately after all governmental approvals and permits have been obtained and
shall append the approved Building Plans and Interior Improvement Cost Estimate
to this Construction Addendum as Schedule 2.
D. Termination: If all permits required for construction of
the Premises in accordance with the Building Plans have not been issued on or
before January 15, 1991, then Tenant, in its discretion, may elect to terminate
the Lease and, at Tenant's election, any Other Lease between Landlord and
Tenant.
E. Changes to Building Plans: After the Building Plans have
been approved by Landlord and Tenant as provided above, neither party shall have
the right to require extra work or make any modifications with respect to the
construction of the Premises, without the prior written consent of the other
party as to (i) the change, (ii) any estimated delay in the scheduled completion
date of the Premises caused by the change, and (iii) any modification to the
Interior Improvement Cost Estimate as a consequence of the change. Landlord
shall not unreasonably withhold or delay its consent to changes or extra work
proposed by Tenant with respect to the Interior Improvements and, if the change
will not materially increase the cost incurred by Landlord for construction of
the Building Shell nor materially modify the exterior appearance of the Building
Shell, then Landlord also shall not unreasonably withhold its consent to change
in the Building Shell. Tenant shall not unreasonably withhold or delay its
consent to changes or extra work proposed by Landlord with respect to the
Building Shell which does not cause any modification of the Final Interior
Improvement Plans, does not increase Interior Improvement Costs, does not delay
construction and does not adversely impact the appearance of the Premise or
Tenant's proposed use. Tenant may withhold its consent, in its discretion, to
any change in the Final Interior Improvement Plans or Interior Improvement Cost
Estimate.
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<PAGE> 42
3. CONTRACTORS:
A. General Contractor: Landlord shall serve as the general
contractor for construction of the Interior Improvements.
B. Subcontracts: Landlord shall cause each subcontract to be
competitively bid by three contractors for construction of the Interior
Improvements. The contractors to whom such work shall be competitively bid shall
be selected by Landlord and approved by Tenant, which approval shall not be
unreasonably withheld. All bids shall be opened simultaneously. All work shall
be awarded based upon the lowest bid submitted unless agreed in writing by
Tenant. Notwithstanding the foregoing, Tenant in its discretion may elect to use
Therma as the mechanical subcontractor and Viking Electric ("Viking") as the
electrical subcontractor in lieu of awarding such subcontracts on the basis of
competitive bids, or Tenant may require that Therma and Viking be one of the
contractors to whom such work shall be competitively bid. Notwithstanding
Tenant's right to approve the subcontractors, each subcontractor is a contractor
only of Landlord and Tenant shall have no liability to the subcontractor under
any subcontract or otherwise with respect to the Building.
C. Construction Manager: Tenant shall have the right to elect
one of the following alternatives in Tenant's discretion: (i) to increase the
development fee set forth in subparagraph 1.L from seven percent (7%) to eight
percent (8%) in lieu of employing a construction manager; or (ii) employ a
construction manager to assist Tenant in planning its Interior Improvements or
to act in a supervisory role to evaluate Tenant's plans and requirements. In the
event Tenant elects to employ a construction manager Landlord shall submit to
Tenant a list of three construction managers to be employed by Tenant and Tenant
shall enter into a contract with one of such construction managers on terms
acceptable to Tenant. The fee charged by such construction manager shall at
Tenant's election be an "Interior Improvement Cost," and Landlord shall pay any
such fee before it becomes due under the terms of Tenant's contract. Landlord
shall not charge any development fee as set forth in subparagraph l.L on any
fees or charges by such construction manager. If Landlord fails to pay such
costs, Tenant, in addition to its other remedies, may (but shall not be
obligated to) advance such costs on Landlord's behalf, and Tenant shall be
entitled to recover such costs from Landlord together with interest at the rate
specified under paragraph 43.D of the Lease from the date of the expenditure
until repaid.
4. COMMENCEMENT AND COMPLETION OF BUILDING:
A. Landlord's Obligation To Construct The Building: As soon
as the Building Plans have been approved, all necessary governmental approvals
and permits have been obtained, and the bids have been accepted, Landlord shall
cause construction of the Building Shell and the Interior Improvements to be
commenced and diligently prosecuted to completion, so that the Premises will be
Substantially Complete as soon as possible. Landlord shall use its best efforts
to give Tenant partial occupancy of the portion of the Premises selected by
Tenant at the earliest possible date, if Tenant so chooses and if such partial
occupancy is legally
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<PAGE> 43
permissible and such partial occupancy shall not unreasonably interfere with
Landlord's completion of construction.
B. Schedule of Critical Dates: Set forth in this paragraph is
a schedule of certain critical dates relating to Landlord's and Tenant's
respective obligations regarding the construction of the Building Shell and the
Interior Improvements (the "Schedule of Performance"). Landlord and Tenant shall
each be obligated to use reasonable efforts to perform their respective
obligations within the time periods set forth in this Schedule of Performance
and elsewhere in this Construction Addendum. The Schedule of Performance is as
follows:
<TABLE>
<CAPTION>
DATE
(Days After
Action Another Event)
------------------------------------------------------------ ---------------------
<S> <C> <C>
1. Tenant Submits Proposed Preliminary Interior Plans
(if Tenant so Elects) July 25, 1990
2. Landlord Approves or Modifies Preliminary Interior 7 Days after Item 1
Plans
3. Parties Finally Approve Preliminary Interior
Improvement Plans 14 days after Item 1
4. Tenant Submits Proposed Final Interior Plans Later of
(i) August 15, 1990;
or (ii) 14 days after
item 3
5. Landlord Submits Reasonable Objections to Proposed
Final Interior Plans and Submits Proposed Interior
Improvement Cost Estimate Based On Bids 7 Days
after Item 4
6. Tenant Modifies Plans To Reduce Interior
Improvement Cost Estimate, or to Resolve Tenant's 7 Days
Objections if required or Tenant so elects after Item 5
7. Landlord Rebids Interior Improvement Cost, if
appropriate, And Submits Revised Interior
Improvement Cost Estimate To Tenant 2 days after Item 6
8. Parties Finally Approve Final Interior Improvement
Plans August 31, 1990
9. Issuance Of All Construction Permits For
Landlord's Work (including shell and interior October 15, 1990
improvements)
</TABLE>
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<PAGE> 44
<TABLE>
<S> <C> <C>
10. Last Date For Issuance Of All Construction Permits
(or Tenant may terminate this Lease in accordance
with this Addendum) DATE (Days After Another Event) January 15, 1991
11. Scheduled Substantial Completion Date December 15, 1990
12. Last Date For Delivery of Premises Ready For
Occupancy (or Tenant may terminate as set forth in
the Addendum) July 15, 1991
</TABLE>
C. Delivery of Possession: When the Premises are
substantially Complete, Landlord shall deliver possession of the Premises to
Tenant. However, Tenant shall have no obligation to accept possession of the
Premises or commence payment of rent until the Commencement Date, as defined in
paragraph 7 of the Lease.
D. Failure to Deliver: Landlord hereby acknowledges that its
failure to deliver to Tenant Premises that are Substantially Complete on or
before December 15, 1990 will cause Tenant to incur costs not contemplated by
the Lease, the exact amount of which will be extremely difficult to ascertain.
Accordingly, if Landlord fails to deliver to Tenant Premises that are
Substantially Complete on or before said date, in Tenant's discretion, Tenant
shall be entitled to apply the sum designated in paragraph 7 of the Lease as the
"Free Rent Amount," to its rental obligations under the Lease. Further, if
Tenant elects to terminate this Lease as a result of Landlord's failure to
deliver possession of the Premises as provided for in the Lease or this
Addendum, Tenant shall be entitled to receive any accrued Free Rent Amount as of
the date of Tenant's termination as liquidated damages for each day delivery of
the Building is delayed beyond December 15, 1990. The parties hereby agree that
such amount represents a fair and reasonable estimate of the cost Tenant will
incur by reason of the late delivery of the Building. Acceptance by Tenant of
liquidated damages for delay shall not constitute a waiver of Landlord's breach
of any provision of the Lease.
5. PAYMENT OF CONSTRUCTION COSTS:
A. Tenant's Contribution To Interior Improvement Costs:
Tenant's obligation to pay the cost of constructing the Premises shall be
limited to the positive difference, if any, between the total Interior
Improvement Costs (not to exceed the Interior Improvement Cost Estimate approved
by Tenant in writing) and the Interior Improvement Allowance (or the sum of the
Interior Improvement Allowance and the portion of the Additional Interior
Improvement Allowance that Tenant elects to apply). The parties acknowledge that
Tenant shall have no obligation to pay any cost of constructing any portion of
the Premises in excess of such amount. If the Interior Improvement Cost Estimate
is more than the Interior Improvement Allowance (plus the portion of the
Additional Interior Improvement Allowance that Tenant elects to apply), Tenant
shall pay to Landlord a proportionate share of each progress payment due to the
subcontractors which bears the same relationship to the total amount of the
progress payment in question as the amount Tenant is obligated to contribute to
the payment of Interior Improvement
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<PAGE> 45
Costs bears to the Interior Improvement Cost Estimate. Tenant shall pay Tenant's
share of any progress payment to Landlord within fifteen (15) days after receipt
of a statement and reasonable documentation of such costs from Landlord. If
Tenant pays any such excess Interior Improvement Costs, as soon as possible
after commencement of the Lease, Landlord and Tenant shall designate as Tenant's
property Interior Improvements having a cost approximately equal to the excess
paid by Tenant. Property designated as Tenant's property under the terms of this
paragraph may be removed from the Premises at any time by Tenant and Tenant
shall be entitled to all investment tax credit, depreciation, and other tax
attributes relating to such property. In determining which Interior Improvements
will be designated as Tenant's property, the parties shall confer in good faith
and shall give preference to those Interior Improvements which are most readily
removable from the Building and which shall have the greatest utility for Tenant
outside of the Building but which are not required for basic business operations
at the Building. At the expiration or sooner termination of the Lease, all
Interior Improvements not designated as Tenant's property under this paragraph
shall be surrendered to Landlord in accordance with the terms of the Lease.
B. Rights if Allowance Unused: If the Interior Improvement
Cost Estimate is less than Landlord's Interior Improvements Allowance, Tenant
shall be entitled to, at Tenant's election: (i) apply any unused allowance for
the payment of interior improvement costs for any other building leased by
Tenant from Landlord; or (ii) offset from its rental obligations under this
Lease the total amount of such unused Interior Improvement Allowance.
6. TENANT'S RIGHT TO ENTER: Tenant, and its authorized representatives,
shall have the right to enter the Building at all reasonable times for the
purpose of inspecting the progress of the construction of the Building Shell and
Interior Improvements. Landlord shall give Tenant at least sixty (60) days prior
written notice of its estimated date for Substantial Completion of the Building,
so that Tenant may cause its fixtures and equipment to be ordered. When the
construction of the Building has proceeded to the point where Tenant's work of
installing its fixtures and equipment in the Building can be commenced in
accordance with good construction practice, Landlord also shall notify Tenant to
that effect and shall permit Tenant and its authorized representatives and
contractors to have access to the Building for a period of not less than thirty
(30) days for the purpose of installing Tenant's trade fixtures and equipment.
7. CONSTRUCTION WARRANTY FOR THE BUILDING: Notwithstanding anything to
the contrary in the Lease, effective upon delivery of the Premises to Tenant,
Landlord does hereby warrant (i) that the Building Shell and the Interior
Improvements were constructed in accordance with any applicable covenants,
conditions or restrictions and the rules, regulations, codes, statutes,
ordinances, and laws of all governmental and quasi-governmental authorities
having jurisdiction over the Building, (ii) that the Building Shell and Interior
Improvements were constructed in accordance with the Building Plans and in a
good and workmanlike manner; and (iii) that all material and equipment installed
at the Premises conformed to the Building Plans and was new and otherwise of
good quality. Notwithstanding anything to the contrary contained in the Lease or
this Addendum, Tenant's acceptance of the Premises shall not be deemed a waiver
of the foregoing warranty or any other warranty of
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<PAGE> 46
Landlord under the Lease, and Landlord shall promptly repair all violations of
the warranty set forth in this paragraph at its sole cost and expense.
8. RISK OF LOSS: Risk of loss of the Premises prior to the Commencement
Date of the Lease shall be borne by Landlord. At all times prior to the
Commencement Date, Landlord at its sole cost and expense shall maintain
so-called contingent liability and broad form "builder's risk" insurance with
coverage in an amount equal to the replacement cost of the Building Shell plus
the Interior Improvement Cost Estimate. The insurance policy (i) shall be in a
form reasonably satisfactory to Tenant, (ii) shall be carried with a company
reasonably acceptable to Tenant, (iii) shall provide that such policy shall not
be subject to cancellation or change except after at least ten (10) days prior
written notice to Tenant, and (iv) shall contain a "cross liability" provision
insuring Landlord and Tenant against any loss caused by the negligence of the
other party. If the Interior Improvement Cost Estimate exceeds the Interior
Improvement Allowance, Tenant shall be designated as a named insured on said
insurance policy and the "deductible" thereunder shall not exceed Five Thousand
Dollars ($5,000). If the Building is damaged or destroyed prior to the
Commencement of the Lease, Tenant shall have the right to terminate the Lease,
and, at Tenant's election, any Other Lease, if the Premises, in the reasonable
opinion of the Architect, cannot be Substantially Complete prior to September
15, 1991. If the Lease is so terminated, Tenant shall be entitled to that amount
of the builder's risk insurance proceeds equal to the amount, if any, paid by
Tenant for construction of the Interior Improvements prior to the termination
date. If the Premises are damaged or destroyed and the Lease is not terminated
pursuant to the terms of the Lease or this Addendum, Landlord shall promptly and
diligently complete construction of the Building in accordance with this
Addendum and all insurance proceeds with respect to the loss shall be paid to an
independent depository, reasonably acceptable to Landlord and Tenant, for
disbursement to the contractors completing the Building as the work progresses
in accordance with customary institutional lending practices.
9. RIGHTS UPON TERMINATION: If the Lease is terminated pursuant to any
provision of this Addendum, then in addition to all other amounts due Tenant
hereunder, all security deposits, letters of credit, prepaid rent, and other
monies paid by Tenant under the terms of the Lease or this Addendum shall be
returned to Tenant upon demand. Subject to Tenant's rights under paragraph 8, in
the event Tenant elects to terminate this Lease, Landlord shall not be required
to return progress payments made by Tenant for construction of the Interior
Improvements in accordance with paragraph 5 of this Addendum.
10. ACCOUNTING: Landlord shall submit to Tenant on a monthly basis an
accounting of all Interior Improvement Costs, certified as true and correct by
Landlord. Tenant shall have the right to audit the books, records and supporting
documents of Landlord during normal business hours, after giving Landlord at
least twenty-four (24) hours prior notice to the extent reasonably necessary to
determine the accuracy of any accounting. Within fifteen (15) days after
Substantial Completion, Landlord shall render to Tenant a final and detailed
accounting of all Interior Improvement Costs paid by Landlord and Tenant,
certified as true and correct by Landlord. Tenant shall have the same audit
rights as set forth above with respect to the monthly accountings. If such audit
discloses that an overpayment was made by Tenant, there
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<PAGE> 47
shall be an adjustment between Landlord and Tenant as soon as reasonably
practicable such that each shall only be required to contribute to the payment
of costs to the extent provided for in this Addendum.
11. TENANT DELAYS: For purposes of this Construction Addendum and the
Lease, the foregoing shall be deemed "Tenant Delays": (i) Tenant's failure to
submit plans and information or review and approve information including the
Interior Improvement Cost Estimate by the dates set forth in this Construction
Addendum except that Tenant's failure to submit a preliminary space plan shall
not be deemed a "Tenant Delay" hereunder; or (ii) as a result of written change
orders made by Tenant pursuant to the terms of this Construction Addendum after
final approval of the Building Plans, to the extent specified in any written
change order. In the event of such Tenant Delays, then the dates on which Tenant
is entitled to the rent or other liquidated damages and to terminate this Lease
or any Other Lease on account of Landlord's failure to Substantially Complete
the Premises shall be postponed one day for each day of such actual delay in
Substantial Completion caused by such Tenant Delay. Furthermore, the date Tenant
is otherwise obligated to begin paying rent shall occur one day earlier than the
Commencement Date for each day that the Commencement Date is actually delayed as
a result of a Tenant Delay; provided, however, that for purposes of this
paragraph, the Commencement Date shall in no event be deemed to occur any date
earlier than December 15, 1990 regardless of any Tenant Delay.
12. CONFLICT: In the event of any conflict between the terms of this
Addendum and the Lease, this Addendum shall prevail.
-11-
<PAGE> 48
IN WITNESS WHEREOF, the parties hereto have executed this Addendum
intending to be bound thereby.
<TABLE>
<S> <C>
LANDLORD: TENANT:
John Michael Sobrato, or his Successor Trustee PYRAMID TECHNOLOGY CORPORATION, a Delaware
Under Revocable Trust Agreement dated April 28, corporation
1989, as amended, FBO Ann Sobtato:
By:
--------------------------------------
Its:
--------------------------------------
By:
-----------------------------------------
Date:
--------------------------------------
Its:
-----------------------------------------
Date:
-----------------------------------------
John A. Sobrato, Trustee Under Trust Agreement
Dated August 29, 1979
By:
-----------------------------------------
Its:
-----------------------------------------
Date:
-----------------------------------------
SOBRATO INTERESTS II,
California general partnership
By:
-----------------------------------------
Its: Managing General Partner
Date:
-----------------------------------------
</TABLE>
-12-
<PAGE> 49
SCHEDULE l
The following modifications, items and improvements are hereby
incorporated as part of the Final Shell Plans. Such modifications, items and
improvements shall be made to the Premises at the sole cost and expense of
Landlord (and not as part of the Interior Improvement Costs):
1. Landlord shall pay for and install (i) a trash compactor pad; (ii)
two (2) electrical transformer pads; and (iii) an enclosure area for the trash
compactor.
2. Landlord shall relocate the sheer walls running through the center of
the Buildings.
3. Landlord shall redsign and relocate the skylights so that such
skylights conform to the advertising information submitted by Landlord.
4. Landlord shall reconfigure the ingress and egress driveways, islands
and parking spaces near the loading docks (including, without limitation, the
effectuation of new stall markings and striping) so as to allow the turning,
loading and maneuvering of seventy (70) foot trucks. Landlord acknowledges that
the foregoing may reduce available parking by as many as eighty (80) spaces and
hereby consents to the same.
5. Landlord shall install "compaction aggregate" beneath the paving in
the truck circulation and heavy traffic areas so as to avoid damage to such
area.
6. Landlord shall add exterior glass in any exterior walls as reasonably
directed by Tenant.
All of the foregoing shall be accomplished pursuant to plans and
specifications prepared by Landlord and approved by Tenant conforming in all
respects to the information submitted to Landlord by Tenant which information as
to size, location and other requirements shall be submitted by Tenant to
Landlord on or before May 25, 1990.
<PAGE> 50
FIRST AMENDMENT TO LEASE AGREEMENT
(PHASE I)
This First Amendment to Lease ("Amendment") is made this ____ day of
March, 1991 by and between NORTH SAN JOSE INTERESTS, a California limited
partnership ("Landlord"), and PYRAMID TECHNOLOGY CORPORATION, a Delaware
corporation ("Tenant"), with reference to the following facts:
RECITALS
A. Landlord (as the successor in interest to John Michael Sobrato, or
his Successor Trustee Under Revocable Trust Agreement dated April 28, 1989, as
amended, FBO Ann Sobrato, John A. Sobrato, Trustee Under Trust Agreement dated
August 29, 1979, and Sobrato Interests II, a California general partnership) and
Tenant are parties to a Lease Agreement (Phase I) pursuant to which Tenant
leases from Landlord certain premises including a building containing 101,552
square feet, located in San Jose, California, as such premises are more
particularly described in the Lease (the "Lease")
B. The parties wish to clarify certain matters concerning the Lease in
this Amendment.
NOW THEREFORE, in consideration of the mutual promises contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties do hereby agree as follows:
AGREEMENT
1. Rental Credit: The parties acknowledge that pursuant to the terms of
a certain side letter dated May 6, 1990 between Landlord and Tenant, Landlord is
required to pay to Tenant on or before the "Commencement Date" as defined in the
Lease the amount of Two Hundred Fifty Thousand Dollars ($250,000) (herein
referred to as the "Moving Allowance"). Further, pursuant to the terms of a
certain Settlement Agreement, Mutual Release and Termination of Lease dated May
30, 1990 between JOHN A. and SUSAN R. SOBRATO 1979 REVOCABLE TRUST and JOHN A.
SOBRATO individually, on the one hand, and Tenant, on the other hand, the sum of
Seventy Thousand Five Hundred Eleven and 10/100 Dollars ($70,511.10) is to be
credited to the monthly rent due under the Lease (herein referred to as the
"Rent Credit") . The total amount of the Moving Allowance and the Rent Credit
(herein collectively referred to as the "Credit") is Three Hundred Twenty
Thousand Five Hundred Eleven and l0/l00 Dollars ($320,511.10).
2. Application of the Credit: The Credit shall be applied as follows:
(a) Sixty Thousand Two Hundred Ninety-One and 28/100 Dollars ($60,291.28) toward
the prorated monthly rent due for the period December 16, 1990 through December
31, 1991; (b) One Hundred Eleven Thousand Seven
<PAGE> 51
Hundred Seven and 20/100 Dollars ($111,707.20) toward the monthly rent due for
the month of January 1991; (c) One Hundred Eleven Thousand Seven Hundred Seven
and 20/100 Dollars ($111,707.20) toward the monthly rent due for the month of
February 1991; and (d) the balance of the Credit in the amount of Thirty-Six
Thousand Eight Hundred Five and 42/100 Dollars ($36,805.42) toward the monthly
rent due for the month of March 1991. Landlord acknowledges having received from
Tenant the balance of the monthly rent for March 1991 in the amount of
Seventy-Four Thousand Nine Hundred One and 78/100 Dollars ($74,901.78)
3. Application of Additional Interior Improvement Allowance: Landlord
and Tenant acknowledge that the total Interior Improvement Costs for the
Interior Improvements under the Lease is Five Million Five Hundred Thirty
Thousand Eight Hundred Forty-Four Dollars ($5,530,844.00). Landlord is required
to pay an Interior Improvement Allowance of Three Million Seven Hundred
Fifty-Seven Thousand Four Hundred Twenty-Four Dollars (3,757,424.00) toward the
payment of Interior Improvement Costs, and Tenant has elected to use One Million
Two Hundred Fifty-Four Thousand Six Hundred Twenty-Four Dollars ($1,254,624.00)
of the Additional Interior Improvement Allowance as defined in the Lease. Tenant
acknowledges that the use by Tenant of such Additional Interior Improvement
Allowance shall reduce the Interior Improvement Allowance under that certain
Lease Agreement (Phase II) dated May 30, 1990 between Landlord and Tenant and
that certain Lease Agreement (Phase III) dated May 30, 1990 between Landlord and
Tenant. Tenant shall pay the balance of the Interior Improvement Costs for the
Interior Improvements at the Premises in the amount of Five Hundred Eighteen
Thousand Seven Hundred Ninety-Six Dollars ($518,796.00) in accordance with the
terms of the Lease.
-2-
<PAGE> 52
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment on
the date set forth below.
LANDLORD: TENANT:
NORTH SAN JOSE INTERESTS PYRAMID TECHNOLOGY CORPORATION
a California limited partnership a Delaware corporation
By: By:
------------------------------ ------------------------------
Its: Managing General Partner Its:
-----------------------------
Dated: Dated:
--------------------------- ---------------------------
-3-
<PAGE> 53
The parties agree that notwithstanding the provisions of paragraph 2.M
of that certain Construction Addendum to Lease that is attached to and that
constitutes part of that certain Lease Agreement (Phase II) (the "Phase II
Lease") and paragraph 2.M of that Construction Addendum to Lease that is
attached to and constitutes part of that certain Lease Agreement (Phase III)
(the "Phase III Lease"), both dated May 30, 1990, Landlord shall not charge
Tenant any contingency fee in connection with any structural and/or floor load
modifications made to either the Building subject to the Phase II Lease or the
Building subject to the Phase III Lease.
AGREED AND ACCEPTED:
"TENANT"
PYRAMID TECHNOLOGY CORPORATION
a Delaware corporation
By:
------------------------------
Its:
-----------------------------
Dated:
---------------------------
"LANDLORD"
NORTH SAN JOSE INTERESTS, a California
limited partnership, (as the successor
to John Michael Sobrato, or his
Successor Trustee Under Revocable Trust
Agreement dated April 28, 1989, as
amended, FBO Ann Sobrato, John A.
Sobrato, Trustee Under Trust Agreement
dated August 29, 1979 and Sobrato
Interests II, a California general
partnership)
By:
------------------------------
Its:
-----------------------------
Dated:
---------------------------
<PAGE> 1
Exhibit 10.6.1
SUBLEASE AGREEMENT
This Sublease Agreement ("Sublease") dated for reference purposes only,
December 15, 1997, by and between Siemens Pyramid Information Systems, Inc., a
Delaware corporation, with its principal offices at 3860 North First Street, San
Jose, California, 95134 ("SUBLANDLORD"), and Netro Corporation, a California
corporation, with its principal business offices at 3200 Coronado Drive, Santa
Clara, California, 95054 ("SUBTENANT").
RECITALS
[ILLEGIBLE]
Therefore, SUBLANDLORD and SUBTENANT agree as follows:
1. PREMISES. Subject to the terms, conditions, and covenants set forth
in this Sublease, SUBLANDLORD hereby leases to SUBTENANT and SUBTENANT hereby
leases from SUBLANDLORD, approximately 47,950 rentable square foot in the
Building commonly known as 3860 North First Street, San Jose-Rotunda Building
Three (R3), CA ("Premises"). A description of the Premises is attached hereto as
EXHIBIT B, outlined in yellow, attached which by this reference is incorporated
herein.
2. EXPANSION PREMISES. Subject to the terms, conditions, and covenants
set forth in this Sublease, effective on October 1, 1998, the Premises shall be
deemed to include an additional 17,877 rentable square foot adjacent space in
the Building commonly known as 3860 North First Street, San Jose, CA-R3
("Expansion Premises") at which time, the
<PAGE> 2
SUBLANDLORD shall deliver the Expansion Premises to SUBTENANT "broom clean" with
all building systems in good working and operable condition. The Expansion
Premises shown as outlined in green on Exhibit B. SUBTENANT shall have a right
of first refusal for the remainder of the Building commonly known as 3860 North
First Street, San Jose, CA-R3 under the same terms and conditions of this
Sublease Agreement, except as provided in this paragraph below.
SUBTENANT shall have a right of first refusal to sublease the remainder
of the Building. If SUBLANDLORD desires to sublease that space, or any portion
thereof, to a third party, SUBLANDLORD shall provide written notice to SUBTENANT
of the terms upon which SUBLANDLORD would be willing to lease the space in
question. If SUBTENANT does not deliver written notice to SUBLANDLORD, within
fifteen (15) days of receipt of SUBLANDLORD's notice, of SUBTENANT's willingness
to occupy the subject space SUBLANDLORD shall be free to sublease that space to
the third party in question. If SUBTENANT does timely indicate its willingness
to occupy the subject space, SUBLANDLORD shall lease the space to SUBTENANT on
all the same terms and conditions set forth herein, including Rent, provided
that if SUBTENANT indicates in its response to SUBLANDLORD that SUBTENANT
desires to substitute any material business term from SUBLANDLORD's notice which
is more favorable to SUBTENANT, such term shall be incorporated into the
sublease of the subject space. It is understood and agreed that SUBLANDLORD
shall have the right to Sublease to any subsidiary, affiliate, or alliance
company without triggering the foregoing right of first refusal.
3. TERM. The term of this Sublease shall be for a period of forty three
(43) months commencing on February 15, 1998 ("Commencement Date"), with Basic
Rent due and payable upon the Commencement Date. The Sublease will expire on
September 14, 2001, unless sooner terminated pursuant to any provision hereof,
or by breach of the terms and conditions of this Sublease.
If for any reason, except as provided for below, SUBLANDLORD has not
delivered possession of the Premises to SUBTENANT by February 15, 1998, in the
condition required hereunder, which shall include completion by SUBLANDLORD, at
its sole cost and expense, of a demising wall separating the existing Premises
and the subleased Premises in a manner reasonably acceptable to SUBTENANT, this
Sublease shall not be void or voidable, nor shall SUBLANDLORD be liable to
SUBTENANT for any loss or damage resulting therefrom: but in such event
SUBTENANT shall not be obligated to pay rent until the date that SUBLANDLORD
delivers possession of the Premises, and the Commencement Date of this Sublease
shall be revised to conform to such date. Notwithstanding the foregoing
sentence, SUBLANDLORD shall not be responsible for any delays whatsoever caused
by or due to the fault of MASTER LANDLORD, or any such delays which may be
caused by, due to, or occur in connection with obtaining MASTER LANDLORD's
consent to this Sublease, or permits from the City of San Jose.
4. BASIC RENT. SUBTENANT shall pay to SUBLANDLORD all Basic Rent for the
Premises according to the following schedule:
-2-
<PAGE> 3
<TABLE>
<CAPTION>
Months Basic Monthly Rental
------ --------------------
<S> <C>
February 15, 1998 - September 30, 1998 $ 79,117.50
October 1, 1998 - January 31, 1999 $108,614.55
February 1, 1999 - January 31, 2000 $111,905.90
February 1, 2000 - January 31, 2001 $115,197.25
February 1, 2001 - September 14, 2001 $118,488.60
</TABLE>
All such Basic Rent shall be payable in advance on the first day of each
calendar month during the Term. SUBTENANT shall deposit with SUBLANDLORD upon
execution of this Sublease the sum of Seventy Nine Thousand One Hundred
Seventeen Dollars and 50/100 ($79,117.50) as Basic Rent for the first month that
Basic Rent is due under this Sublease, namely February 15, 1998 through March
14, 1998. In addition to said Basic Rent, SUBTENANT shall pay its pro-rata share
based on occupied square footage compared to total square footage of the
Premises, of all charges, costs and expense obligations defined as Additional
Rent as set forth in said Master Lease, including any obligations for taxes,
assessments, utilities, and common area costs, and excluding any penalties,
interest, damages, costs or expenses resulting from a default of SUBLANDLORD.
All Basic and Additional Rent ("Rent") shall be paid to SUBLANDLORD at its
address indicated above, or at any other place designated by SUBLANDLORD. Rent
shall be payable without notice or demand and without any deduction, offset, or
abatement, except that Rent shall abate for any portion of the Premises for
which Rent abates under the Master Lease. Rent payable for any portion of a
calendar month shall be a pro rata portion of the installment payable for a lull
calendar month.
5. SECURITY DEPOSIT. Concurrently with SUBTENANT's execution of this
Sublease, SUBTENANT shall deposit with SUBLANDLORD the sum of Two Hundred Thirty
Six Thousand Nine Hundred Seventy Seven Dollars and 20/100 ($236,977.20). Said
sum shall be held by SUBLANDLORD as a Security Deposit for the faithful
performance by SUBTENANT of all the terms, covenants and conditions of this
Sublease to be kept and performed by SUBTENANT during the term hereof. If
SUBTENANT defaults with respect to any provision of this Sublease, including,
but not limited to, the provisions relating to the payment of Rent and any of
the monetary sums due herewith, SUBLANDLORD may (but shall not be required to)
use, apply or retain all or any part of this Security Deposit for the payment of
any other amount which SUBLANDLORD may spend by reason of SUBTENANT's default or
to compensate SUBLANDLORD for any other loss or damage which SUBLANDLORD may
suffer by reason of SUBTENANT's default. If any portion of said Deposit is so
used or applied, SUBTENANT shall, within ten (10) days after written demand
therefor, deposit cash with SUBLANDLORD in that amount sufficient to restore the
Security Deposit to its original amount. SUBTENANT's failure to do so shall be a
material breach of this Sublease. SUBLANDLORD shall not be required to keep this
Security Deposit separate from its general funds, and SUBTENANT shall not be
entitled to interest on such Deposit. So much of the Security Deposit as has not
been properly used, applied, or retained hereunder shall be returned to
SUBTENANT (or at SUBLANDLORD's option, to the last assignee of SUBTENANT's
interest hereunder) at the expiration of the Sublease term and after SUBTENANT
has vacated the Premises. If
-3-
<PAGE> 4
SUBTENANT, during the term of the Sublease, successfully completes an Initial
Public Offering (IPO) and can provide proof and evidence thereof, SUBLANDLORD
shall reimburse to SUBTENANT one-half of the security deposit, One Hundred
Eighteen Thousand Four Hundred Eighty Eight and 60/100 ($118,488.60).
6. USE. SUBTENANT shall use the Premises only for general offices, light
assembly, light manufacturing, storage of electronic components and any other
related legal use in accordance with the Master Lease. SUBTENANT shall not
permit the Premises or any part thereof to be used for any purpose or use in
violation of any law or ordinance, or of the regulation of any governmental
authority, or in any manner that will constitute a nuisance, or in any manner
which would generate or create or emit any toxic waste, hazardous materials, or
environmental damage. SUBTENANT shall not allow any use in violation of any
existing restriction on the Premises. SUBTENANT shall conform its use of the
Premises in every respect to all laws, statutes, ordinances, and regulations now
enforced or hereafter enacted affecting the use of occupancy of the Premises,
provided that SUBTENANT shall not be obligated to correct any condition
pre-dating the Commencement Date for the initial Subleased Premises or the
Expansion Premises, unless the need to comply with such requirement is triggered
by a specific and particular use of the Subleased Premises by SUBTENANT, or by
the construction of alterations by SUBTENANT.
7. ACCEPTANCE OF PREMISES. SUBTENANT acknowledges that the Premises
contain certain existing tenant improvements with which SUBTENANT is familiar.
SUBTENANT agrees that its act of taking possession of the Premises will
constitute its acknowledgment and acceptance that the Premises are in rentable
and good condition, and that SUBLANDLORD makes no representation or warranty of
any kind whatsoever as to the condition or repair of the Premises. Except as
provided for in Section 7.1 below, SUBTENANT acknowledges and hereby agrees that
SUBTENANT is Subleasing the Subject Premises strictly on an "as is" basis, and
that SUBLANDLORD makes no representation or warranty relating to the suitability
of the Premises for SUBTENANT's intended use, or whether said Premises are in
compliance with all applicable building codes, governmental laws, statutes,
ordinances and regulations (e.g. ADA and Title 24 statutes and laws). Any
additional compliance measures regarding ADA shall be sole responsibility of
SUBTENANT, except as otherwise provided herein.
7.1 SUBLANDLORD shall deliver the Premises to SUBTENANT, prior to
SUBTENANT's access, with all building utility systems in good working and
operable condition and with the roof in good condition and repair. Any building
system or component that is altered or damaged during SUBTENANT's access to the
Premises for their operation setup, or thereafter during the term of this
Sublease, by SUBTENANT, its agents, employees or contractors, shall be repaired
at SUBTENANT's expense.
8. INCORPORATION OF MASTER LEASE, ASSUMPTION, TERMINATION OF MASTER
LEASE.
8.1 This Sublease is expressly subject and subordinate to the
terms and conditions of "The Master Lease" attached hereto as Exhibit A. Subject
and except for
-4-
<PAGE> 5
paragraphs 2, 4, 5, 24, 29C, 37, 38, and 41 of the Master Lease, and all
provisions contained in FIRST AMENDMENT TO LEASE AGREEMENT as they apply to this
Sublease, or as otherwise provided herein, all terms and conditions of the
Master Lease are incorporated herein and are deemed a part of this Sublease.
With respect to the obligation to maintain the Premises, SUBLANDLORD shall
continue to maintain the roof membrane, HVAC and other Building systems,
exterior landscaping and common areas as required under the Master Lease, and
SUBTENANT shall pay to SUBLANDLORD its pro rata share of the reasonable costs so
incurred promptly following receipt of written invoice therefor. The basis for
determining the pro rata share of the reasonable costs shall be; (i) an agreed
percentage of such costs if such costs are incurred in the common (shared) areas
of the Premises, proposed by SUBLANDLORD, on the basis of the relative
difference in the square footage of the Building to be occupied by SUBLANDLORD
and by SUBTENANT, to be 47% allocated to SUBTENANT, and after the Expansion
Premises is occupied by SUBTENANT, to be 65% allocated to SUBTENANT, and (ii)
100% allocated to SUBTENANT if such costs involve services rendered for the
primary benefit of the Premises or the Expansion Premises. Subject to Section 10
herein, references to Landlord and Tenant in the Master Lease shall, for
purposes of this Sublease, be deemed to refer to both MASTER LANDLORD and
SUBLANDLORD, and SUBTENANT, respectively, and reference to the Premises (as
defined in the Master Lease) shall refer to the Premises (as defined herein).
8.2 Except as otherwise provided herein, SUBTENANT hereby
expressly assumes and agrees to perform and comply with all obligations required
to be kept or performed by SUBLANDLORD pursuant to the provisions of the Master
Lease with respect to the Premises, to the extent incorporated into this
Sublease. SUBTENANT shall not commit or permit to be committed on the Premises
any act or omission which shall violate any term or condition of the Master
Lease. SUBTENANT agrees to indemnify, defend, hold harmless SUBLANDLORD from any
and all claims, damages, costs, and expenses (including reasonable attorney's
fees) with respect to SUBTENANT's non performance or non observance of any such
term and condition.
8.3 If the Master Lease is terminated, this Sublease shall
terminate simultaneously and the SUBLANDLORD and SUBTENANT shall thereafter be
released from all obligations under this Sublease accruing thereafter (except
that SUBTENANT shall have all of its rights and remedies against SUBLANDLORD if
the Master Lease is terminated as a result of a default by SUBLANDLORD
hereunder, if such default was not the result of a default by SUBTENANT
hereunder, and SUBLANDLORD shall refund to SUBTENANT any unreturned Rent paid in
advance, except as otherwise provided in this Sublease).
9. UTILITIES/SERVICES. SUBLANDLORD will provide domestic water for
building operation and utility water, natural gas, HVAC, electrical power, and
fire protection systems as necessary for the normal operation of the Subleased
Premises, except for those services described below to be obtained directly by
SUBTENANT. Except as otherwise provided herein, SUBTENANT shall pay as
Additional Rent and in accordance with the Master Lease, its share of all
expenses, based on occupied square footage compared to total square footage of
the Premises,
-5-
<PAGE> 6
for all utilities provided to the Premises. SUBTENANT will reimburse to
SUBLANDLORD the actual cost of electrical power supplied to the Premises. The
parties have assumed that each party will consume electrical power at a similar
rate, and the electrical power costs will, therefore, be allocated initially
according to the percentage shares described in section 8.1. However, if either
party determines that the percentage shares do not accurately reflect the actual
consumption of electrical power by the parties, that party may so inform the
other party in writing. For a period of thirty days following receipt of such
notice, the parties will negotiate in good faith to attempt to allocate more
accurately the costs of electrical power, which may include retaining, at the
joint cost of the parties, an independent, qualified electrical consultant to
investigate actual electrical power usage. Provided, however, SUBTENANT shall
obtain, contract for, and pay 100% of all expenses relating to its personal
electronic communications, data and telephone services, its private security
systems, trash, and recycling services provided to the SUBTENANT's Premises.
SUBTENANT's pro-rata share of the Premises shall be 47% for the initial seven
and one-half (7-1/2) months of occupancy. Beginning October 1, 1998, this share
shall increase to 65% for the remainder of the Sublease term provided that if
SUBTENANT subleases the remainder of the Building, pursuant to paragraph 2
herein, its share shall increase to 100%. It is understood and agreed the cost
to sub-meter the Premises has been deemed prohibitive. Any electrical cost
incremental to SUBLESSOR'S normal operation shall be paid by SUBTENANT according
to the square footage allocation. All service, repairs, and maintenance
responsibilities will be listed on attached Schedule A.
10. OBLIGATIONS OF SUBLANDLORD. SUBLANDLORD agrees to maintain the
Master Lease during the Term of this Sublease, subject, however, to any
termination of the Master Lease without the fault of SUBLANDLORD. SUBLANDLORD
agrees to comply with or perform all of its obligations under the Master Lease
that SUBTENANT has not assumed under this Sublease. Provided, however,
SUBLANDLORD, does not assume the obligations required to be kept or performed by
the MASTER LANDLORD under the Master Lease. SUBLANDLORD shall upon written
request by SUBTENANT, fully cooperate with SUBTENANT in enforcing the Master
Lease against MASTER LANDLORD, and SUBTENANT shall reimburse SUBLANDLORD for all
of SUBLANDLORD's costs reasonably incurred in connection therewith. SUBLANDLORD
represents and warrants (i) that the document attached as Exhibit A to this
Sublease is a true, correct and complete copy of the Master Lease, that the
Master Lease represents the entire agreement between SUBLANDLORD and MASTER
LANDLORD with respect to the lease of the Premises, (ii) there is no default, or
any condition which with the passage of time or the giving of notice, or both,
would constitute a default, on the part of either party to the Master Lease,
(iii) SUBLANDLORD has not assigned, encumbered or otherwise transferred any
interest of the Tenant under the Master Lease, and (iv) the scheduled Expiration
Date of the Master Lease is September 14, 2001. SUBLANDLORD shall cooperate with
SUBTENANT as reasonably necessary to obtain the consent of MASTER LANDLORD to
any act for which such consent is required.
11. ALTERATIONS, ADDITIONS, OR IMPROVEMENTS. SUBTENANT shall not make
any alterations, additions or improvements on or to the Premises without first
obtaining the written consent of SUBLANDLORD, which consent will not be
unreasonably withheld or delayed and,
-6-
<PAGE> 7
if required by the Master Lease, the consent of the MASTER LANDLORD. All
permitted alterations, additions and improvements shall be made at the sole
expense of SUBTENANT, and the rights and obligations of the parties regarding
the removal of such alterations, additions and improvements from the Subleased
Premises, and title to the same, shall be governed by Paragraph 10 of the Master
Lease as incorporated herein.
12. ASSIGNMENT OR SUBLEASE. SUBTENANT shall have the Sublease rights of
SUBLANDLORD set forth in Paragraph 29 of the Master Lease, subject to
SUBLANDLORD and MASTER LANDLORD's approval to the extent required hereunder. All
Sublease profits (100%) shall be paid to SUBLANDLORD.
13. HAZARDOUS MATERIALS. Notwithstanding anything contained in Paragraph
18 of the Master Lease, SUBTENANT shall not be entitled to use or store any
Hazardous Materials or Substances on or about the Premises without first
obtaining the express written consent of SUBLANDLORD, which may be given or
withheld in SUBLANDLORD's absolute and sole discretion. Except as otherwise
provided in this Section 13, the provisions of Paragraph 18 of the Master Lease
apply to this Sublease. Provided however, that SUBLANDLORD's consent shall not
be required for normal use, in compliance with applicable Environmental Laws of
customary household and office supplies (SUBTENANT shall first provide
SUBLANDLORD with a list of said materials use), such as mild cleaners,
lubricants and copier toner.
14. BROKERS. SUBLANDLORD and SUBTENANT hereby agree, consent to and
acknowledge that Cooper/Brady Corporate Real Estate Services has represented the
SUBLANDLORD and Colliers Parrish International, Inc. has represented the
SUBTENANT ("Brokers") in connection with this Sublease. SUBLANDLORD and
SUBTENANT represent that no other brokers have been retained in connection with
this Sublease and agree to indemnify, defend and hold harmless the other in
connection with any commission claims brought in connection with their
respective activities on this Sublease. SUBLANDLORD shall pay all commissions
payable to Brokers in connection with this Sublease in accordance with a
separate agreement between SUBLANDLORD and Cooper/Brady Corporate Real Estate
Services.
15. CONSENT OF MASTER LANDLORD. This Sublease requires the consent and
agreement of MASTER LANDLORD and the effectiveness of this Sublease is hereby
expressly conditioned upon receiving such consent. SUBLANDLORD and SUBTENANT
agree to timely execute MASTER LANDLORD's standard Consent to Sublease Agreement
form (a sample copy is provided herein as Exhibit C), which shall be prepared by
MASTER LANDLORD, and shall set forth MASTER LANDLORD's acknowledgment of this
Sublease, and which shall be subject to review and reasonable approval of the
parties. Said Consent shall apply to this Sublease only, and shall not be deemed
as MASTER LANDLORD's consent to any other sublease.
16. MISCELLANEOUS PROVISIONS.
A. SIGNAGE. Notwithstanding anything contained in the Master
Lease, SUBTENANT shall have building signage rights at the front entrance on
North First Street and the subject Premises as reasonably allowed by
SUBLANDLORD, MASTER LANDLORD,
-7-
<PAGE> 8
CITY OF SAN JOSE, and any of the covenant, codes, and restrictions per Master
Lease. All costs of related signage shall be paid by SUBTENANT.
B. SUBTENANT EQUIPMENT. SUBTENANT will require roof access, in
an ongoing process, to inspect and demonstrate equipment related to their
business. Any roof penetrations will be done in accordance with the Master
Lease. Notwithstanding anything contained in the Master Lease, any damage to the
roof through SUBTENANTS actions shall be fully repaired at SUBTENANTS cost.
Subject to the approval of the MASTER LANDLORD, if required by the Master Lease,
SUBTENANT shall have the right to install an LN2 plumbing system, at its sole
cost, in accordance with the Master Lease and this Section 16 of the Sublease,
and conforming to all codes, covenants, and restrictions with the City of San
Jose. SUBTENANT shall conform with all covenants codes and restrictions of the
Master Lease and the City of San Jose.
C. USE OF SUBLANDLORD EMPLOYEES BY SUBTENANT. In the event
SUBTENANT uses any employees of SUBLANDLORD for any of it's purposes for
outfitting or work arrangements, SUBTENANT agrees that it will pay any charge
therefore imposed by SUBLANDLORD and assume the sole liability and
responsibility with respect to any personal injury, including death, or property
damage to or in connection with such use.
D. HOLDING OVER. If SUBTENANT holds over after the expiration of
the Master Lease and SUBLANDLORD pays holdover rent on the entire Premises due
to SUBTENANT's holdover, SUBTENANT shall assume the entire holdover obligation
due under Master Lease.
17. NOTICES. All notices to be given to SUBTENANT may be given in
writing, personally, or by depositing the same in the United States mail,
postage prepaid, addressed to SUBTENANT as provided for herebelow. Any notice or
document required or permitted by this Sublease to be given MASTER LANDLORD or
SUBLANDLORD shall be addressed to MASTER LANDLORD or SUBLANDLORD at the
addresses set forth below, or at such other address as it may have therefore
specified by notice delivered in accordance herewith, and shall be deemed
delivered upon actual receipt or refusal of delivery:
MASTER LANDLORD: North San Jose Interests
c/o Sobrato Development Company
10600 North De Anza Blvd.
Suite 200
Cupertino, CA 95014
SUBLANDLORD: Siemens Pyramid Information Systems
3860 North First Street
Santa Clara, CA 95134
-8-
<PAGE> 9
SUBTENANT: Netro Corporation
3200 Coronado Drive
Santa Clara, CA 95054
IN WITNESS WHEREOF, the parties have executed this Sublease on the date
indicated below.
NETRO CORPORATION, a California corporation
("SUBTENANT")
By: ______________________________
Title: ___________________________
Date: ____________________________
SIEMENS PYRAMID INFORMATION SYSTEMS, INC., a Delaware corporation
("SUBLANDLORD")
By: ______________________________
Title: ___________________________
Date: ____________________________
-9-
<PAGE> 10
AMENDMENT TO SUBLEASE AGREEMENT
This Amendment to the Sublease Agreement dated for reference December 15, 1997,
between Siemens Pyramid Information Systems, Inc. ("SubLandlord") and Netro
Corporation ("SubTenant"), amends the Sublease by providing in Section 2,
Expansion Premises, that SubTenant has until November 1, 1998 to sublease and to
commence paying rent on the Expansion Premises.
EXCEPT AS PROVIDED IN THIS AMENDMENT, ALL TERMS AND CONDITIONS OF THE SUBLEASE
SHALL REMAIN IN FULL FORCE AND EFFECT.
IN WITNESS WHEREOF, the parties have executed this Amendment to Sublease on the
date indicated below.
NETRO CORPORATION, a California corporation
By: ______________________________
Title: ___________________________
Date: ____________________________
SIEMENS PYRAMID INFORMATION SYSTEMS, INC., a Delaware corporation
By: ______________________________
Title: ___________________________
Date: ____________________________
<PAGE> 1
Exhibit 10.6.2
LANDLORD'S CONSENT TO SUBLEASE
North San Jose Interests, a California limited partnership, as successor
in interest to John A. Sobrato, Trustee under trust agreement dated August 29,
1979, as Amended, Sobrato Interest II, a California general partnership, and
John Michael Sobrato or his successor, Trustee Under Revocable Trust Agreement
dated April 28, 1989, as amended, FBO Ann Sobrato ("Landlord"), as Landlord
under that certain Lease (the "Lease") dated May 30, 1990 and a First Amendment
to Lease dated March 12, 1991, by and between Landlord and Siemens Pyramid
Information Systems, Inc., a Delaware corporation ("Tenant"), as Tenant, subject
to and specifically conditioned upon the following terms and conditions hereby
grants its consent to the Sublease dated December 15, 1997 made by and between
the Tenant, as sublandlord, and Netro Corporation, a California corporation
("Subtenant"), as subtenant, a copy of which is attached as Exhibit A ("the
Sublease"), covering that certain premises (the "Premises") commonly known as
3860 North First Street, San Jose, California.
As conditions to the consent of Landlord to the Sublease, it is
understood and agreed as follows:
1. NO RELEASE. This Consent to Sublease shall in no way release the
Tenant or any person or entity claiming by, through or under Tenant, including
Subtenant, from any of its covenants, agreements, liabilities and duties under
the Lease, as the same may be amended from time to time, without respect to any
provision to the contrary in the Sublease.
2. SPECIFIC PROVISIONS OF LEASE AND SUBLEASE. This Consent to
Sublease consenting to a sublease to Subtenant does not constitute approval by
Landlord of any of the provisions of the Sublease document or agreement thereto
or therewith; nor shall the same be construed to amend the Lease in any respect,
any purported modifications being solely for the purpose of setting forth the
rights and obligations as between Tenant and Subtenant, but not binding
Landlord. The Sublease is, in all respects, subject and subordinate to the
Lease, as the same may be amended. Furthermore, in the case of any conflict
between the provisions of this Consent to Sublease or the Lease and the
provisions of the Sublease, the provisions of this Consent to Sublease or the
Lease, as the case may be, shall prevail unaffected by the Sublease.
3. LIMITED CONSENT. This Consent to Sublease does not and shall not
be construed or implied to be a consent to any other matter for which Landlord's
consent is required under the Lease, including, without limitation, any
Alterations under the Lease.
4. TENANT'S CONTINUING LIABILITY. Tenant shall be liable to
Landlord for any default under the Lease, whether such default is caused by
Tenant or Subtenant or anyone claiming by or through either Tenant or Subtenant,
but the foregoing shall not be deemed to restrict or diminish any right which
Landlord may have against Subtenant pursuant to the Lease, in law or in equity
for violation of the Lease or otherwise, including, without limitation, the
right to enjoin or otherwise restrain any violation of the Lease by Subtenant.
5. DEFAULT BY TENANT UNDER THE LEASE. If Tenant defaults under the
Lease, Landlord may elect to receive directly from Subtenant all sums due or
payable to Tenant by
<PAGE> 2
Subtenant pursuant to the Sublease. Upon written notice from Landlord, Subtenant
shall thereafter pay to Landlord any and all sums due or payable under the
Sublease. In such event, Tenant shall receive from Landlord a corresponding
credit for such sums against any payments then due or thereafter becoming due
from Tenant.
6. TERMINATION OF LEASE. If at any time prior to the expiration of
the term of the Sublease the Lease shall terminate or be terminated for any
reason, the Sublease shall simultaneously terminate. However, Subtenant agrees,
at the election and upon written demand of Landlord, and not otherwise, to
attorn to Landlord for the remainder of the term of the Sublease, such
attornment to be upon all of the terms and conditions of the Lease, except that
the Base Rent set forth in the Sublease shall be substituted for the Base Rent
set forth in the Lease and the computation of Additional Rent as provided in the
Lease shall be modified as set forth in the Sublease. The foregoing provisions
of this paragraph shall apply notwithstanding that, as a matter of law, the
Sublease may otherwise terminate upon the termination of the Lease and shall be
self-operative upon such written demand of the Landlord, and no further
instrument shall be required to give effect to said provisions. Upon the demand
of Landlord, however, Subtenant agrees to execute, from time to time, documents
in confirmation of the foregoing provisions of this paragraph satisfactory to
Landlord in which Subtenant shall acknowledge such attornment and shall set
forth the terms and conditions of its tenancy.
7. SUBLEASE PROFITS. Pursuant to Section 29 of the Lease, provided
the Sublease remains in full force and effect, Tenant agrees to pay to Landlord
each month along with the base monthly rent due under the Lease, the sum
outlined on the attached spreadsheet representing Landlord's fifty percent (50%)
share of the amount by which the consideration received pursuant to the Sublease
exceeds the amount due to Landlord under the Lease less the reasonable
subletting costs.
8. NO WAIVER; NO PRIVITY. Nothing herein contained shall be deemed
a waiver of any of the Landlord's rights under the Lease. In no event, however,
shall Landlord be deemed to be in privity of contract with Subtenant or owe any
obligation or duty to Subtenant under the Lease or otherwise, any duties of
Landlord under the Lease being in favor of, for the benefit of and enforceable
solely by Tenant.
9. NOTICES. Subtenant agrees to promptly deliver a copy to Landlord
of all notices of default and all other notices sent to Tenant under the
Sublease, and Tenant agrees to promptly deliver a copy to Landlord of all such
notices sent to Subtenant under the Sublease. All copies of any such notices
shall be delivered personally or sent by United States registered or certified
mail, postage prepaid, return receipt requested, to Landlord.
-2-
<PAGE> 3
LANDLORD
North San Jose Interests, a California limited partnership
by ___________________________________
its __________________________________
TENANT
Siemens Information Systems, Inc., a Delaware corporation
by ___________________________________
its __________________________________
SUBTENANT
Netro Corporation, a California corporation
by ___________________________________
its __________________________________
-3-
<PAGE> 4
Siemens Pyramid Information Systems, Inc./Netro, Inc. Sublease Profit Schedule
<TABLE>
<CAPTION>
2/15/98 6/15/98 10/1/98 2/1/99 2/1/00 2/1/01
------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Siemens rent: $64,732.50 CPI* CPI* CPI* CPI* CPI*
Netro rent: 79,117.50 $79,117.50 $108,614.55 $111,905.90 $115,197.25 $118,488.60
---------- ---------- ----------- ----------- ----------- -----------
Profit per month: $14,385.00 TBD** TBD** TBD** TBD** TBD**
SDC 50% share/mos: $ 7,192.50
</TABLE>
* CPI increase will be 7.5% and 20%.
** To be Determined
<PAGE> 1
Exhibit 10.7
GLOBAL OEM PURCHASE AGREEMENT
BETWEEN
LUCENT TECHNOLOGIES INC.
AND
NETRO CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION A: PRODUCT SPECIFIC TERMS AND CONDITIONS.................................................................1
ARTICLE 1 - MATERIAL .............................................................................................1
ARTICLE 2 - AGREEMENT EFFECTIVE PERIOD............................................................................1
ARTICLE 3 - PRICE AND DISCOUNTS...................................................................................1
ARTICLE 4 - PAYMENT TERMS.........................................................................................3
ARTICLE 5 - FOB ..................................................................................................3
ARTICLE 6 - FREIGHT CLASSIFICATION................................................................................3
ARTICLE 7 - NON-EXCLUSIVE MARKET RIGHTS...........................................................................3
ARTICLE 8 - SPECIFICATIONS OR DRAWINGS............................................................................4
ARTICLE 9 - SOFTWARE LICENSE GRANT................................................................................4
ARTICLE 10 - PRODUCT DOCUMENTATION................................................................................4
ARTICLE 11 - INSPECTION...........................................................................................5
ARTICLE 12 - QUALITY .............................................................................................5
ARTICLE 13 - PACKING, LABELING AND SERIALIZATION.................................................................10
ARTICLE 14 - PURCHASE ORDERS.....................................................................................10
ARTICLE 15 - SHIPPING INTERVAL...................................................................................10
ARTICLE 16 - WARRANTY ...........................................................................................12
ARTICLE 17 - RADIATION, SAFETY AND NETWORK COMPLIANCE STANDARDS..................................................13
ARTICLE 18 - REPAIRS NOT COVERED UNDER WARRANTY..................................................................15
ARTICLE 19 - REPAIR PROCEDURES...................................................................................16
ARTICLE 20 - CONTINUING AVAILABILITY AND ENHANCEMENT.............................................................16
ARTICLE 21 - TECHNICAL SUPPORT...................................................................................18
ARTICLE 22 - TRAINING ...........................................................................................18
ARTICLE 23 - MARKING ............................................................................................18
ARTICLE 25 - NOTICES ........................................... ................................................18
ARTICLE 26 - VARIATION IN QUANTITY...............................................................................19
ARTICLE 27 - SHIPPING ...........................................................................................19
ARTICLE 28 - INVOICING...........................................................................................19
ARTICLE 29 - TITLE AND RISK OF LOSS..............................................................................20
ARTICLE 30 - DEFAULT ............................................................................................20
ARTICLE 31 - SURVIVAL OF OBLIGATIONS.............................................................................20
ARTICLE 32 - INFRINGEMENT........................................................................................20
ARTICLE 33 - INFORMATION.........................................................................................21
ARTICLE 34 - IDENTIFICATION......................................................................................23
ARTICLE 35 - INSIGNIA ...........................................................................................23
ARTICLE 36 - THIS ARTICLE INTENTIONALLY LEFT BLANK...............................................................24
ARTICLE 37 - COMPLIANCE WITH LAWS................................................................................24
ARTICLE 38 - FORCE MAJEURE.......................................................................................24
ARTICLE 39 - ASSIGNMENT..........................................................................................24
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 40 - TAXES ..............................................................................................24
ARTICLE 41 - GOVERNMENT CONTRACT PROVISIONS......................................................................24
ARTICLE 42 - RIGHT OF ENTRY......................................................................................24
ARTICLE 43 - RELEASES VOID.......................................................................................25
ARTICLE 44 - SERVICES ...........................................................................................25
ARTICLE 45 - IMPLEADER...........................................................................................25
ARTICLE 46 - TOXIC SUBSTANCES AND PRODUCT HAZARDS................................................................25
ARTICLE 47 - CHLOROFLUOROCARBONS.................................................................................26
ARTICLE 49 - INDEMNITY...........................................................................................27
ARTICLE 50 - CHOICE OF LAW.......................................................................................27
ARTICLE 51 - SEVERABILITY........................................................................................28
ARTICLE 52 - CLAUSE HEADINGS.....................................................................................28
ARTICLE 53 - WAIVER .............................................................................................28
ARTICLE 54 - ENTIRE AGREEMENT....................................................................................28
ARTICLE 55 - MONTHLY ORDER AND SHIPMENT REPORTS..................................................................28
ARTICLE 56 - OPTION TO EXTEND....................................................................................28
ARTICLE 57 - NEW AND CHANGED METHODS, PROCESSES AND EQUIPMENT....................................................29
ARTICLE 58 - SAMPLES ............................................................................................29
ARTICLE 59 - THIS ARTICLE INTENTIONALLY LEFT BLANK...............................................................29
ARTICLE 60 - OZONE DEPLETING SUBSTANCES LABELING.................................................................29
ARTICLE 61 - HEAVY METALS AND/OR CFC IN PACKAGING................................................................30
ARTICLE 62 - MEDIATION...........................................................................................30
ARTICLE 63 - ELECTRONIC DATA INTERCHANGE (EDI)...................................................................30
ARTICLE 64 - BAR CODE SHIPPING AND RECEIVING LABELS..............................................................30
ARTICLE 65 - THIS ARTICLE INTENTIONALLY LEFT BLANK...............................................................31
ARTICLE 66 - AUDIT ..............................................................................................31
ARTICLE 67 - RECORDS ............................................................................................31
ARTICLE 68 - THIS SECTION INTENTIONALLY LEFT BLANK...............................................................31
ARTICLE 69 - INSTALLATION/CUTOVER ASSISTANCE.....................................................................31
ARTICLE 70 - EMERGENCY SERVICE...................................................................................31
ARTICLE 71 - INVOICING FOR GOODS.................................................................................32
ARTICLE 72 - YEAR 2000 WARRANTY..................................................................................32
</TABLE>
-3-
<PAGE> 4
LUCENT TECHNOLOGIES INC.
GLOBAL PURCHASING ORGANIZATION
GUILFORD CENTER
P.O. BOX 25000
GREENSBORO, NC 27420-5000
PHONE 336-279-7000
Netro Corporation Contract No. GN11980056
Building 3 Page 1 of 35
3860 North First Street
San Jose, CA 95134
This Agreement is made by and between Lucent Technologies Inc. (hereinafter
"Company") having an office at 1600 Osgood Street, North Andover, MA 01845, and
Netro Corporation (hereinafter "Supplier") having an office at 3860 North First
Street (Building 3), San Jose, CA 95134.
SECTION A: PRODUCT SPECIFIC TERMS AND CONDITIONS
ARTICLE 1 - MATERIAL
"MATERIAL" as used in this Agreement shall mean Supplier's broadband, point - to
multipoint, wireless access network products as specified in Appendix C. Such
MATERIAL is hereby offered for sale by Supplier and may be purchased by Company
in accordance with the terms, conditions and specifications stated in this
Agreement. This Agreement is a non-commitment agreement and MATERIAL shall be
furnished by Supplier on an as-ordered basis.
The parties acknowledge that Company reserves the right to manufacture MATERIAL
covered under this Agreement and similar products in Company's own facility and
that the manufacture of such MATERIAL may have a substantial impact on Company's
future purchases under this Agreement. Company will give Supplier written notice
nine months in advance of shipment of the first finished product of any new
Company product line which operates in the same frequency band and is intended
to be a competing or replacement product for the MATERIAL covered by this
agreement.
ARTICLE 2 - AGREEMENT EFFECTIVE PERIOD
The term of this Agreement shall commence on the execution date of this
Agreement and shall, continue in effect thereafter for three full years.
ARTICLE 3 - PRICE AND DISCOUNTS
[***] GHz MATERIAL shall be defined as point to multipoint products designed to
operate within a system whose air interface is within the range of [***] to
[***] GHz. Non-*** GHz MATERIAL
- ---------
[***] Confidential Treatment Requested.
<PAGE> 5
shall be defined as those products designed to operate within a system whose air
interface is outside this range.
Prices and discounts for [***] GHz and non-[***] GHz products shall be as shown
in Appendix A. Prices and discounts as listed in Appendix A shall remain in
effect during the term of this Agreement. In addition, for non-[***] GHz
products, Supplier agrees to furnish MATERIAL to Company on terms and conditions
(including price) as favorable as provided to any of Supplier's other
distributors with similar volumes of MATERIAL being purchased from Supplier. In
the event that the Company and the Supplier reach an agreement for Company
funding of an accelerated development of the Supplier's [***] GHz products,
Supplier agrees to furnish MATERIAL to Company on terms and conditions (not
including price) as favorable as provided to any of the Supplier's other
distributors with similar volumes of MATERIAL being purchased from Supplier. In
addition, for two years from the first commercial delivery of [***] GHz MATERIAL
to Company, Supplier agrees to supply [***] GHz MATERIAL to Company at a price
at least [***] lower than provided to any of the Supplier's other distributors
with similar volumes.
A target customer list is shown in Appendix D. Supplier agrees that MATERIAL
furnished to Company will be priced at least [***] percent [***] below the
price at which Supplier furnishes MATERIAL to any direct end user customers on
the then current target list who make purchases of similar annual volume.
Customers may be added or deleted from the target customer list by mutual
consent of both Company and Supplier.
Discount Calculation:
For the purposes of calculating the pricing discounts under this Agreement, the
annual value for quantities of MATERIAL ordered by Company will be measured in
one-year intervals starting from the execution date of this Agreement. For
MATERIAL ordered by Company during each one-year period, for delivery within
that same one-year period, Supplier shall provide a pricing discount to Company
established at the maximum discount level for the maximum value for aggregate
quantities of MATERIAL to be ordered by Company. Discounts and values for
quantities of MATERIAL are shown on Appendix A. Should the total annual value of
Company's aggregate orders for MATERIAL, for delivery within that same one-year
period, covered under this Agreement fall short of the aggregate value of orders
established for Supplier's pricing discount, Company shall reimburse Supplier
for the difference in price between the price for quantities of MATERIAL ordered
at the lower discount level and the price invoiced to Company at the higher
discount level.
Notwithstanding the above, should Supplier be unable to deliver Company's
required quantities, per MATERIAL description shown in this Agreement and
ordered within the one-year interval periods stated herein, Company shall not be
required to reimburse Supplier the value for shortfall quantities shown in
Appendix A.
- ---------
[***] Confidential Treatment Requested.
-2-
<PAGE> 6
Price Revision
Prices shown in this Agreement shall be reviewed every six months after the
inception date of this Agreement for the purpose of mutually determining price
revision. In addition, should the parties mutually determine that prices should
be reviewed prior to the six months review period, either party may initiate a
review of prices under this Agreement by giving written notice to the other at
least sixty (60) days prior to the proposed effective date of such price review.
If the parties fail to agree upon revised prices by the proposed effective date
of price review, then at no obligation or liability to Company, Company reserves
the right to cease placing future orders with Supplier. Company's orders which
Supplier has in Supplier's possession shall be invoiced at current contract
prices.
ARTICLE 4 - PAYMENT TERMS
Invoices shall be paid in accordance with the terms in this Agreement, and due
dates for payment shall be computed from the date of receipt of invoices by
Company. Payment terms are net 45 days.
ARTICLE 5 - FOB
The MATERIAL shall be shipped FOB San Jose, California, freight charges collect
except RPS if available, otherwise UPS of which either will be prepaid and
billed.
ARTICLE 6 - FREIGHT CLASSIFICATION
MATERIAL purchased under this Agreement shall be shipped to Company or Company's
customers subject to freight charges appropriate for goods classified as Set,
Radio IMP/Wireless Released Value not exceeding $3 per pound.
ARTICLE 7 - NON-EXCLUSIVE MARKET RIGHTS
It is expressly understood and agreed that this Agreement neither grants to
Supplier an exclusive right or privilege to sell to Company any or all products
of the type described in the "MATERIAL" clause which Company may require, nor
requires the purchase of any MATERIAL or other products from Supplier by
Company. It is, therefore, understood that Company may contract with other
manufacturers and suppliers for the procurement of comparable products. In
addition, Company shall, at its sole discretion, decide the extent to which
Company will market, advertise, promote, support or otherwise assist in further
offerings of the MATERIAL.
In accordance with the notification requirements outlined in Article 25,
NOTICES, Supplier shall provide Company with at least thirty (30) days prior
written notice of any change (including any updates of enhancements) proposed to
be made by Supplier in the MATERIAL furnished pursuant to said Specification
under this Agreement.
-3-
<PAGE> 7
Supplier agrees that purchases by Company under this Agreement shall neither
restrict the right of Company to cease purchasing nor require Company to
continue any level of such purchases.
This Agreement shall not prohibit Supplier from selling MATERIAL to third
parties or directly to end users in any country or market.
Company agrees to provide Supplier reasonable and timely notice in the event
Company intends to provide a customer competing MATERIAL from an alternate
vendor. Supplier agrees to provide Company with a list of Supplier's other
worldwide OEM partners. Further, Supplier agrees to give Company reasonable and
timely notice in the event that Supplier forms or intends to form any new
worldwide OEM relationships.
ARTICLE 8 - SPECIFICATIONS OR DRAWINGS
Specifications are shown in Appendix C attached and made a part of this
Agreement.
In accordance with the notification requirements outlined in Article 25,
NOTICES, Supplier shall provide Company with at least thirty (30) days prior
written notice of any MATERIAL change in form, fit or function that would change
Company or Company's customer's network proposed to be made by Supplier in the
MATERIAL furnished pursuant to said Specification under this Agreement.
If Company, in its sole discretion, does not agree to the change proposed by
Supplier, then in addition to all other rights and remedies at law or equity or
otherwise, and without any cost to or liability or obligation of Company,
Company shall have the right to terminate any or all purchase orders for
MATERIAL affected by such change.
ARTICLE 9 - SOFTWARE LICENSE GRANT
Except as stated otherwise in this Agreement, Company shall have a world-wide,
non-exclusive, royalty-free, perpetual, license transferable with the MATERIAL
to use, reproduce and sublicense all software furnished to Company by Supplier
under this Agreement. Company will not reverse compile or disassemble the
software, nor will Company reproduce the software for the purpose of furnishing
it to others.
ARTICLE 10 - PRODUCT DOCUMENTATION
Supplier agrees to furnish, at no charge, product documentation, and any
succeeding changes thereto, as described in the Technical Specification. Company
may use, reproduce, reformat, modify and distribute such product documentation.
Company agrees to reproduce Supplier's copyright notice contained in any
documentation reproduced without change by Company. For documentation which is
reformatted or modified by Company, Company shall have the right to place only
Company's own copyright notice on the reformatted or modified documentation. It
is the intent of the parties that Company's
-4-
<PAGE> 8
copyright notice shall be interpreted to protect the underlying copyright rights
of Supplier to the documentation to the extent such underlying rights are owned
by Supplier. Supplier will correct promptly, by providing replacement or
updates, any defects in Documentation which the Supplier becomes aware of and/or
about which the Company notifies the Supplier, that may result in a product
service loss or could result in a safety hazard.
ARTICLE 11 - INSPECTION
Source Inspection is required and Supplier shall notify the resident Company
quality representative or the Company's Engineering & Environmental Technologies
- - Supplier Quality Services (E&ET-SQS), P.O. Box 900, Princeton, NJ 08542-0900m
Tel. 609-639-3168. Overnight mail should be addressed to Route 569, Carter Road,
Hopewell, NJ 08525. Arrangements will be made by Company for inspection of
MATERIAL five (5) days prior to shipment. Supplier shall provide, without
charge, any production testing facilities and personnel requirement to inspect
the MATERIAL under Quality Program Specification QPS 20.171 which may be changed
from time to time with Supplier's written approval, which specifications will be
attached and made a part of this Agreement to determine that the MATERIAL meets
the requirements of the specifications. Company shall have the right to review
the test setups test procedures, and test data used by Supplier in meeting the
specifications. After the MATERIAL has been manufactured and is ready for
shipment to Company, Supplier shall contact E&ET-SQS for source inspection of
the product prior to its shipment. The average E&ET-SQS response time shall be
two business days and not to exceed five (5) business days. Failure of Company
to inspect MATERIAL at the announced date will not prevent Supplier from
invoicing Company for the MATERIAL to be shipped.
ARTICLE 12 - QUALITY
(a) Supplier commits to ensure that all manufacturing, and design
operations, including any key sub-contractor, or contract manufacturing
suppliers, which contribute to the design, development, production,
delivery and service of material are ISO 9000 registered by an
accredited Registrar have an equal registration (in case of overseas
supplier).
(b) Supplier commits to having a continuous improvement program in place
which will allow it to attain and maintain "acceptable" ratings (or
equivalent) on all quality system elements per Supplier Capability
Assessment (SCA), or other type of Company assessment, as periodically
performed by Company. An "acceptable" element is defined as one where
the quality system meets the "general intent" of the quality system
element and is fully implemented to maintain the quality system and
product quality. No significant deficiencies encountered that would
jeopardize the quality system, and product quality and/or reliability.
(c) Supplier commits to establish quality control (QC) verification points
throughout the manufacturing process. These verification points should
be located in-process as well as after MATERIAL has completed all
manufacturing operations. The scope of these QC verification points
shall be to valid through visual and mechanical inspections and tests,
-5-
<PAGE> 9
and with the use of statistically valid sampling plans, that MATERIAL
conforms to Supplier's manufacturing, product and process
specifications, standards of acceptable workmanship, as well as other
specification's which may be provided by Company. Company reserves the
right to review these QC points and make suggestions for improvement.
Supplier commits to address these suggestions through the
implementation of appropriate corrective actions.
(d) Supplier commits to establish an end of the line Quality Assurance
product audit on material by 12/1/98. The focus of this audit shall be
to replicate user application of MATERIAL as specified by Company's
customer. Test and examination of MATERIAL under the quality audit
shall be at a system level, and shall include but is not limited to:
a) Exercising said MATERIAL over the full spectrum of temperature
ranges over which MATERIAL is designed to operate.
b) Full operation of MATERIAL over a period of time not less than
to ensure best practice and quality.
c) A system for continuous monitoring of all primary and
ancillary product functions and fault detection of the
MATERIAL while under this test.
Supplier shall continuously review customer return data to ensure that
the scope of the product quality assurance audit function includes the
requirement(s)/condition(s) under which the return failed.
Supplier shall perform a detailed failure mode analysis of all MATERIAL
found defective through the quality assurance audit in line with the
requirements and process outlined in paragraph F.
Supplier agrees to provide to Company on a monthly basis, results of
the quality assurance product audit in a format specified by Company.
(e) Supplier commits to establishing a program of tracking return rates.
The following is the suggested method for tracking, calculating, and
tracking customer returns. Company and supplier may mutually agree to
modify this method as appropriate. MATERIAL which has been in operation
for any period of time up to, and including one full year shall be
considered part of this tracking program. For the purpose of this
article, the term "product" shall be used to define the lowest
replaceable unit (lru) of MATERIAL supplied to Company.
For the purpose of calculating the return rate, the following
definitions apply:
RTM(x) = The quantity of lru's which were manufactured in the Target
Month;(x) that have been returned during the period beginning the 4th
month after the Target Month and ending the 15th month from the Target
Month.
-6-
<PAGE> 10
PTM(x) = The total number of lru's in the Target Month;(x).
All returns will be included in the calculation of the return rate
including, but not limited to, failures, no trouble founds, and
recalls.
A Target Quarter Return Rate (TQRR) is to be calculated using the
following equation:
TQRR = 10,000 x [[RTM(l)+RTM(2)+RTM(3)]/[PTM(l)+PTM(2)+PTM(3)]]
Where:
"(1)" refers to the first month of the Target Quarter "(2)" refers to
the second month of the Target Quarter "(3)" refers to the third month
of the Target Quarter
This calculation shall be made on a quarterly basis for the product
manufactured under this contract.
The Supplier agrees to update and report TQRR's on a quarterly basis to
Company, and to comply with the Annual Return Rate (ARR) requirement in
accordance with the following schedule:
<TABLE>
<CAPTION>
System Component MTBF(yrs) ARR(1st yr) (2nd yr) (3rd yr EOL)
<S> <C> <C> <C> <C>
Base Station Shelf [***] [***] [***] [***]
Base Sector Controller [***] [***] [***] [***]
Base Modem Unit [***] [***] [***] [***]
Base Radio Unit [***] [***] [***] [***]
Subscriber Access System [***] [***] [***] [***]
Subscriber Radio Unit [***] [***] [***] [***]
</TABLE>
The ARR is 10,000 times the summation of the number of returns received
for the Target Months of the Manufacture Year divided by the summation
of the manufacturing populations for the Target Months of the
Manufacture Year. Supplier commits to provide to company on a monthly
basis, the cumulative year to date results of the ARR until the annual
measurement requirement is due.
(f) Supplier commits to establishing a system for tracking and analysis all
MATERIAL returned by Company to it, as well as any MATERIAL failures
which occur through the company's end of the line quality assurance
audit. For all MATERIAL in the above two categories, supplier shall
perform a failure mode analysis, which at a minimum will be down to the
component level. Component level failure modes will be recorded, and
failed components found defective will be accumulated for the purpose
of determining repetitive occurrences.
- ---------
[***] Confidential Treatment Requested.
-7-
<PAGE> 11
Material shall be considered defective if it fails to meet the warranty
specifications under this Agreement (including performance and
appearance Specifications) or if during customer testing, installation,
or use, the MATERIAL fails to operate as expected or specified.
If the analysis of a Company return is found to be within the
specifications of this agreement (i.e., a no trouble found condition),
then Supplier shall track these no trouble found conditions and notify
Company of said findings at a minimum of a monthly interval, so that
appropriate investigative measures may be taken to determine the root
cause.
(G) If a Target Quarter Return Rate (TQRR) is found to exceed the
applicable ARR requirements specified in paragraph E, or repetitive
occurrences are observed with regard to component level failures then
the supplier shall provide a written Corrective Action Report to the
Company, explaining in detail the nature of the problem detected, and
the step(s) Supplier proposes to correct the problem. As part of the
plan to correct the problem, it is agreed that the Supplier shall:
a) Incorporate the remedy in affected MATERIAL.
b) Ship all subsequent MATERIAL incorporating the required
modification correcting the problem at no additional charge to
Company; and
c) Repair and/or replace previously shipped MATERIAL that may
contain the same problem trend. In the event that Company
incurs costs due to such repair and/or replacement, including
but not limited to labor and shipping costs, Supplier shall
reimburse Company for such costs. Supplier shall bear risk of
in transit loss and damage for such repaired and/or replaced
MATERIAL.
Supplier and Company shall mutually agree in writing as to the
implementation schedule of the corrective action plan. Supplier agrees
to use its best efforts to implement the plan in accordance with the
agreed upon schedule. It is also agreed that the Company shall be
entitled to postpone at no charge to Company, further deliveries of
orders until such time as the remedy is implemented consistent with
this Article.
(H) As part of a program of continuous improvement, Supplier agrees to
establish annually, improvement goals for a series of key quality
objectives. These goals should include, but are not limited to a)
customer return rates as specified in Article E, b) Quality Assurance
product quality audit defect rates, c) final system test yields.
Supplier agrees to track these goals on a monthly basis, and to commit
the resources necessary for the attainment of these goals.
(I) The following paragraph Summarizes the requirements for providing data
and information to Company as per paragraphs A through H.
-8-
<PAGE> 12
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Ref. Company's
Par. # Data Required Frequency Recipient
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A Corrective Action Response to As dictated by Assessment Lead Assessor Assessment
B ISO Registration copies When requested by Company To be specified by Company
C Corrective Action response to As dictated by the audit To be specified by Company
company's audit of QC practices
D Quality Assurance Results Monthly Company's quality QA contact
E Monthly Return Rate data Quarterly Company's quality QA contact
E Annual Return Rate Summary Results Monthly Company's quality QA contact
F "No trouble founds" summary Monthly Company's quality QA contact
data on customer returns
G Corrective Action Report As dictated by Supplier's data on Company's quality QA contact
repetitive component level failure
mode analysis (FMA) on customer
returns
G Corrective Action Report If return rates exceed Company's quality QA
pre-established thresholds per contact paragraph E
H Quality Improvement Goals Annually Company's quality QA contact
FMA Based on persistent history of To be specified by Company
similar of failure or as requested
Change in Manufacturing Location To be specified by Company
Change in Key Management or programs To be specified by Company
Major Process Changes To be specified by Company
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(J) In the event that the Supplier 1) exceeds the Annual Return Rate
established in Article E by more than [***] during any period of three
months or more, then Company may cancel or postpone other orders.
Supplier reserves the right to instruct Company to return all MATERIAL
that is affected by the problem for full refund, payable by Supplier to
Company within thirty (30) days after receipt of returned material
(with risk of loss or in-transit damage to be borne by Supplier).
- ---------
[***] Confidential Treatment Requested.
-9-
<PAGE> 13
In the event that Supplier fails to complete and issue Corrective Action Reports
as required in Article G, Company may put Supplier on notice that continued
non-compliance for more than 30 days could result in cancellation or
postponement of orders.
ARTICLE 13 - PACKING, LABELING AND SERIALIZATION
MATERIAL purchased, repaired, replaced or refurbished under this Agreement shall
be packed, labeled and serialized by Supplier at no additional charge in
accordance with WES specifications attached hereto and made a part hereof as
changed from time to time with Supplier's written approval, which specifications
are attached and made a part of this Agreement.
ARTICLE 14 - PURCHASE ORDERS
Purchase orders issued under this Agreement shall be sent to the following
address:
Netro Corporation
3860 North First Street (Bldg. 3)
San Jose, CA 95134
Attention: Sales Department
Purchase orders shall specify: (a) description of MATERIAL, inclusive of any
numerical/ alphabetical identification referenced in the price list in this
Agreement, (b) delivery date, (c) applicable price, (d) location to which the
MATERIAL is to be shipped and (e) location to which invoices shall be sent for
payment.
Company shall be allowed to reschedule orders in accordance with following
terms:
<TABLE>
<S> <C>
0-30 days [***]
30-60 days Up to [***] of Order Value may be rescheduled
60+ days [***] rescheduling
</TABLE>
Company will use reasonable efforts to avoid excessive rescheduling.
Forecasts: Company shall strive to provide Supplier with six-month rolling
forecasts which will be updated monthly. Such forecasts shall not constitute a
commitment by Company.
ARTICLE 15 - SHIPPING INTERVAL
The delivery schedule applicable to each purchase order will be agreed upon by
Supplier and Company and set forth in the purchase order. (Note: Supplier has
indicated that MATERIAL can be shipped within the time interval shown in
Appendix B).
- ---------
[***] Confidential Treatment Requested.
-10-
<PAGE> 14
In the event that Supplier exceeds the above maximum interval, then in addition
to all other rights and remedies at law or equity or otherwise, and without any
liability or obligation of Company, Company shall have the right to: (a) cancel
such purchase order, or (b) extend such delivery date to a later date, subject,
however, to the right to cancel as in (a) preceding if delivery is not made or
performance is not completed on or before such extended delivery date. If
Company elects to extend such delivery date, Supplier agrees to absorb the
difference between the charges to ship normal transportation and the charges to
ship premium overnight.
Supplier acknowledges that a pattern of failure to deliver fully conforming
MATERIAL within the time specified in this Agreement or in an order placed
pursuant to this Agreement will cause serious damage to Company. If a pattern of
late or non-conforming delivery emerges, Supplier agrees to pay to Company, as
liquidated damages sustained by Company resulting from such delays, and not as a
penalty, sums shown in the following table:
No penalty during 10 day grace period
1 % per week following grace period
maximum 7% penalty
Company shall have the right to offset amounts owed to it as liquidated damages
under this clause against any amounts owed to Supplier under this Agreement,
under any orders placed pursuant to this Agreement, or under any other
agreement.
In addition to the payment of liquidated damages for ordered MATERIAL,
Supplier's failure to deliver conforming MATERIAL within the time specified in
this Agreement or such order, shall give Company the right at any time to cancel
this Agreement or any orders, placed pursuant to this Agreement, in whole or in
part, and to place no future orders under this Agreement. If Company elects to
cancel an order on which liquidated damages for late delivery are still
accruing, such accrual shall cease on the effective date of the cancellation.
These provisions concerning late delivery of conforming material are intended to
be and shall be cumulative and in addition to every other remedy now or
hereafter possessed by Company for other than late delivery, including but not
limited to its rights to recover damages under the WARRANTY clause in this
Agreement.
Company shall be allowed to cancel purchase orders or items within purchase
orders subject to the following fee schedule:
<TABLE>
Days from Scheduled Delivery Charge for Cancellation
<S> <C>
0-30 days [***] of reduction $
30-60 days [***] of reduction $
60+ days [***] of reduction $
90+ days [***] of reduction
</TABLE>
- ---------
[***] Confidential Treatment Requested.
-11-
<PAGE> 15
ARTICLE 16 - WARRANTY
Supplier warrants to Company and Customers, as defined in this clause, that
MATERIAL furnished will be new, merchantable, free from defects in design
(except to the extent designed by Company), material and workmanship and will
conform to and perform in accordance with the specifications, drawings and
samples set forth in this Agreement for a period of sixteen (16) months from
date of shipment by Supplier to Company or Company's customer (hereinafter
"Customer"). Supplier also warrants to Company and Customers that services will
be performed in a first class, workmanlike manner. In addition, if MATERIAL
furnished contains one or more manufacturer's warranties, Supplier hereby
assigns such warranties to Company and Customers. Supplier warrants that at the
time of delivery to Company such MATERIAL shall be free of any security interest
or any other lien or any other encumbrance whatsoever. All warranties shall
survive inspection acceptance and payment.
Defective or non-conforming MATERIAL will, by mutual agreement, either be
returned to Supplier for repair or replacement, at no cost to Company, with risk
of in-transit loss and damage borne by and freight paid by Company, or be
repaired or replaced by Supplier on Customer's site or another site designated
by Company at no cost to Company. Unless otherwise agreed upon by Supplier and
Company, Supplier shall complete repairs and ship the repaired MATERIAL within
two weeks of receipt of defective or non-conforming MATERIAL, or at Company's
option, ship replacement MATERIAL within two weeks after verbal notification is
given Supplier by Company. Supplier shall bear the risk of in-transit loss and
damage and shall prepay and bear the cost of freight for shipments to Company of
repaired or replaced MATERIAL. If requested by Company, Supplier shall begin
on-site repairs within three (3) days after verbal notification is given
Supplier by Company at Supplier's standard time and material rates if MATERIAL
is not in warranty.
If MATERIAL returned to Supplier or made available to Supplier on site for
repair as provided for in this clause is determined to be beyond repair,
Supplier shall promptly so notify Company and, unless otherwise agreed to in
writing by Supplier and Company, ship replacement MATERIAL without charge within
fifteen (15) days of such notification.
Replacement of MATERIAL shall be warranted as set forth in this WARRANTY clause.
Any MATERIAL which is repaired, modified, or otherwise serviced by Supplier
shall be warranted as provided in this WARRANTY clause for the remainder of the
warranty period or ninety (90) days after the MATERIAL is returned to a
Customer, whichever is later (based upon the date repair, modification or other
service is completed and accepted by Company).
Supplier will notify Company as soon as possible after it becomes aware of any
actual or potential defects in the goods (including equipment and software) and
its ability to provide any of the services, that may adversely affect:
- - the operation or use of the goods by Company's customers
- - the Supplier's ability to maintain/support the goods
-12-
<PAGE> 16
Supplier's warranty obligations and Company's remedies thereunder are solely and
exclusively as stated herein. In no case shall Supplier be liable for indirect
kinds of damages, including but not limited to special, incidental, and
consequential damages (except for personal injury and property damage) or loss
of capital revenue, or profits. In no event shall Supplier's liability to
Company or any party claiming through Company, be in excess of the actual sales
price for all MATERIAL purchased by Company for any items supplied hereunder
(except for personal injury and property damage).
ARTICLE 17 - RADIATION, SAFETY AND NETWORK COMPLIANCE STANDARDS
When MATERIAL furnished under this Agreement is subject to:
a. Domestic (USA) Standards covered by:
- - USA Code of Federal Regulations Title 47
Unintentional Radiation Standards Specified in:
1) Part 15, (EMC Emissions)
2) Part 68, (compatibility with Telephone Network)
Intentional Radiation Standards Specified in:
1) Part 21, (intentional RF Emissions in public licensed
bands)
2) Part 101 (fixed microwave licensed services), as
modified by Orders 97-391, 97-82, and 97-95 or any
other applicable FCC Orders
Network Compliance Standards Specified in:
1) Part 68 (compatibility with telephone network)
- - Safety Standards Specified in:
1) UL 1459 & 1950
2) BellCore GR-1089
Or:
b. International Standards covered by:
- - Unintentional Radiation Standards Specified in:
1) EN 55 022 9CISPR 22), (EMC Emission)
2) IEC 801-1 thru 801-6 9EMC Immunity)
3) EN 60 555-2 and -3 (for equipment operated off AC
Power Mains)
-13-
<PAGE> 17
Note: CE Marking required to indicate compliance with standards 1-3
above for products sold in European Common Market.
- - Intentional Radiation Standards specified in
1) ETS-300 (or EN-301)-xxx (ETSI) standards related to
intentional RF radiation where xxx corresponds to the
document number for the applicable Radio Frequency
(RF) for each radio product (MATERIAL) covered by
this Agreement as may be amended from time to time.
Note: CE Marking required to indicate compliance with above
standards for products sold in European Common
Market.
Or for MATERIAL to be deployed in Canada; the regulations
specified in:
2) Canada Department of Industry Regulations (CDIR);
DGTP-007-96, DGTP-003-97 and DGTP-013-94 or any other
CDIR regulations related to the applicable RF
frequency of a radio product (MATERIAL) to be
deployed in Canada.
- - Safety Standards Specified in:
1) EN 60950 & IEC 950
Note: CE Marking required to indicate compliance with above
safety standards for products sold in European Common
Market.
Where the items in (a) and (b) above are collectively hereinafter called
"RADIATION SAFETY AND NETWORK COMPLIANCE RULES (RS&NC RULES)," Supplier warrants
that such MATERIAL complies with the appropriate registration, certification,
type acceptance and/or verification standards of applicable RS&NC RULES
including, but not limited to, all labeling, instruction requirements, and the
suppression of radiation to specified levels. For applications regulated by
international standards, Supplier and Company additionally understand that there
may be different interpretations of the RS&NC RULES by each country and/or
customer. Supplier agrees to modify equipment, if required to meet regulation
requirements resulting from such interpretation differences upon request of
Company. The price for such modifications shall be mutually agreed to by the
parties.
Supplier shall also establish periodic on-going compliance retesting and follow
a Quality Control Program, submitted to Company to assure that MATERIAL shipped
complies with the applicable RS&NC RULES.
In addition, should MATERIAL generate harmful interference to radio
communications or fail to meet safety requirements, Supplier shall provide to
Company information relating to methods of
-14-
<PAGE> 18
suppressing such interference or meeting safety requirements. If supplied
MATERIAL is demonstrated as non-compliant to previously agreed to RS&NC RULES,
then Supplier shall pay the cost of suppressing such interference or meeting
applicable safety standards or, if mutually agreed to by the parties, Supplier
shall accept the return of the MATERIAL less a reasonable amount for
depreciation, if applicable.
Separate from, or supplementary to the above RS&NC RULES, Supplier and Company
understand that there may be different radiation and/or safety standards for
each country and/or customer. Supplier agrees to modify equipment to meet these
standards upon request of Company. The price for the modifications shall be
mutually agreed upon by the parties.
ARTICLE 18 - REPAIRS NOT COVERED UNDER WARRANTY
In addition to repairs provided for in the WARRANTY clause, Supplier agrees to
provide repair service on all MATERIAL ordered under this Agreement during the
term of this Agreement and for [***] thereafter, which are described as follows:
Within the first five year period, Supplier shall provide repair service on all
MATERIAL after last shipment by Supplier (by product description) to Company or
Company's customers. During the second five year period Supplier shall use its
best efforts to make MATERIAL repair service commercially available after the
last shipment of MATERIAL by Supplier (by product description) to Company or
Company's customers. MATERIAL to be repaired under this clause will be returned
to a location designated by Supplier, and unless otherwise agreed upon by
Supplier and Company, Supplier shall ship the repaired MATERIAL which meets the
specifications set forth in the "SPECIFICATIONS OR DRAWINGS" clause within
thirty (30) days of receipt of the defective or non-conforming MATERIAL. With
the concurrence and scheduling of Company, repair may be made by Supplier on
site.
If MATERIAL is returned to Supplier for repair as provided for in this clause
and is determined to be beyond repair, Supplier shall so notify Company. If
requested by Company, Supplier will sell to Company a replacement at the price
set forth in Supplier's then current agreement with Company for said MATERIAL
or, if no such agreement exists, at a price agreed upon by Supplier and Company.
If the parties fail to agree on a price, the price shall be a reasonably
competitive price for such MATERIAL at the time for delivery. Further, if
requested by Company, Supplier shall take the necessary steps to dispose of the
unrepairable MATERIAL and pay to Company the salvage value, if any.
Replacement and repaired MATERIAL shall be warranted as set forth in the
WARRANTY clause.
It is expressly understood and agreed that this Agreement does not grant
Supplier an exclusive privilege to repair any or all of the MATERIAL purchased
under this Agreement for which Company may require repair; and Company may
perform the repairs or contract with others for these services. In addition,
Supplier authorizes Company and any qualified repairer with whom Company may
contract to perform repairs on all MATERIAL purchased under this Agreement.
[***] CONFIDENTIAL TREATMENT REQUESTED
-15-
<PAGE> 19
All transportation costs of an in transit risk of loss and damage to MATERIAL
returned to Supplier for repair under this clause will be borne by Company and
all transportation costs of and in transit risk of loss and damage to such
repaired or replacement MATERIAL returned to Company will be borne by Supplier.
Price schedules for repairs under this clause are listed in Appendix A.
ARTICLE 19 - REPAIR PROCEDURES
Company shall furnish the following information with MATERIAL returned to
Supplier for repair: (a) Company's name and complete address; (b) name(s) and
telephone number(s) of Company's employee(s) to contact in case of questions
about the MATERIAL to be repaired; (c) ship-to address for return of repaired
MATERIAL if different than (a); (d) a complete list of MATERIAL returned; (e)
the nature of the defect or failure if known; and (f) whether or not returned
MATERIAL is in warranty. Supplier shall, within ten (10) days of the execution
of this Agreement, provide a written notice to Company specifying (i) the
name(s) and telephone number(s) of the individual(s) to be contacted concerning
any questions that may arise concerning repair, and (ii) if required, any
special packing of MATERIAL which might be necessary to provide adequate
in-transit protection from transportation damage.
MATERIAL repaired by Supplier shall have the repair completion date stenciled or
otherwise identified in a permanent manner at a readily visible location on the
MATERIAL and the repaired MATERIAL shall be returned with a tag or other papers
describing the repairs which have been made.
All invoices originated by Supplier for repair services must be clearly
identified as such, and must contain: (1) a reference to Company's purchase
order for these repair services, (2) a detailed description of repairs made by
Supplier and the need therefore, and (3) an itemized listing of parts and labor
charges, if any. Replaced parts will, upon request, be available for inspection
by or returned to Company. Further, the provisions of the INVOICING and SHIPPING
clauses, other than provisions relating to transportation charges with respect
to MATERIAL repaired under warranty, shall apply to Supplier's return to Company
of repaired MATERIAL.
ARTICLE 20 - CONTINUING AVAILABILITY AND ENHANCEMENT
Supplier agrees to offer for sale to Company, during the term of this Agreement
and for at least two years after the expiration of this Agreement, MATERIAL
conforming to the Technical Specifications and price schedules set forth in this
Agreement. After the expiration of this Agreement, the Supplier may limit the
Company to purchases intended for the Company's existing customer base. Provided
that the Supplier has not issued an end of life notice to the Company for a
given item of MATERIAL, the Supplier further agrees to offer for sale to
Company, during the term of this Agreement and until [***] after the expiration
of this Agreement, maintenance, replacement, and repair parts ("Parts") which
are functionally equivalent and identical in form and fit for the MATERIAL
covered by this agreement. If the
[***] CONFIDENTIAL TREATMENT REQUESTED
-16-
<PAGE> 20
supplier has issued an end of life notice to the Company, the term of the
availability of maintenance, replacement and repair parts shall be limited by
the end of life terms. The price for the MATERIAL and Parts shall be the price
set forth in Supplier's then current agreement with Company for said MATERIAL or
Parts or, if no such agreement exists, at a price agreed upon by Company and
Supplier. If the parties fail to agree on a price, the price shall be a
reasonably competitive price for said MATERIAL or Parts at the time for
delivery. The MATERIAL and parts shall be warranted as set forth in the WARRANTY
clause of this Agreement.
In the event Supplier fails to supply such MATERIAL or parts and Supplier is
unable to obtain another source of supply for Company, then such failure or
inability shall be considered noncompliance with this clause and Supplier shall,
license to Company, or another manufacturer under contract with Company, the
technical information or other rights so that Company can manufacture, have
manufactured or obtain such extended or enhanced products, solely for the
purposes contemplated by this Agreement, subject to the negotiation of
reasonable terms and conditions compensating Supplier for such information,
which Supplier and Company agree to negotiate in good faith.
The technical information includes, by example, and not by way of limitation:
(a) manufacturing drawings and specifications of raw materials and components
comprising such MATERIAL or Parts, (b) manufacturing drawings and specifications
covering special tooling and the operation thereof, (c) a detailed list of all
commercially available MATERIAL or Parts and components purchased by Supplier on
the open market disclosing the MATERIAL or part number, name and location of the
Supplier and price lists for the purchase thereof, and (d) one complete copy of
the source code used in the preparation of any software licensed or otherwise
acquired by Company from Supplier under this Agreement.
When the supplier initiates an End of Life (EOL) on a product, it will do so
under the following terms:
<TABLE>
<S> <C>
Supplier Issues EOL Notice: EOL Notice Date
Last Order Opportunity Minimum [***] from EOL Notice Date
RMA Support [***] years from EOL Notice Date
Software Release Support: Earlier of [***] Releases of two years from EOL Notice Date
</TABLE>
In the absence of FORCE MAJEURE conditions of Article 38, Supplier shall accept
orders for any quantity of EOL MATERIAL from the Company in the period from the
EOL notice date to the Last Order Opportunity. Supplier will use best efforts to
maintain its standard delivery schedules on these orders.
If Supplier replaces EOL MATERIAL with a new generation of product which is
functionally equivalent, the software interface to the new generation unit must
be backward compatible to the EOL MATERIAL.
- ---------
[***] Confidential Treatment Requested.
-17-
<PAGE> 21
ARTICLE 21 - TECHNICAL SUPPORT
Company shall be entitled to ongoing technical support, including field service
and assistance and technical support in the development of customer proposals,
provided, however, that the availability or performance of this technical
support service shall not be construed as altering or affecting Supplier's
obligations as set forth in the WARRANTY clause or elsewhere provided for in
this Agreement.
Ongoing technical support via telephone will be at no charge for MATERIAL
in-warranty. During the WARRANTY period for MATERIAL, Supplier's field service
technical support services shall be provided to Company by mutual agreement of
the parties, including emergency [***] hour technical assistance. Beyond the
WARRANTY period, charges, if any, for field service technical support, will be
as shown in Appendix A.
ARTICLE 22 - TRAINING
Supplier will provide, at no charge to Company, one training class and
associated class materials (including videotapes) for the purpose of training
Company's personnel and trainers in the use of the MATERIAL. Installers
furnished by Company shall be certified by Supplier. Additional classes will be
charged at Supplier's daily training rate set forth in Appendix A plus travel
expenses approved in advance by Company.
ARTICLE 23 - MARKING
All MATERIAL furnished under this Agreement shall be marked for identification
purposes in accordance with the specifications set forth in this Agreement and
as follows:
(a) with Supplier model/serial number; and
(b) with month and year of manufacture.
In addition, Supplier agrees to add any other identification which might be
requested by Company such as but not limited to indicia conforming to the
Company Serialization Plan. Charges, if any, for such additional identification
marking shall be as agreed upon by Supplier and Company. This clause does not
reduce or modify Supplier's obligations under the IDENTIFICATION clause.
ARTICLE 24 - THIS ARTICLE INTENTIONALLY LEFT BLANK
ARTICLE 25 - NOTICES
Any notice or demand which under the terms of this Agreement or under any
statute must or may be given or made by Supplier or Company shall be in writing
and shall be given or made by telegram, tested telex, confirmed facsimile, or
similar communication or by certified or registered mail addressed to the
respective parties as follows:
- ---------
[***] Confidential Treatment Requested.
-18-
<PAGE> 22
To Company: Lucent Technologies, Inc.
Global Purchasing Organization
Guilford Center 1
P. O. Box 25000
Greensboro, NC 27420
Attn: [***]
-OR-
To Supplier: Netro Corporation
3860 North First Street (Bldg. 3)
San Jose, CA 95134
Attn: Vice President, Sales
Such notice or demand shall be deemed to have been given or made when sent by
telegram, telex, or facsimile, or other communication or when deposited, postage
prepaid in the U.S. mail.
The above addressed may be changed at any time by giving prior written notice as
above provided.
ARTICLE 26 - VARIATION IN QUANTITY
Company assumes no liability for MATERIAL produced, processed or shipped in
excess of the amount specified in this Agreement or in an order issued pursuant
to this Agreement.
ARTICLE 27 - SHIPPING
Supplier shall; (1) ship the material covered by this Agreement or order
complete unless instructed otherwise; (2) ship to the destination designated in
the Agreement or order; (3) ship according to routing instructions given by
Company; (4) place the Agreement and order number on all subordinate documents;
(5) enclose a packing memorandum with each shipment and, when more than one
package is shipped, identify the package containing the memorandum; and (6) mark
the Agreement and order number on all packages and shipping papers. Adequate
protective packing shall be furnished at no additional charge. Shipping and
routing instructions may be furnished or altered by Company without a writing.
If Supplier does not comply with the terms of the FOB clause of this Agreement
or order or with Company's shipping or routing instructions, Supplier authorizes
Company to deduct from any invoice of Supplier (or to charge back to Supplier),
any increased costs incurred by Company as a result of Supplier's noncompliance.
ARTICLE 28 - INVOICING
Supplier shall (1) render invoices in duplicate, or as otherwise specified in
this Agreement, showing Agreement number, through routing and weight, (2) render
separate invoices for each
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shipment within twenty-four hours after shipment and (3) mail invoices with
copies of bills of lading and shipping notices to the address shown on this
Agreement or order. If prepayment of transportation charges is authorized,
Supplier shall include the transportation charges from the F.O.B. point to the
destination as a separate item on the invoice stating the name of the carrier
used. No minimum billing charges are permitted unless expressly authorized in
the Agreement.
ARTICLE 29 - TITLE AND RISK OF LOSS
Title and risk of loss and damage to material purchased by Company under this
Agreement shall vest in Company when the material has been delivered at the FOB
point.
ARTICLE 30 - DEFAULT
a) In the event Supplier shall be in material breach or default of any of
the terms, conditions or covenants of this Agreement or of any purchase
order, and if such breach or default shall continue for a period of
thirty (30) days after the giving of written notice to Supplier thereof
by Company, then, in addition to all other rights and remedies which
Company may have at law or equity or otherwise, Company shall have the
right to cancel this Agreement and/or any purchase orders placed by
Company without any charge to or obligation or liability of Company.
b) In the event the Company shall be in material breach or default of any
of the material terms, conditions or covenants of this Agreement or of
any purchase order, and if such breach or default shall continue for a
period of thirty (30) days after the giving of written notice to the
Company by the Supplier, then, in addition to all other rights and
remedies which the Supplier may have at law or in equity or otherwise,
the Supplier shall have the right to cancel this Agreement and/or any
purchase orders placed by the Company without any charge to or
obligation or liability of the Supplier.
ARTICLE 31 - SURVIVAL OF OBLIGATIONS
The obligations of the parties under this Agreement, which by their nature would
continue beyond the termination, cancellation or expiration of this Agreement,
shall survive termination, cancellation or expiration of this Agreement.
ARTICLE 32 - INFRINGEMENT
Supplier shall indemnify and save harmless Company, its affiliates, its and
their customers, and each of their officers, directors, employees, successors
and assigns (all hereinafter referred to in this clause as Company) from and
against any losses, damages, liabilities, fines, penalties, and expenses
(including reasonable attorneys' fees) that arise out of or result from any
proved or unproved claim meeting both (1) and (2) as follows: (1) of
infringement of any patent, copyright, trademark or trade secret right, or other
intellectual property right, private right, or any other proprietary or personal
interest, and (2) related by circumstances to the existence of this Agreement or
performance under or in contemplation of it (an Infringement Claim). If the
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Infringement Claim arises solely from Supplier's adherence to Company's written
instructions regarding services or tangible or intangible goods provided by
Supplier (Items) and if the Items (1) are not commercial items available on the
open market or the same as such items, or (2) are not items of Supplier's
designated origin, design or selection, Company shall indemnify Supplier.
Company or Supplier (at Company's request) shall defend or settle, at its own
expense any demand, action or suit on any Infringement Claim for which it is
indemnitor under the preceding provisions and each shall timely notify the other
of any assertion against it of any Infringement Claim and shall cooperate in
good faith with the other to facilitate the defense of any such Claim.
ARTICLE 33 - INFORMATION
1. Company and Supplier, for their mutual benefit, desire to disclose to
one another certain Information (defined in Paragraph 2 below) for the
purpose of enabling Supplier to furnish MATERIAL to Company and Company
to furnish products to its customers ("Purpose").
2. Information consists of certain specifications, designs, plans,
drawings, software, data, prototypes, or other business and/or
technical information, and all copies and derivatives containing such
Information, related to the material which a party considers
proprietary or confidential ("Information"). Information may be in any
form or medium, tangible or intangible, and may be communicated in
writing, orally, or through visual observation. Information shall be
subject to this Agreement, if it is in tangible form, only if clearly
marked as proprietary when disclosed to the receiving party or, if not
in tangible form, its proprietary nature must first be announced, and
it must be reduced to writing and furnished to the receiving party
within thirty days of the initial disclosure.
3. Each party's exclusive representative for receiving tangible
Information Is:
COMPANY: Lucent Technologies SUPPLIER: Netro Corporation
Name: [***] Name: [***]
Title: Director, Architecture & Systems Title: Senior Vice President
Engineering
Address: 890 Tasman Drive Address: 3860 North First Street
Milpitas, CA 95035 San Jose, CA 95134-1702
Phone: 408-952-7421 Phone: 408-216-1515
4. Information, other than proprietary Information identified and
furnished as provided above, shall not be subject to any restriction on
the receiving party's disclosure or use thereof.
5. This Agreement applies to Information disclosed during the term of this
Agreement.
6. Company and Supplier agree that for a Confidentiality Period ending
three years after the termination, expiration or cancellation of this
Agreement:
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a) The receiving party shall use Information only for the
Purpose, shall hold Information in confidence using the same
degree of care as it normally exercises to protect its own
proprietary information, but not less than reasonable care,
taking into account the nature of the Information, and shall
grant access to Information only to its employees who have a
need to know, shall cause its employees to comply with the
provisions of this Agreement applicable to the receiving
party, shall reproduce Information only to the extent
essential to fulfilling the Purpose, and shall prevent
disclosure of Information to third parties. The receiving
party may, however, disclose the Information to its
consultants and contractors with a need to know; provided that
by doing so, the receiving party agrees to bind those
consultants and contractors to terms at least as restrictive
as those stated herein, advise them of their obligations, and
indemnify the disclosing party for any breach of those
obligations.
b) Upon the disclosing party's request, the receiving party shall
either return to the disclosing party all Information or shall
certify to the disclosing party that all media containing
Information have been destroyed. Provided, however, that an
archival copy of the Information may be retained in the files
of the receiving party's counsel, solely for the purpose of
proving the contents of the Information.
7. The foregoing restrictions on each party's use or disclosure of
Information shall not apply to Information that the receiving party can
demonstrate:
a) was independently developed by or for the receiving party
without reference to the Information, or was received without
restrictions; or
b) has become generally available to the public without breach of
confidentiality obligations of the receiving party; or
c) was in the receiving party's possession without restriction or
was known by the receiving party without restriction at the
time of disclosure; or
d) is the subject of a subpoena or other legal or administrative
demand for disclosure; provided, however, that the receiving
party has given the disclosing party prompt notice of such
demand for disclosure and the receiving party reasonably
cooperates with the disclosing party's efforts to secure an
appropriate protective order.
8. Access to Information hereunder shall not preclude an individual who
has seen such Information for the purposes of this Agreement from
working on future projects for the receiving party which relate to
similar subject matters, provided that such individual does not make
reference to the Information and does not copy the substance of the
Information during the Confidentiality Period. Furthermore, nothing
contained herein shall be construed as imposing any restriction on the
receiving party's disclosure or use of any general learning, skills or
know-how developed by the receiving party's personnel under
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this Agreement, if such disclosure and use would be regarded by a
person of ordinary skill in the relevant area as not constituting a
disclosure or use of the Information.
9. As between the parties, all Information shall remain the property of
the disclosing party. By disclosing Information or executing this
Agreement, the disclosing party does not grant any license, explicitly
or implicitly, under any trademark, patent, copyright, mask work
protection right, trade secret or any other intellectual property
right. THE DISCLOSING PARTY DISCLAIMS ALL WARRANTIES REGARDING THE
INFORMATION, INCLUDING ALL WARRANTIES WITH RESPECT TO INFRINGEMENT OF
INTELLECTUAL PROPERTY RIGHTS AND ALL WARRANTIES AS TO THE ACCURACY OR
UTILITY OF SUCH INFORMATION.
The parties acknowledge that certain products, software and technical
information provided pursuant to this Agreement may be subject to United States
export laws and regulations and agree that any use or transfer of such items
must be authorized by the appropriate United States government agency. Neither
party shall directly or indirectly use, distribute, transfer or transmit any
item of Information (even if incorporated into other products, software and
technical information), except in compliance with United States export laws and
regulations.
ARTICLE 34 - IDENTIFICATION
Either party may identify the other party in a factual statement that does not
imply an endorsement and does not use any identification. Neither party shall,
without the other's prior written consent, engage in publicity related to this
Agreement, or make public use of any Identification in any circumstances related
to this Agreement. "Identification" with respect to the Company, means any
semblance of any trade name, trademark, service mark, insignia, symbol, logo, or
any other designation or drawing of Lucent Technologies, Supplier, or their
affiliates. Supplier shall remove or obliterate any such Identification prior to
any use or disposition of any material rejected or not purchased by Company.
ARTICLE 35 - INSIGNIA
Upon Company's written request, "Insignia", including certain trademarks, trade
names, insignia, symbols, decorative designs, or packaging designs of Company,
Lucent Technologies Inc. (hereinafter "Lucent Technologies"), or evidences of
Company's, Company's Agent's, or Lucent Technologies' inspection will be
properly affixed by Supplier to the material furnished or its packaging. Such
Insignia will not be affixed, used, or otherwise displayed on the material
furnished or in connection therewith without written approval of Company. The
manner in which such Insignia will be affixed must be approved in writing by
Company in accordance with standards established by Lucent Technologies as
applicable. Lucent Technologies Inc., (Company) shall retain all right, title
and interest in any and all packaging designs, finished artwork, and separations
furnished to Supplier. This clause does not reduce or modify Supplier's
obligations under the IDENTIFICATION and USE OF INFORMATION CLAUSES.
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ARTICLE 36 - THIS ARTICLE INTENTIONALLY LEFT BLANK
ARTICLE 37 - COMPLIANCE WITH LAWS
Supplier and Company shall comply at their own expense with all applicable laws,
ordinances, regulations and codes, including the identification and procurement
of required permits, certificates, licenses, insurance, approvals and
inspections in performance under this Agreement.
ARTICLE 38 - FORCE MAJEURE
Neither party shall be held responsible for any delay or failure in performance
of any part of this Agreement to the extent such delay or failure is caused by
fire, flood, strike, civil, governmental or military authority, act of God, or
other similar causes beyond its control and without the fault or negligence of
the delayed or non-performing party or its subcontractors ("force majeure
conditions"). Supplier's liability for loss or damage to Company's material in
Supplier's possession or control shall not be modified by this clause. When a
party's delay or nonperformance continues for a period of at least twenty (20)
days, the other party may terminate, at no charge, this Agreement or an order
under the Agreement.
ARTICLE 39 - ASSIGNMENT
Neither party shall assign any right or interest under this Agreement (excepting
solely for moneys due or to become due) without the prior written consent of the
other party, which consent shall not be unreasonably withheld. Supplier shall be
responsible to Company for all Work performed by Supplier's subcontractor(s) at
any tier.
ARTICLE 40 - TAXES
Company shall reimburse Supplier only for the following tax payments with
respect to transactions under this Agreement unless Company advises Supplier
that an exemption applies: state and local sales and use taxes, as applicable.
Taxes payable by Company shall be billed as separate items on Supplier's
invoices and shall not be included in Supplier's prices. Company shall have the
right to have Supplier contest any such taxes; at Company's expense, that
Company deems improperly levied at Company's expense and subject to Company's
direction and control.
ARTICLE 41 - GOVERNMENT CONTRACT PROVISIONS
Orders placed under this Agreement containing a notation that the MATERIAL is
intended for use under Government contracts shall be subject to the then current
Government Provisions printed thereon or in attachments thereto.
ARTICLE 42 - RIGHT OF ENTRY
Each party shall have the right to enter the premises of the other party during
normal business hours with respect to the performance of this Agreement
including an inspection or a Quality
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Review, subject to all plant rules and regulations, clearances, security
regulations and procedures as applicable. Each party shall provide safe and
proper facilities for such purpose.
ARTICLE 43 - RELEASES VOID
Neither party shall require (i) waivers or releases of any personal rights or
(ii) execution of documents which conflict with the terms of this Agreement,
from employees, representatives or customers of the other in connection with
visits to its premises and both parties agree that no such releases, waivers or
documents shall be pleaded by them or third persons in any action or proceeding.
ARTICLE 44 - SERVICES
It is understood that visits by Supplier's representatives or its suppliers'
representatives for inspection, adjustment or other similar purposes in
connection with MATERIAL purchased under this Agreement shall for all purposes
be deemed "Work under this Agreement" and shall be at no charge to Company
unless otherwise agreed in writing between the parties. Technical support visits
by Supplier's personnel, when authorized for payment by Company, shall be
compensated in accordance with Supplier's standard rates shown in Appendix A.
ARTICLE 45 - IMPLEADER
Supplier shall not implead or bring an action against Company based on any claim
by any person for personal injury or death to an employee of Company for which
Company has previously paid or is obligated to pay worker's compensation
benefits to such employee or claimant and for which such employee or claimant
could not otherwise bring legal action against Company.
ARTICLE 46 - TOXIC SUBSTANCES AND PRODUCT HAZARDS
Supplier hereby warrants to Company that, except as expressly stated elsewhere
in this Agreement, all MATERIAL furnished by Supplier as described in this
Agreement is safe for its foreseeable use, is not defined as a hazardous or
toxic substance or material under applicable federal, state or local law,
ordinance, rule, regulation or order (hereinafter collectively referred to as
"law" or "laws"), and presents no abnormal hazards to persons or the
environment. Supplier also warrants that it has no knowledge of any federal,
state or local law, that prohibits the disposal of the MATERIAL as normal refuse
without special precautions except as expressly stated elsewhere in this
Agreement. Supplier also warrants that where required by law, all MATERIAL
furnished by Supplier is either on the EPA Chemical Inventory compiled under
Section 8 (a) of the Toxic Substances Control Act, or is the subject of an
EPA-approved premanufacture notice under 40 CFR Part 720. Supplier further
warrants that all MATERIAL furnished by Supplier complies with all use
restrictions, labeling requirements and all other health and safety requirements
imposed under federal, state, or local laws. Supplier further warrants that,
where required by law, it shall provide to Company, prior to delivery of the
MATERIAL, a Material Safety Data Sheet which complies with the requirements of
the
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Occupational Safety and Health Act of 1970 and all rules and regulations
promulgated thereunder.
Supplier agrees to defend, indemnify and hold Company harmless for any expenses
(including, but not limited to, the cost of substitute material, less
accumulated depreciation) that Company may incur by reason of the recall or
prohibition against continued use or disposal of MATERIAL furnished by Supplier
as described in its Agreement whether such recall or prohibition is directed by
Supplier or occurs under compulsion of law. Company agrees to cooperate with
Supplier to facilitate and minimize the expense of any recall or prohibition
against use of disposal of MATERIAL directed by Supplier or under compulsion of
law.
Supplier further agrees to defend, indemnify and hold Company harmless from and
against any claims, demands, suits, judgments, liabilities, costs and expenses
(including reasonable attorney's fees) which Company may incur under any
applicable federal, state or local laws, and any and all amendments thereto,
including but not limited to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980; the Consumer Product Safety act of 1972;
the Toxic Substances Control Act; Fungicide, and Rodenticide Act; the
Occupational Safety and Health Act; and the Atomic Energy Act; and any and all
amendments to all applicable federal, state, or local laws, by reason of
Company's acquisition, use, distribution or disposal of MATERIAL furnished by
Supplier under this Agreement.
The standard applicable to Supplier under this Article 46 shall be the laws and
regulations in effect at the time MATERIAL is manufactured or shipped.
ARTICLE 47 - CHLOROFLUOROCARBONS
Supplier hereby warrants that it is aware of international agreements and
pending legislation in several nations, including the United States, which would
limit or ban importation of any product containing, or produced using
chlorofluorocarbons ("CFCs") and certain chlorinated solvents. Supplier hereby
warrants that the MATERIAL will conform to all current and future requirements
established pursuant to such agreements, legislation and impending regulations,
and that the MATERIAL will be able to be imported and used lawfully under all
such agreements, legislation and requirements. Supplier also warrants that it is
currently reducing or, if Supplier is not the manufacturer of the MATERIAL, is
currently causing its manufacturing vendor to reduce and will, in an expeditious
manner, eliminate, or, as applicable, have its manufacturing vendor eliminate
the use of ODC's in the manufacture of the MATERIAL.
ARTICLE 48 - INSURANCE
Supplier shall maintain and cause Supplier's subcontractors to maintain during
the term of this Agreement: (1) Workers' Compensation insurance as prescribed by
the law of the state or nation in which the Work is performed; (2) employer's
liability insurance with limits of at least [***] for each occurrence; (3)
automobile liability insurance if the use of motor vehicles is required, with
limits of at least [***] combined single limit for bodily injury and
property damage per occurrence; (4) Commercial General Liability ("CGL")
insurance, ISO 1988 or later
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occurrence form of insurance, including Blanket Contractual Liability and Broad
Form Property Damage, with limits of at least [***] combined single limit
for bodily injury and property damage per occurrence; and (5) if the furnishing
to Company (by sale or otherwise) of material or construction services is
involved, CGL insurance endorsed to include products liability and completed
operations coverage in the amount of [***] per occurrence. All CGL and
automobile liability insurance shall designate Lucent Technologies Inc., its
affiliates, and its directors, officers and employees (all referred to as
"Company") as additional insured. All such insurance must be primary and
non-contributory and required to respond and pay prior to any other insurance or
self-insurance available. Any other coverage available to Company shall apply on
an excess basis. Supplier agrees that Supplier, Supplier's insurer(s) and anyone
claiming by, through, under or in Supplier's behalf shall have no claim, right
of action or right of subrogation against Company and its customers based on any
loss or liability insured against under the foregoing insurance. Supplier and
Supplier's subcontractors shall furnish prior to the start of Work certificates
or adequate proof of the foregoing insurance, including if specifically
requested by Company, endorsements and policies. Company shall be notified in
writing at least thirty (30) days prior to cancellation of or any change in the
policy. Insurance companies providing coverage under this Agreement must be
rated by A-M Best with at least an A- rating. Supplier shall furnish Company
with a Certificate of Insurance indicating that Company is an additional
insured.
ARTICLE 49 - INDEMNITY
At Company's request, Supplier agrees to indemnify, defend and hold harmless
Company, its affiliates, customers, employees, successors and assigns (all
referred to as "Company") from and against any losses, damages, claims, fines,
penalties and expenses (including reasonable attorney's fees) that arise out of
or result from: (1) injuries or death to persons or damage to property,
including theft, in any way arising out of or caused or alleged to have been
caused by the Work or services performed by, or material provided by Supplier or
persons furnished by Supplier; (2) assertions under Workers' Compensation or
similar acts made by persons furnished by Supplier; or (3) any failure of
Supplier to perform its obligations under this Agreement.
Company agrees that it will defend, at its own expense, all suits against
Supplier arising out (i) the representation by Company of the functionality of
the MATERIAL in a manner inconsistent with the Specifications, (ii) the
installation or use of the MATERIAL by Company or its employees or agents, in a
manner inconsistent with the instruction provided by Supplier.
ARTICLE 50 - CHOICE OF LAW
This Agreement and all transactions under it shall be governed by the laws of
the State of New York excluding its choice of laws rules and excluding the
Convention for the International Sale of Goods.
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ARTICLE 51 - SEVERABILITY
If any of the provisions of this Agreement shall be invalid or unenforceable,
such invalidity or unenforceability shall not invalidate or render unenforceable
the entire Agreement, but rather the entire Agreement shall be construed as if
not containing the particular invalid or unenforceable provision or provisions,
and the rights and obligations of Supplier and Company shall be construed and
enforced accordingly.
ARTICLE 52 - CLAUSE HEADINGS
The headings of the clauses in this Agreement are inserted for convenience only
and are not intended to affect the meaning or interpretation of this Agreement.
ARTICLE 53 - WAIVER
The failure of either party at any time to enforce any right or remedy available
to it under this Agreement or otherwise with respect to any breach or failure by
the other party shall not be construed to be a waiver of such right or remedy
with respect to any other breach or failure by the other party.
ARTICLE 54 - ENTIRE AGREEMENT
This Agreement shall incorporate the typed or written provisions on Company's
orders issued pursuant to this Agreement and shall constitute the entire
agreement between the parties with respect to the subject matter of this
Agreement and the order(s) and shall not be modified or rescinded, except by a
writing signed by Supplier and Company. Printed provisions on the reverse side
of Company's orders (except as specified otherwise in this Agreement) and all
provisions on Supplier's forms shall be deemed deleted. Estimates or forecasts
furnished by Company shall not constitute commitments. The provisions of this
Agreement supersede all contemporaneous oral agreements and all prior oral and
written communications and understandings of the parties with respect to the
subject matter of this Agreement.
ARTICLE 55 - MONTHLY ORDER AND SHIPMENT REPORTS
Supplier agrees to render monthly order and shipment reports on or before the
fifth working day of the succeeding month containing the information required on
report forms furnished by Company.
ARTICLE 56 - OPTION TO EXTEND
Company shall have the right to extend the period specified in the clause
AGREEMENT EFFECTIVE PERIOD up to three (3) consecutive twelve (12) month periods
by giving Supplier at least ninety (90) days prior written notice.
Within ten (10) days of the date of Company's notice to extend the period,
Supplier shall notify Company in writing whether Supplier proposes to revise the
price(s) under this Agreement. If
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the parties fail to agree on the revised price(s) within twenty (20) days after
the date of Supplier's notice, Company's notice of extension shall be considered
withdrawn and prices for outstanding orders or orders placed during the term of
this Agreement shall not be revised.
ARTICLE 57 - NEW AND CHANGED METHODS, PROCESSES AND EQUIPMENT
Supplier agrees to keep abreast of major developments in Supplier's industry and
to promptly advise Company of any developments which might affect the production
of any MATERIAL under this Agreement.
ARTICLE 58 - SAMPLES
Prior to first shipment of a new release of MATERIAL to Company or Company's
customers, Supplier shall submit a quantity of MATERIAL, to be mutually agreed
upon by the parties, and subject to Source Inspection by Company's designated
technical representative(s), for examination and subsequent approval by Company.
Supplier shall not make any shipments to the Company's customers under this
agreement prior to approval of the samples which will be manufactured in a
continuous run on Supplier's permanent production tooling in the case of
products intended for general availability, and manufactured in a manner
yielding at least the same functionality and reliability of those products
manufactured on Supplier's permanent production tooling in the case of
pre-general availability products. Company will purchase approved samples from
Supplier. If the samples do not comply in all respects with the specifications,
drawings, and intended functionality that have been previously agreed to by the
parties in writing, Supplier and Company will work together during a 15 day
period to establish a mutually agreeable defect assessment plan and correction
schedule to cure the defective MATERIAL. If Supplier does not submit complying
samples within 30 days after the 15 day mutually agreeable defect assessment
plan. Company shall have the right to terminate this agreement, unless an
extension is approved by mutual agreement, without any cost or charge to Company
whatsoever, including costs or charges incurred by Supplier in procuring
equipment, material and special tooling to perform any part of this Agreement,
loss of profits or labor, and materials expended in the production of samples.
ARTICLE 59 - THIS ARTICLE INTENTIONALLY LEFT BLANK
ARTICLE 60 - OZONE DEPLETING SUBSTANCES LABELING
Supplier warrants and certifies that all products, including packaging and
packaging components, provided to Company under this Agreement have been
accurately labeled, in accordance with the requirements of 40 CFR Part 82 -
entitled "Protection of Stratospheric Ozone, Subpart E - The Labeling of
Products Using Ozone Depleting Substances." Supplier agrees to indemnify, defend
and save harmless Company, its officers, directors and employees from and
against any losses, damages, claims, demands, suits, liabilities, fines,
penalties, and expenses (including reasonable attorneys' fees) that may be
sustained by reason of Supplier's non-compliance with such applicable law or the
terms of this warranty and certification.
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ARTICLE 61 - HEAVY METALS AND/OR CFC IN PACKAGING
Supplier warrants to Company that no lead, cadmium, mercury or hexavalent
chromium have been intentionally added to any packaging or packaging component
(as defined under applicable laws) to be provided to Company under this
Agreement and that packaging materials were not manufactured using and do not
contain chlorofluorocarbons. Supplier further warrants to Company that the sum
of the concentration levels of lead, cadmium, mercury and hexavalent chromium in
the package or packaging component provided to Company under this Agreement does
not exceed 100 parts per million. Upon request, Supplier shall provide to
Company Certificates of Compliance certifying that the packaging and/or
packaging components provided under this Agreement are in compliance with the
requirements set forth above in this clause.
ARTICLE 62 - MEDIATION
If a dispute relates to this Agreement, or its breach, and the parties have not
been successful in resolving such dispute through negotiation, the parties agree
to attempt to resolve the dispute through mediation by submitting the dispute to
a sole mediator selected by the parties or, at any time at the option of a
party, to mediation by the American Arbitration Association ("AAA") in San Jose,
California. Each party shall bear its own expenses and an equal share of the
expenses of the mediator and the fees of the AAA. All defenses based on passage
of time shall be suspended pending the termination of the mediation. Nothing in
this clause shall be construed to preclude any party from seeking injunctive
relief in order to protect its rights pending mediation.
ARTICLE 63 - ELECTRONIC DATA INTERCHANGE (EDI)
Supplier and Company agree that they will use electronic means of issuing
purchase orders, acknowledgments, purchase order changes, ship notices, or such
other purchasing communications as may be agreed upon by Supplier and Company
for transactions under this Agreement ("Electronic Data Interchange" or "EDI").
Such EDI shall be effective on a date to be determined by mutual agreement of
the parties. In order to implement and operate such EDI, Supplier shall, no
later than a date to be determined by mutual agreement of the parties, at its
sole expense obtain, make fully operational and maintain all equipment, software
and other materials set forth in Company's document "How To Get Started on
Electronic Procurement Communications With Lucent Technologies" (May 1, 1996) (a
copy of which Supplier has in its possession). Supplier shall also execute an
Electronic Purchasing Agreement with Company at the time of execution of this
Agreement.
ARTICLE 64 - BAR CODE SHIPPING AND RECEIVING LABELS
No later than a date to be determined by mutual agreement of the parties,
Supplier shall at its sole expense place Company's specified bar code labels on
all shipping packages and containers for the material shipped under this
Agreement. Such bar code labels and the placement thereof shall meet the
requirements shown in the document "Bar Coding With Lucent Technologies - How To
Get Started" May 1, 1996) (a copy of which Supplier has in its possession).
Company may
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change such specification upon written notice to Supplier and Supplier shall
comply with such changes.
ARTICLE 65 - THIS ARTICLE INTENTIONALLY LEFT BLANK
ARTICLE 66 - AUDIT
With the exception of prices fixed by this Agreement, Supplier shall maintain
accurate and complete records including a physical inventory, if applicable, of
all costs incurred under this Agreement which may affect verification,
redetermination, or revision of prices under this Agreement. These records shall
be maintained in accordance with recognized commercial accounting practices so
they may be readily audited and shall be held until costs have been finally
determined under this Agreement and payment or final adjustment of payment, as
the case may be, has been made. Supplier shall permit Company or Company's
representative to examine and audit these records and all supporting records at
all reasonable times. Audits shall be made not later than (a) one (1) calendar
year after the final delivery date of material ordered or completion of services
rendered or (b) one (1) calendar year after the expiration date of this
Agreement, whichever comes later.
ARTICLE 67 - RECORDS
Supplier shall maintain complete and accurate records of all amounts billable to
and payments made by Company hereunder, in accordance with generally accepted
accounting practices. Supplier shall retain such records for a period of three
(3) years from the date of invoice for the final shipment of MATERIALS covered
by this Agreement. Supplier agrees to provide supporting documentation
concerning any disputed amount or invoice to Company within thirty (30) days
after Company provides written notice of the dispute to Supplier.
ARTICLE 68 - THIS SECTION INTENTIONALLY LEFT BLANK
ARTICLE 69 - INSTALLATION/CUTOVER ASSISTANCE
In the event Supplier is not installing the MATERIAL, and if requested by
Company, Supplier agrees to make available at the installation site, , a field
engineer to render installation and cutover assistance as required by Company at
Supplier's prices shown in Appendix A.
ARTICLE 70 - EMERGENCY SERVICE
In addition to the MATERIAL replacement provisions set forth in the "WARRANTY"
and "REPAIRS NOT COVERED UNDER WARRANTY" clauses, Supplier agrees, in the event
of an emergency out-of-service condition caused by MATERIAL furnished under this
Agreement to ship replacement MATERIAL within twenty-four (24) hours of verbal
notification by Company. Supplier's prices in Appendix A shall apply for
"REPAIRS NOT COVERED UNDER WARRANTY" MATERIAL.
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<PAGE> 35
ARTICLE 71 - INVOICING FOR GOODS
Supplier shall: (1) render original invoice, or as otherwise specified in this
Agreement, showing Agreement and order number, through routing and weight; (2)
render separate invoices for each shipment within twenty-four (24) hours after
shipment; and (3) mail invoices with copies of bills of lading and shipping
notices to the address shown on this Agreement or order. If prepayment of
transportation charges is authorized, Supplier shall include the transportation
charges from the FOB point to the destination as a separate item on the invoice
stating the name of the carrier used.
ARTICLE 72 - YEAR 2000 WARRANTY
With respect to all Material, Equipment, Services and Software provided to
Company under this Agreement, Supplier warrants to Company and its customers
that: (i) the operation of such deliverables on or after January 1, 2000,
without limitation as to date, shall in no way be different from their operation
prior to that date; and (ii) such deliverables will be able to process, store,
record and present data containing dates in the Year 2000, and thereafter
without limitation as to date, in the same manner as data containing dates prior
to the Year 2000. Supplier further warrants that to the extent its internal
systems impact its relationship with Company, such systems also comply with the
foregoing warranties.
Netro Corporation Lucent Technologies Inc.
By: By:
------------------------------ ------------------------------
Name (Print): Name (Print):
-------------------- --------------------
Title: Title:
--------------------------- ---------------------------
Date: Date:
---------------------------- ----------------------------
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<PAGE> 36
APPENDIX A: PRICE SCHEDULE
1. MATERIAL
Discount Schedule during first [***] years of agreement
<TABLE>
<CAPTION>
Annual Value of Ordering Min % discount from List Price
- ------------------------ ------------------------------
<S> <C>
Quantities to Supplier
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
</TABLE>
Discount Schedule after the first [***] years of agreement
<TABLE>
<CAPTION>
Annual Value of Ordering
Quantities to Supplier Min % discount from List Price
---------------------- ------------------------------
<S> <C>
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
</TABLE>
Note: The above discount schedules are applicable to hardware and software
products shown in this Agreement but do not apply to labor rates and services
which are also shown in this Agreement.
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<PAGE> 37
AIRSTAR
<TABLE>
<S> <C> <C> <C> <C>
AIRSTAR ACCESSORY
Recommended Installation Kit
SHW-X-1000-01 AirStar User's Manual [***] [***] [***]
SHW-X-1002-00 Installation Toolkit [***] [***] [***]
Cables
CAB-X-0001-00 Cable, DB15 to RJ-45 [***] [***]
AIRVIEW PMP
Base Unit
NMS-X-2003-01 AirView, Link Explorer, PMP, single user, CD-ROM [***] [***] [***]
NMS-X-2004-01 AirView, Link Explorer, PMP, site license, CD-ROM [***] [***] [***]
NMS-X-2005-00 AirView, Link Explorer, PMP, Laptop [***] [***] [***]
BASE MODEM MODULE
Base Unit
BMM-E-1207-02 Base Modem Module, [***] channel, [***] MHz [***], [***] QAM [***] [***] [***]
BMM-E-1214-02 Base Modem Module, [***] channel, [***] MHz [***], [***] QAM [***] [***] [***]
BMM-F-1210-02 Base Modem Module, [***] channel, [***] MHz [***], [***] QAM [***] [***] [***]
BMM-F-1220-02 Base Modem Module, [***] channel, [***] MHz [***], [***] QAM [***] [***] [***]
BASE MODEM UNIT
Base Unit
BMU-E-2000-00 Modem unit, [***] channel, [***]Mb/s per channel, [***]QAM, 1 [***] [***]
ETSI
BASE RADIO UNIT
Base Unit
BRU-E-2601-01 BRU, [***] GHz, Band [***], [***](0)Sector, Vertical
Polarization, 7 [***] [***] [***]
BRU-E-2603-01 BRU, [***] GHz, Band [***], [***](0)Sector, Vertical
Polarization, 7 [***] [***] [***]
BRU-E-2611-01 BRU, [***] GHz, Band [***], [***](0)Sector, Vertical
Polarization, 7 [***] [***] [***]
BRU-E-2613-01 BRU, [***] GHz, Band [***], [***](0)Sector, Vertical
Polarization, 7 [***] [***] [***]
BRU-E-1001-02 BRU, [***] GHz, Band [***], [***](0)Sector, Vertical
Polarization [***] [***] [***]
BRU-E-1011-02 BRU, [***] GHz, Band [***], [***](0)Sector, Vertical
Polarization [***] [***] [***]
BRU-E-1021-02 BRU, [***] GHz, Band [***], [***](0)Sector, Vertical
Polarization [***] [***] [***]
BRU-E-1081-02 BRU, [***] GHz, Band [***], [***](0)Sector, Horizontal
Polarization [***] [***] [***]
BRU-E-10A1-02 BRU, [***] GHz, Band [***], [***](0)Sector, Horizontal
Polarization [***] [***] [***]
BRU-E-2601-02 BRU, [***] GHz, Band [***], [***](0)Sector, Vertical
Polarization [***] [***] [***]
BRU-E-2603-02 BRU, [***] GHz, Band [***], [***](0)Sector, Vertical
Polarization [***] [***] [***]
BRU-E-2611-02 BRU, [***] GHz, Band [***], [***](0)Sector, Vertical
Polarization [***] [***] [***]
BRU-E-2613-02 BRU, [***] GHz, Band [***], [***](0)Sector, Vertical
Polarization [***] [***] [***]
Required Mounting Accessories
SHW-X-2001-00 BRU, Bracket, [***] BRU, Pole Mount [***] [***] [***]
SHW-X-2002-00 BRU, Bracket, [***] BRU, Pole Mount, [***] GHz [***] [***] [***]
</TABLE>
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<PAGE> 38
<TABLE>
<S> <C> <C> <C> <C>
BASE SECTOR CONTROLLER
Base Unit
BSC-X-2000-01 BSC, [***] Ch, [***] Mb/s max throughput [***] [***] [***]
BSC-X-4000-02 BSC, [***] Ch, [***] Mb/s max throughput [***] [***] [***]
Spares
BSC-X-1001-00 BSC, Back Card [***] [***]
BSC-X-1005-01 BSC, Front Card, [***] Ch., [***] Mb/s max throughput [***] [***]
BSC-X-1001-02 BSC, Back Card [***] [***]
BSC-X-1005-02 BSC, Front Card, [***] Ch., [***] Mb/s max throughput [***] [***]
BASE STATION SHELF
Base Unit
BSS-E-1110-00 BSS, Non redundant, E3, [***]V [***] [***] [***]
BSS-E-2220-00 BSS, Fully Redundant, E3, [***]V [***] [***] [***]
BSS-F-2220-00 BSS, Fully Redundant, DS3, [***]V [***] [***] [***]
BSS-F-1110-00 BSS, Non redundant, DS3, [***]V [***] [***] [***]
BSS-X-1111-00 BSS, Non redundant, OC3/STM1, [***]V [***] [***] [***]
BSS-X-2221-00 BSS, Fully redundant, OC3/STM1, [***]V [***] [***] [***]
BSS-X-3000-02 BSS Station Shelf [***] [***] [***]
Required Software Accessories
SFW-X-1001-00 BSS, Software, BSC Redundancy [***] [***] [***]
SFW-X-1002-00 BSS, Software, Broadband Wireless OS [***] [***] [***]
Optional AC Power Cords
BSS-X-0004-11 BSS, Power Cord, CEE 7/7 [***] [***] [***]
BSS-X-0004-12 BSS, Power Cord, BS 1363 [***] [***] [***]
BSS-X-0004-13 BSS, Power Cord, CE123-16/Vii [***] [***] [***]
BSS-X-0004-14 BSS, Power Cord, NEMA L6-20 [***] [***] [***]
Installation Kit
BSS-X-0012-00 BSS, Installation Kit, DS3/E3, Redundant [***] [***] [***]
BSS-X-0013-00 BSS, Installation Kit, OC3/STM-1, Redundant [***] [***] [***]
Optional AC Power Supply Accessories
BSS-X-0004-01 BSS, AC Power Supply Option 1 (1 x 875, one AC [***] [***] [***]
input)
BSS-X-0004-02 BSS, AC Power Supply Option 2 (2 x 875, one AC [***] [***] [***]
BSS-X-0004-03 BSS, AC Power Supply Option 3 (2 x 875, two AC [***] [***] [***]
SHW-X-3006-01 Power Supply, Dual, 110VAC [***] [***] [***]
SHW-X-3006-02 Power Supply, Dual, 220VAC [***] [***] [***]
Miscellaneous Accessories
BSS-X-0003-00 BSS, Cooling fan tray [***] [***] [***]
BSS-X-0010-00 BSS, Ethernet Transceiver [***] [***] [***]
BSS-X-0011-00 BSS, Clock Source, [***] [***] [***] [***]
Spares
BSS-F-0006-00 BSS, BNM, DS3 Trunk card [***] [***] [***]
BSS-X-0001-00 BSS, ASC Module [***] [***] [***]
BSS-X-0002-00 BSS, DC Entry Module [***] [***] [***]
BSS-X-0004-10 BSS, AC Power Supply Module, 875W [***] [***] [***]
BSS-X-0005-00 BSS, BNM, STM-1/OC3 [***] [***] [***]
BSS-X-9999-00 BSS, AXIS shelf, ASC module [***] [***] [***]
BSS-E-0008-00 BSS, BNM, E3 Trunk card [***] [***] [***]
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
SOFTWARE MAINTENANCE AND SERVICE
Required Software Maintenance
SVC-X-1002-00 BSS, Software, Broadband Wireless OS [***] [***] [***]
SVC-X-1003-00 Software Maintenance, SAS, [***] [***] [***] [***]
SVC-X-1013-00 Software Maintenance, SAS, [***] [***] [***] [***]
SVC-X-2003-00 Software Maintenance, [***] [***] [***] [***]
SVC-X-2004-00 Software Maintenance, [***] [***] [***] [***]
License
SVC-E-1003-01 Software Maintenance, SAS, Broadband Wireless OS [***] [***] [***]
SVC-E-1004-00 Software Maintenance, SAS, [***] [***] [***] [***]
SVC-E-1020-02 Software Maintenance, SAS, [***] [***] [***] [***]
SVC-X-1010-00 Software Maintenance, SAS, [***] [***] [***] [***]
SVC-X-1014-00 Software Maintenance, SAS, [***] [***] [***] [***]
SVC-X-1020-01 Software Maintenance, SAS, [***] [***] [***] [***]
SVC-X-1001-00 Software Maintenance, BSC [***] [***] [***] [***]
Optional Software Service
SVC-X-2000-00 Software Service, On-Site, per Man-Day [***] [***] [***]
SUBSCRIBER ACCESS SYSTEM
Base Unit
SAS-E-1002-01 SAS, [***]QAM, [***] MHz, [***]E1, [***] [***] [***] [***]
SAS-E-1202-02 SAS, [***]QAM, [***] MHz, [***]E1, [***] [***] [***] [***]
SAS-E-1204-02 SAS, [***]QAM, [***] MHz, [***]E1, [***] [***] [***] [***]
SAS-E-1222-02 SAS, [***]QAM, [***] MHz, [***]E1, [***] [***] [***] [***]
Required Software Accessories
SFW-X-1003-01 SAS, Software, Broadband Wireless OS [***] [***] [***]
SFW-E-1003-02 SAS, Software, Broadband Wireless OS, DES40 [***] [***] [***]
SFW-E-1020-02 SAS, Software, Bundle, BBWOS, IP, FR, [***] [***] [***] [***]
SFW-F-1003-02 SAS, Software, Broadband Wireless, [***] [***] [***] [***]
SFW-F-1020-02 SAS, Software, Bundle, BBWOS, [***] [***] [***] [***]
SFW-X-1020-01 SAS, Software, Bundle, BBWOS, [***] [***] [***] [***]
Optional Software Accessories
SFW-X-1013-00 SAS, Software, RFC1483 IP over ATM [***] [***] [***]
SFW-E-1014-00 SAS, Software, [***] [***] [***] [***]
SFW-X-1010-00 SAS, Software, FR/ATM Interworking [***] [***] [***]
Optional Power Supply Accessories
SHW-X-3005-00 SAS, Software Supply, 220 VAC [***] [***] [***]
SHW-X-3007-01 Power Supply, AC, Battery Back-Up [***] [***] [***]
Optional Connector Adapter Accessories
SFW-X-3008-00 SAS, Converter, [***] Ohm to [***] Ohm [***] [***] [***]
SFW-X-3021-00 SAS, Converter, [***] [***] [***] [***]
SHW-X-3035-00 SAS, Converter, [***] [***] [***] [***]
</TABLE>
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<PAGE> 40
<TABLE>
<S> <C> <C> <C> <C>
SUBSCRIBER RADIO UNIT
Base Unit
SRU-E-2602-01 SRU, ETSI [***] GHz, Band [***] [***] MHz, Integral antenna [***] [***] [***]
SRU-E-2604-01 SRU, ETSI [***] GHz, Band [***] [***] MHz, Integral antenna [***] [***] [***]
SRU-E-2612-01 SRU, ETSI [***] GHz, Band [***] [***] MHz, Non-integral [***] [***] [***]
antenna
SRU-E-2614-01 SRU, ETSI [***] GHz, Band [***] [***] MHz, Non-integral [***] [***] [***]
antenna
SRU-E-1002-01 SRU, ETSI [***] GHz, Band [***] Integral antenna [***] [***] [***]
SRU-E-1020-02 SRU, ETSI [***] GHz, Band [***] Integral antenna [***] [***] [***]
SRU-E-2602-02 SRU, ETSI [***] GHz, Band [***] [***] MHz, Integral [***] [***] [***]
antenna
SRU-E-2604-02 SRU, ETSI [***] GHz, Band [***] [***] MHz, Integral [***] [***] [***]
antenna
SRU-E-2612-02 SRU, ETSI [***] GHz, Band [***] [***] MHz, Non-integral [***] [***] [***]
antenna
SRU-E-2614-02 SRU, ETSI [***] GHz, Band [***] [***] MHz, Non-integral [***] [***] [***]
antenna
Required Mounting Accessories
SHW-X-2010-01 SRU, Bracket, Wall Mount, Integral Antenna [***] [***] [***]
SHW-X-2010-02 SRU, Bracket, Pole Mount, Integral Antenna [***] [***] [***]
SHW-X-2012-00 SRU, Bracket, Pole Mount, [***] GHz [***] [***] [***]
SHW-X-2012-01 SRU, Bracket, Wall Mount, [***] GHz [***] [***] [***]
Nonintegral Antenna Options
ANT-X-2601-01 Antenna, [***] GHz, [***] parabolic 1 LA [***]
ANT-X-2602-01 Antenna, [***] GHz, [***] parabolic 1 LA [***]
</TABLE>
NOTES
Availability of all product subject to change without notice. Please contact
your Netro Sales
Office for the most current availability information
Status Notes:
TBA - To Be Available. Field Sales may generate quotes and accept purchase
orders LA - Limited Availability to qualified customers only GA - General
Availability (No restrictions) D - Discontinued Product. Do not order
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APPENDIX B: DELIVERY SCHEDULE AND MANUFACTURING INTERVAL
MANUFACTURING INTERVAL - Supplier's manufacturing interval for generally
available MATERIAL covered by this Agreement is [***] days for SAS equipment,
[***] days for non-SAS equipment. The manufacturing interval covers time
required by Supplier to obtain raw material and produce standard finished
MATERIAL.
DELIVERY INTERVAL - Supplier shall ship finished MATERIAL within [***] days
after the manufacturing interval and upon receipt of Company's Order unless the
Order sets forth a later shipping date.
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<PAGE> 42
AirStar System Specifications for [***] and [***] are attached hereto and made a
part hereof.
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<PAGE> 43
AIRSTAR SYSTEM SPECIFICATIONS
[***] GHZ (ITU VERSION)
RADIO PERFORMANCE SPECIFICATIONS
RANGE AND AVAILABILITY (TYPICAL)
[***] kilometer radius, [***] availability (CCIR climatic Zone [***]
[***] minimum antenna gains
ANTENNAS:
BASE STATION:
The Base Station Radio comprises a number of sectorized radio unit arrays. Each
sector has one or more Base Radio Units, allowing modular capacity build-up and
redundant configuration of both radio and antenna.
<TABLE>
<CAPTION>
Azimuth Elevation Nominal # of Sectors Availability
Beamwidth Beamwidth Gain Per Cell
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[***] degrees [***] degrees [***] dBi [***] to [***] [***]
[***] degrees [***] degrees [***] dBi [***] to [***] [***]
[***] degrees [***] degrees [***] dBi [***] to [***] [***]
- -------------------------------------------------------------------------------------------
</TABLE>
SUBSCRIBER TERMINAL:
High performance planar antenna, [***] dB nominal gain.
<TABLE>
<S> <C>
RADIO PERFORMANCE SPECIFICATIONS:
Synthesizer Design: [***], software controlled
Frequency Range: [***] to [***] GHz
T/R Spacing: [***] MHz
Tuning Range: [***] MHz
Channel Bandwidth: [***] MHz, [***] MHz [***]
Tuning Step Size: [***] MHz
Maximum Transmit Power ([***]QAM): [***] dBm (typical)
Automatic Tx Power Control Dynamic Range: [***] dB
AIR INTERFACE
MODULATION FORMAT
Base Station to Subscriber Terminal: [***] QAM, [***]
Subscriber Terminal to Base Station: [***] QAM, [***]
FDM of multiple [***] MHz carriers and Tx to RX
separation
RECEIVER SENSITIVITY - TYPICAL (BER = [***] AFTER FEC)
[***] QAM, [***] Mb/s: [***] dBm
</TABLE>
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<TABLE>
<S> <C>
[***]AM, [***] Mb/s: [***] dBm [***])
</TABLE>
MEDIUM ACCESS CONTROL
Netro's CellMAC protocol for wireless ATM, with centralized traffic scheduling
based on Netro's virtual framer for ATM CBR traffic and virtual shaper for ATM
VBR traffic.
<TABLE>
<S> <C>
SYSTEM CAPACITY
Capacity per subscriber ([***] MHz, [***]AM): [***] Kb/s to [***] Mb/s
Capacity per Base Station Shelf: [***] Mb/s
LINK ENCRYPTION (REL.3)
DES Key Length [***] bit. [***] bit, with export license
</TABLE>
<TABLE>
<S> <C> <C>
INTERFACE SPECIFICATIONS:
CPE Interfaces Interworking Function Network Interface
[***] [***] [***]
[***] [***]
[***] [***] [***]
[***]
[***]
[***] [***]
[***] [***]
</TABLE>
<TABLE>
<S> <C>
NETWORK MANAGEMENT
Host to Network Element Protocol: SNMP
Host Platform: Windows NT
Software Download: Local and Remote
Performance Monitoring: per [***]
</TABLE>
SYSTEM AVAILABILITY
[***] Redundancy on all base station components.
[***] Redundancy on base station modems and radios [***]
STANDARDS AND REGULATORY COMPLIANCE
<TABLE>
<S> <C>
System: [***]
[***]
EMC: [***]
[***]
Physical Interfaces: [***]
[***]
Mechanical and Safety: [***]
Environmental: [***]
ENVIRONMENTAL
Operating Temperature [***] C to + [***] C (Indoor unit)
</TABLE>
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<PAGE> 45
<TABLE>
<S> <C>
[***] C to [***] C (Outdoor unit)
Relative Humidity (Indoor): [***]%, non-condensing
Altitude (System): [***] m
Wind loading: [***] km/hr (Operational)
[***] km/hr (Survival)
POWER
Input Voltage
- Base Station: [***] VDC
- Subscriber Terminal: [***] VDC or [***] VAC, [***] Hz
Power Consumption (Typical):
- Base Station: [***] W
- Subscriber Terminal: [***] W
</TABLE>
<TABLE>
<CAPTION>
MECHANICAL
Dimensions: H x W x D Weight
- ----------- --------- ------
<S> <C> <C>
Subscriber Terminal:
- Indoor unit (SAS) 4 cm x 21.5 cm x 28 cm 2.5 kg
- Outdoor unit (SRU) 22 cm x 22 cm x 7 cm 6.0 kg
Base Station:
- Indoor unit (BSS, incl. Cooling) 44.4 cm x 48.3 cm x 50.8 cm 21.5 kg
- Outdoor unit (BRU) 22 cm x 22 cm x 7 cm 5.5 kg
Indoor Unit to Outdoor Unit Connection: 0 - 100 m (LMR240)
0 - 300 m (LMR400)
</TABLE>
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<PAGE> 46
The final content and availability of [***] features is subject to change and is
dependent upon developmental and field experience, as well as customer
requirements and market demands. As the developmental plans for AirStar
progress, we will keep Lucent apprised of the progress against milestones.
[***] features represent our current plans based on customer and partner input.
They are currently in an early definition phase and may be changed depending on
our mutual requirements. Final content and availability will be determined in
accordance with Netro's New Product Development Process.
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<PAGE> 47
NETRO SUPPORT GUIDE FOR RESELLERS
AND SYSTEMS INTEGRATORS
All Resellers of Netro products are expected to be able technically and
organizationally to provide Tier I and Tier II support as outlined in this
document to the end user as the end user (Customer) requires. It is the
responsibility of the reseller to provide the following support to the end user
(Customer):
- - A Customer Service call center where users (Customers) can report
problems and receive Tier I and Tier II technical support.
- - A Spare Parts stock adequate to supply the user with replacement parts
as required to maintain the system.
- - Software upgrades and assistance with software installation.
- - Technical information including product documentation.
- - Training to the user regarding the operation of the equipment.
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<PAGE> 48
I. TECHNICAL SUPPORT RESPONSIBILITIES
TIERED TECHNICAL SUPPORT RESPONSIBILITIES
Customers, Resellers System Integrators, and equipment vendors often refer to
levels of support as a tier 1, 2, or 3 level of support. At Netro Corporation,
the various levels of support are defined as follows:
<TABLE>
<CAPTION>
TIER ORGANIZATION RESPONSIBLE DUTIES
# FOR SUPPORT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tier 1 Normally the responsibility - Assist operations personnel.
of the Customer, Reseller or - Provide product technical information.
System integrator. - Provide installation and configuration support.
- Perform first level diagnostic operations.
- Gather technical problem data.
- Remove and replace hardware.
- Escalate to Tier 2 support.
- ---------------------------------------------------------------------------------------------------------
Tier 2 Normally the responsibility - Be capable of training the Tier 1 support provider.
of the Reseller or System - Be familiar with the technical environment
integrator. including integrated 3rd party products.
- Confirm that a hardware or software failure has
occurred.
- Recommend operational workarounds.
- Utilize appropriate test equipment.
- Analyze traces, gather specific failure data.
- Have in-depth, specialized product knowledge.
- Create complex failure environments.
- Duplicate failure conditions in a lab environment.
- Recommend workarounds and probable failure causes.
- Assist Tier 3 support in characterizing and
duplicating failure events.
- Stock spare parts and manage the RMA process.
- ---------------------------------------------------------------------------------------------------------
Tier 3 Netro Technical Assistance - Have specific engineering level knowledge of the
Center product.
- Recommend and create hardware or software product
modifications.
- Assist Tier 2 with difficult technical situations.
The responsibility of Netro
Corp.
</TABLE>
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<PAGE> 49
NETRO SERVICES
II. WARRANTY
HARDWARE PRODUCT WARRANTY
Netro warrants that all hardware products provided by Netro will be free from
defects in materials and workmanship under normal operating conditions
for a period of [***] following the date of shipment from Netro.
Should a product fail within this warranty period, Netro will, at its
discretion, repair or replace the defective product at no cost to the
customer. Defective products must be returned to Netro, shipping
prepaid. Replacement products may be refurbished units or may contain
refurbished materials. All repaired or replaced products will be
warranted for the remainder of the warranty period associated with the
original product or for a period of [***] days, whichever is longer.
HARDWARE REPLACEMENT DURING THE WARRANTY PERIOD
Customers desiring the rapid replacement of defective units during or after the
Warranty period will be expected to sign a Service Support Agreement
with their Reseller. The Reseller may choose either to hold an adequate
supply of spares for immediate replacement of faulty equipment or may
choose instead to obtain a back-to-back agreement with Netro for
`Advanced replacement' of critical parts. Advanced Replacement is
defined under `Repair Activities' later in this document.
SOFTWARE PRODUCT WARRANTY
Netro warrants that its software media will be free form defects in materials
and workmanship under normal operating conditions for a period of [***]
following the delivery of the software media. Netro also warrants that
the software will substantially conform to the functional specifications
set forth in the documentation for the software.
SOFTWARE SUPPORT DURING OR AFTER THE WARRANTY PERIOD
Customers who require telephone support during or after the Warranty period will
be expected to sign a Service Support Agreement with their Reseller. The
Reseller will need to obtain a back-to-back agreement with Netro for
Telephone Technical Support.
Customers requiring software updates and relevant associated documentation will
be expected to subscribe to the Software Subscription Service and sign a
relevant agreement with their Reseller. The Reseller will need to
purchase this service form Netro either via the Netro Software
Subscription Program or the Netro Reseller and Systems Integrator
Contract Support.
[***] Confidential Treatment Requested
-3-
<PAGE> 50
EXTENDED WARRANTY
Extended Warranty is available from Netro to Resellers. For an additional charge
related to the initial purchase price of equipment, Netro is willing to
extend the duration of the Warranty.
III. NETRO RESELLER AND SYSTEMS INTEGRATOR SUPPORT CONTRACT
THE NETRO RESELLER SUPPORT CONTRACT
The Netro Systems Integrator Support Contract is available to Resellers and
System Integrators who provide tier I and tier II support to the product end
user. The Reseller or System Integrator will receive Tier III technical support
and hardware repair services from Netro.
Services provided under the Reseller Support Contract are:
- - TELEPHONE TECHNICAL SUPPORT (TECHNICAL ASSISTANCE CENTER). Netro will
provide Tier III telephone support during normal business hours (08:00
to 18:00 Central European Time) from either Netro's local office or
Netro's Corporate Service Center. (Note: 24x7 Telephone Technical
Support is available from Netro's Corporate Service Center at an
additional charge. See the Support price list.) No one will accept USA
hours outside of USA!!
- - SOFTWARE UPDATES. Netro will provide major software updates as well as
maintenance fixes, upon request, for product supported under this
agreement, as defined within the Netro Software Subscription Program
- - DOCUMENTATION. Netro will provide the latest version of Netro's
technical documentation. This documentation may be on CD, in electronic
format or in hard copy.
- - PARTS REPAIR. Netro will include a repair service that will repair the
defective unit and return the repaired unit to the customer.
OR
- - RAPID REPLACEMENT OF PARTS: Netro will provide the "advanced
replacement" of critical parts in a timely manner as defined earlier in
this document. This provides for the rapid replenishment of local stock
and eliminates the need to wait for factory repairs to be returned.
IV. NETRO SOFTWARE SUBSCRIPTION PROGRAM
THE NETRO SOFTWARE SUBSCRIPTION PROGRAM
The Netro Software Subscription Program offers a convenient, cost-effective
method which allows Customers to maintain Netro's software products at the most
recent software release level
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<PAGE> 51
thereby allowing customers to derive the greatest benefit from their software
investment. The Service is provided by the Reseller to the Customer and
purchased by the Reseller from Netro.
Services covered by the Netro Software Subscription Program:
- - SOFTWARE UPDATES. Netro will provide major software updates as well as
maintenance fixes, upon request, for product supported under this
agreement.
- - ACCESS TO SOFTWARE FIXES. Netro will provide access to the latest
software fixes, as they become available, via the Technical Assistance
Center and the Resellers own support center and technical staff
- - DOCUMENTATION. Netro will provide the latest version of Netro's software
release notes and other technical documentation related to the software.
The software subscription program can be purchased either as part of the Netro
Reseller Support Contract or may be purchased separately.
V. NETRO RESELLER AND SYSTEM INTEGRATOR INSTALLATION SUPPORT PROGRAM
NETRO RESELLER AND SYSTEM INTEGRATOR INSTALLATION SUPPORT PROGRAM
The Netro Installation Program is designed to allow Netro's Resellers to utilize
Netro's extensive experience in providing pre-installation support as well as
installation support and training during the start up phase of the Netro system.
Netro Customer Service will provide a series of valuable services designed to
make installations successful. Netro's Technical Assistance Center will provide
the following services as a part of the Installation Program:
1. Netro will provide Netro's standard AirMAN or AirStar class for up to 4
students at Netro's training facility. Upon completion, students will be
able to install, operate and maintain the Netro system.
2. Netro Technical Assistance Center staff will spend up to 3 days either
at Reseller's site or at Netro's facility working with Reseller's staff
to help verify Customer network designs and will make recommendations
relating to Netro Equipment as necessary to ensure that all technical
and performance objectives set by the Customer for the network (e.g. for
a complex ATM network involving AirMAN and AirStar as well as other
equipment are met. Installation requirements can be determined and tests
can be developed for the specific Customer installation.
3. For a period of up to 5 consecutive days, Netro Technical Assistance
staff will assist the Reseller, at the chosen location, with the
installation and configuration of Netro Equipment and will work with you
to place the base station into operation and to execute the test plan.
-5-
<PAGE> 52
4. During the 5-day installation period, Netro Technical Assistance Center
will also provide on-site training to Reseller's and Customer's staff on
the equipment being installed.
VI. NETRO SOFTWARE SUPPORT RELEASE POLICY
THE NETRO SOFTWARE SUPPORT RELEASE POLICY
Netro will provide telephone support and maintenance for Netro's current release
of a Software product. In addition, Netro will provide telephone support and
maintenance for one release prior to the current release for a period of 12
months following the general availability of Netro's most current release. This
includes "dot" (i.e. interim) releases.
Example: Netro will provide telephone support and defect maintenance for release
2.1 of a software product for a period of 12 months after the general
availability of release 2.2.
NETRO TECHNICAL ASSISTANCE MAY REQUIRE THAT THE CUSTOMER UPGRADE TO A NEWER
RELEASE OF SOFTWARE TO RESOLVE A REPORTED PROBLEM IF IT IS NOT PRACTICAL, AS
DETERMINED BY NETRO, TO PROVIDE A FIX TO A CUSTOMER'S SOFTWARE RELEASE.
VII. THE TECHNICAL ASSISTANCE CENTER
CONTACTING THE TECHNICAL ASSISTANCE CENTER
The Technical Assistance center, is located in San Jose, California, is staffed
with Technical Specialists who have extensive experience with the Netro product
line as well as significant experience with many aspects of networking, voice
and data communications as well as wireless communications.
The Technical Assistance Center may be contacted via e-mail at:
[email protected]
or by calling during normal business hours:
- SAN JOSE, CALIFORNIA, USA
(+) 408-216-1500 or by fax: (+) 408-216-1555
- FRANKFURT, GERMANY
(+) 49-6196-400-977 or by fax: (+) 49-6196-400-935
VIII. NETRO CORPORATION PROBLEM PRIORITY DEFINITIONS
PROBLEM PRIORITY DEFINITIONS:
Priority 1: An existing network or link is inoperable or there is a
situation that causes critical impact to the Customer's
business operation. The Customer, the
-6-
<PAGE> 53
Reseller and/or System Integrator, and Netro will commit
all resources necessary to resolve the situation.
Priority 1 problems are given the highest level of
attention and are immediately addressed by the Netro
Technical Assistance Center. Netro Engineering will
become engaged as necessary at the request of Netro
Customer Technical Assistance Center.
Netro Resolution Goals:
<TABLE>
<S> <C>
Workaround to restore operations. May be hardware, [***] hours
software, or operations related.
Software fix if software related [***] days
Inclusion of software fix in next release [***] months
</TABLE>
Priority 2: The operation of an existing network or link or a test
network imminently due to go live is severely degraded,
or significant aspects of the Customer's business
operation are being negatively impacted by unacceptable
hardware or software performance. The Customer, the
Reseller and/or System Integrator and Netro will make
every reasonable effort to resolve the situation in a
timely manner.
Netro Resolution Goals:
<TABLE>
<S> <C>
Workaround to restore operations. May be hardware, [***] hours
software, or operations related.
Software fix if software related [***] days
Inclusion of software fix in next release [***] months
</TABLE>
Priority 3: Operational performance of the network is impaired while
most business operations remain functional. The
Customer, the Reseller and/or System Integrator and
Netro will commit resources during Standard Business
Hours to restore service to satisfactory levels.
Netro Resolution Goals:
<TABLE>
<S> <C>
Workaround to restore operations. May be hardware, [***] days
software, or operations related.
Software fix if software related [***] days
Inclusion of software fix in next release [***] months
</TABLE>
Priority 4: Information or assistance is required on Netro product
capabilities, installation, enhancement requests or
configuration. There is clearly little or no impact to
the Customer's business operation. Netro is willing to
provide resources during Standard Business Hours to
provide information or assistance as requested. Netro
commits to consider work arounds and future product
developments to resolve requests for improvement by the
Customer. The resolution may be a technical assistance
service, a work-
-7-
[***] CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 54
around, a resolution through a new feature included in a
future release, revised documentation or a statement
that Netro will not be modifying the product as
suggested.
IX. REPAIR ACTIVITIES:
1. HARDWARE UPGRADES: At customer's request, units received by
Netro for repair will also be upgraded to the latest engineering
revision level whenever practical.
2. TURNAROUND: REPAIR AND RETURN.
Netro will make all reasonable efforts to repair and ship the
Customer's unit within 20 business days of receipt of the unit
at Netro. (This applies to units repaired under Warranty or
under the Netro Reseller Support Contract (if covered) outside
of the Warranty period)
It is important that the Reseller and the Customer follow
Netro's RMA (Return Material Authorization) process. The
Reseller is urged to document each service request made by the
Customer and retain a full log, with a resolution of each case.
Cases referred to Netro will all be documented by Netro against
an RMA number, and will be cleared by a resolution and
description of the cause, which will also be documented by
Netro. Netro's RMA process is initiated by contacting the Netro
Technical Assistance Center. The Reseller and the Customer are
responsible for the proper packaging and the payment of shipping
related fees for shipment of the product of Netro. Netro is
responsible for the proper packaging and payment of shipping
related fees for shipment of payment of shipping related fees
upon return of the product to the Reseller (or Customer as
required by the Reseller).
3. TURNAROUND: ADVANCE REPLACEMENT.
Netro will make all reasonable efforts to ship a replacement
unit to the customer within 5 business days of notification that
the Customer requests an "Advance Replacement."
Customer must return the defective unit to Netro within 15
business days. Netro retains the right to invoice units not
received within 15 business days at the then current list price.
Customer or Reseller will assume ownership of the replaced unit
and Netro will assume ownership of the repaired unit.
Shipping and packaging terms and responsibilities and costs are
as for normal `Turnaround: Repair and Return' as defined above.
-8-
<PAGE> 55
THE AMERICAS, EUROPE, ASIA
ONLY
X. NETRO RESELLER AND SYSTEMS INTEGRATOR SUPPORT PRICE LIST
THE AMERICAS, EUROPE, ASIA ONLY
<TABLE>
<S> <C> <C>
HOURLY RATES: During Netro Normal Business Hours [***] per hour
Technical Including Travel Time [***] hour minimum
Assistance Center plus T&E
or On-site
activities.
After Netro Normal Business Hours [***] per hour
Including Travel Time [***] minimum
plus T&E
DAILY RATES: Including Travel Time [***] per day
Technical plus T&E
Assistance Center
or On-site
activities.
TRAINING RATES: At Netro facility (1 to 6 students). [***] per day
Netro supplies necessary equipment.
Includes training materials.
At customer facility (1 to 6 students). [***] per day
Customer to supply all necessary plus T&E
equipment and facilities including
system setup. Netro supplies training
materials.
SYSTEM INTEGRATION Includes: [***] plus T&E
AND INSTALLATION Training at Netro for up to 4
PROGRAM students (3 or 4 day class)
Up to 3 days of pre-installation
assistance
Up to 5 days of on-site installation
assistance and OJT
NETRO RESELLER For Netro Products outside of the [***] annually
SUPPORT CONTRACT: warranty period. (For program features, (Cumulative product
(AFTER THE WARRANTY see section II) Systems Integrator will purchases)
PERIOD) receive factory repair and return of
defective hardware, SW updates, current [***] annually
documentation and Tier III technical (Cumulative product
support. purchases)
Advance Replacement Option.
(24 X 7 TELEPHONE As an add-on to the Netro Reseller [***] annually (added
SUPPORT) Support Contract, Netro offers to the Netro S.I.
24 x 7-telephone support for an Contract)
additional [***] annually.
</TABLE>
-9-
[***] CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 56
<TABLE>
<S> <C> <C>
NETRO SOFTWARE For the Netro Network Management System, [***] annually of the
SUBSCRIPTION the Subscription service provides s.w. list price
updates to the software as they become
available
REPAIR CENTER RATES: During the Warranty period Customer pays No Charge
freight to Netro. Netro pays return
freight
Out of warranty Repair and Return See Netro Product/
Customer pays freight to Netro. Netro Repair price list
pays return freight
Out of warranty Advance Replacements See Netro Product/
Customer pays freight to Netro. Netro Repair price list
pays return
Repair Center T&M rates No T&M rates
available
Advance Replacement at any time
Surcharge per
parts price list.
In Warranty "No Trouble Found" rate [***] of standard
repair rate
EXTENDED WARRANTY: For Netro Products outside of Netro's [***] annually
(AFTER THE WARRANTY warranty period where "return to (Cumulative product
PERIOD) factory" for repair services is desired purchases)
by the Reseller
</TABLE>
- ------------------
Note: Products placed under a maintenance contract for a given end user
customer must include all products shipped to that end user.
-10-
[***] CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 57
XI. NETRO RESELLER AND SYSTEMS INTEGRATOR SUPPORT PRICE LIST
NETRO SYSTEMS
THE MIDDLE EAST ONLY
<TABLE>
<S> <C> <C>
HOURLY RATES: During Netro Normal Business Hours [***] per hour
Technical Including Travel Time [***] hour minimum
Assistance Center
or On-site
activities.
After Netro Normal Business Hours [***] per hour
Including Travel Time 1 hour minimum
DAILY RATES: Including [***] per day plus
Technical T&E
Assistance Center
or On-site
activities.
TRAINING RATES: At Netro facility (1 to 6 students) [***] per day
Netro supplies necessary equipment First Free
Includes training materials
At customer facility (1 to 6 students) [***] per day plus
Customer to supply all necessary T&E
equipment and facilities including
system setup.
Netro supplies training materials
SYSTEM INTEGRATION Includes: [***] plus T&E
AND INSTALLATION Training at Netro for up to 4 students
PROGRAM (3 or 4 day class) Up to 3 days of
pre-installation assistance Up to 5
days of on-site installation
assistance and OJT
NETRO S.I. SUPPORT For Netro Products outside of the [***] annually
CONTRACT: (AFTER warranty period. (For program features, (Cumulative product
THE WARRANTY PERIOD) see section II) Systems Integrator will purchases)
receive factory repair and return
of defective hardware, SW updates, [***] annually
current documentation and Tier III
technical support
Advance Replacement Option (Cumulative product
purchases)
(24 X 7 TELEPHONE As an add-on to the Netro S.I. Support [***] annually (added
SUPPORT) Contract, Netro offers 24 x 7 telephone to the Netro S.I.
support for an additional [***] annually Contract)
NETRO SOFTWARE For the Netro Network Management System, [***] annually of the
SUBSCRIPTION the Subscription service provides s.w. list price
updates to the software as they become
available
</TABLE>
-11-
[***] CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 58
<TABLE>
<S> <C> <C>
REPAIR CENTER RATES: During the Warranty period No Charge
Customer pays freight to Netro. Netro
pays return freight
Out of warranty Repair and Return See Netro Product/
Customer pays freight to Netro. Netro Repair price list
pays return freight
Out of warranty Advance Replacements See Netro Product/
Customer pays freight to Netro. Netro Repair price list
pays return
Repair Center T&M rates No T&M rates
available
Advance Replacement at any time Surcharge per parts
price list
In Warranty "No Trouble Found" rate [***]% of standard
repair rate
EXTENDED WARRANTY: For Netro Products outside of Netro's [***]% annually
(AFTER THE WARRANTY warranty period where "return to (Cumulative product
PERIOD) factory" for repair services is desired purchases)
by the Reseller.
</TABLE>
Note: Products placed under a maintenance contract for a given end user
customer must include all products shipped to that end user.
[***] Confidential Treatment Requested
-12-
<PAGE> 59
REPAIR SCHEDULE
Supplier's document entitled "Netro AirStar Repair and Replace Price List" dated
14 September 1998 is attached hereto and made a part hereof.
-1-
<PAGE> 60
NETRO AIRSTAR
REPAIR AND REPLACE PRICE LIST
14 SEPTEMBER 1998
NETRO CORPORATION 3860 NORTH FIRST STREET, SAN JOSE, CA 95134 PHONE +1(408
216-1500 FAX +1(408) 216-1555 WWW.NETRO-CORP.COM
ALL SPECIFICATIONS SUBJECT TO CHANGE WITHOUT NOTICE. AIRMAN IS A REGISTERED
TRADEMARK. NETRO, AIRSTAR AND AIRVIEW ARE TRADEMARKS OF NETRO CORPORATION. ALL
OTHER TRADEMARKS ARE OWNED BY THEIR RESPECTIVE COMPANIES. (C)1996 NETRO
CORPORATION. ALL RIGHTS RESERVED.
-1-
<PAGE> 61
AIRSTAR
<TABLE>
<CAPTION>
MODEL NO. DESCRIPTION PRICE
- --------- ----------- -----
<S> <C> <C>
BASE MODEM MODULE
Base Unit
BMM-E-1207-02 Base Modem Module, [***] channel, [***] MHz ETSI, [***] QAM [***]
BMM-E-1214-02 Base Modem Module, [***] channel, [***] MHz ETSI, [***] QAM [***]
BMM-F-1210-02 Base Modem Module, [***] channel, [***] MHz FCC, [***] QAM [***]
BMM-F-1220-02 Base Modem Module, [***] channel, [***] MHz FCC, [***] QAM [***]
BASE MODEM UNIT
Base Unit
BMU-E-2000-00 Modem unit, [***] channel, [***] Mb/s per channel, [***]QAM, ETSI [***]
BMU-E-2000-01 Modem unit, [***] channel, [***] Mb/s per channel w/[***] QAM or
RSM-X-1001-00 Redundancy Switching Module (up to [***] redundancy) [***]
BASE RADIO UNIT
Base Unit
BRU-E-1001-02 BRU, [***]GHz, Band [***], [***]Sector, Vertical Polarization [***]
BRU-E-1011-02 BRU, [***]GHz, Band [***], [***]Sector, Vertical Polarization [***]
BRU-E-1021-02 BRU, [***]GHz, Band [***], [***]Sector, Vertical Polarization [***]
BRU-E-1081-02 BRU, [***]GHz, Band [***], [***]Sector, Horizontal [***]
BRU-E-10A1-02 BRU, [***]GHz, Band [***], [***]Sector, Horizontal [***]
BRU-E-2601-01 BRU, [***]GHz, Band [***], [***]Sector, Vertical [***]
BRU-E-2601-02 BRU, [***]GHz, Band [***], [***]Sector, Vertical [***]
BRU-E-2603-01 BRU, [***]GHz, Band [***], [***]Sector, Vertical Polarization [***]
BRU-E-2603-02 BRU, [***]GHz, Band [***], [***]Sector, Vertical [***]
BRU-E-2611-01 BRU, [***]GHz, Band [***], [***]Sector, Vertical Polarization [***]
BRU-E-2611-02 BRU, [***]GHz, Band [***], [***]Sector, Vertical [***]
BRU-E-2613-01 BRU, [***]GHz, Band [***], [***]Sector, Vertical Polarization [***]
BRU-E-2613-02 BRU, [***]GHz, Band [***], [***]Sector, Vertical [***]
Required Mounting Accessories
SHW-X-2001-00 BRU, Bracket, Single BRU, Pole Mount [***]
SHW-X-2002-00 BRU, Bracket, Dual BRU, Pole Mount, [***] GHz [***]
BASE SECTOR CONTROLLER
Base Unit
BSC-E-2000-00 BSC, [***] Channel, [***] Mb/s throughput [***]
BSC-E-4000-01 BSC, [***] Ch, [***] Mb/s/ch., [***] redundant [***]
BSC-E-4000-02 BSC, [***] Ch, [***] Mb/s throughput [***] QAM, [***] Mb/s [***]
BSC-X-2000-01 BSC, [***] Ch, [***] Mb/s max throughput [***]
BSC-X-4000-02 BSC, [***] Ch, [***] Mb/s max throughput [***]
Spares
BSC-E-1005-00 BSC, Front Card, [***] Channel
BSC-X-1001-00 BSC, Back Card
BSC-X-1001-02 BSC, Back Card
BSC-X-1005-01 BSC, Front Card, [***] Ch., [***] Mb/s max throughput
BSC-X-1005-02 BSC, Front Card, [***] Ch., [***] Mb/s max throughput
</TABLE>
[***] CONFIDENTIAL TREATMENT REQUESTED
-1-
<PAGE> 62
<TABLE>
<S> <C> <C>
SUBSCRIBER ACCESS SYSTEM
Base Unit
SAS-E-1002-01 SAS, [***] QAM, [***] MHz, [***]E1, [***] [***]
SAS-E-1008-02 SAS, [***] QAM, [***] E1, [***].21, [***] [***]
SAS-E-1202-02 SAS, [***] QAM, [***] MHz, [***]E1, [***] [***]
SAS-E-1204-02 SAS, [***] QAM, [***] MHz, [***]E1, [***] [***]
SAS-E-1222-02 SAS, [***] QAM, [***] MHz, [***]E1, [***] [***]
Required Software Accessories
SFW-E-1003-02 SAS, Software, Broadband Wireless [***] [***]
SFW-E-1020-02 SAS, Software Bundle, BBWOS, [***] [***]
SFW-F-1003-02 SAS, Software, Broadband Wireless [***] [***]
SFW-F-1020-02 SAS, Software Bundle, BBWOS, [***] [***]
SFW-X-1003-01 SAS, Software, Broadband Wireless OS [***]
SFW-X-1020-01 SAS, Software Bundle, BBWOS, [***] [***]
Optional Software Accessories
SFW-E-1014-00 SAS, Software, [***] [***]
SFW-X-1010-00 SAS, Software, [***] [***]
SFW-X-1013-00 SAS, Software, [***] [***]
Optional Power Supply Accessories
SHW-X-3005-00 SAS, Power Supply, 220 VAC [***]
SHW-X-3007-01 Power Supply, AC, Battery Back-Up [***]
Optional Connector Adapter Accessories
SHW-X-3008-00 SAS, Converter, 120 Ohm to 75 Ohm [***]
SHW-X-3021-00 SAS, Converter, X.21 [***]
SHW-X-3035-00 SAS, Converter, V.35 [***]
SUBSCRIBER RADIO UNIT
Base Unit
SRU-E-1002-01 SRU, ETSI [***] GHz, Band [***] Integral antenna [***]
SRU-E-1002-02 SRU, ETSI [***] GHz, Band [***] Integral antenna [***]
SRU-E-2602-01 SRU, ETSI [***] GHz, Band [***] MHz Integral antenna [***]
SRU-E-2602-02 SRU, ETSI [***] GHz, Band [***] MHz, Integral antenna [***]
SRU-E-2604-01 SRU, ETSI [***] GHz, Band [***] MHz Integral antenna [***]
SRU-E-2604-02 SRU, ETSI [***] GHz, Band [***] MHz, Integral antenna [***]
SRU-E-2612-01 SRU, ETSI [***] GHz, Band [***] MHz, Non-integral [***]
SRU-E-2612-02 SRU, ETSI [***] GHz, Band [***] MHz, Non-integral [***]
SRU-E-2614-01 SRU, ETSI [***] GHz, Band [***] MHz, Non-integral [***]
SRU-E-2614-02 SRU, ETSI [***] GHz, Band [***] MHz, Non-integral [***]
Required Mounting Accessories
SHW-X-2010-00 SRU, Pole Mount, [***] GHz [***]
SHW-X-2010-01 SRU, Bracket, Wall Mount, Integral Antenna [***]
SHW-X-2010-02 SRU, Bracket, Pole Mount, Integral Antenna [***]
SHW-X-2012-00 SRU, Bracket, Pole Mount, [***] GHz [***]
SHW-X-2012-01 SRU, Bracket, Wall Mount, [***] GHz [***]
Nonintegral Antenna Options
ANT-X-2601-01 Antenna, [***]-[***] GHz, [***] parabolic [***]
ANT-X-2602-01 Antenna, [***]-[***] GHz, [***] parabolic [***]
</TABLE>
[***] CONFIDENTIAL TREATMENT REQUESTED
-2-
<PAGE> 63
NOTES
Availability of all product subject to change without notice. Please contact
your Netro Sales Office for the most current availability information.
-3-
<PAGE> 64
WARRANTY ELIGIBILITY SYSTEM
TRANSACTION
The Warranty Eligibility System (WES) tracks a serialized product from
manufacturing to the customer and provides up-to-date information about the
product's warranty status. In order to accomplish this, WES receives data from
entities whose functions affect an item's warrantability.
At the end of the manufacturing, shipping, or repair processes, information
about an item will be sent to WES for inclusion on the Warranty Database. This
file can be sent to WES using
1) UNIX file transfer at,
[***] where origsystem is the UNIX machine originating the file XX is a
location code entry in location table and NNNN is the sequence number on
the header record.
2) or electronically sent to,
[***]
3) or via internet,
[***]
4) or by placing the file on a floppy disk and mailing the disk directly to
the WES group at:
Lucent Technologies, Inc.
Westwood of Lisle
Attn: [***]
2443 Warrenville Road
Lisle, IL 60532
Batch files received for processing by WES must be processed by a Header Record
as attached. Following the Data Records must be a Trailer Record also attached.
The Header and Trailer Records are interrogated by WES and messages are returned
to the sending location indicating the status of each file transmitted to WES.
These files should be sent at least once a week, depending on volume, in order
to keep the database current. That data needs to be formatted as shown on the
following page.
-1-
[***] CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 65
HEADER RECORD
<TABLE>
<CAPTION>
COLUNM FIELD SIZE FIELD CONTENT COMMENTS
- ------ ---------- ------------- --------
<S> <C> <C> <C>
[***] [***] Transaction Code &&HDR
[***] [***] - Blank
[***] [***] Source of Input Job Name of Feeder
[***] [***] Blank
[***] [***] Transmission Sequence Zero Filled
Number Right Justified
[***] [***] Blank
[***] [***] Time HHMMSS
[***] [***] Blank
[***] [***] Date MMDDYY
[***] [***] Blank
[***] [***] Originating Location Location that Originated
this Transaction
</TABLE>
ALL ALPHA REPRESENTATION SHOULD BE CAPITALIZED
-2-
[***] CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 66
TRAILER RECORD
<TABLE>
<CAPTION>
COLUMN FIELD SIZE FIELD CONTENT COMMENTS
- ------ ---------- ------------- --------
<S> <C> <C> <C>
[***] [***] Transaction Code &&TLR
[***] [***] Blank
[***] [***] Record Count
[***] [***] Blank
</TABLE>
ALL ALPHA REPRESENTATION SHOULD BE CAPITALIZED
-3-
[***] CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 67
ADD TRANSACTION FORMAT
<TABLE>
<CAPTION>
COLUMN FIELD SIZE FIELD CONTENT COMMENTS
------ ---------- ------------- --------
<S> <C> <C> <C> <C>
1) [***] [***] Transaction Code A
2) [***] [***] Item Serial Number
3) [***] [***] Order Number Lucent Order Number
[***] [***] Blank
4) [***] [***] Manufacturing Ship Date (MMDDYY)
5) [***] [***] Parent Serial Number
6) [***] [***] Product Line Left Justified
7) [***] [***] Product Identification
Number
[***] [***] Blank
8) [***] [***] Originating Location Location that Originated
Transaction
</TABLE>
ALL ALPHA REPRESENTATION SHOULD BE CAPITALIZED
1) One digit code representing the [***].
2) The number assigned to each unique product produced by factory. Includes
a [***].
3) The identifier of an order placed by a customer.
4) The date an item was shipped from manufacturing. The format is MMDDYY.
5) The item serial number of the equipment that the current items is
embedded in.
6) A five character identifier used to [***], which is assigned by the
product manager in agreement with WES.
7) The [***]. Left justified.
8) [***] the transaction.
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[***] CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 68
RGM TRANSACTION FORMAT
<TABLE>
<CAPTION>
COLUMN FIELD SIZE FIELD CONTENT COMMENTS
------ ---------- ------------- --------
<S> <C> <C> <C> <C>
1) [***] [***] Transaction Code G
2) [***] [***] Item Serial Number
3) [***] [***] Order Number Lucent Order Number
[***] [***] Blank
4) [***] [***] Returned Date MMDDYY
[***] [***] Blank
5) [***] [***] Originating Location Location that Originated
Transaction
</TABLE>
ALL ALPHA REPRESENTATION SHOULD BE CAPITALIZED
1) One digit code representing [***]. [***]
2) (The number assigned to each unique product produced by factory.
Includes [***].
3) The date an item was returned accompanied by a returned goods memorandum
or an SES exchange.
4) [***] transaction.
[***] CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 69
MMC SHIP TRANSACTION FORMAT
<TABLE>
<CAPTION>
COLUMN FIELD SIZE FIELD CONTENT COMMENTS
------ ---------- ------------- --------
<S> <C> <C> <C> <C>
1) 1 (01) Transaction Code M
2) 2-13 (12) Item Serial Number
3) 14-23 (10) Order Number Number
24-38 (15) Blank
4) 39-44 (06) MMC Ship Date MMDDYY
5) 62-86 (25) Product Identification Left Justified
Number
6) 87-91 (05) Product Line
92-123 (32) Blank
7) 124-125 (02) Originating Location Location that Originated
Transaction
</TABLE>
ALL ALPHA REPRESENTATION SHOULD BE CAPITALIZED
1) One digit code representing the transaction to be performed by WES, i.e.
A = Add, R = Repair, M = MMC Ship, etc.
2) The number assigned to each unique product produced by factory. Includes
a two digit manufacturing identification number (assigned by the product manager
in agreement with WES) used in positions 3 and 4 of the 12 character serial
number as described in KS-23490.
3) The identifier of an order placed by a customer.
4) The date an item was shipped from the MDC or service center.
5) The product identification number assigned by product manager which
consists of the comcode. Left justified.
6) Up to five character code used to distinguish product for determining
warranty, which is assigned by the product manager in agreement with WES.
7) Location which originates the transaction.
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<PAGE> 70
REPAIR TRANSACTION FORMAT
<TABLE>
<CAPTION>
COLUMN FIELD SIZE FIELD CONTENT COMMENTS
------ ---------- ------------- --------
<S> <C> <C> <C> <C>
1) [***] [***] Transaction Code R
2) [***] [***] Item Serial Number
3) [***] [***] Repair Order
4) [***] [***] Customer Repair Order
Number
5) [***] [***] Repair Date MMDDYY
[***] [***] Customer Order Number
(overflow)
6) [***] [***] Product Line Left Justified
7) [***] [***] Product Identification
Number
8) [***] [***] Circuit Pack Code or
Microcode
9) [***] [***] Circuit Pack Series or
Issue of Microcode
[***] [***] Blank
10) [***] [***] Repair Code
11) [***] [***] Manufacturing Location *
12) [***] [***] Manufacturing Date *
13) [***] [***] Originating Location
</TABLE>
ALL ALPHA REPRESENTATION SHOULD BE CAPITALIZED
* Location of manufacture required or [***] or [***] Item Serial Numbers.
[***] is the location code for the site affixing the label.
[***] is the year of original manufacturing date [***] is the
next serial number to be assigned by the location.
These formats are only valid when the item was not previously barcoded.
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[***] CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 71
REPAIR TRANSACTION FORMAT
continued
1) One digit code representing the [***] [***]
2) The number assigned to each unique product produced by factory. Includes
a [***] [***]
3) This is the order number the item was repaired under, not the one it was
initially ordered under.
4) The customer's identifier for their repair order.
5) Date the item was repaired.
6) At five character used to distinguish [***] [***]
7) The product identification number [***] [***] Left justified.
8) Apparatus code assigned for identification of product at cpcode level.
9) Product level of the cpcode.
10) The code that indicates what type of action was taken by repair
organization to satisfy the customer's repair order.
The possible values are: A = not repairable K = no trouble found R =
trouble found (repairable)
11) Two digit code indicating
12) Date of manufacture. MMYY
13) [***] the transaction.
-8-
[***] CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 72
SUBSTITUTE TRANSACTION FORMAT
<TABLE>
<CAPTION>
COLUMN FIELD SIZE FIELD CONTENT COMMENTS
------ ---------- ------------- --------
<S> <C> <C> <C> <C>
1) [***] [***] Transaction Code S
2) [***] [***] Replaced Item Serial
Number
3) [***] [***] Repair Order Number
4) [***] [***] Customer Order Number
5) [***] [***] Substitute Date MMDDYY
6) [***] [***] Replacing Item Serial
Number
7) [***] [***] Product Line Product Line
Left Justified
8) [***] [***] Product Identification
[***] [***] Customer Order Number
(overflow)
[***] [***] Blank
9) [***] [***] Originating Location Location that Originated
Transaction
</TABLE>
[***] CONFIDENTIAL TREATMENT REQUESTED
ALL ALPHA REPRESENTATION SHOULD BE CAPITALIZED
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<PAGE> 73
SUBSTITUTE TRANSACTION FORMAT
continued
1) One digit code representing [***] [***]
2) Serial number of product returned by customer or installer. Format same
as item serial number.
3) Required if item is to be added to database.
4) The customer's identifier for their repair order.
5) Data substitution was made.
6) Item serial number of product the repair organization returned to a
customer, product withdrawn from an installation pool and added to an order,
item sent in by customer on a spares exchange. Format same as item serial
number.
7) A five character used to [***] [***]
8) Replacing serial number's product identification number [***]
[***] Left justified.
9) [***] the transaction.
[***] Confidential Treatment Requested
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<PAGE> 74
Addendum 1 to Contract GN11980056
Agreement No. GN11980056 between Netro Corporation ("Supplier") and Lucent
Technologies ("Company") is hereby amended as follows:
Both Company and Supplier agree to accelerated production schedule for [***] GHz
point-to-multi point radios.
~ Company agrees to fund Supplier per Attachment A1.
~ Supplier agrees to deliver product per Attachment A1.
Effective October 15, 1998 the following clauses are hereby added to the
agreement.
TERMINATION - For purposes related exclusively to the accelerated development of
the [***] GHz point-to-multi point radio, Company may terminate accelerated
state of business relationship in whole or in part by giving Supplier at least
30 days prior written notice but not before item 4 listed on Attachment A1.
Prices for any work remaining with Supplier under this Agreement terminated in
part may be adjusted to fairly reflect Supplier's costs resulting from work
withdrawn. Upon termination, Company shall pay Supplier all amounts due for
services and material, if any, provided by Supplier to Company under this
agreement up to and including the effective date of termination. Such payment
will constitute a full and complete discharge of Company's obligations under
this Agreement.
In the event that Lucent terminates the Agreement prior to shipment of the
[***] GHz product to Lucent's customers, Netro agrees to pay a rebate to Lucent
from its sales of the [***] GHz radios. The rebate will be paid at the rate of
[***]% of the net sales of the [***] GHz radios up to a maximum rebate of
Lucent's funding prior to termination. The rebate of funding shall survive the
original OEM agreement in time if Lucent's funding has not been fully rebated.
If Company terminates the accelerated development of [***] GHz product, Company
will not recognize any preferred pricing as described in Article 3 of the OEM
agreement for [***] GHz product.
Lucent agrees that it will provide a $[***] minimum order to Netro for [***] GHz
products as soon as it is able to do so but no later than December 31, 1998.
Lucent realizes that unless a firm order of at least [***] dollars is placed for
[***] GHz equipment, there is no economic justification to continue the
development effort beyond the prototype stage. Hence in the absence of a firm
order of at least [***], it is the intention of both Lucent and Netro to halt
the [***] GHz development effort after the completion of the prototype
[***] CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 75
All other terms and conditions as stated in the original contract remain
unchanged.
Netro Corporation Lucent Technologies, Inc.
By: By:
------------------------------ -------------------------------
Name: (Print) Name: (Print):
----------------------------- -----------------------------
Title: Title:
--------------------------- ----------------------------
Date: Date:
---------------------------- -----------------------------
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<PAGE> 76
ATTACHMENT A1
<TABLE>
<CAPTION>
39GHZ POINT TO MULTI POINT ACCELERATED PRODUCTION SCHEDULE DELIVERY NRE
MILESTONES AND DELIVERABLES DATE PAYMENT
--------------------------- ---- -------
<S> <C> <C>
1 Completion and acceptance by Company of Supplier project 10/6/98 [***]
plan. Company places order with Supplier for long lead time
components and procurement of personnel resources for [***] GHz
radio.
2 Company and Supplier sign agreement for [***] GHz Accelerated 10/23/98 [***]
Production.
3 Completion and acceptance by Company of [***] GHz PMP 11/1/98 [***]
specification and pricing for [***] GHz products.
4 Completion and acceptance by Company of Supplier's first [***] 2/28/99 [***]
GHz PMP Release 1.0 prototype radio/system.
5 Completion of qualification, delivery and acceptance by 5/31/99 [***]
Company of three (3) production units of Release 2.0
MATERIAL; begin manufacturing ramp. Price for production
units of MATERIAL is in addition to the NRE associated with
this milestone.
6 Limited availability of Release 3.0 MATERIAL and delivery to 9/30/99 [***]
Company of all appropriate design documentation.
TOTAL [***]
</TABLE>
[***] CONFIDENTIAL TREATMENT REQUESTED
-1-
<PAGE> 1
Exhibit 10.8
FRAME AGREEMENT
between
Netro Corporation, with head offices in Santa Clara (California), 3200 Coronado
Drive (hereinafter referred to as "NETRO")
and
Italtel s.p.a., with head offices in Milano (Italy), P.le Zavattari n. 12
(hereinafter referred to as "Italtel")
(NETRO and Italtel are also hereinafter referred to jointly as "Parties" and
severally as "Party")
WITNESSETH
WHEREAS, Italtel is an integrated manufacturer with significant presence
transmission, wireless and other markets; and telecommunication in switching,
transmission, wireless and other markets; and
WHEREAS, NETRO offers the AirStar point-to-multipoint wireless broadband
access product family, together with associated network management software, for
voice, data and video applications; and
WHEREAS, the Parties, intending to undertake a cooperation to develop,
manufacture, market and sell the Products as hereinbelow defined, with each
Party contributing, according to its respective role, the appropriate
technologies, resources and effort, signed on September 1st 1997 a Memorandum of
Understanding indicating the headlines of the above cooperation; and
WHEREAS, by signing this Agreement the Parties intend to better define
the terms and conditions of their cooperation with respect to the Products.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS.
ARTICLE 1 - - DEFINITIONS
The terms defined in this Article 1 and used in this Agreement shall have the
following meanings:
1.01 The term "Agreement" shall mean this Frame Agreement as well as any
Supplemental Agreements ("SAS") and the Annexes thereto entered into pursuant
hereto.
1.02 The term "Products" shall mean the Existing Netro Products as
defined in 1.03. below, the [***] Product as defined in 1.04 below and the "New
Products" as defined in 1.06. below.
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[***] Confidential Treatment Requested.
<PAGE> 2
1.03 The term "Existing Netro Products" shall mean the following
existing Products of Netro made available by it during the term of this
Agreement: AIRSTAR\AIRVIEW\ and any natural evolutions and modifications thereof
such as software updates, additional frequencies, etc. other than modifications
made on an exclusive basis for third parties. Substantially new products or
major changes in application or functionality of Existing Netro Products will be
added to the Agreement from time to time at the discretion of NETRO with the
consent of ITALTEL.
1.04 The term "Feeder Product" shall mean the PMP Product to be jointly
developed by the Parties for the Feeder Market.
1.05 The term "Feeder Market" is defined to include all connections
between network infrastructure elements both for fixed and mobile applications.
An example is interconnection of [***] base stations with [***]. The "Feeder
Market", as defined, does not include [***] equipment [***] to the network.
1.06 The term "New Products" shall mean any Product the Parties decide
to jointly develop during the term of their cooperation other than the Feeder
Product defined in Article 1.04.
1.07 The term "Supplemental Agreement" or "SA" shall mean any contract
which will be entered into pursuant to this Frame Agreement under which the
Parties will agree to activate their co-operation with respect to a specific
Product.
1.08 The term "Reference Market Price" shall mean the FOB successful
price (i.e. excluding duties and freight) in the majority of competitive bids
having comparable configuration and volume.
1.09 The term "Existing Information" shall mean any information
developed solely by either Party during any program undertaken by the Parties to
jointly develop a Product as well as any information contributed by such Party
to the joint development program of the Feeder Product. Each Party shall
designate in writing what constitutes its Existing Information from time to
time.
1.10 The term "Affiliate" means a company which is under common control
with, controls or is controlled by either one of the two Parties to this
Agreement as long as such control exists, as well as any company belonging to
the same group to which belongs the Party.
ARTICLE 2 - - SCOPE
2.01 The Parties undertake to cooperate in order to develop,
manufacture, market and sell the Products, with each Party contributing,
according to its respective role, the appropriate technologies, resources and
effort, as better specified herein and in any SA possibly entered between the
Parties.
[***] CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 3
2.02 At NETRO's request Italtel either directly or through third parties
will use its best efforts in order to render to NETRO on a non exclusive basis
installation support and commissioning services of the Products sold by NETRO to
its customers at reasonable and fair terms and conditions to be agreed upon by
the Parties, which should be comparable with similar terms and conditions
proposed by Italtel for similar projects in the same country.
ARTICLE 3 - - MODES OF CO-OPERATION
3.01 With respect to Existing Netro Products the Parties shall enter
into a non-exclusive OEM relationship pursuant to which NETRO shall supply to
Italtel the Existing Netro Products for world-wide resale by it to any third
party.
Both Italtel and the Siemens group of companies shall have the right to
include the Existing Netro Products in their respective product catalogues for
world-wide sales with their own labels and logo; Italtel will use reasonable
efforts for marketing and selling the AirStar product.
3.02 As far as the Feeder Product is concerned, the Parties shall
jointly develop such Product on a non exclusive basis for the Feeder Market,
including any evolutions and modifications reasonably necessary from time to
time to meet market requirements.
The joint development activities of the Parties shall be carried out
pursuant to the development schedule and allocation of tasks to be agreed by the
Parties in the relevant Supplemental Agreement.
The resulting Feeder Product will be supplied by Netro to Italtel on a non
exclusive basis for world-wide resale by it to any third party.
The interface cards necessary for the integration with the Network Management
Systems used by Italtel will be exclusive ownership of Italtel and manufactured
by Italtel for its own exclusive use in the market.
3.03 With respect to the New Products, the Parties will consider from
time to time entering into possible new projects to jointly develop products,
other than the Feeder Product. In the event the Parties decide on the basis of a
business plan to pursue such joint development, they will negotiate and agree
the relevant terms and conditions.
3.04 Most Favored Customer. NETRO undertakes that during the validity
period of this Agreement, the transfer prices, and other terms and conditions
granted to Italtel shall be no less favorable than those given by NETRO to any
other customer purchasing the same items under similar terms and conditions.
ARTICLE 4 - - SUPPLEMENTAL AGREEMENTS
4.01 The Parties shall implement this Agreement by means of specific
Supplemental Agreements. Each SA shall be deemed to incorporate the provisions
of this Agreement and shall
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<PAGE> 4
constitute an integral part hereof. In the event specific provisions contained
in a SA conflict with or alter the provisions of this Agreement, the provisions
of the SA shall prevail.
ARTICLE 5 - - ORGANIZATIONAL STRUCTURE
5.01 The co-operation between the Parties set forth under this Agreement
shall be coordinated through the activity of a joint committee (hereinafter
referred to as "the Committee"), composed by an equal number of representative
for each Party. The Committee will be formed within 1 week from the signature of
this Agreement
5.02 In addition to any other applicable provisions of this Agreement,
the mission of the Committee is to stimulate and coordinate the activities of
the Parties as to:
(a) define and submit for the approval of the Parties the schedule and
allocation of tasks and expenses for the joint development of the Feeder Product
and New Products;
(b) monitor progress of the development activities of the Parties;
(c) monitor the market price evolution and define the Reference Market
Price applicable to the supplies from NETRO to Italtel;
(d) stimulate and coordinate the market activities of the Parties for
all Products falling within their co-operation;
(e) prepare detailed products and business plans;
(f) harmonize manufacturing activities relevant to the Feeder Product;
(g) authorize sublicencing activities for the Feeder Product to non
Affiliates. It is understood and agreed that contract manufacturing activities
of NETRO and Italtel are not subject to the authorization of the Committee
ARTICLE 6 - - CONFIDENTIALITY
6.01 During the term of this Agreement and for a period of five (5)
years thereafter, each Party agrees to maintain in confidence all information
which is indicated to be proprietary received from the other Party under this
Agreement, not to disclose the same to third parties and to instruct and oblige
all of its personnel and third parties having access to such information to
adhere to this obligation of confidentiality. The duty to hold information in
confidence shall not extend, however, to information that:
a) is known to the receiving Party at the time of disclosure;
b) is in the public domain at the time of disclosure or enters the
public domain through no acts attributable to the receiving Party;
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<PAGE> 5
c) becomes available to the receiving Party from a third party under no
obligation to any Party thereunder to keep that information in confidence;
d) is published by the disclosing Party;
e) is transferred to third parties who have reason to use such
information in order to fulfill the purpose of this Agreement and who are in
turn subject to an equivalent obligation of confidentiality; or
f) is required by applicable law limited to the extension of such
requirement.
The duty to hold such information in confidence shall require each Party
to exercise the same degree of care with respect to the other Party's
information that it exercises with respect to its own proprietary information
and in any event no less than reasonable care. Each Party will use the other
Party's information only for the purposes of this Agreement. Each Party will not
reverse engineer the information or products of the other Party, except as
expressly authorized by this Agreement or an SA.
Each Party recognizes that the information furnished under this
Agreement shall remain the property of the furnishing Party; the receiving Party
shall not use, reproduce or copy such proprietary information, in whole or in
part, except to the extent necessary to pursue the purposes of this Agreement
and shall return or destroy such information and any copies thereof or notes
relating thereto upon the expiration or termination of this Agreement.
For the purposes of this clause, Italtel agrees to establish procedures
reasonably satisfactory to NETRO so that Italtel technical employees assigned to
the Feeder Product project during the term of such project will not work on any
Italtel project competitive to AIRSTAR or Feeder Product.
6.02 The Parties agree to keep confidential and not to disclose to third
parties the contents of this Agreement.
All media releases, public announcements and public disclosures relating to this
Agreement shall be previously agreed in writing by the Parties.
ARTICLE 7 - - EXISTING INFORMATION
7.01 Each Party grants to the other Party (hereinafter "Licensed Party")
a personal, irrevocable except if terminated under Article 13.02 non
transferable and non-exclusive right to use its Existing Information solely for
sale of the Existing Netro Product and manufacture and sale of the Feeder
Product. The aforesaid right to use Existing Information for the manufacture of
the Feeder Product includes the right to communicate portions of the Existing
Information to suppliers solely for the procurement by the Licensed Party of
Products, materials, manufacturing facilities, parts and components, described
in such Existing Information, for use in manufacture in accordance with each
Supplemental Agreement, provided that such suppliers agree in writing
-5-
<PAGE> 6
to fully comply with all Existing Information confidentiality obligations and
restrictions hereunder.
Other terms and conditions of the license may be indicated in each
relevant SA.
7.02 No ownership interest in the Existing Information or any portion
thereof is transferred or conveyed to the Licensed Party hereunder.
7.03 Each Party undertakes to comply with the applicable laws and
regulations of the other Party's country, including the U.S. Foreign Corrupt
Practices Act. In particular, the Licensed Party hereby assures the other Party
that it does not intend to and will not knowingly without the prior written
consent, if required, of the Office of Export Licensing of the U.S. Department
of Commerce, P.O. Box 273, Washington, D.C. 20044, United States of America,
transmit directly or indirectly:
(i) any information obtained from the other Party pursuant to this
Agreement; or
(ii) any Product (including processes and services) produced directly by
the use of such Existing Information; or
to (1) the countries specified in Supplemental No. 1 to Part 770 of the Export
Administration Regulations issued by the U.S. Department of Commerce or (2) any
national or resident of the foregoing countries.
7.04 Promptly upon completion of the validation of the Feeder Product
Release 1 or immediately in the event of termination by Italtel pursuant to
Article 13.02 (a) or (b) all Existing Information as well as any other
information necessary for manufacturing, the Feeder Product shall be lodged by
Netro in an Escrow Account by an Escrow Bank, to be jointly indicated by the
Parties.
Such information will be updated in a timely manner with information related to
any subsequent modification to the Feeder Product.
Upon reaching a cumulative amount of purchase of Products of [***]
[***] from NETRO or in the event of termination by Italtel under clause 13.04
(a) and (c) Italtel, in order to exploit its right to manufacture the Feeder
Product, pursuant to Article 4.03 of the relevant SA, will have the right to
obtain on first demand such Existing Information as well as all the other the
information put in the Escrow Account. Following expiration/termination of this
Agreement each Party shall be entitled to use the Existing Information of the
other Party only in accordance with the provisions of Article 13.04.
hereof.
Italtel shall bear the fees of establishing and maintaining this Escrow Account.
ARTICLE 8 - - ASSIGNMENT
- ---------
[***] Confidential Treatment Requested.
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<PAGE> 7
This Agreement may not be assigned or otherwise disposed of, nor may any
of the rights or obligations hereunder be delegated, by either Party, without
the prior written consent of the other Party, unless otherwise provided for in
this Agreement.
The above provision shall not be applicable in cases of assignment to
Affiliates of each Party.
ARTICLE 9 - - INDEPENDENT CONTRACTOR
Each Party to this Agreement shall have the status of an independent
contractor and shall not for any reason hold itself out or represent itself as
being an employee, agent or representative of the other Party.
ARTICLE 10 - - SEVERABILITY
In the event that any provision or provisions of this Agreement which
materially affects the rights or obligations of the Parties under this Agreement
are ruled illegal or unenforceable by a court or regulatory authority, the
remainder of this Agreement shall nevertheless remain valid and enforceable,
provided that an equitable revision is negotiated and agreed by the Parties with
a view to maintaining a balance between their respective rights and obligations
ARTICLE 11 - - ENTIRE AGREEMENT
This Agreement, together with any SAs and Annexes hereto sets forth the
entire Agreement between the Parties and replaces and makes void any other oral
or written Agreement which may have been previously entered into.
Other terms modifying or making exception to the present Agreement shall be
considered valid only if established in writing and signed by both Parties.
ARTICLE 12 - - NOTIFICATION
Any notification connected with this Agreement shall be valid if
addressed by registered letter or by telefax or by confirmed telex to:
ITALTEL s.p.a.
[***]
Centro Direzionale Lombardo
Via Roma 108
20060 Cassina de' Pecchi
Milano (Italy)
fax nr.+39.2.2733.2510 phone nr.+39.2.2733.2272
E-Mail: Vito Calabrese Italtel.it
and to
NETRO Corporation
- ---------
[***] Confidential Treatment Requested.
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<PAGE> 8
[***]
3200 Coronado Drive
95054 Santa Clara California - U.S.A.
fax nr.+l.408.654.7516
Telephone nr. +1.408.654.7520
E-Mail: [email protected]
ARTICLE 13 - - TERM AND TERMINATION
13.01 This Agreement shall be valid and operative for a term of 5 (five)
years starting from its signature, unless extended by written agreement of the
Parties.
13.02 This Agreement may be terminated under the following conditions:
(a) at the end of 60 days following written notice by the non-breaching
Party of a material breach by the other Party, provided that such breach is not
cured within the same 60 days period.
(b) at the end of twenty-four (24) hours following written notice by
either Party, if the other Party files a petition in bankruptcy, or under a
general assignment for the benefit of creditors, or becomes insolvent, or is
otherwise unable to generally meet its business obligations for a period of
three (3) months;
13.03 Upon the expiry or termination of this Agreement, those terms and
conditions, which by their nature would continue beyond such expiry or
termination, that is Confidentiality, Government Restrictions, Conciliation and
Arbitration shall remain in full force and effect.
Upon expiry or termination of this Agreement, each Party shall complete
all existing contractual commitments to third parties.
The Parties also shall comply with all existing contractual commitments
between them, which were the basis of corresponding, agreed upon contractual
commitments to third parties, to the extent that the completion of the Parties'
commitments is necessary to complete their commitments to third parties. Nothing
herein shall require a Party to continue its performance under a Supplemental
Agreement which was the subject of a material breach by the other Party, or to
transfer additional Existing Information following such expiry or termination.
13.04 CONTINUED USE OF EXISTING INFORMATION
Upon any expiry or termination of this Agreement, both Parties shall
cease using the other Party's Existing Information, and shall return same,
except as provided herein:
(a) in the event of expiry of this Agreement as per Article 13.01 each
Party shall be authorized to continue using, on a non-exclusive basis, all
Existing Information licensed to it pursuant to Article 7.01. of this Frame
Agreement as of the date of such expiry, to comply with all existing contractual
commitments and binding offers to third parties as well as with new
- ---------
[***] Confidential Treatment Requested.
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<PAGE> 9
orders acquired during the 12 months subsequent to such expiry and to the same
extent as authorized during the Agreement, for a period of 3 (three ) years.
Italtel will continue to source at least 50% of its manufacturing requirements
from NETRO during such extended period, as long as NETRO continues to
manufacture the Product.
In addition, Italtel shall be authorized to sell Product manufactured
utilizing such Existing Information in accordance with all terms and conditions
of this Section 13.04(a). Neither Party shall be under any obligations to
provide updates or improvements to Existing Information following such expiry.
(b) in the event of termination by NETRO under clause 13.02 (a) or (b),
or due to an Italtel material breach of a Supplemental Agreement, and provided
that any possible misuse of Existing Information under said Supplemental
Agreement has been cured, Italtel (the breaching Party) shall be entitled to
continue utilizing on a non-exclusive basis Netro Existing Information to the
same extent as during the Agreement, for a period of eighteen (18) months solely
for the purpose of selling Products to comply with all the existing contractual
commitments and binding offers, thereby excluding any manufacturing right.
NETRO (the non breaching Party) shall have the right to use Italtel Existing
Information to the same extent as during the Agreement for a period of 5 (five)
years.
(c) in the event of termination by Italtel pursuant to Article 13.02 (a)
or (b) or due to a NETRO material breach of a Supplemental Agreement, and
provided that any possible misuse of Existing Information under said
Supplemental Agreement has been cured, NETRO (the breaching Party) shall be
entitled to continue utilizing on a non-exclusive basis and at the same terms
and conditions provided for by the relevant SA Italtel Existing Information for
a period of eighteen (18) months solely for the purpose of selling Products to
comply with all the existing contractual commitments and binding offers.
Italtel (the non breaching Party) shall have the right to use NETRO
Existing Information to the same extent as during the Agreement for a period of
5 (five) years.
ARTICLE 14 - - CONCILIATION AND ARBITRATION
14.01 The Parties shall try to amicably settle any dispute arising out
of this Agreement. In the event an amicable settlement is not reached, the
dispute shall be finally settled under the Rules of Conciliation and Arbitration
of International Chamber of Commerce, by three arbitrators appointed in
accordance with said Rules.
The Arbitral Tribunal shall sit in London (UK) and the proceeding shall
be conducted in the English language.
14.02 The Arbitrators shall render their decision in accordance with the
substantive laws of United Kingdom.
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<PAGE> 10
The award shall be final and legally binding on the Parties and shall be
subject to enforcement in any courts having jurisdiction over the Parties
The Parties agree to exclude the right of appeal to any court which
would otherwise have jurisdiction in connection with any question of law arising
in the course of the arbitration or out of the award.
The arbitration shall be the sole recourse of the Parties, to the
exclusion of the courts of law. Remedies indicated by the Arbitration may, under
appropriate circumstances, include injunctive relief as well as monetary awards.
ARTICLE 15 - - GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
substantive laws of United Kingdom.
ARTICLE 16 - - LIMITATION OF LIABILITY
In no event shall either Party be liable towards the other Party for any
incidental or consequential damages, including -without limitation - loss of
profits.
ARTICLE 17 - - LOGISTIC SERVICES
NETRO shall render logistic services for Italtel employees to be
assigned to a site near NETRO's premises, upon request of Italtel and at fair
terms and conditions, reflecting NETRO'S fully loaded costs.
Netro Corporation Italtel s.p.a.
Place Place
Date Date
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<PAGE> 1
Exhibit 10.8.1
SUPPLEMENTAL AGREEMENT N. 01
NON EXCLUSIVE OEM SUPPLEMENTAL AGREEMENT
PRODUCTS: AIR STAR/AIRVIEW/AIRMAN
between
NETRO CORPORATION
SANTA CLARA, CA, USA
and
ITALTEL S.P.A.
MILANO - - ITALY
<PAGE> 2
This Supplemental Agreement is made
between
NETRO Corporation, a company organized and existing under the laws of
California, USA ("Netro or Seller")
and
Italtel s.p.a., a company organised and existing under the laws of Italy
("Italtel or Buyer")
WITNESSETH
WHEREAS, as of today the Parties have entered into a Frame Agreement,
which sets forth the general terms and conditions of their cooperation with
respect to the Products as defined in Article 1.02. of the Frame Agreement;
WHEREAS, pursuant to Article 3.01. of the Frame Agreement, the
Parties undertake to enter into a non-exclusive OEM relationship pursuant to
which Netro shall supply to Italtel the Existing Netro Products for world-wide
resale by it to any third party;
WHEREAS, the Parties hereby intend to better define the specific
rules governing their relationship with respect to the above mentioned Existing
Netro Products.
NOW, THEREFORE, the Parties do hereby agree as follows:
DEFINITIONS
(a) "Affiliate" has the same meaning of that referred to in Article
1.10 of the Frame Agreement.
(b) "Delivery Interval" means the period of time running from the
date of order until the date of delivery to the Buyer of the Existing Netro
Products ordered.
(c) "Existing Netro Products" has the same meaning of that referred
to in Article 1.03 of the Frame Agreement.
(d) "Frame Agreement" means the Agreement entered into between the
Parties as of today, ruling their cooperation with respect to the Products.
(e) "Reference Market Price" has the same meaning of that referred to
in Article 1.8. of the Frame Agreement.
(f) "Related Documentation" means materials useful in connection with
the Products, such as, but not limited to, flow charts, logic diagrams and
listings, program descriptions and specifications.
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<PAGE> 3
(g) Other Capitalized terms -- unless otherwise herein defined --
shall have the meanings defined in the Frame Agreement.
(h) Seller shall mean Netro.
(i) Buyer shall mean Italtel.
ARTICLE 1 -- SCOPE
This Supplemental Agreement (A) sets forth the terms and conditions
under which Seller agrees to furnish the Existing Netro Products to Buyer for
worldwide distribution by Buyer to its customers by sale, lease, or otherwise;
and (B) establishes the Parties' responsibilities with respect to installation,
maintenance and support of such Existing Netro Products.
ARTICLE 2 -- EXISTING NETRO PRODUCTS
2.01 Netro represents that the guaranteed characteristics and
specifications of the Existing Netro Products, both for [***] markets, at the
date of this Supplemental Agreement are those listed in the Annex 1 hereto.
Netro may update Annex 1 from time to time, if some characteristics would
change.
2.02 In the spirit of this Supplemental Agreement in case of natural
evolutions and modifications of Existing Netro Products (as better defined in
Article 1.03. of the Frame Agreement) Netro undertakes to timely provide Italtel
with sufficient information and documentation in order to promote the enhanced
and extended Products worldwide.
2.03 If the modified Products should not grant full backward
compatibility, Netro undertakes to produce the previous version of the Existing
Netro Products for Italtel for a minimum period of 18 months after the
commercial availability of the enhanced Products.
2.04 The characteristics and conditions related to Quality Assurance
are detailed in the Annex 2 hereto.
2.05 In order to integrate the Existing Products with network
management systems used by Italtel, Italtel may develop and manufacture for its
own exclusive use certain interface cards. Netro shall provide Italtel with the
necessary hardware and software specifications to that purpose.
ARTICLE 3 - - MARKETING RIGHTS
3.01 Italtel will have the non exclusive right to promote, sell or
lease, as a single equipment or together with other products or systems, the
Existing Netro Products in any market freely and with no limitations, with the
exceptions listed in Annex 3.
3.02 Italtel and its Affiliates will have the right to include the
Existing Netro Products in their respective catalogues with their own mark and
brand name; Italtel will use reasonable efforts for selling the AirStar Product.
To this purpose Netro agrees to deliver to Italtel the
[***] CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 4
Existing Netro Products properly marked and externally coloured in accordance
with Italtel's instructions.
3.03 Netro warrants that it does not have nor will undertake any
obligation with anybody conflicting with the rights granted to Italtel pursuant
to this Supplemental Agreement.
ARTICLE 4 -- CONDITIONS OF SUPPLY
4.01 Unless otherwise agreed in relation with a specific project the
following terms and conditions shall be applicable to all orders for the
purchase of the Existing Netro Products (or portion thereof) to be supplied by
Netro to Italtel and such terms and conditions shall take preference over any
conflicting or inconsistent terms of Italtel's purchase orders or Netro
conditions of sale.
4.02 Italtel, shall purchase the Existing Netro Products by issuing a
written purchase order, to be transmitted by confirmed fax, identifying the
Existing Netro Products to be purchased, the quantity, price, total purchase
order price, shipping instructions (if any), delivery dates and place and any
other specific information impacting on the equipment delivery schedule. Netro
shall confirm, by confirmed telefax, any purchase order within one (1) week of
Netro's receipt thereof, provided its terms are in accordance with those of this
Supplemental Agreement or better ones for Netro, if so agreed by the Parties.
Orders not rejected within 1 week shall be deemed accepted. As a general rule,
orders placed in conformity with the forecast and delivery intervals shall be
accepted.
Buyer shall send all orders under this Supplemental Agreement to:
NETRO Corporation
ATT.: Sales Operations
3200 Coronado Drive
Santa Clara, CA 95954 USA
fax: +408 654 7525
Orders sent to addresses other than the one specified in this Section
4.03 shall not be valid for the purposes of this Supplemental Agreement.
Netro undertakes to supply, for 3 years after the expiration of this
Supplemental Agreement, equipment to Italtel for all the expansions of the
contracts signed by Italtel during the validity of this Supplemental Agreement.
4.03 Depending of the specific indications of the purchase order, the
ordered Products will be delivered FCA Santa Clara (USA).
Delivery dates will be those specified in the order and in any case
the lead time will not be less than the standard lead time declared by Netro
with the exception of a different lead time accepted by Netro in writing for
specific orders.
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<PAGE> 5
Netro declares that standard lead time from the reception of purchase
order to delivery FCA is 4 weeks, provided that the order is within the 6 months
rolling forecast as defined herebelow; any variation in standard lead time will
be promptly notified by written notice to Italtel and accepted by it.
4.04 Italtel will issue monthly a rolling forecast (with the best
possible indications of frequency and configurations) indicating requested
deliveries for the coming six months - divided in months as per Annex 4.
First forecast will be issued by Italtel on the last working day of
the month that follows the date of signature of the Supplemental Agreement.
ARTICLE 5 -- TITLE TO PRODUCTS
Unless otherwise agreed to in writing, title to, and risk of loss and
damage to, Products (except as provided in the section Use of Information) shall
pass to Buyer upon FCA, in accordance with the delivery terms in INCOTERMS, as
republished by the International Chamber of Commerce in 1990.
ARTICLE 6 -- PRICES
6.01 Starting from the signature of this Supplemental Agreement and
up to June 1998, the Reference Market Price is defined by Netro. The initial
Reference Market Price is attached under Annex 5.
Special projects will be discussed by the Parties on a case by case
basis.
6.02 After June 1998 the Reference Market Price will be agreed upon
by the Committee, Market Subdivision, provided in the Frame Agreement.
6.03 Netro will grant a discount on the Reference Market Price as per
points 6.01. and 6.02. as follows:
<TABLE>
<CAPTION>
ANNUAL VOLUME/CALENDAR YEAR DISCOUNT
--------------------------- --------
<S> <C>
[***] million (LEVEL 1) [***]
[***] million (LEVEL 2) [***]
over [***] million (LEVEL 3) [***]
</TABLE>
6.04 The above quantity discount matrix is based on, and applicable
to, the total volume of Products sold by Netro to Italtel or to its Affiliates
in a certain calendar year.
The initial discount for each calendar year will be that of level 2.
[***] CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 6
The Parties shall review the sales volume and forecast quarterly and
if they show a clear trend towards different levels, the Parties shall meet to
finalize a compensation procedure to achieve the correct discount level on the
total sales volume of that specific calendar year.
As an exception to the above for the initial year of deliveries
(1998), the starting level will be level 1.
ARTICLE 7 -- PAYMENTS
7.01 Payments of all amounts contained under this Supplemental
Agreement shall be in U.S. dollars, and invoices shall be rendered in the same
currency. Buyer shall promptly make all payments due under this Supplemental
Agreement by Bank Wire Transfer unless otherwise agreed.
Payment shall be [***] days net. Invoices shall not be submitted
prior to Seller's fulfilling its obligation to deliver the Products FCA. Buyer
shall arrange for its bank to remit funds in U.S. dollars by Bank Wire Transfer
with reference to Buyer's Order Number to the bank account which shall be
specified by Seller.
In the event of Italtel delay in payment due to reasons other than
force majeure, Netro may claim from Italtel reimbursement of the financial costs
related to the delayed amount calculated on the basis of 10% per annum.
7.02 Payment shall be made only for the Existing Netro Products
specified in the order. Buyer may deduct from the amount indicated in the
invoice all Products delivered which were not specified. Buyer shall notify
Seller in writing and following acknowledgement by Seller, these Products shall
be returned by Buyer to the Seller at Seller's expense.
7.03 The Seller will not seek payments for services rendered to fix
the Product(s) under warranty. The Seller has listed product's warranty terms
and conditions under Article 11 hereof.
7.04 In the event that Netro fails for reasons other than causes of
force majeure to deliver FCA each batch of the Existing Netro Products or parts
thereof at the respective dates accepted in the relevant purchase order, Italtel
- - without prejudice of its right of cancellation of the concerned order - may
claim from Netro penalties equivalent to [***] in 1998, [***] in 1999, [***] in
2000 and thereafter of the corresponding price of the complete delayed Netro
systems per week of delay without exceeding in any case [***] of said price.
Netro shall inform immediately Italtel in the event it anticipates any delay in
its deliveries and the Parties shall make their best efforts to minimise the
consequences thereof.
ARTICLE 8 -- RESPONSIBILITIES OF SELLER
8.01 Netro agrees to and will provide to Italtel sufficient and
appropriate updated technical documentation necessary for the correct
installation, operation and maintenance of the Products that allow Italtel to
prepare a complete documentation to be supplied to the customer
[***] CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 7
together with the Products. Italtel shall be responsible at its own expense for
translation into such languages as it chooses.
8.02 Netro agrees to provide to Italtel, by January 1998 two training
courses for Italtel's personnel one on installation, operation, maintenance and
the other one on repair, both [***] for Italtel for a [***] each. Each Party
will be responsible for transportation costs and living expenses of its own
personnel.
8.03 Netro agrees to provide to Italtel supervision for installation
and commissioning services at fair and reasonable terms and conditions.
8.04 During the term of this SA Netro will be responsible for
supporting the Existing Products, Hardware and Software at the terms and
conditions specified in Annex 6.
In addition to the above and on Buyer's request, Netro will render
hot-line service and/or "on site support". All the Technical Assistance services
and prices therefor are listed in Annex 6. The Parties may update -- by mutual
written agreement from time to time -- Annex 6.
8.05 Netro agrees to provide reasonable advance notification to Buyer
of intended phase out of the Existing Product or specific features, parts or
software releases; in such events Seller shall communicate to the Buyer:
(a) the period of time within which the Buyer can issue a last buy
order of the concerned items;
(b) the quantities of items and relevant spare parts of the said
items available to Buyer under the last buy order option.
Netro shall accept and fulfill all orders issued by Italtel for the concerned
items and relevant spare parts during the period of time mentioned under (a)
above.
ARTICLE 9 -- INFORMATION NECESSARY TO FULFILL SELLER'S OR BUYER'S OBLIGATIONS
The Parties shall exchange such technical information, data,
technical support or assistance as may reasonably be required by either Party to
fulfill its obligations under this Supplemental Agreement or any order
hereunder.
ARTICLE 10 -- SPARE PARTS
10.01 Netro shall undertake to supply the Buyer, upon its request,
with spare parts for the Existing Product or substitutes therefor for a period
of [***] from the date of the last shipment of the Existing Product to the
extent that such spare parts or substitutes continue to be manufactured by
Netro.
The Buyer shall have the right to place a final bulk order for the
spare parts prior to the expiry of the period mentioned under this Article
10.01. Netro shall fulfill the said bulk order with the originally used parts or
equivalent and compatible substitutes.
[***] CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 8
In the event that any supplier to Netro of components for the
Existing Product notifies Netro of its termination of production of any
component, then Netro shall promptly notify the Buyer of such termination, and
of available substitutes. The Parties shall discuss to determine estimated
quantity of such components necessary to support the Existing Product.
10.02 The Buyer shall purchase recommended spare parts, modules and
consumables for the proper installation, maintenance and repair of the Existing
Product. The delivery schedule of such spares shall be mutually agreed to by the
Parties. Spare parts, modules and consumables list and prices are set forth in
Annex 7 hereto.
ARTICLE 11 - SOURCE INSPECTION
In order to certify the quality of the Products and of its
manufacturing process and to allow Italtel to fulfill its contractual
obligations with the customer, Italtel may at any reasonable time inspect, at
Netro's facility the various manufacturing steps of the products which will or
may be used in the performance of this Supplemental Agreement and inspect and
test material and workmanship related to the Products purchased hereunder.
Italtel shall give Netro reasonable prior notice of the dates on which the
inspections will take place. All inspections and tests shall be performed in
such a manner as not to delay the work unduly.
The Parties will jointly define specific procedures to carry out the
inspections.
ARTICLE 12 -- WARRANTY
12.01 Seller warrants to Buyer the following:
(a) upon shipment, the Existing Netro Products will be free from
defects in material and workmanship, as well as the software therein contained
will be free from those defects which materially affect its operation and
performance, and will conform to Seller's specifications for such Products
described in Annex 1 to this Supplemental Agreement;
(b) with respect to Products or partial assembly of Products not
manufactured by Seller nor purchased under Seller's procurement specifications,
Seller, to the extent permitted, does hereby extend to Buyer the warranties
given to Seller by its vendor of such Products.
12.02 The term "Warranty Period" means, with respect to Products and
Software covered in Article 12.01 (a) and (b), [***] from the date of delivery
of the Product or Software by Seller. The Warranty Period for a repaired Product
or part thereof excludes the repair time by Seller and is the remainder of the
original Warranty Period or [***] after the delivery of the repaired item to
Buyer, whichever occurs later.
12.03 If, under normal and proper use during the applicable Warranty
Period, a defect or nonconformity appears in a Product, or Software proves to
have a defect which affects performance in accordance with Seller's
specifications, or a service proves not to have been done in a careful and
workmanship-like manner, and Buyer notifies Seller in writing of such defect or
nonconformity not later than thirty (30) days after the expiration of such
Warranty Period, the
[***] CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 9
Buyer shall follow Seller's instructions regarding return of defective or
nonconforming materials, and Seller will:
(a) as to Products, at its option, repair or replace such Product
without charge. Buyer shall have the option of removing and reinstalling or
having Seller remove and reinstall the defective or nonconforming Product. In
this case, the cost of the removal and the reinstallation shall be borne by
Buyer;
(b) as to Software, at its option, correct or replace such Software
without charge; corrections may be incorporated free of charge into a new
release of the Software; a Software failure actually causing service disruption,
will be immediately attended to by Seller without waiting for a new software
release.
(c) as to services correct any defects or deficiencies.
12.04 Products returned for repair or replacement will be accepted by
Seller only in accordance with its instructions and procedures for such returns
Seller shall repair or replace the Products [***] (measured by date of receipt
in Seller's factory to date of shipment from Seller's factory. The cost of the
transportation associated with returning such Product to Seller shall be borne
by Buyer. Seller shall pay the costs of transportation of the repaired or
replaced Product to the destination designated by Buyer. If Seller determines
after consultation with Buyer that a returned Product is not defective, Buyer
shall pay Seller all costs of handling, inspecting, testing and transportation.
Replaced Products or parts shall become Seller's property.
12.05 Seller makes no warranty with respect to defective conditions
or non-conformities caused by any of the following acts: misuse, neglect,
accident or abuse by anyone other than Seller or its subcontractors; improper
wiring, repairing, alteration, improper installation, storage or maintenance by
anyone other than Seller or its subcontractors; use in a manner not in
accordance with the specifications, operating instructions or license-to-use;
failure of Buyer or its customers to implement Seller's recommended
modifications and corrections.
12.06 The foregoing warranties contained in this Article are
exclusive and are in lieu of all other express and implied warranties,
representations, or conditions, statutory or otherwise, including but not
limited to, warranties or conditions of merchantability, or fitness for a
particular purpose. Buyer's sole and exclusive remedy under warranty shall be
Seller's obligation as set forth in this Article 12.
12.07 The Seller shall immediately attend to any of the Software bugs
causing service distruption of customer network even beyond the Warranty Period
correcting or replacing the affected Software without charge to the Buyer.
The Parties will also discuss terms of a Software Maintenance
Contract to take effect after the expiration of the Warranty Period.
[***] CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 10
ARTICLE 13 -- INFRINGEMENT OF PATENTS
In the event of any claim, action, proceeding or suit by a third
party against Buyer alleging an infringement of any patent, copyright or
trademark, or because of the use, in accordance with Seller's specifications
registered in the United States and the European Community, of any Product
furnished by Seller to Buyer under this Supplemental Agreement, Seller, at his
expense, will defend Buyer, subject to the conditions and exceptions stated
below. Seller will reimburse Buyer for any cost, expense or attorney's fees
incurred at Seller's written request or authorization, and will indemnify Buyer
against any liability assessed against it by final judgment on account of such
infringement or violation arising out of such use or resale.
Seller will, at his expense and at his option, either (i) replace the
Existing Netro Products furnished pursuant to these Rules with a suitable
substitute free of any infringement; (2) modify it so that it will be free of
the infringement; or (3) procure for Buyer a license or other right to use it.
If none of the foregoing options are practical, Seller will remove the enjoined
Product and refund to Buyer any amounts paid to Seller therefor, minus a
reasonable charge for any actual period of use by Buyer.
Buyer shall give Seller prompt written notice of all such claims,
actions, proceedings, or suits alleging infringement or violation and Seller
shall have full and complete authority to assume the sole defense thereof,
including appeals, and to settle the same. Buyer shall, upon Seller's request
and at Seller's expense, furnish all information and assistance available to
Buyer and cooperate in every reasonable way to facilitate the defense and/or
settlement of any such claim, action, proceeding or suit.
No undertaking of Seller under this clause shall extend to any such
alleged infringement or violation to the extent that it: (1) arises from
adherence to design modifications, specifications, drawings, or written
instructions which Seller is directed by Buyer to follow, but only if such
alleged infringement or violation does not reside in commercial Product of
Seller's design or selection; or (2) arises from adherence to instructions to
apply Buyer's trademark, trade name, or other company identification; or (3)
resides in a Product which is not of Seller's origin and which is furnished by
Buyer to Seller for use under this Supplemental Agreement. In the foregoing
cases number (1) through (3), Buyer will defend and save Seller harmless subject
to the same terms and conditions and exceptions stated above with respect to
Seller's rights and obligations under this clause.
The liability of Seller, or Buyer, in the cases of (1) through (3)
above, with respect to any and all claims, actions, proceedings, or suits by
third parties alleging infringement of patents, trademarks, or copyrights or
violation of trade secrets or proprietary rights because of, or in connection
with, any Products furnished pursuant to this Supplemental Agreement, shall be
limited to the specific undertakings contained in this clause.
ARTICLE 14 -- LICENCE PROVISIONS
14.01 GENERAL: All documentation, technical information, and business
information which either Party furnishes to the other Party under or in
contemplation of this SA, and which
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<PAGE> 11
bears a proprietary marking or copyright notice, and all Software and Related
Documentation in whatever form recorded and whether or not part of firmware,
furnished by one Party to the other, and all copies thereof made by the
receiving Party, including translations, compilations and partial copies
(hereinafter "Information") shall remain the property of the furnishing Party
and shall be treated by the receiving Party in accordance with the provisions of
this Article.
14.02 LICENSE TO BUYER:
(a) With respect to Information furnished to Buyer for its own use,
Seller grants to Buyer a personal, non-transferable (except as otherwise
provided in this Article) and non-exclusive license to use Information for its
own business operations.
(b) With respect to furnished Information which is related to a
Product sold to Buyer and resold to a customer by Buyer, Seller grants to Buyer,
subject to the provisions of Paragraph 13.04. of this Article, a right to grant
to such customer, a permanent, personal, non-transferable and non-exclusive
right to use such Information solely in or with such Product for installation,
maintenance, or operation of such Products.
(c) Upon Seller's prior written authorization, which authorization
may be of a general nature, Buyer may disclose Information to other persons for
the purpose of Buyer's performing his obligations under this Supplemental
Agreement, provided such other person agrees in writing (a copy of which will be
provided to Seller at his request) to a confidentiality agreement which Seller
will provide to Buyer and which will contain the same conditions imposed upon
Buyer in this Article.
14.03 RESTRICTIONS ON BUYER'S SUBLICENSING RIGHTS: the rights granted
to Buyer in paragraph 14.02. (b) are subject to Buyer obtaining a written
agreement from his sublicensee including the same conditions of confidentiality,
as applicable, as are imposed upon Buyer in paragraph 14.04. of this Article.
14.04. PROVISION OF WRITTEN SUBLICENSES: the written sublicenses
referred to in paragraph 14.03 of this Article shall specify that:
(a) customer is granted a permanent, personal, non-transferable and
non-exclusive right to use the Information in his own premises solely to order
or to evaluate for that purpose the Product for which such Information is
furnished, or to install, operate or maintain such Product or
(b) no title to the intellectual property in such Information is
transferred;
(c) the Information shall not be reproduced or copied, in whole or in
part, except as necessary for authorized use, and each such copy shall contain
the same copyright notice and proprietary marking as appears on the original
Information including diskette markings; and
(d) customer will not reverse-compile or disassemble any Software
contained in such Information.
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<PAGE> 12
ARTICLE 15 -- ITALTEL'S INDEMNITY
In the event of any claim, action or proceeding or suit against Netro arising
out of the negligence or willful misconduct of Italtel or its agents in
installing or supporting the Existing Netro Products or arising out of Italtel's
representation of Netro Products in a manner inconsistent with Netro's written
materials, Italtel shall at its expense indemnify Netro and defend it against
any and all costs including attorney's fee. The provisions of the third
paragraph of Art. 13 shall apply in reverse.
ARTICLE 16 -- NOTICE
All notices or other communications required or permitted to be given under
these rules shall be made in writing, by telex or telefax or mail, to the person
and address set forth below, or such other address as may be designated in
writing hereafter:
To Seller
NETRO CORPORATION
[***]
3200 Coronado Drive
Santa Clara, CA 95954 - USA
fax no. :+l.408.654.7516
E-mail: [email protected]
To Buyer
Italtel s.p.a.
[***]
Centro Direzionale Lombardo
Via Roma 108
20090 Cassina de' Pecchi
MILANO- ITALY
fax no.: +039.2.2733.2510
E-mail: [email protected]
ARTICLE 17 -- TERM
This Supplemental Agreement shall remain in effect for a period of
five (5) years from the date of its signature or upon termination or expiry of
the Frame Agreement, which event occurs first.
Independently, this Agreement may also be terminated by either Party
with notice to the other Party sixty (60) days after a material breach by the
other Party.
The Parties may agree to terminate this Supplemental Agreement, or to
extend it, under the same or different terms and conditions.
[***] CONFIDENTIAL TREATMENT REQUESTED
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ARTICLE 18 -- MISCELLANEOUS
A. COUNTERPARTS: This Supplemental Agreement shall be executed in two
counterparts, each of which will be deemed an original and both of which, taken
together, shall constitute the same document.
B. ISO-9000: Seller will promptly inform Buyer in the event Seller is
no longer certified under ISO-9000 standards.
Netro Corporation Italtel s.p.a.
/s/ Gideon Ben-Efraim /s/ Italtel s.p.a.
- ---------------------------------- ----------------------------------
11/19/97 November 28, 1997
- ---------------------------------- ----------------------------------
Date Date
Munich Milano
- ---------------------------------- ----------------------------------
Place Place
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<PAGE> 14
SUPPLEMENTAL AGREEMENT NR. 01
LIST OF ANNEXES
ANNEX 1 GUARANTEED CHARACTERISTICS AND SPECIFICATIONS OF EXISTING
NETRO PRODUCTS
ANNEX 2 QUALITY ASSURANCE CHARACTERISTICS AND CONDITIONS
ANNEX 3 EXCLUSIVITY COMMITMENTS OF NETRO
ANNEX 4 FORECAST AND DELIVERIES MATRIX
ANNEX 5 INITIAL REFERENCE MARKET PRICE LIST
ANNEX 6 TECHNICAL ASSISTANCE SERVICES
ANNEX 7 SPARE PARTS, MODULES AND CONSUMABLES LIST AND PRICES
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<PAGE> 15
ANNEX 1
TO SUPPLEMENTAL AGREEMENT NR. 01
GUARANTEED CHARACTERISTICS AND SPECIFICATIONS OF EXISTING NETRO PRODUCTS
SYSTEM FUNCTIONAL SPECIFICATION FOR AIRSTAR.
RELEASE 1.0, DRAFT REV 1.1
DATED NOVEMBER 10, 1997
-15-
<PAGE> 16
ANNEX 2
TO SUPPLEMENTAL AGREEMENT NR. 01
QUALITY ASSURANCE CHARACTERISTICS AND CONDITIONS
Netro's quality program is an integral part of Netro's business process and is
involved in all aspects of the activities that occur within Netro on a daily
basis. In the area of Netro products, the quality program starts at the earliest
phase in the new product design and progresses throughout the life cycle of the
product. It includes design control's and evaluations, manufacturing readiness
evaluations prior to release for manufacture, full documentation of all parts,
materials and processes, material and vendor testing and controls, full product
evaluation and testing prior to shipment to the end users, and a complete
customer service activity to resolve any issues that may occur after shipment.
Netro's quality program is based on ISO-9001 Quality System Requirements and
Netro has been registered by the British Standards Institute (BSI) after having
been evaluated through an exhaustive set of audits to those requirements.
Netro's registration number is #xxxxxx, and this initial registration was
received in March of 1997. Since that time, Netro has had a follow-up six month
audit by BSI and successfully passed this additional evaluation. Continuing
audits of the Netro system can be expected to be completed on a six month basis.
In addition to the BSI registration, Netro has been evaluated and audited by the
British Approvals Board for Telecommunications (BABT) and has received their
Full Quality Assurance Approval (FQAA) so that Netro quality system and testing
procedures have been approved for testing of the Digital products produced by
Netro. FQAA approval was received after a comprehensive audit of Netro's quality
system that was similar in content and thoroughness to the ISO registration
audit. This approval was also received in March of 1997 and since that time,
Netro has had a successful follow-up audit which allows for continuation of
Netro's FQAA approval.
To assure that all products produced by Netro meet the requirements specified by
Netro's product specifications or the special requirements imposed by Netro
customers, Netro has implemented a comprehensive system of quality assurance
analysis and test that starts at the earliest part of the production process:
- - Components are carefully selected to assure that their performance had been
proven in the environments that Netro's products will see in use. Custom
parts and Materials are specially tested and evaluated by Netro to assure
reliable performance. To the extent possible, Supplier Quality Systems must
meet the requirements of ISO-9000. When this is not possible, Netro
evaluates the Supplier systems to assure that their approach to quality
assurance provides products that meet all applicable requirements.
-16-
<PAGE> 17
- - Material received by Netro, is evaluated upon receipt to see that it meets
specified requirements. Material that is found to be discrepant is
evaluated to identify the specific problem found and the supplier contacted
to determine the corrective and preventive action that must be taken so
that defective material is not received in the future.
- - As product moves through the production line, it is evaluated by trained
production operators to assure that it meets all of the quality
requirements necessary for acceptable product performance. An on line
quality information system (Quality Feedback System) is utilized to
maintain the data associated with evaluations and test. Each step in the
production process is entered into QFS by the use of bar codes, and if any
step should be missed, or has defects associated with it, the system will
prevent the product from moving on in the production flow. Data from this
system is utilized to analyze failure modes and to establish the corrective
and preventive actions necessary to eliminate the problem.
- - At the system level, products are subjected to a wide range of tests and
evaluations to assure that they will work in the customers applications.
These tests include Environmental Stress Screening (ESS), electrical
performance tests, calibration tests, and any other tests and evaluations
deemed necessary to assure superior performance. Burn-in tests and other
tests necessary to weed out early failures are conducted at various levels
of the production cycle.
- - All products are packaged in specially designed materials and containers
that have been tested to assure that they will survive the rigorous and
difficult environments that are seen in transporting and handling Digital
Radio products.
Continuous improvement and total customer satisfaction are the cornerstones of
Netro's quality system and reflect the major content of Netro's quality policy.
Continuous improvement is a way of life at Netro. Not only improvement in the
quality of the products Netro produces, but improvement in product performance,
in Netro's business systems, and overall service to the customers. In its drive
to achieve total customer satisfaction Netro has fully staffed a Customer
Services Organization that responds to customer requirements and issues as they
occur. This organization stands ready to respond to Customers requests as they
arise and is continuously seeking ways of improving overall service.
Netro's Quality Assurance Manual has been written to reflect the actual
operating methods employed by Netro during all phases of its business and
product life. This manual describes all parts of the Netro quality Assurance
System and is available for review by customers. If forms the basis for a
comprehensive system of documents that describe the actual procedures that are
used by Netro personnel in the performance of their duties. Employee's are
thoroughly trained in all aspects of the Quality Manual and the Company
Operating Procedures and part of each employee responsibility is to understand
and use Netro's quality policy and overall quality system. This well trained and
competent work force assures Netro customers of superior radio products.
Netro will also deliver a copy of its quality manual to Italtel promptly when it
is available.
-17-
<PAGE> 18
ANNEX 3
TO SUPPLEMENTAL AGREEMENT NR. 01
EXCLUSIVITY COMMITMENTS OF NETRO
[***] RFQ DATED AUGUST 8, 1997 WITH [***]
[***] CONFIDENTIAL TREATMENT REQUESTED
-18-
<PAGE> 19
ANNEX 4
TO SUPPLEMENTAL AGREEMENT NR. 01
FORECAST AND DELIVERIES MATRIX
<TABLE>
<CAPTION>
2000 AND
1998 1999 THEREAFTER
- ----------- -------------- ---------------- ---------------
<S> <C> <C> <C>
Firm Orders first [***] months first [***] month [***] month
Binding Forecast [***] & [***] month [***] to [***] month [***] month
qty: [***] qty: [***] qty: [***]
[***] & [***] month [***] to [***] month [***] month
qty: [***] qty: [***] qty: [***]
Non Binding Forecast -- [***] to [***] month [***] to [***] month
</TABLE>
[***] CONFIDENTIAL TREATMENT REQUESTED
-19-
<PAGE> 20
ANNEX 5
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
MARKET
DESCRIPTION FIELD TRIAL PRICING - LIMITED DEPLOYMENTS REFERENCE
ITEM MODEL NO. PRICING VALID FROM OCTOBER 1, 1997 - FEBRUARY 28, 1998 PRICE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Base Station Shelf BSS-E-2221-00 Base Station Shelf, Redundant Control Card, Trunk Card,
and Power [***] x STM-1 Trunk [***]
(BSS) BSS-E 2220-00 Base Station Shelf, Redundant Control Card, Trunk Card,
and Power [***] x E3 Trunk [***]
- ---------------------------------------------------------------------------------------------------------------------------
Base Station BSC-E-2000-00 Control card, [***], total
throughput [***]Mb/s, with CellMAC [***]
Controller (BSC) BSC-F-2000-00 Control card, [***], total
throughput [***], with CellMAC [***]
- ---------------------------------------------------------------------------------------------------------------------------
Base Station Modem BMU-E-2000-00 Modem Unit, [***] port modem, [***]Mb/s per port,
[***]QAM, [***] standards [***]
Unit (BMU) BMU-F-2000-00 Modem Unit, [***] port modem, [***]Mb/s per port,
[***]QAM, [***] standards [***]
- ---------------------------------------------------------------------------------------------------------------------------
Base Station Radio BRU-E-2601-01 Radio Unit, ETSI [***] MHz Channelization, [***]GHz,
[***] sector, Band [***], integral antenna [***]
Unit (BRU) BRU-E-2611-01 Radio Unit, ETS [***] MHz Channelization, [***]GHz,
[***] sector, Band 1, integral antenna [***]
BRU-E-2603-01 Radio Unit, ETS [***] MHz Channelization, [***]GHz, [***] sector,
Band [***], integral antenna [***]
BRU-E-2613-01 Radio Unit, ETS 7MHz Channelization, [***]GHz, [***] degree sector,
Band [***], integral antenna [***]
BRU-F-2401-00 Radio Unit, FCC [***] MHz Channelization, [***]GHz, [***] degree sector,
Band [***] (gain = [***]dBi) [***]
BRU-F-2411-00 Radio Unit, FCC [***] MHz Channelization, [***]GHz, [***] degree sector,
Band [***] (gain = [***]dBi) [***]
- ---------------------------------------------------------------------------------------------------------------------------
Subscriber Access SAS-E-1001-01 Access System, [***] x [***] ports [***]
System (SAS) SAS-E-1002-01 Access System, [***] x [***] ports, [***] port [***]
SAS-F-1001-00 Access System, [***] x [***] ports [***]
SAS-F-1002-00 Access System, [***] x [***] ports, [***] port [***]
- ---------------------------------------------------------------------------------------------------------------------------
Subscriber Radio SRU-E-2602-01 Radio Unit, [***], [***]GHz Band [***], Integral Antenna [***]
Unit (SRU) SRU-E-2604-01 Radio Unit, [***], [***]GHz Band [***], Integral Antenna [***]
SRU-F-2402-00 Radio Unit, [***], [***]GHz Band [***], Integral Antenna [***]
- ---------------------------------------------------------------------------------------------------------------------------
AirView Options NMS-A-2001-01 AirView NMS with Windows 95 Laptop [***]
NMS-A-2002-01 AirView NMS with Windows 95 Desktop [***]
NMS-A-2003-01 AirView NMS software - CD-ROM [***]
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
T1 FCC compliant product is currently available only at [***] GHz.
Pricing for the [***] GHz product is provided here - it should be used for
budgetary purposes only An FCC compliant T1 product operating at [***] GHz is
planned for mid-1998. Please consult Netro for specific pricing and
availability.
[***] CONFIDENTIAL TREATMENT REQUESTED
-20-
<PAGE> 21
Annex 5
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
MARKET
DESCRIPTION FIELD TRIAL PRICING - LIMITED DEPLOYMENTS REFERENCE
ITEM MODEL NO. PRICING EFFECTIVE FROM MARCH 1, 1998 PRICE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Base Station Shelf BSS-E-2221-00 Base Station Shelf, Redundant Control Card, Trunk Card,
and Power [***] x STM-1 Trunk [***]
(BSS) BSS-E-2220-00 Base Station Shelf, Redundant Control Card, Trunk Card,
and Power [***] x E3 Trunk [***]
- --------------------------------------------------------------------------------------------------------------------------
Base Station BSC-E-2000-01 Control card, [***] channels, total throughput [***]Mb/s,
with CellMAC, with redundant support [***]
Controller (BSC) BSC-F-2000-01 Control card, [***] channels, total throughput [***]Mb/s,
with CellMAC, with redundant support [***]
- --------------------------------------------------------------------------------------------------------------------------
Base Station BMU-E-2000-01 Modem Unit, [***] Port modem, [***]Mb/s per port, [***]QAM, [***]
standards, with redundant support [***]
Modern Unit (BMU) BMU-F-2000-01 Modem Unit, [***] port modem, [***]Mb/s per port, [***]QAM, [***]
standards, with redundant support [***]
- --------------------------------------------------------------------------------------------------------------------------
Base Station Radio BRU-E-2601-01 Radio Unit, [***] [***] MHz Channelization, [***]GHz, [***] degree
sector, Band [***], integral antenna [***]
Unit (BRU) BRU-E-2611-01 Radio Unit, [***] [***] MHz Channelization, [***]GHz, [***] degree
sector, Band [***], [***] antenna [***]
BRU-E-2603-01 Radio Unit, [***] [***] MHz Channelization,
[***]GHz, [***] degree sector. Band [***], integral antenna [***]
BRU-E-2613-01 Radio Unit, [***] [***] MHz Channelization,
[***]26GHz, [***] degree sector, Band [***], [***] antenna [***]
BRU-E-1001-01 Radio Unit, [***] [***]MHz Channelization,
[***]GHz, [***] degree sector, Band [***], [***] antenna* [***]
BRU-E-1011-01 Radio Unit, [***] [***] MHz Channelization,
[***]GHz, [***] degree sector, Band [***], integral antenna* [***]
BRU-F-2401-01 Radio Unit, [***] [***] MHz Channelization, [***]GHz, [***] degree
sector, Band [***], (gain = [***]dBi) [***]
BRU-F-2411-01 Radio Unit, [***] [***] MHz Channelization, [***]GHz,
[***] degree sector, Band [***], (gain = [***]dBi) [***]
- --------------------------------------------------------------------------------------------------------------------------
Relay Switching RSM-E-1001-01 Redundancy Switching Module - 2 RU height for Release 1 BSC/BMU [***]
Matrix (RSM)
- --------------------------------------------------------------------------------------------------------------------------
Subscriber Access SAS-E-1001-01 Access System, [***] x [***] ports [***]
System (SAS) SAS-E-1002-01 Access System, [***] x [***] ports, [***] port [***]
SAS-F-1001-01 Access System, [***] x [***] ports [***]
SAS-F-1002-01 Access System, [***] x [***] ports, [***] port [***]
- --------------------------------------------------------------------------------------------------------------------------
Subscriber Radio SRU-E-2602-01 Radio Unit, [***], [***]GHz Band [***], Integral Antenna [***]
Unit (SR U) SRU-E-2604-01 Radio Unit, [***], [***]GHz Band [***], Integral Antenna [***]
SRU-E-1002-01 Radio Unit, [***], [***]GHz Band [***], Integral Antenna [***]
SRU-F-2402-01 Radio Unit, [***], [***]GHz Band [***], Integral Antenna [***]
- --------------------------------------------------------------------------------------------------------------------------
AirView Options NMS-A-2001-01 AirView NMS with Windows 95 Laptop [***]
NMS-A-2002-01 AirView NMS with Windows 96 Desktop [***]
NMS-A-2003-01 AirView NMS software - CD-ROM [***]
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: [***] GHz equipment is not available before May 1, 1998 - check with Netro
for exact availability dates.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
MARKET
REFERENCE
SYSTEM LEVEL PRICING PRICE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
4 SECTOR BASE STATION - RELEASES 1
ETSI [***]GHz, [***]Mb/s Capacity Per Sector, Non Redundant [***]
ETSI [***]GHz, [***]Mb/s Capacity Per Sector, Redundant [***] Level [***]
SUBSCRIBER TERMINALS - RELEASE 1
ETSI [***] GHz [***] x [***] [***]
FCC [***] GHz, [***] x [***], [***] [***]
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
[***] CONFIDENTIAL TREATMENT REQUESTED
-21-
<PAGE> 22
ANNEX 6
TO SUPPLEMENT AGREEMENT NR. 01
TECHNICAL ASSISTANCE SERVICES
<TABLE>
<CAPTION>
SERVICE DESCRIPTION PRICE LIST
------- ----------- ----------
<S> <C> <C>
EMERGENCY ASSISTANCE
Problem resolution Assistance Assisting Italtel in the resolution of technical [***] per day
problems when on-site assistance is requested by
Italtel and Tier III assistance is needed.
Hotline and software fix support Tier III (Engineering level) support provided by [***] of product
telephone to Italtel during Netro's normal purchases
business hours. Italtel to provide Tier I & II
support to Italtel's customers. Software fixes
provided to Italtel as developed by Netro.
Netro maintains the current release of software
shipping plus one release prior. The support of
prior releases of software is on a "best efforts"
basis.
</TABLE>
[***] CONFIDENTIAL TREATMENT REQUESTED
-22-
<PAGE> 23
RESPONSIBILITIES:
<TABLE>
- ---------------------------------------------------------------------------------------------------------------
TIER # ORGANIZATION PROVIDING SUPPORT GENERAL DUTIES
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TIER 1 End User Operations and/or Italtel Assist operations personnel.
Tier 1 Technical Support Provide product technical information to users.
Provide installation and configuration support to
users.
Perform first level diagnostic operations.
Gather technical problem data.
Remove and replace hardware.
Escalate to Tier 2 support.
- ---------------------------------------------------------------------------------------------------------------
TIER 2 Italtel Tier 2 Technical Support Be familiar with the technical environment
including integrated 3rd party products.
Confirm that a hardware or software failure has
occurred.
Recommend operational workarounds.
Utilize appropriate test equipment.
Analyze traces, gather specific failure data.
Have in-depth, specialized product knowledge.
Create complex failure environments.
Duplicate failure conditions in a lab
environment.
Recommend workarounds and probable failure
causes.
Assist Tier 3 support in characterizing and
duplicating failure events.
- ---------------------------------------------------------------------------------------------------------------
TIER 3 Italtel and/or Netro Support Have specific engineering level knowledge of
Netro's products.
Recommend and create hardware or software product
modifications.
Diagnose problems not identified by Tier 2
Support.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
-23-
<PAGE> 24
ITALTEL - NETRO CORPORATION PROBLEM PRIORITY DEFINITIONS
PROBLEM PRIORITY DEFINITIONS:
Priority 1: An existing network or link is inoperable or there is a
situation that causes Critical impact to the Customer's
business operation. Italtel is providing Tier II support
and requests assistance from Netro. Italtel, Netro and the
customer will commit full-time resources to resolve the
situation. The situation may be resolved by a fix, a
workaround, an upgrade to the software, or an operational
change that allows the customer to gain operational
stability.
Priority 2: The operation of an existing network or link is severely
degraded, or significant aspects of the Customer's business
operation are being negatively impacted by unacceptable
hardware or software performance. The customer is able to
maintain operations but in a severely degraded manner.
Italtel is providing Tier II support to the customer and
requests assistance from Netro. Italtel, Netro and the
Customer will commit resources as deemed necessary to
resolve the situation. The situation may be resolved by a
fix, a workaround, an upgrade to the software, or an
operational change that allows the customer to gain
operational stability.
Priority 3: Operational performance of the network is impaired while
most business operations remain functional. Italtel, Netro
and the Customer are willing to commit resources during
Standard Business Hours to restore service to satisfactory
levels. The situation may be resolved by a fix, a
workaround, an upgrade to the software, or an operational
change that allows the customer to gain operational
stability.
Priority 4: Information or assistance is required on Netro product
capabilities, installation, or configuration. There is
clearly little or no impact to the Customer's business
operation. Netro and Customer are willing to provide
resources during Standard Business Hours to provide
information or assistance as requested. If a fix or
workaround is deemed necessary, it may be provided in a
later release of the software or the Customer may be
requested to upgrade to a higher level of software to
resolve the issue.
-24-
<PAGE> 25
AIRSTAR(TM) SPARES PRICE List
ANNEX 7
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SPARES PRICING PRICE WITH PRICE WITH
MODEL NO. PRICING VALID FROM OCTOBER - FEBRUARY STANDARD LEAD TIME EXPENDED SHIPMENT
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BSS-E-2221-00 Base Station Shelf, Redundant Control Card, Trunk Card,
and Power, [***] x STM-1 Trunk [***] [***]
BSS-E-2220-00 Base Station Shelf, Redundant Control Card, Trunk Card,
and Power, [***] x E3 Trunk [***] [***]
- --------------------------------------------------------------------------------------------------------------------------------
BSC-E-2000-00 Control card, [***] Channels, total throughput [***]Mb/s, with CellMAC [***] [***]
BSC-F-2000-00 Control card, [***] channels, total throughput [***]Mb/s, with CellMAC [***] [***]
- --------------------------------------------------------------------------------------------------------------------------------
IMU-E-2000-00 Modem Unit, [***] port modem, [***]Mb/s per port, [***]QAM, [***] standardS [***] [***]
IMU-F-2000-00 Modem Unit, [***] port modem, [***]Mb/s per port, [***]QAM, [***] standards [***] [***]
- --------------------------------------------------------------------------------------------------------------------------------
BRU-E-2601-01 Radio unit, [***] [***] MHz Channelization, [***]GHz, [***] degree sector,
Band [***], integral antenna [***] [***]
BRU-E-2611-01 Radio unit, [***] [***] MHz Channelization, [***]GHz, [***] degree sector,
Band [***], integral antenna [***] [***]
BRU-E-2603-01 Radio unit, [***] [***] MHz Channelization, [***]GHz, [***] degree sector,
Band [***], integral antenna [***] [***]
BRU-E-2613-01 Radio unit, [***] [***] MHz Channelization, [***]GHz, [***] degree sector,
Band [***], integral antenna [***] [***]
BRU-F-2401-01 Radio unit, [***] [***] MHz Channelization, [***]GHz, [***] degree sector,
Band [***], (gain = [***]dBi) [***] [***]
BRU-F-2411-01 Radio unit, [***] [***] MHz Channelization, [***]GHz, [***] degree sector,
Band [***], (gain - [***]dBi) [***] [***]
- --------------------------------------------------------------------------------------------------------------------------------
SAS-E-1001-01 Access System, [***] x [***] ports [***] [***]
SAS-E-1002-01 Access System, [***] x [***] ports, [***] port [***] [***]
SAS-F-1001-00 Access System, [***] x [***] ports [***] [***]
SAS-F-1002-00 Access System, [***] x [***] ports, [***] port [***] [***]
- --------------------------------------------------------------------------------------------------------------------------------
SRU-E-2602-01 Radio Unit, [***], [***]GHz Band [***], Integral Antenna [***] [***]
SRU-E-2604-01 Radio Unit, [***], [***]GHz Band [***], Integral Antenna [***] [***]
SRU-F-2402-00 Radio Unit, [***], [***]GHz Band [***], Integral Antenna [***] [***]
- --------------------------------------------------------------------------------------------------------------------------------
NMS-A-2001-01 AirView NMS with Windows 95 Laptop [***] [***]
NMS-A-2002-01 AirView NMS with Windows 95 Desktop [***] [***]
NMS-A-2003-01 AirView NMS software - CD-ROM [***] [***]
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXPECTED SHIPMENT: `BEST EFFORT' SHIPMENT WITHIN 5 BUSINESS DAYS OF ORDER.
T1 FCC compliant product is currently available only at [***] GHz.
Pricing for the [***] GHz product is provided here it should be used for
budgetary purposes only An FCC compliant T1 product operating at [***] GHz is
planned for mid-1998. Please consult Netro for specific pricing and
availability.
[***] CONFIDENTIAL TREATMENT REQUESTED
-25-
<PAGE> 26
AirStar(TM) Spares Price List
Annex 7
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
PRICE WITH PRICE WITH
SPARES PRICING - RELEASE 1 FEATURES - LARGE SCALE DEPLOYMENTS STANDARD LEAD EXPEDITED
MODEL NO. PRICING EFFECTIVE FROM MARCH 1, TIME SHIPMENT
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
B655 E 2221-00 Base Station Shelf, Redundant Control Card,
Trunk Card, and Power [***] x STM-1 Trunk [***] [***]
BSS E 2220-00 Base Station Shelf, Redundant Control Card,
Trunk Card, and Power [***] x E3 Trunk [***] [***]
- --------------------------------------------------------------------------------------------------------------------------------
BSC-E-2000-01 Control card, [***] channels, total throughput [***]Mb/s, with CellMAC [***] [***]
BSC-F-2000-01 Control card, [***] channels, total throughput [***]Mb/s, with CellMAC,
with redundant support [***] [***]
- --------------------------------------------------------------------------------------------------------------------------------
BMU-E'2000-01 Modem Unit, [***] port modem, [***]Mb/s per port, [***]AM, [***] standards [***] [***]
BMU-F-2000-01 Modem Unit, [***] port modem, [***]Mb/s per port, [***]AM, [***] standards,
with redundant support [***] [***]
- --------------------------------------------------------------------------------------------------------------------------------
BRU-E-2601-01 Radio Unit, [***] [***] MHz Channelization, [***]GHz, [***] degree sector,
Band [***], integral antenna [***] [***]
BRU-E-2611-01 Radio Unit, [***] [***] MHz Channelization, [***]GHz, [***] degree sector,
Band [***], integral antenna [***] [***]
BRU-E-2603-01 Radio Unit, [***] [***] MHz Channelization, [***]GHz, [***] degree sector,
Band [***], integral antenna [***] [***]
BRU-E-2613-01 Radio Unit, [***] [***] MHz Channelization, [***]GHz, [***] degree sector,
Band [***], integral antenna [***] [***]
BRU-E-1001-01 Radio Unit, [***] MHz Channelization, [***]GHz, [***] degree sector,
Band [***], integral antenna [***] [***]
BRU-E-1011-01 Radio Unit, [***] MHz Channelization, [***]GHz. [***] degree sector,
Band [***], integral antenna [***] [***]
BRU-F.2401-01 Radio Unit, [***] [***]MHz Channelization, [***]GHz, [***] degree sector,
Band [***] (gain = [***]dBi) [***] [***]
BRU-F-2411-01 Radio Unit, [***] 10MHz Channelization, [***]GHz, [***] degree sector,
Band [***] (gain = [***]dBi) [***] [***]
- --------------------------------------------------------------------------------------------------------------------------------
RSM-E-l00101 Redundancy Switching Module - 2 RU height for Release 1 BSC/BMU [***] [***]
- --------------------------------------------------------------------------------------------------------------------------------
SAS-E-1001-01 Access System, [***] x [***] ports [***] [***]
SAS-E-1002.01 Access System, [***] x [***] ports, 10BaseT port [***] [***]
SAS-F-1001-01 Access System, [***] x [***] ports [***] [***]
SAS-F-1002-01 Access System, [***] x [***] ports, 10BaseT port [***] [***]
- --------------------------------------------------------------------------------------------------------------------------------
SRU-E-2602-01 Radio Unit, [***], [***]GHz Band [***], [***] Antenna [***] [***]
SRU-E-2604-01 Radio Unit, [***], [***]GHz Band [***], [***] Antenna [***] [***]
SRU-E-1002-01 Radio Unit, [***], [***]GHz Band [***], [***] Antenna [***] [***]
SRU-F-2402-01 Radio Unit, [***], [***]Hz Band [***], [***] Antenna [***] [***]
- --------------------------------------------------------------------------------------------------------------------------------
NMS-A-2001-0l AirView NMS with Windows 95 Laptop [***] [***]
NMS-A-2002-01 AirView NMS with Windows 95 Desktop [***] [***]
NMS-A-2003-01 AirView NMS software - CD-ROM [***] [***]
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: [***]GHz equipment is not available before May 1,1998 - check with Netro
for exact availability dates
EXPEDITED SHIPMENT: `BEST EFFORT' SHIPMENT WITHIN 5 BUSINESS DAYS OF ORDER.
[***] CONFIDENTIAL TREATMENT REQUESTED
-26-
<PAGE> 1
Exhibit 10.8.2
SUPPLEMENTAL AGREEMENT NR. 02
JOINT DEVELOPMENT AGREEMENT
PRODUCT: FEEDER PRODUCT
between
Netro Corporation
Santa Clara, CA, USA
and
Italtel s.p.a
Milano -- Italy
<PAGE> 2
This agreement is made
between
NETRO CORPORATION, a Californian corporation
(hereinafter referred to as "Netro")
and
Italtel s.p.a., an Italian corporation
(hereinafter referred to as "Italtel")
(Netro and Italtel are also hereinafter referred to jointly
as "the Parties" and separately as "Party")
WITNESSETH
WHEREAS as of today the Parties entered into a Frame Agreement which
sets forth the general terms and conditions ruling their cooperation with
respect to the Products as defined in Article 1.02. of the Frame Agreement; and
WHEREAS, pursuant to Article 3.02. of the Frame Agreement, the Parties
undertake to jointly develop the Feeder Product as hereinafter defined; and
WHEREAS, the Parties hereby intend to better define the specific rules
governing their cooperation with respect to the above mentioned Feeder Product.
NOW, THEREFORE, the Parties agree as follows:
DEFINITIONS
Frame Agreement: means the Agreement entered into between
the Parties as of today ruling their
cooperation with respect to the
Products, as defined in Article 1.02. of
such Frame Agreement
-2-
<PAGE> 3
Netro PMP Product: means the Netro point - to - multipoint
product AIRSTAR, as defined in SA. nr.
0l
Feeder Product: has the same meaning of that referred to
in Article 1.04. of the Frame Agreement
Feeder Market: has the same meaning of that referred to
in Article 1.05. of the Frame Agreement
Existing Information: has the same meaning of that referred to
in Article 1.09 of the Frame Agreement
Joint Developed Information: means the information which is jointly
originated by the Parties during the
Joint Development Program
Reference Market Price: has the same meaning of that referred to
in Article 1.08. of the Frame Agreement.
1. SCOPE OF WORK.
1.01. The Parties shall jointly develop on a non exclusive basis the
Feeder Product for the Feeder Market, the characteristics and specifications of
which are described in Annex 1 hereto.
1.02. Since the Feeder Product shall be developed by adapting and using
as a basis the Netro PMP Product (AIRSTAR), in the event that third party's
software is used in the Netro PMP Product, Netro warrants to Italtel that such
third party's software is available on commercially reasonable terms and will
not prejudice in any way Italtel rights under this Supplemental Agreement.
Netro will provide access to the third party's software at the same
price and conditions obtained by Netro.
Netro further warrants that it owns or has rights to all intellectual
property necessary for the development and manufacture of AirStar and the Feeder
Product, free and clear of any adverse claims of any third party.
1.03. In order to integrate the Feeder Product with the Network
Management Systems used by Italtel, Italtel will develop and manufacture for its
own exclusive use the necessary Interface Cards.
-3-
<PAGE> 4
2. JOINT DEVELOPMENT PROGRAM.
2.01. The Parties shall carry out and complete the development
activities under this Supplemental Agreement in accordance with the Joint
Development Program, as better defined in 2.03. below.
The first release of the Feeder Product is targeted for July 1998.
2.02. The above mentioned development activities of the Feeder Product
shall be carried out under the guidance of the Committee - Product subdivision,
with participation of both Parties' R&D personnel.
2.03. The detailed Joint Development Program (including planned
development efforts and activities, development time schedule, list of Italtel
and Netro information that may be useful or necessary for the carrying out of
the activities, etc.) is hereto attached under Annex 2.
From time to time the Joint Development Program will be updated to cover
product modifications, as required by the market, that will be authorised by the
Committee.
2.04. The Parties recognize that time to market is essential for the
success of the program; should the program suffer unexpected delays, the Parties
will promptly meet to identify remedies. Should the completion of the Joint
Development Program suffer - for reason not attributable to a Party - a delay
which is likely to prejudice the success of the Feeder Product in the market -
and should the Parties fail in good faith to identify appropriate remedies, then
either Party shall be entitled to withdraw from the Joint Development Programme
without incurring any liabilities towards the other Party.
3. CONTRIBUTION OF THE PARTIES.
The allocation of tasks, as defined by the Committee Product Subdivision
and approved by the Parties pursuant to Article 5.02.(a) of the Frame Agreement,
is that specified in Annex 2 hereto attached.
Each Party will bear the expenses associated with its own tasks.
4. OWNERSHIP AND EXPLOITATION.
4.01. Each Party shall retain the ownership of its Existing Information.
Each Party shall license to the other Party the necessary information to enable
it to manufacture, modify and sell (under trade marks and logos of its own
choice) the Feeder Product within the Feeder Market; this will include the right
to have a third party manufacture the Feeder Product, provided that
manufacturing by anyone other than an Affiliate of Italtel will require the
consent of Netro in the Committee, which consent will not be unreasonably
withheld.
The above mentioned licence shall be personal, irrevocable -- except if
terminated due to the licensed Party under Article 13.02 (a) or (b) of the Frame
Agreement-- non-transferrable,
-4-
<PAGE> 5
non-exclusive. Rights of each Party with respect to Existing Information of the
other Party after termination/expirat are specified in Article 13.04 of the
Frame Agreement.
4.02. Netro and Italtel shall jointly and severally own the Joint
Developed Information, if any.
The right to use the Joint Developed Information outside the Feeder
Product by either Party must be approved by the Committee on a case by case
basis.
4.03. Italtel agrees not to exploit its manufacturing rights of the
Feeder Product until reaching a cumulative amount of [***] of Products purchased
from Netro, unless Netro fails to deliver to Italtel the Feeder Products
according to the mutually agreed plan.
5. SUPPLIES BY NETRO TO ITALTEL.
5.01. During the period established in Article 4.03. above, Netro
undertakes to supply the Feeder Product to Italtel according to the sales plan
mentioned in Article 6 hereto and upon the same terms and conditions established
in SA nr. 01 between the Parties.
5.02. After reaching [***] purchase level mentioned in Art. 4.03.
Italtel is free to exploit its manufacturing rights hereunder, but will continue
to purchase from Netro the following percentages of its requirements of the
Feeder Product:
<TABLE>
<S> <C>
Next 12 months [***]
Second 12 months [***]
Third 12 months and thereafter [***]
</TABLE>
unless Netro fails to deliver the Feeder Products according to the sales plan
and upon the same terms and conditions established in SA nr. 01 between the
Parties.
In addition, Netro will continue to sell its proprietary components to
Italtel (such as ASICS) at reasonable and fair terms to be agreed by the
Parties.
5.03. On the Reference Market Price, as defined by the Committee,
applicable to the supplies of the Feeder Product from Netro to Italtel, Netro
will grant the following discounts:
<TABLE>
<CAPTION>
ANNUAL VOLUME/CALENDAR YEAR DISCOUNT
- ---------------------------------------------------------------
<S> <C>
$ [***] (LEVEL 1) [***]
$ [***] (LEVEL 2) [***]
$ [***] (LEVEL 3) [***]
</TABLE>
5.04. The above quantity discount matrix is based on, and applicable to,
the total volume of Feeder Products sold by Netro to Italtel and/or its
Affiliates in a certain calendar year.
[***] CONFIDENTIAL TREATMENT REQUESTED
-5-
<PAGE> 6
The initial discount for each calendar year will be that of level 2.
The Parties shall review the sales volume and forecast quarterly, and if
they show a clear trend towards different levels, the Parties shall meet to
finalize a compensation procedure to achieve the correct discount level on the
total sales volume of that specific calendar year.
As an exception to the above for the initial deliveries (1998), the
starting level will be level 1.
6. SALES PLAN.
6.01. Italtel shall define a sales plan of the Feeder Product sales
through the year 2000 divided in 6 months periods.
The initial version is attached hereto under Annex 3.
7. PRODUCT NAME.
Each Party shall be free to use any tradenames or logos - at its own choice -
with respect to the Product.
8. TERMINATION This Agreement shall terminate in accordance with Article 13
of the Frame Agreement, and may be terminated by either Party in the event of a
material breach by the other Party that is not cured within 60 days.
9. MISCELLANEOUS.
A. Counterparts: This Supplemental Agreement shall be executed in two
counterparts, each of which will be deemed an original and both of which, taken
together, shall constitute the same document.
B. ISO-9000: Seller will promptly inform Buyer in the event Seller is no
longer certified under ISO-9000 standards.
Netro Corporation Italtel s.p.a.
/s/ Gideon Ben-Efraim /s/ Italtel s.p.a.
- ---------------------------------- ----------------------------------
11/19/97 November 28, 1997
- ---------------------------------- ----------------------------------
Date Date
Munich Milano
- ---------------------------------- ----------------------------------
Place Place
-6-
<PAGE> 7
SUPPLEMENTAL AGREEMENT NR. 02.
LIST OF ANNEXES
ANNEX 1 FEEDER PRODUCT CHARATERISTIC AND SPECIFICATION
ANNEX 2 JOINT DEVELOPMENT PROGRAM AND TASKS
ALLOCATION
ANNEX 3 INITIAL SALES PLAN
-7-
<PAGE> 8
[LOGO]
AIRSTAR
PMP FEEDER PRODUCT SPECIFICATIONS
Issue: 0.5 (Draft)
Date: Nov 21-1997
Document Number:
File: Feeder 0-5.doc
-8-
<PAGE> 9
1.2 SCOPE AND PURPOSE
This document specifies a point to multipoint radio product for
micro-cellular feeder applications, such as GSM. This product is based on the
AirStar technology developed at Netro. The building blocks of AirStar are
modified to provide a compact and cost effective solution for the Cellular
Feeder application.
1.3 PUBLICATION HISTORY
<TABLE>
<CAPTION>
Issue Date Main changes
- ----- ---- ------------
<S> <C> <C>
0.1 9-14-97 First issue (draft)
0.2 9-15-97 Modified Draft
0.3 9-16-97 Modified Draft
0.4 10-08-97 Modified Draft
0.5 11-21-97 Added [***] to every [***] statement.
Changed [***] to [***]
Changed [***] and added [***] interfaces at
the Central Station, thus [***] does not include [***]
Added table for [***] GHz frequency band.
</TABLE>
[***] CONFIDENTIAL TREATMENT REQUESTED
-9-
<PAGE> 10
Table of Contents
<TABLE>
<S> <C>
1.0 INTRODUCTION
1.1 Cover Sheet....................................................................1-1
1.2 Scope and Purpose..............................................................1-2
1.3 Publication History............................................................1-2
1.4 List of Illustrations..........................................................1-3
1.5 Tables.........................................................................1-4
1.6 Glossary.......................................................................1-5
2. BACKGROUND 2-7
2.1 The Building Blocks of a Wireless Mobile System................................2-7
2.2 AirStar vs. Feeder Network terminology.........................................2-8
3. SYSTEM SPECIFICATIONS ........................................................3-9
3.1 Traffic Transport Definition...................................................3-9
3.2 Total Capacity.................................................................3-9
3.3 Radio Performance.............................................................3-10
3.4 Terminal Station..............................................................3-13
3.5 Central Station...............................................................3-14
3.6 Central Station Release 1.....................................................3-15
3.7 Central Station Release 2.....................................................3-16
3.8 Building Blocks...............................................................3-17
3.8.1 [***]...............................................................3-17
3.8.2 [***]...............................................................3-18
3.9 Environmental.................................................................3-19
3.10 NMS..........................................................................3-19
3.11 Evolution....................................................................3-19
4. OPEN ISSUES .................................................................4-21
1.4 LIST OF ILLUSTRATIONS
FIGURE 2-1: FEEDER NETWORK BUILDING BLOCKS........................................2-8
FIGURE 3-1: CENTRAL STATION RELEASE 1 - REDUNDANT CONFIGURATION..................3-16
FIGURE 3-2: CENTRAL STATION RELEASE 2 - REDUNDANT CONFIGURATION..................3-17
FIGURE 3-3: CSC BLOCK DIAGRAM....................................................3-18
FIGURE 3-4: TERMINAL STATION DIGITAL CARD (SIC)..................................3-19
</TABLE>
[***] CONFIDENTIAL TREATMENT REQUESTED
-10-
<PAGE> 11
1.5 TABLES
<TABLE>
<S> <C>
TABLE 2-I: AIRSTAR AND FEEDER PRODUCT TERMINOLOGY.................................2-8
TABLE 3-1: TRAFFIC TRANSPORT FUNCTIONS............................................3-9
TABLE 3-2: TRAFFIC CAPACITY OPTIONS...............................................3-9
TABLE 3-3: RADIO SPECIFICATIONS ([***] GHZ)......................................3-10
TABLE 3-4: RADIO SPECIFICATIONS ([***] GHZ)......................................3-12
TABLE 3-5: TERMINAL STATION......................................................3-14
</TABLE>
[***] CONFIDENTIAL TREATMENT REQUESTED
-11-
<PAGE> 12
1.6 GLOSSARY
Note: Netro-specific terms use BOLD ITALIC characters. Netro AirStar
terminology not used here is listed in (PARENTHESIS)
ASC Axis Shelf Controller (A Cisco Card)
ATM Asynchronous Transfer Mode
BMU Base Modem Unit, a CSS plug-in card
(BRU) Base Radio Unit (referred below as CRU)
(BSC) (Netro) Base Station Controller (referred below as
CSC)
BSC (Cellular) Base Station Controller
CELLMAC Netro MAC protocol for exchange of ATM cells
between
CMU Central Modem Unit (also called at Netro BMU).
CRU Central Radio Unit (also called at Netro BRU)
CSC Central Station Controller (also called at Netro
BSC)
CS Central Station
CSS Central Station Shelf
El European digital line interface at 2.048 Mbps.
E3 European digital line interface at 34.368 Mbps.
ID Identification
IP Internet Protocol
LAN Local Area Network
LIU Line Interface Unit
MAC Media Access Control
Mbps Mega bits per second
MSU Multi-SIC-Unit converting to E1 or Tl (a double
SIC card interface)
MTBF Mean Time Between Failures
MTTR Mean Time To Repair
NMS Network Management System
RU Radio Unit
SAS Subscriber Access System (AirStar)
SIC Subscriber interface Card (inside SAS for Access
product)
SRU Subscriber Radio unit (AirStar)
ST Subscriber Terminal (AirStar)
STI Subscriber Terminal Identifier
TBD To be defined (later).
TS Terminal Station (Equivalent to an ST but an
integral unit for the Feeder Application)
2 BACKGROUND
2.1 THE BUILDING BLOCKS OF A WIRELESS MOBILE SYSTEM
A Mobile Feeder Network is a point to multipoint (PMP) microwave network
that interconnects digital traffic [***].
[***] CONFIDENTIAL TREATMENT REQUESTED
-12-
<PAGE> 13
[***]
[***]
FIGURE 2-1: FEEDER NETWORK BUILDING BLOCKS
2.2 AIRSTAR VS. FEEDER NETWORK TERMINOLOGY
Unfortunately, the term "Base Station" has different meanings [***] and the
AirStar system. To retain the mobile terminology, the feeder network components
are renamed, even if they are identical, as shown in Table 2-1.
<TABLE>
<S> <C> <C>
AirStar Feeder Network Equivalence
Base Station Shelf (BSS) [***] Similar
Base Station Controller (BSC) [***] (CSC)Same
Base Modem Unit (BMU) [***] Similar
Base Radio Unit (BRU) [***] Same
Subscriber Terminal (ST) [***] Similar (TS is integral)
</TABLE>
TABLE 2-1: AIRSTAR AND FEEDER PRODUCT TERMINOLOGY
[***] CONFIDENTIAL TREATMENT REQUESTED
-13-
<PAGE> 14
3. SYSTEM SPECIFICATIONS
3.1 TRAFFIC TRANSPORT DEFINITION
Each [***] may require n = [***] to [***] kbit/s (DS0) channels. In a [***]
application, each channel consists of [***] x [***] kbit/s sub-channels, one of
which may be a "[***]" channel. The Feeder transports the nxDS0 channels
transparently, regardless of signaling content. Base Stations i and j may have
ni and nj channels, respectively, and in general, ni needs not be equal to nj.
The [***] channels are provided at the [***] as [***]. Only n out of the full
line capacity is forwarded to the [***]. The air interface will transmit only
the n provisioned channels but these provisioned channels are always
transmitted, whether active or not. The [***] need not be contiguous. The [***]
are full duplex. These channels are delivered as [***] interfaces at the [***]
interface, such that each [***] line is an aggregate of multiple base stations
traffic. The mapping of [***] channels is such that all channels from one [***]
terminate in the same [***].
The bandwidth provisioning is semi permanent. A change requires human
intervention via NMS and is considered to be an non-frequent event. A change in
capacity will interrupt the service for that particular mobile base station.
These specifications are summarized below.
<TABLE>
<S> <C>
Mobile Base Station Interface Single [***] or [***] (fractional)
# of DS0 transported [***]
Bandwidth Allocation Provisioned via NMS
Minimum Capacity ([***] MHz carrier, ETSI [***][***] carrying up to [***] [***] channels
application and [***] MHz FCC application)) [***][***] with [***] [***] channels.
E1/T1 protection (at TS only) Lightning Protection
</TABLE>
TABLE 3-1: TRAFFIC TRANSPORT FUNCTIONS
3.2 TOTAL CAPACITY
The capacity per sector has one of the following options (subject to several
release phases):
<TABLE>
<S> <C>
Total BSC Interfaces Modulation Scheme
[***]xE1/[***]xT1 [***]-QAM
[***]xE1/ [***]xT1 [***]-QAM
[***]xE1/ [***]xT1 [***]-QAM
[***]xE1/[***]xT1 [***]-QAM
[***]xE1/[***]xT1 [***]-QAM
</TABLE>
TABLE 3-2: TRAFFIC CAPACITY OPTIONS
[***] CONFIDENTIAL TREATMENT REQUESTED
-14-
<PAGE> 15
3.3 RADIO PERFORMANCE
TABLE 3-3: RADIO SPECIFICATIONS ([***] GHZ)
RANG. AND [***] KILOMETER RADIUS
AVAILABILITY (TYP) [***] AVAILABILITY (CCIR climatic Zone E, Northern
Europe)
RADIO UNIT AND ANTENNAS Base Station: The Base Station Radio is comprised of a
number of sectorized Radio Unit Arrays. Each sector
contains one or more Base Station Radio Unite (BRUs),
allowing modular capacity build-up and redundant
configuration of both radio and antennae. A choice of
high performance lens corrected horn antennae are
available with a [***] beamwidth, as shown:
<TABLE>
<CAPTION>
Horizontal Vertical # of Sectors
Beamwidth Beamwidth Gain Per Cell
--------- --------- ---- ------------
<S> <C> <C> <C> <C>
[***] [***] [***] dBi [***] to [***]
[***] [***] [***] dBi [***] to [***]
[***] [***] [***] dBi [***] to [***]
[***] [***] [***] dBi [***] to [***]
</TABLE>
TERMINAL STATION TERMINAL: The subscriber radio unit is
comprised of an integral [***].
Optional standard parabolic antennae may be used to
increase system range.
~ Integral:: High performance lens corrected horn, [***]
dB gain
~ Non-integral: [***] m at [***] dBi or [***] m at
[***]dBi
FREQUENCY RANGE DIGITALLY SYNTHESIZED, SOFTWARE CONTROLLED
~ [***] to [***] GHz
~ T/R Spacing = [***] MHz
CHANNEL BANDWIDTH [***] MHz, optional [***] MHz and [***] MHz
MODULATION FORMAT CENTRAL STATION TO TERMINAL STATION: [***] QAM or [***]
QAM, TDM
TERMINAL STATION TO CENTRAL STATION: [***] QAM or [***]
QAM, TDMA
<TABLE>
<CAPTION>
TRANSMIT POWER [***]QAM [***]QAM
<S> <C> <C> <C>
CENTRAL STATION (TYP) [***] dBm ([***]/[***] dB) [***] dBm ([***]/[***] dB)
TERMINAL STATION (TYP) [***] dBm ([***]/[***] dB) [***] dBm ([***]/[***]dB)
ATPC (AUTOMATIC TRANSMIT POWER CONTROL RANGE): 50 dB
RECEIVER RECEIVER SENSITIVITY:(BER=[***]) [***] QAM [***] QAM
Central Station: [***] dBm at [***] Mb/s [***] dBm at [***] Mb/s
Terminal Station: [***] dBm at [***] Mb/s [***] dBm at [***] Mb/s
RECEIVER SENSITIVITY: (BER=[***]) [***] QAM [***] QAM
Central Station: [***] dBm at [***] Mb/s [***] dBm at [***] Mb/s
Terminal Station [***] dBm at [***] Mb/s [***] dBm at [***] Mb/s
</TABLE>
AIR INTERFACE Netro's CellMACTM protocol for wireless ATM, with
centralized traffic scheduling based on Netro's virtual
framer for ATM CBR traffic and virtual shaper for ATM
VBR traffic
SYSTEM CAPACITY CAPACITY PER SUBSCRIBER ([***] MHz, full duplex,
channel):
~ [***] QAM: [***] Kb/s to [***] Mb/s
~ [***] QAM: [***] Kb/s to [***] Mb/s
<TABLE>
<S> <C> <C>
INTERFACE TERMINAL STATIONS: CENTRAL STATIONS:
SPECIFICATIONS [***] [***]
</TABLE>
NETWORK MANAGEMENT Integral SNMP, for industry compatibility
Downloadable software, local and remote
Windows NT based
Performance measurement:: [***]
[***]
[***] CONFIDENTIAL TREATMENT REQUESTED
-15-
<PAGE> 16
STANDARDS AND SYSTEM: ETSI prETS [***] [***], BAPT [***] ZV, MPT
REGULATORY [***], prETS, TM4. ITU-R, RecF.[***], [***]
COMPLIANCE EMC: CE Mark, CISPR [***], EN5[***], EN5[***] and [***],
ETS, [***] [***] and [***] Traffic interface: [***],
[***], [***], [***], [***], [***], [***], IEEE 802.3
Mechanical and safety: IS09001, FQAA. CE Mark, EN 60950,
EN 41003, IEC 950 Environmental: ETS 300 019
ENVIRONMENTAL OPERATING TEMPERATURE, CENTRAL STATION
~ Indoor unit: [***] C to [***] C
~ Outdoor unit: [***] C to [***] C
OPERATING TEMPERATURE, TERMINAL STATION
~ Outdoor unit: [***] C to [***] C
RELATIVE HUMIDITY (INDOOR): [***]-[***], NON-CONDENSING
ALTITUDE (SYSTEM): [***]-[***] m
WIND LOADING: Operational: [***] km/hr; Survival: [***]
km/hr
POWER INPUT VOLTAGE:
~ Terminal Station: [***] VDC/[***] VDC or [***] VAC,
[***] Hz
~ Central station: [***] VDC/[***] VDC
Power consumption (typ):
~ Central station: [***] W
~ Terminal Station: [***] W
REDUNDANCY [***]
<TABLE>
<CAPTION>
MECHANICAL DIMENSIONS: HxWxD Weight
TERMINAL STATIONS: TBD [***] kg
CENTRAL STATION UNIT:
<S> <C> <C>
~ Indoor unit (BSS, incl. cooling) [***] cm x [***] cm x [***] cm [***] kg
~ Outdoor unit (BRU): [***] cm x [***] cm x [***] cm [***] kg
~
</TABLE>
TABLE 3-4: RADIO SPECIFICATIONS ([***] GHZ)
RANGE AND [***] KILOMETER RADIUS
AVAILABILITY (TYP) [***] AVAILABILITY (CCIR CLIMATIC ZONE E, NORTHERN
EUROPE)
RADIO UNIT AND
ANTENNAS CENTRAL STATION: The Central Station Radio is comprised
of a number of sectorized Radio Unit Arrays. Each sector
contains one or more Central Station Radio Unite (CRUs),
allowing modular capacity build-up and redundant
configuration of both radio and antennae. A choice of
high performance lens corrected horn antennae are
available with a -3~ beamwidth, as shown:
<TABLE>
<CAPTION>
Azimuth Elevation # of Sectors
Beamwidth Beamwidth Gain Per Cell
--------- --------- ---- --------
<S> <C> <C> <C> <C>
[***] [***] [***] dBi [***] to [***]
[***] [***] [***] dBi [***] to [***]
[***] [***] [***] dBi [***] to [***]
[***] [***] [***] dBi [***] to [***]
</TABLE>
TERMINAL STATION: The subscriber radio unit is comprised
of an integral planar antenna with [***] dB gain.
FREQUENCY RANGE DIGITALLY SYNTHESIZED, SOFTWARE CONTROLLED
~ [***] to [***] GHz
~ T/R Spacing = [***] MHz
CHANNEL BANDWIDTH [***] MHz step size
MODULATION FORMAT CENTRAL STATION TO TERMINAL STATION: [***] QAM or [***]
QAM, TDM
[***] CONFIDENTIAL TREATMENT REQUESTED
-16-
<PAGE> 17
TERMINAL STATION TO CENTRAL STATION: 4 QAM or 16 QAM,
TDMA
<TABLE>
<S> <C> <C>
TRANSMIT POWER (TYP) [***] QAM [***] QAM
CENTRAL STATION [***] dBm [***] dBm
TERMINAL STATION [***] dBm [***] dBm
ATPC (AUTOMATIC TRANSMIT POWER CONTROL RANGE): [***] dB
RECEIVER RECEIVER SENSITIVITY: (BER=[***]) [***] QAM [***] QAM
Central Station: [***] dBm at [***] Mb/s [***] dBm at [***] Mb/s
Terminal Station: [***] dBm at [***] Mb/s [***] dBm at [***] Mb/s
</TABLE>
AIR INTERFACE Netro's CellMACTM protocol for wireless ATM, with
centralized traffic scheduling based on Netro's virtual
framer for ATM CBR traffic and virtual shaper for ATM
VBR traffic
SYSTEM CAPACITY CAPACITY PER SUBSCRIBER ([***] MHz, full duplex,
channel):
~ [***] QAM: [***] Kb/s to [***] Mb/s
~ [***] QAM: [***] Kb/s to [***] Mb/s
INTERFACE TERMINAL STATIONS: Central Stations:
SPECIFICATIONS ~ [***] ~ [***]
~ [***] ~ [***]
NETWORK MANAGEMENT Integral SNMP, for industry compatibility
Downloadable software, local and remote
Windows NT based
Performance measurement:: [***]
STANDARDS AND SYSTEM: [***], prETS
REGULATORY [***]
COMPLIANCE TRAFFIC INTERFACE: [***],
l.431, CTR 12, TBR 13, IEEE 802.3 MECHANICAL AND SAFETY:
[***]
ENVIRONMENTAL OPERATING TEMPERATURE, CENTRAL STATION
~ Indoor unit: [***]~ C to [***]~ C
~ Outdoor unit: [***]~ C to [***]~ C
OPERATING TEMPERATURE, TERMINAL STATION
~ Outdoor unit: [***]~ C to [***]~ C
RELATIVE HUMIDITY (INDOOR): [***], non-condensing
ALTITUDE (SYSTEM): [***] m
WIND LOADING: Operational: [***] km/hr; Survival: [***]
km/hr
POWER INPUT VOLTAGE:
~ Terminal Station: [***] VDC/[***] VDC or [***] VAC,
[***] Hz
~ Central station: [***] VDC/[***] VDC
POWER CONSUMPTION (TYP):
~ Central station: [***] W
~ Terminal Station: [***] W
REDUNDANCY [***]
<TABLE>
<CAPTION>
MECHANICAL DIMENSIONS: HxWxD Weight
- ---------- ----------- ----- ------
<S> <C> <C>
TERMINAL STATIONS: [***] [***] kg
CENTRAL STATION UNIT:
~ Indoor unit (BSS, incl. cooling) [***] cm x [***] cm x [***] cm [***] kg
~ Outdoor unit (BRU): [***] cm x [***] cm x [***] cm [***] kg
</TABLE>
SAS TO SRU CONNECTION: LMR240, [***] m; LMR[***], [***]m
3.4 TERMINAL STATION
[***] CONFIDENTIAL TREATMENT REQUESTED
-17-
<PAGE> 18
The TS is an outdoor unit including the radio section and [***] interface. It is
equivalent to a single box containing the AirStar SRU and SAS, however only one
[***] is required as an interface. The [***] is lightning protected.
The TS includes the functions of the SAS digital card (Subscriber Interface
Card), excluding unneeded stuff options, but the card is modified to the outdoor
temperature range. It is TBD whether the SIC card will be used as-is or it will
be redesigned for a new form-factor.
The TS includes also the SAS modem card, which is de-stuffed for unneeded
functions, such as the coax multiplexer and telemetry (radio control) modem.
The rest of the TS is the SRU function, which includes most of the AirStar
modules unchanged. Two modules that can be slightly depopulated are the Radio
Unit Controller (RUC) and If module.
The TS will have an integral [***] antenna compliant with [***] for the [***]
band, and an optional [***] mm parabolic-reflector antenna, that may use a
different TS enclosure than the lens-horn. For [***] GHz bands an
[***]-compliant flat antenna will be used.
The polarization can be either [***] or [***]. A field setting of
polarization is desired, but a factory setting is acceptable. The current
elongated shape of the SRU is desired to be maintained with the TS, although it
may be enlarged to accommodate the extra hardware.
No local craft interface is required, however the design will allow optional
[***] port. This port will be used for trouble shooting purpose, not for
configuration and not on a permanent basis.
The TS will have optional [***] protection switching option including switching
of the [***] port.
<TABLE>
<CAPTION>
Mobile Base Station Interface: Single [***]
- ------------------------------ -----------------
<S> <C>
Antenna: [***] mm lens-Horn. [***] mm parabolic option.
Flat antenna for [***] GHz band, dimension
of-[***]mmx[***]mm..
Frequency bands: [***] GHz, [***] GHz (two separate products)
Polarization: Vertical, Horizontal
Polarization Setting Factory or orientation (TBD)
TS mounting option for [***] GHZ band.
Local Port RS-[***], for temporary connection only
Redundancy: [***], El/T1 lines switched externally (likely
in battery switch unit)
Battery Backup: External, 30 minutes minimum.
Feeder Cable Shielded 2 x Twisted Pair + Power pair (TBD)
</TABLE>
TABLE 3-5: TERMINAL STATION
[***] CONFIDENTIAL TREATMENT REQUESTED
-18-
<PAGE> 19
A backup control unit will be developed to provide both battery backup and E1/T1
switching for the mobile base station.
3.5 CENTRAL STATION
The Central Station is located normally next to a mobile BSC. It provides access
at increments of [***][***]. The main building blocks are;
Central Station Shelf (CSS) consisting of a card cage [***], and including AC or
DC redundant power supplies and fan-cooling shelves. This card cage can host the
CSC (identical to AirStar BSC) card.
The first generation CSC card has two channels, each supporting [***][***]
payload. The CSC uses one channel for communication with a modem unit (CMU) that
is attached to a CRU (identical to a BRU). The other channel in the CSC is
connected to a second port in the CMU. This port is converted to four local
El/T1 interfaces by a card identical to an existing SIC Card, via a digital
adapter ("Null Modem").
The CSC must redirect the wireless traffic to the local E1/T1 ports at the SIC
card. This is done by the ATM switching function of the CSC.
A local [***] port is used for local craft and NMS access.
The CSC-CMU-CRU group is subject to [***] redundancy, and they can be switched
with the [***] lines. The [***] lines switching is TBD.
The CMU is a rack mounted box. A future product release will allow to plug the
CMU directly to the CSS.
A co-located TMN adapter converts the l0BaseT SNMP traffic to CMIZE/Q3 traffic.
3.6 CENTRAL STATION RELEASE 1
The configuration of release 1 is depicted in Figure 3-1. It consists of the
following components:
[***]
[***]. The ASC card provides mass storage, synchronization and NMS
access. The ASC card will not be required in future releases that do not use the
Axis shelf.
A CSC card, Axis plug-in module, identical to the AirStar Access product, with 2
[***] Mbit/sec capacity. The CSC is further discussed below.
A CTU (Central terminal Unit), a rack mounted module for converting two BSC
channels to [***] [***] lines. The CTU is similar in function to two SAS units
in the Access product.
[***] CONFIDENTIAL TREATMENT REQUESTED
-19-
<PAGE> 20
A CMU - a rack-mounted "[***]" including [***]-channel RF modem. In release 1
[***] channel is in use per CCS card, however the other channel is available foe
a second [***] or for the future [***] CSC.
The CRU is the same [***] GHz product as the BRU in the Access project. It uses
a [***] antenna to cover a sector or a corner of a square cell.
Each CSC has a [***] port for NMS access. Future releases will convert these
ports by extra hardware and software to a TMN interface.
A [***] interface runs through the ch-2 port of the CSC to the CMU and from the
CSC to the CTU, thus the two CSC cards can communicate both via the [***] and
they have control of the CMU and CRU for redundancy switching.
[***] CONFIDENTIAL TREATMENT REQUESTED
-20-
<PAGE> 21
[***]
FIGURE 3-1: CENTRAL STATION RELEASE 1 - REDUNDANT CONFIGURATION
The building blocks are further discussed below.
3.7 CENTRAL STATION RELEASE 2
[***] CONFIDENTIAL TREATMENT REQUESTED
-21-
<PAGE> 22
[***]
FIGURE 3-2: CENTRAL STATION RELEASE 2 - REDUNDANT CONFIGURATION
The main differences in release 2:
The CSC is replaced by an identical function that does not require an Axis shelf
and an ASC card. The new unit is rack mounted, has [***] and is called BUNI (for
Base-User Network Interface). The BUNI also includes a port for fast redundancy
switch using the direct port.
Subsequent BUNI and CMU releases will also support [***] QAM.
3.8 BUILDING BLOCKS
3.8.1 CSC
[***] CONFIDENTIAL TREATMENT REQUESTED
-22-
<PAGE> 23
[GRAPHIC]
FIGURE 3-3: CSC BLOCK DIAGRAM
The CSC includes some functions that are not necessary for the feeder
application. Over time, these functions will be de-stuffed for cost reduction.
The main elements are:
CellMAC Controller for controlling the MAC air interface (including framing,
FEC, timing).
Request Grant Processor for coordinating the air interface activities.
ATM Cross connect for switching local traffic and user traffic.
A CPU, PCI interface and [***] interfaces.
3.8.2 SIC
[***] CONFIDENTIAL TREATMENT REQUESTED
-23-
<PAGE> 24
[***]
FIGURE 3-4 TERMINAL STATION DIGITAL CARD (SIC)
While there will be several versions of the SIC card, the above \block diagram
depicts the typical implementation.
CellMAC ASIC controls the MAC layer, scrambling, REC and ATM conversion (AAL1
and AAL5).
A CPU control the system, running the VX-Works operating system, local
configuration, MAC management and the SNPM agent.
Four [***] or [***] (stuff options) provide the line interfaces.
Two serial ports provide a test port and a telemetry port controlling the radio.
The modem interface includes data/clock lines and a control bus.
3.9 ENVIRONMENTAL
See Table 3-3.
3.10 NMS
See Table 3-3. Italtel will provide a QAD board for NMS integration. [***]
3.11 EVOLUTION
The product will evolve in capacity, national standards, and frequency bands.
The evolutionary steps are:
The CSC release 1 is [***] channel [***]QAM for [***] MHz (ETSI) and [***] MHz
(FCC) channel spacing. Release 2 is [***] channel, [***] QAM [***] MHz (ETSI)
and [***] MHz (FCC). The CSC is changed to a rack mounted [***].
The CRU and TS release 1 are [***] GHz band. Future release is for [***] GHz
channel and US bands (TBD).
The CMU is a [***] [***] Pizza box, [***] QAM. It will evolve to a Dual [***]
QAM modem BMU card, and a SMU card (dual [***]) in release 2.
[***] CONFIDENTIAL TREATMENT REQUESTED
-24-
<PAGE> 25
SANR2 - ANNEX 2
NETRO/ITALTEL WORK SPLIT
1. Italtel is prime on NMS integration, with Netro providing technical
support, HW and SW specifications, in order to integrate the interface cards in
the system.
2. Netro is prime on SS/SRU and BMU/SAS specified modifications and
integration with Italtel providing technical support.
3. Italtel is prime on all external additional hardware related to power
and any functionality required to provide redundancy. Netro will provide
technical support.
NOTES:
1. Both companies will cooperate on product specifications
2. Netro will develop product documentation
3. Both companies will cooperate on system integration and
qualification/test activities
-25-
<PAGE> 26
4. OPEN ISSUES
1. Hot Standby Switch time of [***] ms may not be feasible. However release
2 ill incorporate switch-over mechanism with average switch time [***] ms.
2. LCT at the TS, is it needed? Probably for prototype products only.
3. Are AIS and LOS and loss of frame sufficient indications of E1/T1 switch
over at the TS? Probably yes.
4. Redundancy arrangements of the CS.
5. Wide-mouth power supply [***]-[***] V.
6. Define polarization setting method.
7. [***] will be [***] (OMEGA) balanced. Will [***] (OMEGA) interface be
required too?
8. Does the CSS require an ASC to operate? How will reference be derived
from E1/T1s?
9. How will large antenna option be provided
10. USA frequency band and bit rate definitions.
11. Battery and redundancy switching at the TS.
Some of these issues have been further discussed in Italtel Requirements
document of 5 November 1995.
[***] CONFIDENTIAL TREATMENT REQUESTED
-26-
<PAGE> 27
SANR 2 - ANNEX 2
FEEDER PRODUCT - MILESTONE SUMMARY
<TABLE>
<CAPTION>
END OF LIMITED
RELEASE CONTENT PROTOTYPE VALIDATION AVAILABILITY GA
- ---------------- ------------------ --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
RLS1 [***]GHz [***] [***] [***] [***]
[***]E1 [***]QAM
Link Explorer
RLS2 [***]GHz/[***]GHz [***] [***] [***] [***]
[***]E1/[***]E1
[***]QAM, LE
Redundancy for
Subscriber
terminals
RLS2.1 Italtel NMS [***] [***]
integration
RLS3 [***]GHz/[***]GHz [***] [***] [***] [***]
[***]QAM/[***]QAM
[***]E1/[***]E1
RLS3.1 Italtel NMS [***] [***]
integration
</TABLE>
Notes:
1. Prototype milestones based on unreleased hardware and can be used for
Demos
2. End of validation also includes availability of Field Trial Equipment
3. Limited availability: Product is released but quantities are limited
4. GA: Product is generally available
5. T1 version and milestones will be defined within first half of 1998
[***] CONFIDENTIAL TREATMENT REQUESTED
-27-
<PAGE> 28
ANNEX 3
TO SUPPLEMENTAL AGREEMENT NR.02
INITIAL SALES PLAN
PRELIMINARY SALES PLAN
POINT TO MULTIPOINT RADIO FOR FEEDER APPLICATIONS
<TABLE>
<CAPTION>
1998 1999 2000
---------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
1~ sem 2~ sem 1~ sem 2~ sem 1~ sem 2~ sem
Assumption:
Market Price (US$) [***] [***] [***] [***] [***]
QUANTITY Trial, Pilots TBD
Deliveries [***] [***] [***] [***]
SALES (KUS$)Trial, Pilots [***]
Deliveries [***] [***] [***] [***]
TOTAL SALES [***] [***] [***]
Transfer price (US$) [***] [***] [***] [***] [***]
Purchase from Netro [***] [***] [***] [***] [***]
(KUS$) [***] [***] [***]
</TABLE>
[***] CONFIDENTIAL TREATMENT REQUESTED
-28-
<PAGE> 1
Exhibit 10.9
NETRO
THE WIRELESS ATM COMPANY
- --------------------------------------------------------------------------------
MANUFACTURING AGREEMENT
BETWEEN
SOLECTRON CALIFORNIA CORPORATION
AND
NETRO CORPORATION
DATED: MAY 31, 1998
- --------------------------------------------------------------------------------
Netro Corporation 3860 North First Street San Jose California 95134
408.216.1500 408.216.1500 (Fax)
<PAGE> 2
NETRO
THE WIRELESS ATM COMPANY
TABLE OF CONTENTS
1. PERIOD OF AGREEMENT................................................. Page 1
2. PRODUCTS, PRICES & QUANTITIES ...................................... Page 1
2.1 Products to be Produced ............................................ Page 1
2.2 Product Definition ................................................. Page 1
2.3 Cost Reduction ..................................................... Page 1
2.4 European Manufacturing ............................................. Page 2
2.5 Pricing Model ...................................................... Page 2
3. PROGRESS REVIEWS & DOCUMENTATION ................................... Page 2
3.1 Progress Reviews ................................................... Page 2
3.2 Document Submittals & Approvals .................................... Page 3
3.3 Other Information .................................................. Page 3
4. PRODUCT ORDERING ................................................... PAGE 3
4.1 Forecast ........................................................... Page 3
4.2 Purchase Orders .................................................... Page 3
4.3 Quantity & Delivery Changes ........................................ Page 3
4.3 Stocking ........................................................... Page 4
4.5 Material Procurement ............................................... Page 4
4.6 New Products ....................................................... Page 4
4.7 Bar Code Shipping and Receiving Labels ............................. Page 4
4.8 Electronic Data Interchange (EDI) .................................. Page 4
5. TEST EQUIPMENT, TOOLING & SPACE .................................... PAGE 5
6. GENERAL TERMS & CONDITIONS ......................................... PAGE 5
6.1 Specification Changes .............................................. Page 5
6.2 Approved Vendor Lists (AVL) ........................................ Page 5
6.3 Netro Supplied Components .......................................... Page 5
7. ACCEPTANCE & INSPECTION ............................................ PAGE 6
8. SHIPMENT & DELIVERY ................................................ PAGE 6
8.1 On-Time Delivery ................................................... Page 6
8.2 Early/Late Delivery ................................................ Page 6
8.3 Payments ........................................................... Page 7
8.4 Data ............................................................... Page 7
8.5 Quality Information ................................................ Page 7
9. CUSTOMER FOCUS TEAM AND PROGRAM MANAGER ............................ PAGE 7
<PAGE> 3
NETRO
THE WIRELESS ATM COMPANY
10. TERMINATION ...................................................... PAGE 8
11. WARRANTY ......................................................... PAGE 8
12. INTELLECTUAL PROPERTY/NON-COMPETITION ............................ PAGE 9
12.1 Intellectual Property ............................................ Page 9
12.2 Confidentiality .................................................. Page 9
12.3 Publicity ........................................................ Page 9
12.4 Exclusivity ...................................................... Page 9
12.5 Non-Competition .................................................. Page 9
12.6 Escrow ........................................................... Page 9
13. MISCELLANEOUS .................................................... PAGE 10
13.1 Language & Currency .............................................. Page 10
13.2 Laws of California, USA .......................................... Page 10
13.3 Arbitration ...................................................... Page 10
13.4 Defaults ......................................................... Page 10
13.5 Assignment ....................................................... Page 10
13.6 Force Majeure .................................................... Page 10
13.7 Precedence ....................................................... Page 10
13.8 Limitation of Liability .......................................... Page 11
13.9 Notice ........................................................... Page 11
13.10 Right of Entry ................................................... Page 11
APPENDIX "A" PRODUCTS
APPENDIX "B" QUALITY
APPENDIX "C" STATEMENT OF WORK
<PAGE> 4
MANUFACTURING AGREEMENT [NETRO LOGO]
- -------------------------------------------------------------------------------
1. PERIOD OF AGREEMENT
This agreement is entered into as of May 31, 1998 between Solectron California
Corporation whose principal place of business is located at 847 Gibraltar Drive
Milpitas, California 95035 (Supplier) and Netro Corporation whose principal
place of business is located at 3860 North First Street, San Jose, CA 95134
(Netro). This contract shall begin on the date of signing of the Agreement, and
shall terminate thirty-six (36) months from that date unless terminated or
renewed per other terms of the Agreement. Contract renewal discussions will
begin at least six (6) months in advance of the contract termination date. It is
the intent of the parties that this Agreement shall prevail over the terms and
conditions of any purchase order, acknowledgment form or other instrument.
2. PRODUCTS, PRICES & QUANTITIES.
2.1 PRODUCTS TO BE PRODUCED. Supplier agrees to supply to Netro throughout the
term of this Agreement, any mix of the items listed in Appendix "A" at the
prices agreed to in writing by the parties. Other Products may be added to
Appendix "A" once Netro and Supplier have reached written agreement.
2.2 PRODUCT DEFINITION. At the start of this Agreement, Supplier shall produce
the Products defined in Appendix "A" exactly to the drawings, specifications,
and documentation provided by Netro and agreed to in writing by Supplier unless
otherwise approved in writing by Netro. Only the suppliers shown on the Approved
Vendor List ("AVL") provided by Netro shall be utilized for the initial
procurement of materials. Supplier shall have the right to submit revisions to
Netro to the AVL and Bill of Material ("BOM") so that cost reductions shall be
achieved. Such revisions may include, but not be limited to design changes,
manufacturing technology improvements, development of new vendors, etc. All such
changes submitted by Supplier shall be approved in writing by Netro, prior to
implementation of the changes and Netro shall have the unlimited right to use
such changes, in any way it deems appropriate and at its sole discretion.
2.3 COST REDUCTION. Supplier shall implement an ongoing cost reduction program
(including material and productivity improvements) that will target an
annualized cost reduction of a minimum of [***] per cent ([***]) per Quarter for
Appendix "A" Products. Each cost reduction year will start at the signing of the
Agreement and continue until the anniversary date of the Agreement, then a new
cost reduction year will start. Netro will support this cost reduction effort
and will work closely with Supplier to achieve the targeted results. Changes to
meet the cost reduction goals will be mutually agreed to in terms of
implementation timing, effect on inventories, value of the cost reduction,
overall total cost savings, etc. Supplier shall retain the savings of Supplier
generated cost reductions within the quarter that they occur and will be
reflected in the quoted Product costs at the quarterly progress review meeting,
then such savings shall revert fully to Netro. Cost reductions developed solely
by Netro shall be fully retained by Netro. Each cost reduction activity
associated with material or design changes will be authorized by a Netro
generated and approved Engineering Change Order (ECO). The ECO will document the
initiator of the cost reduction, i.e., Netro or Supplier, and the change in the
Product cost to Netro resulting from the cost reduction. Cost reductions may
include but not be limited to reductions in Supplier margins, labor rates,
overheads, G & A's, etc. as driven by efficiency improvements, volumes or total
revenues. At each quarterly progress review meeting, a summary of cost reduction
activities and results will be presented by Supplier.
[***] CONFIDENTIAL TREATMENT REQUESTED
- -------------------------------------------------------------------------------
1
<PAGE> 5
MANUFACTURING AGREEMENT [NETRO]
THE WIRELESS ATM COMPANY
- --------------------------------------------------------------------------------
2.4 EUROPEAN MANUFACTURING: Supplier agrees that in the future, and at Netro's
direction, Netro Products may be required to be produced and delivered from a
manufacturing facility in the European Union (EU). Supplier agrees that such a
facility will be available for production and delivery of Netro Products within
six (6) months after notification by Netro that such production is required.
Transfer of Products to the EU facility will be the responsibility of Supplier
and at the cost of Supplier. Netro reserves the right to approve the facility
for production prior to start of manufacturing of Netrol Products. Such approval
will not be unreasonably withheld or delayed. Should Netro require Supplier to
undertake export activity on behalf of Netro, Netro agrees to submit requested
export information to Supplier pursuant to Solectron Guidelines for
Customer-Driven Export Shipments.
2.5 PRICING MODEL. Selling price to Netro shall be based on the actual [***],
multiplied by a [***], plus the [***], plus the [***] times the [***], plus the
[***] times the [***] all multiplied [***], [***] rate. The MUF, ALR, TLR, ICT
ad PSG&A factors shall apply to all Products in Appendix "A" and shall vary
according to the chart shown below.
Purchased Quantity of Units By Month
<TABLE><CAPTION>
0-500 501-1000 1001-5000 5001-10000
----- -------- --------- ----------
<S> <C> <C> <C> <C>
MAT'L UPLIFT FACTOR (MUF): [***] [***] [***] [***]
PROFIT, SG&A (PSG&A): [***] [***] [***] [***]
ASSY LAB RATE/HOUR (ALR): [***] [***] [***] [***]
TEST LAB RATE/HOUR (TLR): [***] [***] [***] [***]
ICT LAB RATE/HOUR (ICT): [***] [***] [***] [***]
BILL OF MATERIAL COSTS (BOM):- as quoted
ALL LABOR HOURS :- as quoted
</TABLE>
[***] SELLING PRICE TO NETRO
The Selling Price to Netro shall be as quoted or otherwise agreed in writing by
Netro and Supplier, upon issuance by Netro of the initial purchase order for the
Product(s). The Selling Price shall be reviewed at the quarterly progress review
meetings. Product pricing factors for each quarter will be determined by the
average monthly run rate of Product units in the last month of the prior quarter
and sixty (60) days of purchase orders outstanding. Material cost and labor
hours requires a separate detailed line item analysis and will be reviewed by
the parties at the quarterly progress review meetings.
3. PROGRESS REVIEWS & DOCUMENTATION
3.1 PROGRESS REVIEWS. Periodic progress reviews will be held between Netro and
Supplier, as a minimum, on a quarterly basis. Meetings shall be held at a
mutually acceptable time and location and will include but not be limited to
quality and delivery performance, inventory plans, cost reduction program plans
and status, market and product forecasts, design change issues, costed bill of
materials, labor cost data, etc. Agendas shall be prepared and mutually agreed
to at least two (2) weeks in advance of such meetings.
[***] CONFIDENTIAL TREATMENT REQUESTED
- --------------------------------------------------------------------------------
2
<PAGE> 6
NETRO
MANUFACTURING AGREEMENT THE WIRELESS ATM COMPANY
- --------------------------------------------------------------------------------
5.2 DOCUMENT SUBMITTALS & APPROVALS. Documentation prepared either by Netro or
Supplier and submitted to the other shall be approved, disapproved or
conditionally approved within ten (10) working days of such submittal.
Disapproval's or Conditional Approval's shall include a detailed description of
the unsatisfactory areas and provide suggestions as to how such conditions can
be corrected.
3.3 OTHER INFORMATION. Netro may require other schedules, submittals and
information from time to time from Supplier and vice versa. These requirements
may be included as an Appendix to this Agreement or requested in writing from
Netro or Supplier.
4. PRODUCT ORDERING
4.1 FORECAST. Netro will provide a [***] rolling shipment forecast each month
and a [***] shipment forecast each quarter. These forecasts shall be by item
part number and shall include anticipated delivery date, quantity to be
delivered, etc. and are non-binding best estimates of Netro's future needs.
However, if Netro falls short of this goal by the end of the term of this
Agreement, or cancels this Agreement, there shall be no bill-backs or other
retroactive price increases associated with the shortfall or cancellation.
4.2 PURCHASE ORDERS. Netro's initial purchase order for each Product shall be
for sixty (60) days of Product shipments which will set forth the ordered
types, quantities & required delivery dates of the Products to be produced. Each
month, Netro will release an additional thirty (30) days of Product, which will
be, to the extent possible, based on the forecasts provided above. Upon receipt
and acceptance of Netro's purchase order or material release, Supplier will be
obligated to sell and deliver the Products in accordance with the quantities
and delivery dates specified by the purchase orders or releases. Purchase order
releases will be provided to Supplier by Netro within ten (10) working days
after the end of each calendar month.
4.3 QUANTITY & DELIVERY CHARGES. Purchase orders for existing Products can
deviate from forecast or purchase order as follows:
a. Within 30 Days - plus or minus [***]
b. Between 31 and 60 Days - plus or minus [***]
c. More than 60 Days - plus or minus [***]
where the total charge for the quarter is plus or minus [***] per cent [***].
Any change requested by Netro beyond the allowable increase/decrease shall be
handled by Supplier on a reasonable commercial efforts basis subject to material
availability, capacity availability and agreed upon Product testing
requirements. If the volume exceeds [***] Product units per month, Netro and
Supplier agree to review these percentages at the quarterly progress review
meetings and adjust them to then current business requirements. Should Netro
insist on keeping this high degree of flexibility for unit volumes exceeding
[***] per month the parties will negotiate in good faith a reasonable carrying
charge for such excess inventory.
From time to time, Netro may request Supplier to carry or have on order certain
strategic components, subassemblies, or assemblies (collectively "Strategic
Materials") at higher levels than required in this clause. In this case, Netro
would be responsible for the carrying cost of Strategic Materials.
[***] CONFIDENTIAL TREATMENT REQUESTED
- --------------------------------------------------------------------------------
Netro Corporation 3860 North First Street San Jose California 95134
408.216.1500 408.216.1555 (Fax)
3
<PAGE> 7
NETRO
MANUFACTURING AGREEMENT THE WIRELESS ATM COMPANY
- --------------------------------------------------------------------------------
4.4 STOCKING. In order to satisfy any potential need for a sudden increase in
Product quantities or for replacement of any returned Products, Supplier agrees
to ship to Netro, within fifteen (15) calendar days (plus the time needed for
environmental screenings and other mutually agreed upon Product testing) of a
written request, a minimum of [***] percent [***] of the average monthly product
requirements as calculated from the [***] rolling forecast. The replenishment
period of any inventory shipped pursuant to this Section shall be then
applicable component material lead time.
4.5 MATERIAL PROCUREMENT. Supplier is authorized to purchase materials required
to provide Products ordered in writing by Netro; Strategic Materials as
requested by Netro; and long lead time materials agreed to by Netro on a Long
Lead Authorization Form. The parties will work together on a best efforts basis
to reduce material leadtimes. Netro realizes its financial responsibility for
material purchased on behalf of Netro. In the event of a cancellation of a
Purchase Order or revision of Long Lead Authorization, or excess material
created by an engineering change, or revision of Strategic Materials quantities
requested by Netro, Netro agrees to compensate Supplier for reasonable costs
associated with the cancellation for Products and material inventory and
Strategic Materials purchased per the terms of the Agreement and to fill Netro's
purchase orders as follows: (i) the contract price of all finished Products in
Supplier's possession, (ii) the burdened cost of material inventory and/or labor
whether in raw form or work in process, and not returnable to the vendor or
usable for other customers, (iii) the burdened cost of material on order which
cannot be canceled, and (iv) any actual vendor cancellation charges incurred
with respect to material re-allocation, customer cancellations or returns to the
vendor. Supplier shall undertake best efforts to cancel all applicable component
purchase orders and reduce component inventory through return for credit
programs or allocate components for alternate programs if applicable. Netro will
pay the mutually agreed upon cancellation charges, if any, within thirty (30)
days of receipt of invoice. Netro shall have the right to any or all material
received by or paid for by Netro under this clause.
4.6 NEW PRODUCTS. Netro, from time to time, expects to introduce new products
that may obsolete or modify the Products specified on Exhibit "A". When such
introductions are made, Netro and Supplier will work together to determine
whether the new products or product modifications can be produced economically
by Supplier and whether Supplier is capable of producing such products. Netro
shall have the sole responsibility for making such a determination. If Supplier
is chosen to produce the new or modified products, Netro and Supplier will
mutually develop new product introduction plans for the products being
transferred to Supplier. Such plans will include space and equipment
availability, utilization of existing inventory, etc. New Products will be
entered on Appendix "A" by contract modification.
4.7 BAR CODE SHIPPING AND RECEIVING LABELS. Supplier shall place Netro's
specified bar code labels on all shipping packages and containers for the
material shipped under this Agreement. Netro may change such specification upon
written notice to Supplier and Supplier shall comply with such changes.
4.8 ELECTRONIC DATA INTERCHANGE (EDI). Supplier shall assist Netro in
implementing an EDI system that is compliant with EDI requirements of Netro's
customers in a mutually agreed to scope and timetable.
[***] CONFIDENTIAL TREATMENT REQUESTED
- --------------------------------------------------------------------------------
Netro Corporation 3860 North First Street San Jose California 95134
408.216.1500 408.216.1500 (Fax)
4
<PAGE> 8
NETRO
MANUFACTURING AGREEMENT THE WIRELESS ATM COMPANY
- --------------------------------------------------------------------------------
TEST EQUIPMENT, TOOLING & SPACE.
Supplier will provide all functional test equipment required to fully test the
Products being produced. Netro will supply the functional test software codes
to run the test equipment providing that the equipment architecture is
identical to that used by Netro. Should any special software or third party
licenses or approvals be required to operate the equipment to support
functional testing in the Supplier's facility, Supplier shall take whatever
commercially reasonable steps are necessary to obtain such licenses or
approvals and any costs associated with obtaining or using the licenses or
approvals shall be borne by Supplier. All other fixtures and tooling unique to
Netro, required to produce and test the products and subassemblies shall be
provided by Supplier. Netro and Supplier shall determine what tests are
required and this equipment will be capable of fully testing the Products and
ensuring that they meet the requirements and specifications. Supplier is
responsible to calibrate test equipment on a periodic basis. Netro will have the
option to approve the test equipment architecture prior to use in testing the
Products. Supplier will archive such documentation so that it is easily
reproduced and will make it available to Netro if the Supplier cancels this
Agreement without cause. Supplier will allocate sufficient floor space in its
facilities to meet the capacity requirements projected by Netro in the twelve
(12) month forecast.
6. GENERAL TERMS & CONDITIONS.
6.1 SPECIFICATION CHANGES. Netro or Supplier may, from time to time, request
changes to the Products shown in Appendix "A" by delivering to the other party
a fully approved Engineering Change Order (ECO) or reasonable facsimile as used
by Supplier's internal documentation system. Sufficient documentation will be
included in the change, to effectively support an investigation of the impact
of the engineering change. The proposed change will be fully evaluated within
ten (10) working days of receipt and an effective change date shall be mutually
agreed to by Netro and Supplier. Any ECO changes deemed to be "Critical" by
either Netro or Supplier shall be immediately brought to the attention of the
other party, by written notification, and such ECO changes will be mutually
evaluated and completed within two (2) working days of such notification. If
any such implemented change causes an increase or decrease in the price of, or
time required for the delivery of material or performance of work under this
Agreement, an equitable adjustment shall be made in the Contract Price and/or
the delivery dates. Netro has final design approval on all Products, changes to
Products, and modifications to Products.
6.2 APPROVED VENDOR LISTS (AVL). Netro will provide to Supplier an AVL which
specifies the materials to be used in building the Products listed in Appendix
"A". Supplier will manufacture the Products using components obtained from the
approved vendors. Any deviations must be approved, in writing, by Netro in
advance of use. Netro will from time to time update the AVL and any such
changes will be immediately given in writing or electronically to Supplier.
6.3 NETRO SUPPLIED COMPONENTS. Initial quantities of materials that Netro has
in stock or on firm order for manufacture of the Products on Appendix "A", will
be purchased by Supplier at a mutually agreed upon price. Netro may also choose
to supply certain critical components to Supplier on an ongoing basis. Netro
supplied materials and components shall be included in the Selling Price to
Netro (PAR 2.5) at the BOM cost times a mark up factor of [***].
[***] CONFIDENTIAL TREATMENT REQUESTED
- --------------------------------------------------------------------------------
Netro Corporation 3860 North First Street San Jose California 95134
408.216.1500 408.216.1555 (Fax)
5
<PAGE> 9
NETRO
MANUFACTURING AGREEMENT THE WIRELESS ATM COMPANY
- --------------------------------------------------------------------------------
7. ACCEPTANCE & INSPECTION.
The basis for acceptance of the Products on this order shall be full conformance
to the drawings, specifications and test criteria as stated on Netro's
documentation provided to Supplier. Supplier will satisfactorily meet a minimum
of IPC610 Class II quality standard for all Products. Netro or its customers
may elect to source inspect Products and/or test data and results before
delivery from Supplier. Netro must accompany Netro customers while at Supplier's
facilities. Supplier will provide reasonable space for the source inspector.
Supplier will provide Netro five (5) working days advance notice of Product
availability for source inspection and Netro agrees to source inspect said
Products within five (5) working days after such notification. When Netro elects
to perform source inspection at Supplier's facility, final acceptance shall
occur at the time of source inspector's acceptance of Product, provided however,
that the mere review by Netro of performance data, test results and
manufacturing processes and consultation with Supplier's employees by Netro
regarding such information shall not be deemed to be a Source Inspection
hereunder. Netro may elect to inspect delivered Products one hundred per cent
(100%) or on a sampling basis. Any lot failing to meet the mutually agreed upon
sample inspection lot rejection criteria may be returned to Supplier for one
hundred per cent (100%) inspection, at Supplier's expense, if so desired by
Netro. Netro will notify Supplier of rejection of any Products in writing
within two (2) working days after rejection. Supplier may elect to have the
Products returned to them for evaluation, or with Netro's concurrence, have
Netro repair the Product at Supplier's pre-approved cost. Any Products returned
to Supplier shall be handled per Supplier's Returned Material Authorization
procedure. Products returned to Supplier for evaluation and/or repair shall be
repaired or replaced by Supplier within ten (10) working days of receipt unless
required by Netro to meet Netro's monthly shipment commitments. In that event,
the Supplier will utilize available resources, including finished goods
inventory, overtime labor, etc. to expedite and complete the timely delivery of
Products at Supplier's expense.
8. SHIPMENT & DELIVERY.
8.1 ON-TIME DELIVERY. Supplier agrees to deliver Products on-time per its
committed delivery dates as stated on Netro's Purchase Order and agreed to by
Suppliers acknowledgment of said Purchase Order. On-time delivery is defined to
be plus or minus [***] from the committed delivery dates. On-time delivery point
is Supplier's dock. The FOB point will be Supplier's facility. Shipping is to be
by normal transportation methods, unless otherwise requested by Netro. Netro, in
the future, may require Supplier to ship directly to end users of the Products.
These shipments will be FOB Supplier's facility.
8.2 EARLY/LATE DELIVERY. Early Delivery is defined as [***] in advance of
scheduled delivery date. Netro at its option can refuse to accept early delivery
and if Netro chooses to accept early delivery, such acceptance must be in
writing. Late delivery is defined as being [***] later than the scheduled and
acknowledged delivery date at the applicable dock as stated in the appropriate
purchase order. If Supplier fails to make deliveries at the specified time and
such failure is caused by Supplier, Supplier will, at no additional cost to
Netro, employ accelerated measures such as material expediting fees, premium
transportation costs, or labor overtime required to meet the specified delivery
schedule or minimize the lateness of deliveries. If despite such measures and in
the event late delivery is solely attributed to Supplier, Supplier shall, after
a grace period of ten (10) business days, incur a liquidated damage fee for
late delivery of [***] of the Product selling price for each full week units are
late after the grace period. These liquidated damages shall be capped at [***]
of the price of the late units. Netro may terminate the Purchase Order (or this
[***] CONFIDENTIAL TREATMENT REQUESTED
- --------------------------------------------------------------------------------
Netro Corporation 3860 North First Street San Jose California 95134
408.216.1500 408.216.1555 (Fax)
6
<PAGE> 10
NETRO
MANUFACTURING AGREEMENT THE WIRELESS ATM COMPANY
- --------------------------------------------------------------------------------
Agreement in accordance with Section 13.4) should the limit of [***] be reached.
The foregoing is Netro's sole remedy for delayed or non-delivery of Products.
8.3 PAYMENTS. Unless otherwise agreed to in writing, payments for Products
shipped will be Net 30 days after date of invoice which shall not be before
date of shipment. Netro will bear all applicable sales and use taxes or provide
resale certificates as needed.
8.4 DATA. With each shipment, data sheets shall be included that show the
actual test results from the functional or acceptance tests completed on the
Products. Test results shall be provided by serial number for each Product in
the shipment and shall include the data and be in the format agreed upon by the
parties. In addition, Supplier shall provide data on a weekly basis showing
overall yield for the Products being shipped including its major subassemblies.
This data shall include a Pareto breakdown that shows the causes of the yield
losses. Format and content of this weekly data shall be as agreed upon by the
parties. Analysis of the root cause of the defects and the action taken to
prevent recurrence shall be provided by Supplier at Netro's request. Similar
data shall be maintained and transmitted to Netro for all Products returned to
Supplier for repair or replacement.
8.5 QUALITY INFORMATION. Supplier shall supply Netro and its customers with
quality information on a reasonable and timely basis as described in Appendix
"B" Quality.
CUSTOMER FOCUS TEAM AND PROGRAM MANAGER.
Supplier shall provide a dedicated Customer Focus Team (CFT) to Netro at
Supplier's expense. In addition, Supplier shall provide a Program Manager to
oversee Supplier's CFT. When requested by Netro, the CFT will assist Netro to
improve the quality, cost structure and ease of manufacture of the Products,
in defining the equipment requirements, in defining critical parameters to
quantify certain critical aspects of the design and manufacturing process in
order to control and improve the quality level of the Products, and in
selecting and qualifying cost effective component suppliers. The parties shall
mutually agree upon the evolution of the resource skill set and location of the
CFT members during the various phases of the Products life cycles. Supplier will
use best efforts to ensure the CFT will include individuals with skills deemed
critical by Netro for Supplier to be successful in manufacturing the Products.
The CFT will provide mutually agreed upon assistance including, but not limited
to, (i) optimizing Product and process design, (ii) facilities preparation for
the Pilot line whether at Netro or Supplier, (iii) documenting and
characterizing the pilot manufacturing process, (iv) defining and documenting a
manufacturing quality system which will ensure that the Products complies with
customer specifications, (v) developing failure analysis and rework procedures
and related documentation, (vi) performing failure analysis activities, (vii)
selecting and qualifying the vendor base, (viii) reducing Product cost
(material, labor, and overhead), (ix) improving Product quality levels in
preparation for mass production, and (x) developing packaging specifications
for incoming materials and components, materials and components that are
internally utilized in the manufacturing process, and finished Product.)
Supplier will also assist Netro by performing HALT (highly accelerated life
tests) for the Products mutually agreed to.
The parties have drafted a Statement of Work, the current version of which is
attached as Appendix "C" Statement of Work. The parties expect to update this
periodically.
[***] CONFIDENTIAL TREATMENT REQUESTED
- --------------------------------------------------------------------------------
Netro Corporation 3860 North First Street San Jose California 95134
408.216.1500 408.216.1555 (Fax)
7
<PAGE> 11
NETRO
THE WIRELESS ATM COMPANY
MANUFACTURING AGREEMENT
- --------------------------------------------------------------------------------
10. TERMINATION.
Either party shall have the right to cancel this Agreement without cause by
providing ninety (90) days written notice to the other party. Supplier will be
entitled to reimbursement for reasonable costs associated with termination
without cause by Netro or with cause by Supplier (as provided in Section 13.4),
but shall not be entitled to reimbursement if this Agreement is canceled
without cause by the Supplier or with cause (as provided in Section 13.4) by
Netro. Reasonable costs may include the contract price of all finished Products
on hand, the cost of material inventory (including handling charges and value
add) whether in raw form or work in process, the cost of material on order
(including charges) which can not be canceled, and any vendor cancellation
charges incurred with respect to material canceled or returned to the vendor.
The Supplier will use reasonable commercial efforts to mitigate these
cancellation and restocking charges through negotiation with suppliers and
utilization of materials in Supplier's other customer's products. Netro shall
have the right to any or all material received by or paid for by Netro under
this clause. In the event of a termination request by Supplier without cause,
Netro shall receive no less than ninety (90) days written notice to place a last
buy for forecasted deliveries up to (6) months inclusive of the 90 days written
notice and Supplier will provide documentation for tooling and fixtures to Netro
as requested.
11. WARRANTY.
Supplier warrants that the units of Product supplied under this Agreement will
meet the mutually agreed upon specifications in effect at the time of
manufacture and be free from defects in Supplier supplied material and
workmanship for a period of [***] from the date of manufacture. Parts not
meeting the specifications shall be returned to Supplier for replacement, repair
or credit. Supplier will return all units determined by Supplier to be warranty
defectives within ten (10) working days of receipt. The repair work will be
warranted for a period of [***] from the date of repair or for the original
warranty date, whichever is longer. Repair of out of warranty returns will be
negotiated between Netro and Supplier. Supplier will provide corrective and
preventive action for all in warranty materials identified as not meeting
specifications. Replacement, repair or credit of warranty repairs constitutes
Netro's sole remedies against Supplier for breach of warranty claims. Out-of
Warranty Products returned to Supplier for repair shall be evaluated and the
cost to repair the unit determined. Within five (5) business days of receipt of
Product Supplier will notify Netro of the estimated repair cost and will await
written authorization from Netro before starting work. Out-of-warranty repairs
will be completed and returned to Netro or end customer within fifteen (15) days
of receipt of start work authorization subject to material availability.
Products that have been subjected to abuse, misuse, accident, alteration,
neglect or unauthorized repair will be handled the same as an Out-of-warranty
repair.
THE WARRANTIES CONTAINED IN THIS SECTION ARE IN LIEU OF, AND SUPPLIER EXPRESSLY
DISCLAIMS AND NETRO WAIVES ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS,
IMPLIED, STATUTORY OR ARISING BY COURSE OF DEALING OR PERFORMANCE, CUSTOM,
USAGE IN THE TRADE OR OTHERWISE, INCLUDING WITHOUT LIMITATION THE IMPLIED
WARRANTIES OF MERCHANTABILITY, TITLE AND FITNESS FOR A PARTICULAR USE.
[***] CONFIDENTIAL TREATMENT REQUESTED
- -------------------------------------------------------------------------------
Netro Corporation 3860 North First Street San Jose California 95134
408.216.1500 408.216.1555 (Fax)
8
<PAGE> 12
MANUFACTURING AGREEMENT NETRO
THE WIRELESS ATM COMPANY
- --------------------------------------------------------------------------------
12. INTELLECTUAL PROPERTY/NON-COMPETITION.
12.1 INTELLECTUAL PROPERTY. All intellectual property and rights to the Product
designs developed by Netro or Supplier during the course of this agreement, and
all related derivative products and improvements shall be the sole (100%)
property of Netro. Netro retain the intellectual rights to the Netro Products
and derivatives of the Products, circuits and sub-assemblies. Supplier will not
use Netro proprietary technology in any products for other customers. All
documentation provided by Netro regarding Netro Products shall be returned to
Netro at the conclusion of this contract. All documentation made by Supplier of
Netro's bills of materials, assembly instructions, and test processes and
procedures and enhancements thereof shall be returned to Netro at the conclusion
of this contract. Supplier manufacturing processes and supplier developed
manufacturing documentation are proprietary technology and/or trade secrets of
Supplier and Netro will not be provided this documentation.
12.2 CONFIDENTIALITY. Netro and Supplier acknowledge that the terms of the Non
Disclosure Agreement (NDA) signed between the parties are in full force and
effect during the term of this Agreement, any extensions or modifications to
this Agreement and to the date stated on the NDA, whichever is longer.
12.3 PUBLICITY. All material relating to this Agreement which is intended for
publication in any form, including but not limited to the relationship between
Netro and Supplier, must be approved in writing by both parties before any such
publication can be made.
12.4 EXCLUSIVITY. Supplier shall manufacture the Products which are subject to
this Agreement exclusively for Netro and shall not publicize such
relationships in any form including any contents of this Agreement (except to
auditors and to comply with the Supplier's legal obligations) without written
approval from Netro which will not be unreasonably withheld or delayed. The
Product which is subject to the provisions of this section shall also include
all subassemblies utilized in the Product and their derivatives. Netro
proprietary information shall not be conveyed in any form to any other party.
12.5 NON-COMPETITION. Supplier shall not compete with Netro, directly or
indirectly, by using Netro's intellectual property for any purpose not
authorized by this Agreement during the term of this and any follow-on Agreement
and for a period of [***] after termination of this Agreement. Supplier will not
manufacture products which are competitive with Netro Products in the same
building in which Netro Products are manufactured. In addition, Supplier's
employees who are assigned to the CFT, and the Program Manager assigned by
Solectron to oversee the CFT, will not be assigned by Supplier to work on any
product which is competitive with Netro Products prior to November 30, 1999
unless otherwise agreed in writing by the parties. For the purposes of this
section 12.5 Netro Products are defined as point to multi-point radios in the
[***] gigahertz frequency range.
12.6 ESCROW. If requested by Netro for escrow and contingent licenses
requirements, supplier agrees to provide any available documentation for
manufacturing processes related to Netro products, but in no event will Supplier
be expected to supply its own proprietary information.
[***] CONFIDENTIAL TREATMENT REQUESTED
- --------------------------------------------------------------------------------
Netro Corporation 3860 North First Street San Jose California 95134
408.216.1500 408.216.1555 (Fax)
9
<PAGE> 13
MANUFACTURING AGREEMENT NETRO
THE WIRELESS ATM COMPANY
- -------------------------------------------------------------------------------
13. MISCELLANEOUS.
13.1 LANGUAGE & CURRENCY. All correspondence, transactions and documents
transmitted between Netro and Supplier shall be in the English language. All
prices quoted and payments made shall be in US Dollars.
13.2 LAWS OF CALIFORNIA, USA. This Agreement shall be construed, interpreted
and enforced in accordance with the law of the State of California, USA.
13.3 ARBITRATION. Any controversy or claim arising out of this contract, shall
be settled by arbitration in San Jose, California in accordance with the Rules
of the American Arbitration Association, and any judgment or award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof. The
parties agree that any arbitration shall be commenced within thirty (30) days of
the controversy or claim.
13.4 DEFAULTS. Either Netro or Supplier may, by written notice to the other
party, terminate this Agreement and all or any of the privileges granted herein,
(1) if the other party defaults in any payment to the terminating party called
for in this Agreement and such fault continues unremedied for a period of thirty
days after the date of delivery of written notice, or (2) if the other party
defaults in the performance by it of any other material term or condition (e.g.
quality), or of any purchase order issued pursuant to this Agreement, and such
default continues unremedied for a period of thirty days after the date of
delivery of written notice. The effective date of termination will not be
before the expiration of any applicable cure period provided for herein. In the
case of late or non-delivery, the right to terminate this Agreement will be
available only after the liquidated damages cap in Section 8.2 is reached.
Either party may immediately terminate this Agreement if the other party files
for bankruptcy, is adjudicated bankrupt, has a receiver appointed for it, or
becomes involvement.
13.5 ASSIGNMENT. This Agreement may be assigned to any parent, affiliate,
successor or subsidiary corporation, company or division. Otherwise this
Agreement may not be assigned by either party without the prior written consent
of the other party, which shall not be unreasonably withheld.
13.6 FORCE MAJEURE. Neither party shall be liable to the other for any delay
or failure in the performance of its obligations and responsibilities hereunder
if such delay or failure is caused by any fires, floods, strikes, work
stoppages, accidents, wars (declared or undeclared), acts of God, acts of any
Government agency or authority, epidemics, quarantine restrictions, freight
embargoes, public disorders, riots or any other cause beyond the fault or
control of the defaulting party. Each party shall use its best efforts to
mitigate the impact of this clause. Supplier's liability for loss or damage to
Netro's material in Supplier's possession or control shall not be modified by
this clause. When a party's delay or nonperformance continues for a period of
at least fifteen (15) days, the other party may terminate, at no charge, any
open purchase orders under the Agreement.
13.7 PRECEDENCE. It is the intent of the parties that this Agreement and its
addenda shall prevail over the terms and conditions of any purchase order,
acknowledgement form or other instrument. This Agreement may be executed in one
or more counterparts, each of which will be deemed the original, but all of
which will constitute but one and the same document. The parties agree this
Agreement and its addenda may not be modified except in writing signed by both
parties.
- --------------------------------------------------------------------------------
Netro Corporation 3860 North First Street San Jose California 95134
408.216.1500 408.216.1555 (Fax)
10
<PAGE> 14
MANUFACTURING AGREEMENT [NETRO LOGO]
THE WIRELESS ATM COMPANY
- --------------------------------------------------------------------------------
3.8 Limitation of Liability
IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT, WARRANTY, OR TORT
(INCLUDING NEGLIGENCE), STRICT LIABILITY, PRODUCT LIABILITY, OR OTHERWISE,
SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL, INCIDENTAL,
CONSEQUENTIAL, EXEMPLARY DAMAGES OF ANY KIND WHETHER OR NOT EITHER PARTY
WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.
13.9 NOTICE. If notice is required, it shall be in writing, and sent by
personal delivery, facsimile, etc. and addressed to the party at the address
appearing below.
If no Netro Corporation: If to Solectron California Corporation:
Netro Corporation Solectron California Corporation
3860 North First Street 847 Gibraltar Drive, Building 5
San Jose, CA 95134 Milpitas, CA 95035
ATTN: Vice President Operations ATTN: Corporate Legal Department
13.10 RIGHT OF ENTRY. Upon reasonable notice each party shall have the right
to enter the premises of the other party during normal business hours with
respect to the performance of this Agreement including an inspection or a
Quality Review, subject to all plant rules and regulations, security
regulations and procedures as applicable. From time to time and with
reasonable notice, Netro may request Supplier to allow visitors of Netro to
tour the Supplier's facilities that are building Product for Netro.
Acceptance of such requests shall not be unreasonably withheld by Supplier.
NETRO CORPORATION SOLECTRON CALIFORNIA CORPORATION
[SIGNATURE ILLEGIBLE] 5/29/98 [SIGNATURE ILLEGIBLE] 5/29/89
- --------------------- --------- -------------------- ---------
Approved By: Date: Approved By: Date:
- --------------------------------------------------------------------------------
11
<PAGE> 15
APPENDIX A PRODUCTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Description Model Number Part Number
- -------------------------------------------------------------------------------------------------
<S> <C> <S>
NAS-2 with [***] Engine AM-NA-2010X 13558-0001
NAS-2 without [***] Engine AM-NA-2011X TBD
NAS-2 with [***] [***]; no ATM AM-NA-2012X 13549-0001
[***] ohm connector board n/a 11572-0000
SAS [***][***] SAS-E-1001-XX 12618-0000
SAS [***][***] SAS-F-1001-XX TBD
SAS [***][***] w/ethernet SAS-E-1002-XX 13765-0000
SAS [***][***] w/ethernet SAS-F-1002-XX 13329-0000
SAS[***][***] with daughter bd, enet SAS-E-1002-XX TBD October
SAS[***][***] with daughter bd, enet SAS-F-1002-XX TBD December
SAS[***][***] with ASIC TBD TBD Q4
SAS[***][***] with ASIC TBD TBD Q1'99
Ruggedized SAS ETSI RSS-E-1002-XX TBD October
NAU (SAS w/o modem) NAU-E-1004-XX TBD October
SAS [***][***] SAS-E-1004-XX TBD December
SAS [***][***], [***] SAS-E-1008-XX TBD December
RJ45 to BNC adapter card n/a 13157-0000
SRU [***] GHz TBD, Assorted Bands TBD, Assorted Bands, Dec
SRU [***] GHz - SL Package TBD, Assorted Bands TBD, Assorted Bands, Dec
SRU [***]GHz Bnd[***], Vert, [***] SRU-E-2802-XX 13685-0002
SRU [***]GHz - Bnd[***] SL Package SRU-E-2612-XX 13687-0002
SRU [***]GHz Bnd[***], Vert, [***] SRU-E-2604-XX 13685-0004
SRU [***]GHz - Bnd[***] SL Package SRU-E-2614-XX 13687-0004
SRU [***]GHz Bnd[***], Vert, [***] SRU-F-2402-XX 13680-0002
SRU [***]GHz - SL Package SRU-F-2412-XX 13496-0002
SRU [***]GHz Bnd [***] SRU-E-1002-XX 13883-0002
BRU [***] GHz TBD, Assorted Bands TBD, Assorted Bands
BRU [***]GHz, Bnd [***]deg, [***] BRU-E-2601-XX 13688-0001
BRU [***]GHz, Bnd [***]deg, [***] BRU-E-2603-XX 13686-0003
BRU [***]GHz, Bnd [***]deg, [***] BRU-E-2611-XX 13686-0005
BRU [***]GHz, Bnd [***]deg, [***] BRU-E-2613-XX 12851-0006
BRU [***]GHz, Bnd [***]deg, [***] BRU-F-2401-XX 13681-0001
BRU [***]GHz, Bnd [***]deg, [***] BRU-F-2411-XX 13681-0005
BRU [***]GHz, Bnd [***]deg, [***] BRU-F-2431-XX 13681-0009
BRU [***]GHz, Bnd [***]deg, [***] BRU-E-1001-XX 13883-0001
BRU [***]GHz, Bnd [***]deg, [***] BRU-E-1011-XX TBD, October
BMU [***] BMU-E-2000-XX 13763-0000
BMU [***] BMU-F-2000-XX 13837-0000
BMU [***] Access Shelf (card), [***] BMU-E-1000-XX TBD, October
BSC, [***] or [***] BSC-E-2000-XX/BSC-F-2000-XX 12877-0000
BSC back card BSC-X-1001-XX, part of -2000-XX 13260-0000
BSC, [***] or [***] ASIC TBD TBD, October
BSU - BSC front card, [***] channel BSU-E-2000-XX TBD, October
BSU - BSC front card, [***] channel BSU-E-4000-XX TBD, October
BSC, [***]Channel, [***] BSC-E-4000-XX TBD, October
BSC, [***]Channel, [***] BSC-F-4000-XX TBD, December
AM2000 [***]GHz SL Bnd[***] AM-RU-2107X 13687-0003
AM2000 [***]GHz SL Bnd[***] AM-RU-2018X 13687-0004
</TABLE>
NOTE: Subassemblies and PCA's related to these part numbers are included even
though they are not specifically called out in this table. Product list subject
to change.
CONFIDENTIAL
[***] CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 16
APPENDIX B QUALITY
(A) Supplier commits to ensure that all manufacturing, and design operations,
including any key sub-contractor, or contract manufacturing suppliers, which
contribute to the design, development, production, delivery and service of
material are ISO 9000 registered by an accredited Registrar by one year
after first purchase order is placed by Netro.
(B) Supplier commits to having a continuous improvement program in place which
will allow it to attain and maintain "acceptable" ratings (or equivalent) on
all quality system elements as periodically performed by Netro. An
"acceptable" element is defined as one where the quality system meets the
"general intent" of the quality system and is fully deployed to maintain the
quality system and product quality. No significant deficiencies encountered
that would jeopardize the quality system, and product quality and/or
reliability.
(C) Supplier commits to establish key quality control (qc) verification points
throughout the manufacturing process. These verification points should be
located in-process as well as after MATERIAL has completed all manufacturing
operations. The scope of these qc verification points shall be validated
through visual or mechanical inspections and/or tests, and with the use of
statistically valid sampling plans, that MATERIAL conforms to Supplier's
manufacturing, product and process specifications, standards of acceptable
workmanship, as well as other specifications which may be provided by Netro.
Netro reserves the right to review these qc points and make suggestions for
improvement. Supplier commits to address these suggestions through the
implementation of appropriate corrective actions.
(D) Supplier commits to establish an end of the line Quality Assurance product
audit on material by three (3) months after first purchase order. The focus
of this audit shall be to replicate user application of MATERIAL as
specified by Netro's customer. Test and examination of MATERIAL under the
quality audit shall be at a system level, and shall include but is not
limited to:
a) Exercising said MATERIAL over the full spectrum of temperature
ranges over which MATERIAL is designed to operate.
b) Full operation of MATERIAL over a period of time not less than 72
hours.
c) A system for continuous monitoring of all primary product functions
and fault detection of the MATERIAL while under this test.
Supplier shall continuously review customer return data to ensure that the
scope of the product quality assurance audit function includes the
requirement(s)/condition(s) under which the return failed.
1
<PAGE> 17
Supplier shall perform a detailed failure mode analysis of all MATERIAL
found defective through the quality assurance audit in line with the
requirements and process outlined in paragraph F.
Supplier agrees to provide to Netro on a monthly basis, results of the
quality assurance product audit in a format specified by Netro.
(E) Supplier commits to establishing a program of tracking monthly, quarterly,
and annual return rates for the product manufactured under this contract.
The Supplier agrees to update and report on returns on a quarterly basis
to Netro.
(F) Supplier commits to establishing a system for tracking and analysis all
MATERIAL returned by Netro to it, as well as any MATERIAL failures which
occur through Netro's end of the line quality assurance audit. For all
MATERIAL in the above two categories, supplier shall perform a failure
mode analysis, which at a minimum will be down to the component level.
Component level failure modes will be recorded, and failed components
found defective will be accumulated for the purpose of determining
repetitive occurrences.
Material shall be considered defective if it fails to meet the warranty
specifications under this Agreement (including performance and appearance
Specifications) or if during customer testing, installation, or use, the
MATERIAL fails to operate as expected or specified.
If the analysis of a return is found to be within the specifications of
this agreement (i.e., a no trouble found condition), then Supplier shall
track these no trouble found conditions and notify Netro of said findings
at a minimum of a monthly interval, so that appropriate investigative
measures may be taken to determine the root cause.
(G) If the return rate is found to exceed a mutually agreed to acceptable rate
or repetitive occurrences are observed with regard to component level
failures then the supplier shall provide a written Corrective Action
Report to Netro, explaining in detail the nature of the problem detected,
and the step(s) Supplier proposes to correct the problem. As part of the
plan to correct the problem, it is agreed that the Supplier shall:
a) Incorporate the remedy in affected MATERIAL.
b) Ship all subsequent MATERIAL incorporating the required
modification correcting the problem at no additional charge to
Netro; and
c) Create a mutually agreed to plan to address the scope of
correction and the proper course of actions to be taken by
Supplier and Netro.
2
<PAGE> 18
Supplier and Netro shall mutually agree in writing as to the
implementation schedule of the corrective action plan. Supplier agrees to
use its best efforts to implement the plan in accordance with the agreed
upon schedule. It is also agreed that the Netro shall be entitled to
postpone at no charge to Netro, further deliveries of orders until such
time as the remedy is implemented consistent with this Article.
(H) As part of a program of continuous improvement, Supplier agrees to
establish annually, improvement goals for a series of key quality
objectives. These goals should include, but are not limited to a)
customer return rates, b) Quality Assurance product quality audit defect
rates, c) final system test yields. Supplier agrees to track these goals
on a monthly basis, and to commit the resources necessary for the
attainment of these goals.
3
<PAGE> 19
(I) The following paragraph summarizes the requirements for providing data and
information to Netro as per paragraphs A through H.
-------------------------------------------------------------------
REF. DATA REQUIRED FREQUENCY
PAR.
#
-------------------------------------------------------------------
A Corrective Action As dictated by
Response to Assessment
Assessment
-------------------------------------------------------------------
B ISO Registration When requested by
copies Netro
-------------------------------------------------------------------
C Corrective Action As dictated by the audit
response to Netro's
audit of QC practices
-------------------------------------------------------------------
D Quality Assurance Monthly
Results
-------------------------------------------------------------------
E Monthly Return Rate Quarterly
data
-------------------------------------------------------------------
E Annual Return Rate Monthly
Summary Results
-------------------------------------------------------------------
F "No trouble founds" Monthly
summary data on
customer returns
-------------------------------------------------------------------
G Corrective Action As dictated by Supplier's
Report data on repetitive
component level failure
mode analysis (FMA) on
customer returns
-------------------------------------------------------------------
G Corrective Action If return rates exceed
Report pre-established
thresholds
-------------------------------------------------------------------
H Quality Improvement Annually
Goals
-------------------------------------------------------------------
(J) As used in this Paragraph, the term "Epidemic Failure" means a specific
product failure affecting [***] percent [***] or more of a specific Product
then under warranty, which is a direct result of a defect in Supplier
workmanship. In the event of an Epidemic Failure, Supplier will perform root
cause analysis of the failure and cooperate with Netro to implement remedial
actions necessary to correct the failure mode. Furthermore, without limiting
its warranty obligations, Supplier will reimburse Netro for any and all
standard freight and labor charges of replacing the affected
[***] CONFIDENTIAL TREATMENT REQUESTED
4
<PAGE> 20
Netro for any and all standard freight and labor charges of replacing the
affected Product already shipped by Netro and in the field, provided such
charges do not exceed [***] percent [***] of the total cost paid by Netro to
Supplier for the affected Products.
Supplier shall have no liability or responsibility under this Paragraph for any
losses or damages to the extent that any such Epidemic Failure claims are the
result of (i) Supplier's compliance with Netro supplied specifications and
manufacturing processes; (ii) the negligence of Netro or any other person
providing goods or services in connection with the design, development,
production and distribution of the Product (with the exception of Supplier
assembly of the Product); (iii) modification or alteration of the Product by a
party other than Supplier; (iv) incorrect installation or incorporation of the
Product by a party other than Supplier; (v) defects in Netro's products or any
components supplied by a third party thereof.
[***] CONFIDENTIAL TREATMENT REQUESTED
5
<PAGE> 21
APPENDIX C
STATEMENT OF WORK
OBJECTIVE: Netro will help Solectron acquire high-frequency RF expertise, with
the goal of becoming proficient in manufacturing radio products within 6 to 9
months. Solectron will help Netro put processes in place that will facilitate
future product transitions, as well as prepare for volume ramp of Netro's
product line.
SCOPE OF WORK
Solectron shall make itself familiar with Netro's products, primarily by
residing on-site to learn and document processes and technology. The objective
is to fully understand the design, test and manufacturing of the Netro's product
line. Listed below are the major points that need to be addressed going forward.
1. This phase will review the following areas:
1.1 Netro's design, test and manufacturing process flow
1.2 Netro's test plans and procedures, Failure diagnostics/analysis
methodologies, cycle time, calibration procedure and cycle time, test
cycle time, and yield data.
2. ESS requirements (HALT, etc.)
Solectron shall work with Netro to prepare and compile:
2.1 Test plans
2.2 Test Procedures
2.3 Define failure criteria at the component, board and system level
2.4 And provide/participate for the design inputs as a result of 2.1-2.3.
3. ICT opportunities
STC shall work with Netro to determine which assemblies are candidates for ICT.
Netro to provide schematics for all assemblies quoted.
4. Failure analysis/isolation/detection
There shall be three levels of failure isolation/detection, based on
criticality:
4.1 Level three (board/box level failures that occur during normal
manufacturing operations)
4.2 Level two - component level failures which may be due to:
4.2.1 Faulty/Bad component
4.2.2 Design related failures (Derating factors, out of spec, etc.)
4.2.3 Process related failures (IR reflow, shorts/opens, solder, etc.)
4.3 Level one (Failure has been isolated to a component, cross sectioning
may be required to determine the cause of the failure to be performed
either at Solectron or at Solectron's supplier using Solectron's
leverage)
1
<PAGE> 22
5. RF functional Test
Short term, Solectron will work with Netro to streamline current test process to
increase efficiency and throughput. Longer term, the focus would move towards:
5.1 Cost/Trade off analysis on the level of automation
5.2 Automation implementation based outcome of 5.1 above
5.3 Increase test coverage at the box level
5.4 Determine proper amount of time for testing
6. Training methodology
6.1 The Solectron project will work with Netro to understand their testing
methodology and put forward a training plan for Solectron's operators.
6.2 Based on the outcome in 6.1, adequate training for Solectron's
operators/technicians/engineers will be provided.
6.3 The Solectron project team will work to enhance the on-going RF
training provided presently for the operators, technicians and
engineers working at Solectron, to ensure a strong RF pool of
resources to draw from in future.
7. Hiring of RF engineers/technicians:
Due to increasing demand for manufacturing and testing RF products, Solectron is
in the process of recruiting additional RF/Microwave/Wireless engineers and
technicians. There are several openings within the Milpitas campus. The
Solectron Technical Center has solidly positioned its RF capabilities by
establishing several business relationships with RF consulting firms in US for
outsourcing of consulting engineering services if an when necessary. Solectron
is currently staffed for the manufacturing of PCB's from Netro, but will hire
(or transfer) resources for the radio production.
8. Reliability
Solectron shall implement a reliability and qualification program plan in
collaboration with Netro. This plan will encompass both component and system
level testing in an attempt to help Netro with its design for reliability, yield
analysis and improvement, IQC, reduction/elimination of burn-in time, review/
audit of supplier's reliability, qualification and screening procedures,
utilization of derating factors, and worst case scenario analysis. Netro will
identify critical component list for Solectron.
9. Source Inspection
Solectron to help perform source inspection, qualification, incoming test and
quality control for the critical RF components. Netro to identify critical
component list for Solectron.
2
<PAGE> 23
10. Documentation
Solectron to assist in documenting the manufacturing process. This would include
adding more detail to current documents, rev control, visual aids, etc.
11. Cost Reduction Efforts
Solectron feels there are opportunities for future cost reduction, illustrated
in the following examples (but not limited to):
- Automation of current test stations
- Design future platforms to be similar, with configuration done at the
very end of the manufacturing process (i.e. choosing frequency range)
- Reduction of ESS testing (by going to sampling, etc.)
PROJECT TEAM
The following people from Solectron will form the main team dedicated to Netro,
whose main purpose will be to understand the transition requirements that will
lead to full production of the radio product.
- - [***], RF Training Manager
- - [***], RF Test Engineer
- - [***], Manufacturing Program Manager
- - [***], RF Engineering Manager
- - [***], RF Process Engineer
- - [***], Process Engineer
- - [***], Materials Manager
This team also has the ability to bring in backup support from the attached
resource list, as needed for functional area.
[***] CONFIDENTIAL TREATMENT REQUESTED
3
<PAGE> 24
GETTING STARTED
Solectron will use the following steps (defined per the attached timeline) in
the approach to each assembly in order to cover the areas necessary for
manufacturing.
ASSESSMENT FOR MANUFACTURING - CHECKLIST FOR PCB ONLY (1 WEEK)
Assumptions - Board only to start
- Functional test will be duplicated per current methodology
Assessment Team - [***]
- [***]
- [***]
- - Component type and specification per assembly
- - identify whether or not the assembly is candidate for ICT
- - Current yield (average)
- - If functional test, what are equipment requirements
- - Is there manual adjustment required during functional test
- - Identify special parts handling (i.e., hand loading of PTH components)
- - Level of workmanship required (i.e., IPC, etc.)
- - Identify components subject to BABT
- - ESS test plan and procedures
- - Material inventory status and on-order status
- - Other unique facility requirements
QUOTATION (3 WEEKS FOR FULL TURNKEY QUOTES)
Assumption - All assemblies are well documented (per below), and Solectron will
work closely with Netro to bring up EDI capabilities for data transfer.
- - Full turnkey quote for new assemblies takes 3 weeks
- - Following documents are needed to begin quote process
- Theory of operations
- Schematic
- BOM and AVL for all components
- Assembly drawing
- Functional test plan, procedures and times
- Fab drawing
- ESS test plan, procedures and times
- Sample board (non-functional)
[***] CONFIDENTIAL TREATMENT REQUESTED
4
<PAGE> 25
QUOTE REVIEW (1 WEEK)
o This time is used for Netro to review for approval
o Solectron to clarify any open items
MATERIAL TRANSFER (4 WEEKS)
Listed below are the normal steps in transitioning inventory management to
Solectron:
o Ensure documentation is accurate (i.e. BOM rev levels, etc.)
o Take physical inventory of on-hand materials
o Put Letter of Authorization in place for Solectron to procure long lead
items
o Review open PO report by component
o Solectron loads forecast demand from Netro (BOM, AVL, etc.)
o Solectron begins purchasing on-hand inventory (per ABC policy) to support
fcst.
o Netro issues Letter of Authorization to vendors to allow Solectron to
take over outstanding PO's issued by Netro
o Solectron continues to place new PO's to support future demand
ICT TEST DEVELOPMENT (6 WEEKS)
This time is required to develop and build the test fixtures for in-circuit
test. Netro to provide known good boards for development effort.
FUNCTIONAL TEST DEVELOPMENT (8 WEEKS)
Assumption -- Solectron initially will duplicate Netro test stations and
procedures. In future, Solectron will make suggestions to increase productivity
(throughput) of the functional test stations to support higher volumes. Upon
signing of the contract, Solectron will order the equipment needed to support
production.
PCB TOOLING (2 WEEKS)
o This time used for manufacture of fixtures required.
MPI DEVELOPMENT (1 WEEK)
o Process instructions used in manufacturing
ASSEMBLY PILOT RUN (1 WEEK)
o Used to validate production
o Quantity TBD
ASSEMBLY TEST (POST PILOT -- 1 WEEK)
o Includes both functional and ESS depending on requirements
5
<PAGE> 26
TEST SUPPORT TEAMS
Test Team (Digital) -- [***]
-- [***]
Test Team (RTF) -- [***]
-- [***]
-- [***]
-- [***]
[***] CONFIDENTIAL TREATMENT REQUESTED
6
<PAGE> 27
TIMELINE FOR PRODUCTION OF NETRO [***]GHZ SRU
[***] - Solectron team moves on-site at Netro
- Assess current manufacturing and test processes
- Document the assembly and test process
- Order Equipment [***] (Contract Dependent)
- Assess capacity required for next [***]
- Begin engineering training
- Begin component engineering (IQC, reliability, etc.)
- Begin material transfer process
- Begin test development/duplication
- Identify ESS chambers to be used for production
- Formulate labor plan for operators and technicians
- Put quality plan in place with measurable goals
- Prove out SMT lines with consignment runs - first article
approval
- Identify RF assemblers and technicians and start training at
Netro
- Agree on quality and performance metrics - provide daily, weekly,
monthly as determined by Netro-Solectron
- Identify RF components for IQA (Netro)
- Develop plan for HALT testing for reliability
[***] - Complete material transfer from Netro
- Preliminary cost reduction plan and realistic targets
- Complete ICT fixture development
- Begin turnkey production of boards
- Set up quality metrics feedback system
- Implement IQA plan for RF components
- Implement HALT testing
- Continue RF training; Document training
- Continue document assembly and test process
- Begin work on improving production yields
[***] - Begin set up of test equipment
- Begin ICT test of boards
- Monitor yields - improvement plan
- Continue RF training; Document training
- Continue document assembly and test process
[***] - Complete set up of equipment for test stations
- Continue RF training; Document training
- Continue document assembly and test process
- Monitor yields - improvement plan
- Complete material transition of mechanical components
[***] - Complete set up of equipment for radio test
- Continue RF training; Document training
[***] CONFIDENTIAL TREATMENT REQUESTED
7
<PAGE> 28
- Complete document assembly and test process
- Monitor yields - improvement plan
[***] - Complete RF training for technicians
- Pilot build and test of radio products
- Complete troubleshooting, rework training, and documentation
- Monitor yields - improvement plan
[***] - Continue work on improving production yields
- OOB (out of box) failures should be at least as good as Netro's
yields should be at least as good as Netro's by [***]
- Continue to improve quality metrics/feedback at all stations
- Begin ramp to volume
- Assess [***] capacity looking forward (at each quarterly meeting)
- Begin plan for test automation
- Get ready for full system Integration and test - TBD by Netro and
Solectron
Next Level of Detail - Month 1
- Labor Plan [***]
- Material Plan [***]
- Test Plan [***]
- EDI Feasibility [***]
- Program Manager Defined [***]
- Calendar Determined - [***]
- SOW for other products (SAS, BSC, BMU)
- Project Teams Assigned [***]
Issues
- Manpower (RF trained)
- Acquisition of Equipment
- Contract Signature
[***] CONFIDENTIAL TREATMENT REQUESTED
8
<PAGE> 1
Exhibit 10.10
NETRO
THE WIRELESS ATM COMPANY EXECUTION COPY
- --------------------------------------------------------------------------------
MANUFACTURING AND ENGINEERING SERVICES
AGREEMENT
BETWEEN
NETRO CORPORATION
and
MICROELECTRONICS TECHNOLOGY INC.
January 11,1999
<PAGE> 2
NETRO
THE WIRELESS ATM COMPANY EXECUTION COPY
- --------------------------------------------------------------------------------
MANUFACTURING AND ENGINEERING SERVICES AGREEMENT
This Manufacturing and Engineering Services Agreement, (the "Agreement"),
effective as of January 11, 1999 (the "Effective Date"), is made by and between
Microelectronics Technology, Inc., a corporation organized under the laws of
Taiwan and having its principal office at 1, Innovation Road II, Hsinchu Science
Based Industrial Park, Hsinchu 300, Taiwan, R.O.C. ("Manufacturer") and Netro
Corporation, a California corporation having its principal office at 3860 N.
First Street, San Jose, California 95134 USA (the "Purchaser").
RECITALS
WHEREAS, the Purchaser is engaged in the design, manufacture and sale of
broadband, wireless telecommunications equipment;
WHEREAS, the Manufacturer is an established leader in the manufacture and
engineering of reliable, low cost, microwave radios and RF modules;
NOW, THEREFORE, in order to allow Purchaser to receive manufacturing and
engineering services from Manufacturer, and in consideration of the mutual
promises herein contained, it is agreed as follows:
1. PURPOSE
The purpose of this Agreement is to set forth the terms and conditions
applicable to (i) the manufacture and sale by Manufacturer to Purchaser, of
Purchaser's AirStar products listed herein on Appendix A, (ii) the purchase by
third-party contractors to Purchaser of components of the Purchaser's AirStar
products that are manufactured by Manufacturer, and (iii) the provision of
manufacturing engineering services by Manufacturer to Purchaser with respect to
Purchaser's products. Following the date of this Agreement, Purchaser may
identify additional products or frequencies for which it may seek the
engineering services and/or manufacturing capability (provided Manufacturer can
become qualified to manufacture such products) of Manufacturer. Upon the mutual
written agreement of the parties, any such new services will be added to
Appendix D as described in Section 5 of this Agreement, any such new products or
frequencies shall be added to Appendix A, and the relevant specifications for
any such products and frequencies will be added to Appendix B. The products of
Purchaser listed on Appendix A hereto, together with the components listed in
Appendix A which are designated for sale to Purchaser's third-party contractors,
are referred to herein as the "Products". Any additional terms or conditions
proposed by Purchaser or Manufacturer are not applicable unless expressly
approved and agreed to in writing and signed by authorized representative of the
other party, and in the event that the terms of any other document conflict with
the terms of this Agreement, even if agreed to by the parties, this Agreement
shall govern.
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- --------------------------------------------------------------------------------
2. RELATIONSHIP OF THE PARTIES
This Agreement does not constitute Manufacturer as an employee, agent, or legal
representative of or a joint venturer or partner with, Purchaser for any purpose
whatsoever, Manufacturer is not granted, nor shall it represent that it has been
granted, any right or authority to assume or create any obligation or
responsibility, expressed or implied, on behalf of, or in the name of,
Purchaser, to incur debts or make collections for Purchaser or to bind Purchaser
in any manner whatsoever. It is the intent of the parties hereto to create the
relationship on the part of the Manufacturer of an independent contractor, for
whose actions or failure to act, the Purchaser shall not be responsible.
3. MANUFACTURE OF PRODUCTS
a. Manufacture. Manufacturer will manufacture the Products using the components
and to the specifications provided on Appendix B as updated from time to time in
accordance with Section 15 hereof (the "Specifications"). Manufacturer will only
use components from vendors approved by Purchaser for the supply of such
components. Following the Effective Date, Manufacturer may, with Purchaser's
prior written approval, identify and qualify other vendors for the purpose of
reducing costs or improving quality.
b. Quality. All Products manufactured by Manufacturer for Purchaser shall
conform to Manufacturer's quality procedures and workmanship standards
consistent with IPC-610 class II. Manufacturer will perform on-going reliability
testing in order to ensure Product reliability over time. Testing specifications
and the acceptance test plan will be mutually agreed to. Manufacturer will
provide Purchaser with monthly mean-time between failures data. Manufacturer
will perform highly accelerated life testing and highly accelerated stress
screens for each new Product, key component and subassembly produced by
Manufacturer. Manufacturer agrees to comply in all respects with the Quality
Standards and Reports set forth on Appendix C.
c. Documentation. Manufacturer will, based upon the materials, information,
data, manufacturing processes and techniques provided by Purchaser, maintain a
comprehensive system of materials to document the manufacturing processes and
techniques used in connection with the manufacture of each of the Products (the
"Documentation"). The Documentation will be prepared in sufficient detail to
ensure that the manufacturing processes for the Products may be understood and
replicated by a third party and, other than incidental materials which are not
necessary for the replication of the manufacturing process by a third party
(e.g., shop floor instructions and individual work-station guides), the
Documentation will be prepared in English. Manufacturer agrees to translate
and/or interpret any Documentation that is not prepared in English into English
at the request of Purchaser at Manufacturer's expense and within thirty (30)
days of Purchaser's request. The Documentation will be updated by Manufacturer
upon each release of a new version of a Product and each material change to the
manufacturing process for a Product. Upon each update of the Documentation,
Manufacturer will provide Purchaser with a complete copy of such updated
Documentation.
d. Ownership of Specifications and Documentation. The Specifications and the
Documentation (including Documentation created pursuant to Section 4(b)(ii)
below) shall be
-3-
<PAGE> 4
NETRO
THE WIRELESS ATM COMPANY EXECUTION COPY
- --------------------------------------------------------------------------------
deemed to be the Confidential Information of Purchaser and shall be solely owned
by Purchaser. Manufacturer hereby grants, transfers and assigns all right, title
and interest in such work and all copyrights, including renewals and extensions,
in the Specifications and Documentation to the Purchaser. Manufacturer hereby
waives all rights of identification of authorship and any and all rights of
approval, restriction or limitation on use or subsequent modifications to the
Specifications or the Documentation. From time to time upon Purchaser's prior
written request, Manufacturer and its employees and contractors, shall confirm
the foregoing assignment by execution and delivery of such assignments,
confirmations or other written instruments as Purchaser may request. Purchaser,
its successors and assigns, shall have the right to obtain and hold in its own
name all copyright registrations and other evidence of rights that may be
available for such Specifications and Documentation. Manufacturer acknowledges
Purchaser's right to place the Specifications and Documentation in escrow in
Purchaser's cost, pursuant to the terms of Purchaser's agreements with customers
and other third parties. Notwithstanding the foregoing, in the event that
Manufacturer applies an improvement or invention to the Products which was not
(a) originally conceived of or reduced to practice in connection with a Product
of Purchaser, (b) created with the assistance of Purchaser personnel, materials
or information, OR (c) created pursuant to Section 5 hereof, such improvement or
invention shall be solely owned by Manufacturer, including without limitation,
patent, copyright, trademark, trade-secret, know-how, and other intellectual
property rights thereto.
4. PURCHASE AND SALE OF PRODUCTS
a. Forecast. On or before the fifteenth (15th) day of each month, Purchaser
shall provide Manufacturer with a non-binding forecast setting forth, on a
Product by Product basis, Purchaser's requirements for the next six (6) calendar
months (the "Purchaser Forecast"). In addition, on each such date Purchaser will
provide Manufacturer with a good faith estimate of its expectations of Product
purchases by its third-party contractors. Manufacturer shall at all times
maintain sufficient inventory of components for the Products to ensure the
availability of Products to Purchaser and its third-party contractors consistent
with the forecasts provided as provided above. The Purchaser Forecast shall not
bind the Purchaser except as set forth in Section 4(b) below.
b. Orders. Purchaser agrees to place a binding purchase order for at least the
quantity of Products set forth on the latest two (2) months of the Purchaser
Forecast pursuant to standard purchase orders. Purchaser may also order
additional amounts from Manufacturer, pursuant to separate purchase orders
specifying the quantity of each Product to be purchased and the requested
delivery dates. Each purchase order hereunder shall be subject to the following
terms and conditions, notwithstanding anything contained in the purchase order
to the contrary.
(i) Acceptance and Rejection. Manufacturer will accept or reject purchase orders
from Purchaser in a written notice within five (5) working days of receipt
thereof, provided, however, that Manufacturer shall be required to accept any
purchase order that (A) does not increase the total amount to be purchased by
Purchaser beyond 25% of the total amount forecast during such period, and (B)
requests delivery no sooner than four (4) calendar weeks from the
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<PAGE> 5
NETRO
THE WIRELESS ATM COMPANY EXECUTION COPY
- --------------------------------------------------------------------------------
date of such purchase order. Failure by Manufacturer to reject a purchase order
within the timeframe specified above shall be deemed to be acceptance of a
purchase order hereunder.
Purchaser or its designees may elect to source inspect Products
and/or test data and results before delivery from Manufacturer. Manufacturer
will provide reasonable space for the source inspection. Manufacturer will
provide Purchaser with five (5) working days advance notice of Product
availability for source inspection and Purchaser agrees to source inspect said
Products within five (5) working days after such notification. When Purchaser
elects to perform source inspection at Manufacturer's facility, final acceptance
shall occur at the time of source inspector's written acceptance of Product. The
source inspector's written acceptance shall be made within five (5) working days
after such source inspection. If the source inspector fails to be available for
source inspection within the time frame established above, Manufacturer may ship
the Products and Purchaser will inspect the Products upon receipt as described
in the first paragraph hereof.
(ii) Price. Following the qualification of Manufacturer for a given
Product, Manufacturer will quote a firm price for such Product, which will be
included in Appendix A to this Agreement and will be the price for a given
Product unless reduced as follows. Each such firm price quote will include a
bill of materials, cost of materials, cost of labor, profit margin and such
other detail as Purchaser shall reasonably request.
Manufacturer will use its best efforts, with the assistance of
Purchaser, to implement an ongoing cost reduction program that will aim at a
price reduction to Purchaser of [***] percent ([***]) per annum, beginning once
the Manufacturer has produced more than [***] units of a Product. Manufacturer
agrees to update the Specifications and Documentation to reflect all such cost
reduction efforts and any such revised materials shall be "Specifications"
and/or "Documentation" for all purposes under this Agreement. Notwithstanding
the foregoing, no change will be made to the Specifications of or manufacturing
process for a Product without the prior written approval of Purchaser.
(iii) Delivery. All purchase orders issued by Purchaser will be shipped
according to the schedule provided in the applicable purchase order. Deliveries
will be marked as instructed by the party placing such order, including without
limitation, with bar code labels as specified by Purchaser or its third party
contractors from time to time, and will include all relevant test data for such
shipment. All shipments of Products are FOB Manufacturer's factory location with
method of shipment and insurance specified by and paid for by the party placing
the order. If a Product is not available for more than ten (10) working days
from the originally schedule delivery date, Manufacturer shall accrue a late fee
of [***] of the selling price for such Product(s) which is (are) delayed in such
order for each day that such order is delayed beyond such ten (10) working day
period, up to a maximum of [***]. Notwithstanding the foregoing, such penalties
shall not apply where the delays in shipment are as a result of design defects
or Purchaser's negligence.
[***] CONFIDENTIAL TREATMENT REQUESTED
-5-
<PAGE> 6
NETRO
THE WIRELESS ATM COMPANY EXECUTION COPY
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(iv) Rescheduling. A purchase order may be rescheduled, prior to
fifteen (15) working days before the scheduled delivery date for such order. If
a purchase order is rescheduled for more than thirty (30) calendar days from the
originally scheduled delivery date, Purchaser shall accrue a rescheduling charge
of [***] of the selling price for such rescheduled purchase order for each
thirty (30) day period that such rescheduling of a delivery date is delayed
beyond such thirty (30) day period up to a maximum of [***]. If a rescheduling
of a delivery date is delayed beyond [***], Manufacturer shall have the right to
deliver the Products for such purchase order on the one hundred-and-eightieth
day from the originally scheduled delivery date.
(v) Cancellation. In the event that Purchaser cancels any purchase
order, Purchaser shall compensate Manufacturer for the reasonable, actual,
out-of-pocket expenses incurred by Manufacturer in acquiring components and
manufacturing the Products subject to such order. Manufacturer will use its best
efforts to mitigate such costs however, in the event that Purchaser is required
to compensate Manufacturer under this Section, Purchaser shall be entitled to
take title over all inventory, components and Products for which it delivers
compensation hereunder.
(vi) Payment. Payment is due and payable fifty (50) calendar days from
the date of issuance of the invoice or shipment of the Products, whichever is
later (the "Payment Date"). Within ten (10) business days after notice by
Manufacturer of its acceptance of a purchase order, Purchaser will establish an
irrevocable letter of credit with a U.S. Bank in favor of the Manufacturer in
the amount of such purchase order (each an "LC"). Each LC shall provide that the
Manufacturer may draw upon the LC on the Payment Date, upon presentation of a
letter, certified by Manufacturer, as to the shipment of the Products and the
invoice and/or shipment date, together with such other documentation and
evidence of shipment as is reasonably established in such LC.
(vii) Electronic Data Interchange. Manufacturer and Purchaser will
jointly implement an Electronic Data Interchange ("EDI") system that is
compliant with the EDI requirements of Purchaser's customers in a mutually
agreed to scope and timetable.
(viii) Semi-Annual Review of Prices. Beginning on the date [***] from
the date of this Agreement, and every [***] thereafter, the parties will meet to
discuss in good faith revisions to the pricing and payment terms set forth in
this Section 4(b), in order to reflect competitive pressures and other
then-current market conditions.
c. Acceptance and Rejection of Deliveries. The basic acceptance criteria for
Products shall be conformance to the Specifications by Purchaser. The Purchaser,
or its third-party contractors will accept or reject deliveries of the Products
within twenty (20) working days of receipt of such Products. Such party may
elect to reject Products individually or reject lots on the basis of sample
inspections as described on Appendix A. Any Product (or lot of Products based on
a sample) which fails to meet the Specifications due to the fault of
Manufacturer, will be replaced or repaired by Manufacturer. All such Products
shall be tracked by Manufacturer's RMA system. Manufacturer shall provide
monthly reports on the status of all RMAs. If the recipient
[***] CONFIDENTIAL TREATMENT REQUESTED
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NETRO
THE WIRELESS ATM COMPANY EXECUTION COPY
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of an order does not provide Manufacturer such notice within the twenty (20)
working day period, the Product will be presumed to have been accepted, and any
defective Products will be dealt with thereafter as warranty claims.
d. Purchases from Purchaser. Manufacturer will purchase certain components and
inventory from Purchaser on terms and conditions mutually agreeable to the
parties and pursuant to purchase orders distinct from those under this
Agreement.
5. ENGINEERING SERVICES
a. Identification of Services. Manufacturer agrees to undertake and complete
certain manufacturing engineering tasks for Purchaser. Purchaser has described
such services to Manufacturer in detail and Manufacturer has provided purchaser
with a firm price quote for such services, both of which are attached hereto as
Appendix D. It is the parties intention that Purchaser will compensate
Manufacturer for these services proportionately to reflect the timely
achievement of milestones by Manufacturer and the value of interim milestones to
Purchaser. Therefore, within ten (10) working days after the Effective Date,
Purchaser and Manufacturer will mutually agree upon an update to Appendix D,
which will provide for the same services to be provided by Manufacturer to
Purchaser at the same price quoted by Manufacturer, but will also list key
interim milestones for such services, delivery dates for each such milestone and
payment amounts for each such milestone. As the parties identify additional
manufacturing engineering tasks with respect to existing or newly added Products
the parties will, by mutual agreement, update Appendix D in writing. The
products of the efforts of the tasks referred to on Appendix D are referred to
herein as the "Deliverables".
b. Acceptance and Rejection of Deliverables. Upon delivery of any Deliverables,
Purchaser will test, review and otherwise evaluate such Deliverables to
determine whether such Deliverables warrant modifications to the Specifications,
Documentation or manufacturing process for a Product. Within thirty (30)
calendar days of delivery of the Deliverables, Purchaser shall provide
Manufacturer with written notice of acceptance or rejection of such
Deliverables. In the event Purchaser rejects such Deliverables for cause (i.e.,
failure to comply with the specifications for such Deliverable), Purchaser may,
at its option extend the period for delivery of such Deliverable on the basis of
the originally agreed to compensation or terminate the project for such
Deliverable with no further liability to Manufacturer. If Purchaser rejects such
Deliverable other than for cause, Manufacturer shall nonetheless be entitled to
receive the compensation as set forth in subsection (c) below. If Purchaser
accepts such Deliverable, Manufacturer and Purchaser will work together to
implement such changes as are necessitated to the Specifications, Documentation
and other materials and Manufacturer shall be entitled to receive compensation
as set forth in subsection (c) below.
c. Ownership of Deliverables. Manufacturer understands and agrees that the work
to performed by it for Purchaser pursuant to this Agreement shall be considered
"Work Made for Hire" as that term is defined in Title 17, United States Code,
Section 201; Purchaser shall own all right, title and interest in the
Deliverables developed by Manufacturer. If, for any reason, the
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Works Made for Hire rule is found not be applicable to this Agreement,
Manufacturer hereby assigns all of its right, title and interest in the
Deliverables, including, without limitation, all patent rights, copyrights,
trade secrets to Purchaser. Manufacturer agrees to cooperate with Purchaser and
to execute all documents necessary to effectuate and perfect Purchaser's
ownership of and rights to the Deliverables.
d. Compensation for Deliverables. In consideration for any engineering services
provided hereunder Purchaser will issue securities to Manufacturer (or a
wholly-owned subsidiary of Manufacturer) as follows. Upon the achievement of
each milestone for which Manufacturer is entitled to compensation pursuant to
Appendix D, Purchaser will issue to Manufacturer (or a wholly-owned subsidiary
of Manufacturer) that number of shares of the Purchaser's then most recently
issued series of Preferred Stock as is determined by dividing the dollar amount
specified for the achievement of such milestone on Appendix D by the price per
share at which shares of such series of Preferred Stock were most recently
issued. Notwithstanding the foregoing, if Purchaser effects an initial public
offering of Common Stock, then following such offering Purchaser may, at its
election, decide to compensate Manufacturer in cash, or such other mutually
agreeable form of consideration, for any services provided on or after the
effective date of such offering.
d. Termination of Projects. Purchaser may cancel a project for cause under this
Section, without any further liability to Manufacturer, if Manufacturer has not
delivered a Deliverable or other significant intermediate work product within
thirty (30) working days of the mutually agreed scheduled delivery date, or for
other material failures of Manufacturer in connection with such project.
Purchaser may also cancel a project for convenience under this Section at any
time, provided however, that if Purchaser cancels a project for convenience, and
the securities delivered by Purchaser as of such cancellation reflect, a
different percentage of the total securities originally planned to be issued for
such project than the percentage of work completed by Manufacturer as of such
date, then the party to whom such benefit has accrued will provide the other
party with cash compensation or will return or grant, as appropriate, securities
to the other party, to offset such differential compensation.
e. Additional Representations. With respect to any securities issued hereunder,
Manufacturer hereby represents and warrants, and agrees to represent and warrant
at the time such securities are issued, as follows: (i) that Manufacturer has
had access to and is familiar with information concerning the Purchaser's
business, affairs, financial condition, and current prospects; (ii) that any
such securities are being acquired for its own account, not as a nominee or
agent, and not with a view to or in connection with the sale or distribution of
any part thereof; (iii) that Manufacturer understands that such securities will
not be registered under the Securities Act of 1933, and (iv) that the issuance
of such securities does not conflict with the laws of the jurisdiction in which
Manufacturer is organized. The Manufacturer further agrees that, in connection
with the initial registration of the Purchaser's securities that, upon request
of the Purchaser or the underwriters managing any underwritten initial public
offering of the Purchaser's securities, not to sell, make any short sale of,
loan, grant any option for the purchase of, or otherwise dispose of any
securities of the Purchaser (other than those included in the
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registration) without the prior written consent of the Purchaser or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days from the effective date of such registration) as may
be requested by the Purchaser or such managing underwriters.
6. WARRANTY
Manufacturer warrants all Products sold under this Agreement to comply with the
Specifications and be free from defects in material and workmanship under normal
and proper use for a period of [***] from the latest of the issuance date of the
invoice of the purchase order, the shipment date for such Products and the
acceptance date for such Products.
THE FOREGOING WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES EXPRESSED, IMPLIED, OR
STATUTORY, INCLUDING WARRANTY OF MERCHANTABILITY.
Within the stated warranty period, Manufacturer will repair or replace, at its
option, any Product which is returned to its plant, provided inspection and
examination discloses to Manufacturer's reasonable satisfaction that (a) the
reported defects are within the warranty coverage, (b) the Product has not been
tampered with, or (c) the Product has not been damaged due to misuse, improper
storage or maintenance, negligence or accident. Purchaser will bear the cost of
shipping such defective Products to Manufacturer, and if Manufacturer is
required to repair or replace such Products, Manufacturer will return the
warranty repaired Product shipping via the same type of service originally used
to ship the failed Product to the recipient at Manufacturer's cost.
Any such returned or repaired item shall have a full [***] warranty beginning on
the date that such repaired or replaced Products are received by the Purchaser
or the Purchaser's customer. Manufacturer shall provide repaired or replaced
Products to the party ordering such products within fifteen (15) working days of
receiving such defective products.
THE FOREGOING CONSTITUTES THE PURCHASER'S SOLE AND EXCLUSIVE REMEDY AND IS IN
LIEU OF ANY AND ALL REMEDIES WHICH MAY BE AVAILABLE TO THE PURCHASER.
7. Term
a. Termination. The term of this Agreement shall be three (3) years from the
Effective Date. At any time at least one hundred and eighty days (180) prior the
expiration of the initial term, Purchaser may, at its sole option, renew this
Agreement for an additional three (3) year term, by written notice to
Manufacturer. This Agreement may otherwise be terminated as hereinafter
provided:
(i) Either party may immediately terminate this Agreement at any time if
the other party hereto breaches any material provision of this Agreement or
becomes insolvent or is
[***] CONFIDENTIAL TREATMENT REQUESTED
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adjudicated bankrupt which breach is not cured within sixty (60) calendar days
of receiving written notice of the breach.
(ii) Either party hereto may terminate this Agreement, without cause
upon giving to the other one hundred eighty days (180) calendar days prior
written notice. The Manufacturer, in accordance with the Agreement, will fulfill
any outstanding orders placed by Purchaser in place at the time of termination
or during the notice periods described in this Section 7(a).
b. Effect of Termination. In the event of termination as herein provided,
Manufacturer shall (i) upon the request of Purchaser, satisfy any outstanding
accepted purchase orders, (ii) upon the request of Purchaser, deliver any
outstanding Deliverables which are scheduled to be delivered within thirty (30)
days of such termination, and (iii) return to Purchaser all Product information,
software, firmware, drawings, test fixtures and test equipment Purchaser may
have supplied or paid for in connection with this Agreement as well as all
copies of the Documentation, Specifications and manufacturing process
documentation in Manufacturer's possession. In the event that Purchaser
terminates this Agreement pursuant to Section 7(a)(ii) hereof, Purchaser agrees
to compensate Manufacturer for its actual costs incurred prior to such
termination (i) in acquiring any long lead-time material, which was approved for
acquisition by Purchaser in writing, (ii) in accepting on-going purchase orders
from Manufacturer's subcontractors/third-party contractors, which expenses were
approved in writing by Purchaser, and (iii) for any work-in process or other
inventory relating to accepted purchase orders canceled by Purchaser in
accordance with the terms of Section 4(B)(v) hereof. Manufacturer will use its
best efforts to minimize any such expenses, however, in the event that Purchaser
is required to compensate Manufacturer under this Section, Purchaser shall be
entitled to take title over all inventory, components and Products for which it
delivers compensation hereunder.
Sections 3(c), 5(b), 5(c), 6, 7(b), 9, 12, 13, 14, 16, 18, 20, 21, 22 and 23 of
this Agreement shall survive the termination of this Agreement.
8. FORCE MAJEURE
Manufacturer will exercise every reasonable effort to meet any quoted or agreed
upon shipment date or dates. Manufacturer shall not, however, be liable for any
loss or damage, including consequential damages, due to delays or failure to
ship resulting from any cause beyond its reasonable control, such as, but not
limited to, securing necessary export licenses, compliance with government law
or regulation, acts of God, acts or omissions of the Purchaser, acts of civil or
military authority, judicial action, defaults of subcontractors or vendors,
labor disputes, failure or delays in transportation, embargoes, wars or riots,
or the inability of carriers to make scheduled deliveries. Notwithstanding the
foregoing, in the event that such condition extends for more than thirty (30)
calendar days, Purchaser or its third-party contractors may cancel any orders
pending with Manufacturer without penalty.
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9. NO RIGHTS
Manufacturer agrees that it will not in any manner represent that it has
ownership of the trade name "Netro Corporation" or any other trade name or
trademark used by Purchaser to identify the Products or used in connection with
the Products. Manufacturer further agrees that it will not register or attempt
to register any such trade names or trademarks under the laws of any
jurisdiction, and will not at any time do, or cause to be done, any act or thing
contesting, or in any way impairing or tending to impair, any part of
Purchaser's right, title, and interest in such trade names or trademarks,
whether or not they are registered in the jurisdictions in which Manufacturer is
located or does business. Nothing in this Agreement shall be construed as
granting to Manufacturer or conferring on Manufacturer any rights by license or
otherwise to Purchaser's patent, trademark, copyright, know how or other
proprietary or confidential rights.
10. COMPUTER SOFTWARE
Any and all computer software delivered hereunder is and shall remain the sole
and exclusive property of Purchaser, or Purchaser's suppliers, and shall be held
in trust and confidence by the Manufacturer for Purchaser, or Purchaser's
suppliers. The Manufacturer shall have a non-exclusive license to use such
computer software solely in conjunction with the execution of Manufacturer's
obligations under this Agreement. The Manufacturer's license to use such
computer software shall terminate upon termination of this Agreement. All copies
of the software shall be returned to Purchaser upon termination of this
Agreement.
11. NO WAIVER OF RIGHTS
A failure by one of the parties to this Agreement to assert its rights for or
upon any breach of this Agreement shall not be deemed a waiver of such rights,
nor shall any such waiver be implied from the acceptance of any payment. No
waiver in writing by one of the parties hereto, with respect to any right, shall
extend to or affect any subsequent breach, either of like or different kind, or
impair any right consequent thereon.
12. INDEMNIFICATION
a. Manufacturer shall defend, indemnify and hold harmless Purchaser and its
directors, officers, shareholders, employees and agents from any loss, cost
damage or expense including without limitation, attorney's fees incurred by
them, regardless of how caused if arising out of (i) any defect arising from the
manufacture, assembly or test of the Products procured by Purchaser from
Manufacturer hereunder, and (ii) the negligence of the employees, consultants or
authorized agents of Manufacturer. Manufacturer will not be required to provide
such defense and indemnification (i) if such loss was caused solely by the
negligence or willful misconduct of Purchaser, its employees, or its authorized
agents, (ii) if such loss was caused by no fault of Manufacturer, or (iii)
unless Purchaser notifies Manufacturer within a reasonable time of any such
claim, provides Manufacturer with sole control of the defense or settlement of
such claim and provides Manufacturer, with such reasonable assistance as
Manufacturer may request to assist it in defending or settling such claim.
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b. Purchaser shall defend, indemnify and hold harmless Manufacturer and its
directors, officers, shareholders, employees and agents from any loss, cost
damage or expense including without limitation, attorney's fees incurred
regardless of how caused if arising out of (i) any improper information,
manufacturing process and any other material provided by Purchaser to
Manufacturer for the purpose of this Agreement, or (ii) a claim that the
Products, when manufactured in accordance with the Documentation and
Specifications provided by Purchaser to Manufacturer hereunder, infringe the
valid intellectual property rights of a third party unless such infringement
arises from (A) any modification of the Products by Manufacturer or any third
party in a way not approved in writing by Purchaser, or (B) the inclusion or use
of any technology, information or other material provided by Purchaser in the
Products. Purchaser will not be required to provide such defense and
indemnification (i) if such loss was caused solely by the negligence or willful
misconduct of Manufacturer, its employees, or its authorized agents, (ii) if
such loss was caused by no fault of Purchaser, or (iii) unless Manufacturer
notifies Purchaser within a reasonable time of any such claim, provides
Purchaser with sole control of the defense or settlement of such claim and
provides Purchaser, with such reasonable assistance as Purchaser may request to
assist it in defending or settling such claim.
13. LIMITATION OF LIABILITY
Neither party nor its suppliers shall be liable for any indirect, incidental,
special, or consequential damages, including but not limited to, loss of profits
or revenue, or cost of substituted facilities, equipment or services which arise
out of performance or failure to perform any obligation contained within this
agreement, whether the claim is in contract, tort (including negligence), strict
liability or otherwise, even if such party has been advised of the possibility
of such damages.
Manufacturer or its suppliers shall not be liable for indirect, incidental,
special, or consequential damages and in no event shall the liability of the
Manufacturer arising in connection with any Products purchased under this
Agreement exceed the actual amount paid to Manufacturer for Products and
Deliverables hereunder.
14. NON COMPETE
a. During the term of this Agreement and for [***] following the termination
hereof, so long as (i) Manufacturer's total revenue from the Products ordered by
Purchaser and its third-party contractors under this Agreement (including the
deemed value of any engineering services provided hereunder) during calendar
year 1999 is greater than or equal to the greater of (A) [***] and (B) [***] of
Purchaser's Requirement of Products during such period, (ii) Manufacturer's
total revenue from the Products ordered by Purchaser and its third-party
contractors under this Agreement (including the deemed value of any engineering
services provided hereunder) during calendar year 2000 is greater than or equal
to the greater of (A) [***] and (B) [***] of Purchaser's Requirement of Products
during such period, and (iii) Manufacturer's total revenue from the Products
ordered by Purchaser and its third-party contractors under this Agreement
[***] CONFIDENTIAL TREATMENT REQUESTED
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(including the deemed value of any engineering services provided hereunder)
during calendar year 2001 is greater than or equal to the greater of (A) [***]
and (B) [***] of Purchaser's Requirement of Products during such period;
Manufacturer and its affiliates agree that they will not directly or indirectly
provide products or services (excluding stand-alone, receive-only Low Noise
Block down converters for broadcast television services in the consumer
marketplace which are not designed to be integrated into the broad-band
point-to-multipoint microwave radios of any third party) to any third party,
including any affiliate of Manufacturer, with the effect of aiding the design or
manufacture of non-satellite, broad-band point-to-multipoint microwave radios in
the 10 to 42 GHz frequencies to a party other than the Purchaser.
Notwithstanding the foregoing, neither the dollar volume nor the percentage
purchase requirements for the maintenance will be necessary for the maintenance
of exclusivity if (1) Manufacturer has not qualified to release the Products
listed on Appendix E hereto within the timeframes listed thereon, or (2)
Manufacturer is failing to provide Products to Purchaser in accordance with the
delivery and quality requirements set forth in this Agreement and the
Documentation.
b. For purposes of measuring the minimum dollar requirements of Section 14(a)
above, up to an aggregate of [***] worth of purchase orders and engineering
services requests placed prior to the end of a period, but which are not to be
delivered until subsequent periods may, at Purchaser's election, be included in
measuring such minimum quantities, provided that if such amounts are so included
in a period, such amounts will not be included in any subsequent periods. For
purposes of measuring the minimum percentage requirements described in Section
14(a) above, the numerator of such fraction will be the monetary value of all
cash, securities and other compensation (including for components and
engineering services) delivered to Manufacturer by Purchaser or its third party
contractors hereunder and the denominator of such fraction will be the
Purchaser's Requirement for Products. The term "Requirement for Products" shall
mean the dollar value (as measured by the price from Manufacturer to Purchaser)
of complete radios purchased by Purchaser from any source.
c. In the event that Manufacturer's quoted prices are not comparable to those
available to Purchaser from other parties on similar terms and conditions,
Manufacturer will work together with Purchaser in good faith to reach a mutually
acceptable prices.
15. PRODUCT CHANGES
Manufacturer understands and agrees that Purchaser from time to time may make
changes to the design and/or Specifications on any Product involved with this
Agreement. Changes will be documented and provided to Manufacturer via
Engineering Change Orders ("ECOs"). Each ECO will specify an effective date for
the change. Upon receipt of an ECO, Manufacturer shall review it and provide a
written response to Purchaser within five (5) working days stating any impact to
schedule or price. Manufacturer shall not implement any ECO which delays any
delivery schedule or increases price to the Purchaser without first obtaining
written authorization from Purchaser. Upon adoption of any ECO that has a
material impact on the price for a Product, Manufacturer will requote a firm
price for such Product in accordance with the
[***] CONFIDENTIAL TREATMENT REQUESTED
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provisions of Section 4(b)(ii) hereof. Manufacturer may also propose engineering
changes to Purchaser from time to time, which Purchaser will evaluate in good
faith, and convert to ECOs if appropriate.
In the event that Purchaser develops new or replacement products which are
suitable for manufacture by Manufacturer, the parties will work together in good
faith to add such products to Appendix A hereto and have such products
manufactured and sold hereunder.
16. CONFIDENTIALITY
a. Confidential Information. Each party hereto agrees that (i) the
Specifications, (ii) the Documentation, (iii) the Deliverables, (iv) the
existence and terms of this Agreement, (v) any forecasts provided hereunder,
(vi) all information regarding number, quantity, and status of the Products, and
(vii) any other information disclosed by Purchaser to Manufacturer hereunder are
the Confidential Information of Purchaser and shall be governed by the terms of
the Mutual Nondisclosure Agreement between Purchaser and Manufacturer dated July
29, 1998 (the "NDA"), which is incorporated by reference herein. The parties
hereby agree that notwithstanding the provisions of the NDA, such agreement
shall prevail and shall be in full force and effect during the term of this
Agreement and for a period of two (2) years following the expiration of this
Agreement.
b. Publicity. Neither party shall make any public announcement or press release
regarding this Agreement or the relationship between the parties, or including
the name, tradename or trademarks of the other party without the prior written
consent of such party, which consent will not be unreasonably withheld.
17. ENTIRE AGREEMENT
This instrument including the referenced Appendices and the NDA constitutes the
entire Agreement relative to the establishment of the manufacturer relationship
between Purchaser and Manufacturer.
Purchaser may use its standard forms to issue purchase orders, specify
quantities, authorize prices, change schedules, modify specifications and
documentation or provide other notices as provided for in this Agreement. In the
event of any conflict, discrepancy or inconsistency between this Agreement and
any other document delivered exchanged between the parties with respect to the
subject matter hereof, the terms and conditions of this Agreement shall prevail
to the extent of such conflict, discrepancy or inconsistency.
18. NON-ASSIGNABLE
This Agreement may not be transferred or assigned in whole or in part by either
party without the prior written consent of the other party, provided however
that (i) the Purchaser may assign its right to purchase Products hereunder to
any third party who provides manufacturing or engineering services to Purchaser,
and (ii) the Purchaser may assign transfer and/or assign this
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agreement to any third-party who acquires Purchaser by means of a merger or a
purchase of all or substantially all of the stock or assets of Purchaser,
provided that the assignee confirms its obligations under the terms and
conditions of this contract and such assignment is not prohibited by the laws of
the United States or Taiwan. Manufacturer will not sell any Products to any
party other than Purchaser or a party authorized in writing for such purchase by
Purchaser.
19. NOTICES
All notices given pursuant to this Agreement shall be in the English language.
Notices shall be deemed effective on the day they are received by the other
party by certified or registered mail, return receipt requested, addressed to
the other party at the address stated on the first page of this Agreement or at
any superseding address so notified hereunder.
20. SEVERABILITY OF PROVISIONS
The invalidity under applicable law, regulations, or other governmental
restrictions or prohibitions of any provisions of this Agreement shall not
affect the validity of any other provisions of this Agreement, and in the event
that any provision hereof be determined to be invalid or otherwise illegal, this
Agreement shall remain effective and shall be construed in accordance with its
terms as if the invalid or illegal provision were not contained herein.
21. GOVERNING LAW
This Agreement is deemed entered into in San Jose, California, and shall in all
respects be governed by and construed under the laws of the state of California
as such laws are applied to agreements between California residents entered into
and performed entirely within California. Any litigation or other dispute
resolution between the parties relating to this Agreement will take place in
Santa Clara County, California. This Agreement was prepared in English and all
monetary references herein are to U.S. Dollars. No translation of this Agreement
into any other language shall be of any force or effect in the interpretation of
this Agreement or in determination of the interests of either party hereto.
22. AUTHORITY
Purchaser and Manufacturer each represent to the other that it has due and
proper authority to make and perform all duties and obligations stipulated
herein and contemplated by this Agreement.
23. COMPLIANCE WITH LAWS
Each party agrees to comply with all applicable U.S. regulations with respect to
the manufacture and sale of the Products hereunder, including without
limitation, the Foreign Corrupt Practices Act and the Export Administration Act.
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24. RIGHT OF ENTRY
Purchaser shall have the right to inspect the facilities of Manufacturer during
Manufacturer's normal business hours in order to conduct customer tours, inspect
manufacturing and other processes, and verify compliance with laws and quality
specifications hereunder, upon reasonable advance notice to Manufacturer.
25. EXECUTION
This Agreement may be executed in counterparts, each of which shall be
enforceable against the party or parties actually executing such counterparts,
and all of which together shall constitute one instrument. The parties may
exchange executed copies of this Agreement by facsimile, and any such facsimile
signatures shall be binding upon the party transmitting its signature. Any party
providing a facsimile signatures hereunder will, promptly following the
Effective Date, provide the other party hereto with an originally executed
Agreement.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals
the day and year showed below.
NETRO CORPORATION MICROELECTRONICS TECHNOLOGY INC.
- ---------------------------------- -------------------------------------
Signature Signature
Date: Date:
----------------------------- --------------------------------
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Appendix A
PRODUCTS AND PRICES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
[***]GHZ MIL-BLOCK [***] [***]
14555-XXXX $ [***] $ [***]
[***]GHZ AMPLIFIER [***] [***]
13805-XXXX $ [***] $ [***]
IFM [***] [***] [***]
---
13735-0000 $ [***] $ [***] $ [***]
RUC [***] [***] [***]
---
13900-0000 $ [***] $ [***] $ [***]
[***]GHZ RU [***] [***] [***]
--------
14559-0002 SRU $ [***] $ [***] $ [***]
14560-0001 BRU $ [***] $ [***] $ [***]
[***]GHZ RU [***] [***] [***]
13883-0002 SRU [***] [***] [***]
13883-0001 BRU [***] [***] [***]
[***]GHZ RU [***] [***] [***]
N/A [***] [***] [***]
N/A [***] [***] [***]
</TABLE>
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[***] CONFIDENTIAL TREATMENT REQUESTED
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APPENDIX B
SPECIFICATIONS
1. [***]Ghz Airstar Mil-Block 14605-0000 Test Procedure
2. [***]Ghz Airstar Amplifiers 14112-0000 Test Procedure
3. [***]Ghz Airstar RUC/PS 14290-0000 Test Procedure
4. [***]Ghz Airstar IF Module 14606-0000 Test Procedure
[***] CONFIDENTIAL TREATMENT REQUESTED
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PRODUCT SPECIFICATION FOR AIRSTAR [***]GHz AND [***]GHz RADIOS NETRO
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PRODUCT SPECIFICATION
AIRSTAR [***]GHZ AND [***]GHZ BASE STATION AND
SUBSCRIBER RADIO UNITS
EXCERPTED FROM SYSTEM FUNCTIONAL SPECIFICATION - REVISION: 0.6
ORIGINAL DATE: 15 DECEMBER, 1998
AUTHOR: [***]
[***]
NOTICE
================================================================================
THIS DOCUMENT IS THE PROPERTY OF NETRO CORPORATION AND IS CONFIDENTIAL.
PUBLICATION, DUPLICATION, DISCLOSURE, OR USE FOR ANY PURPOSE NOT EXPRESSLY
AUTHORIZED BY NETRO CORPORATION IS PROHIBITED
================================================================================
[***] CONFIDENTIAL TREATMENT REQUESTED
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PRODUCT SPECIFICATION FOR AIRSTAR [***]GHz AND [***]GHz RADIOS NETRO
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CONTENTS
<TABLE>
<S> <C> <C>
1 OVERVIEW.............................................................................1
1.1 Abstract......................................................................1
1.2 Generic System Specifications.................................................1
1.3 Mechanical and Packaging......................................................1
2 AIR INTERFACE........................................................................2
2.1 Frequency Plan................................................................2
2.1.1 ETSI Spectrum Mask.....................................................4
2.1.2 Interference Tolerance for 4 QAM.......................................4
2.1.3 Frequency Reuse Assumptions............................................5
2.1.4 Two-Frequency Arrangement..............................................5
2.1.5 Two-Frequency Arrangement Coverage.....................................6
2.2 Physical Layer................................................................6
2.2.1 System Gain Calculation................................................7
2.2.2 Range and Availability for [***]GHz ETSI...............................7
2.2.3 Range and Availability for [***]GHz ETSI...............................8
3 SYSTEM COMPONENTS...................................................................11
3.1 Base Radio Unit (BRU).......................................................11
3.1.1 Antenna Performance Characteristics...................................11
3.1.2 Radio Unit Performance Specifications.................................17
3.1.3 RSL Port..............................................................19
3.1.4 IF Interface..........................................................19
3.1.5 BRU Telemetry.........................................................20
3.2 Subscriber Radio Unit (SRU)..................................................20
3.2.1 Antenna Performance Specifications....................................21
3.2.2 Radio Unit Performance Characteristics................................25
3.2.3 Transmit Power Control................................................25
3.2.4 Mount.................................................................25
3.2.5 IF Interface..........................................................26
3.2.6 SRU Telemetry.........................................................26
4 PRODUCT COMPLIANCE..................................................................27
4.1 Reliability and Service Availability.........................................27
4.2 Safety and Protection Requirements...........................................27
4.3 Electromagnetic Compatibility Requirements...................................27
4.3.1 Radiated Emission.....................................................27
4.3.2 Conducted Emissions...................................................27
4.3.3 Radiated RF Immunity..................................................27
4.3.4 Conducted Immunity....................................................28
4.3.5 Electrostatic Discharge...............................................28
4.3.6 Regulatory and Safety Requirements....................................28
4.4 Standards....................................................................28
1.1.1 ATM Forum Documents...................................................28
</TABLE>
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PRODUCT SPECIFICATION FOR AIRSTAR [***]GHz AND [***]GHz RADIOS NETRO
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<TABLE>
<S> <C> <C>
1.1.2 IETF Documents........................................................28
1.1.3 Frame Relay Forum Documents...........................................28
1.1.4 ITU-T Documents.......................................................28
1.1.5 ETSI Documents........................................................29
</TABLE>
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PRODUCT SPECIFICATION FOR AIRSTAR 26GHz AND 10GHz RADIOS NETRO
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FIGURES
<TABLE>
<CAPTION>
<S> <C>
Figure 2-1 - ETSI Spectrum Mask [***]MHz Channel ...................................... 4
Figure 2-2 - Bit Error Ratio [***][***]-QAM ........................................... 4
Figure 2-3 - [***] square-cell reuse scheme ........................................... 6
Figure 2-4 - Path Length & Fade Margin, CCIR [***] by Availability, [***]-QAM ......... 7
Figure 2-5 - Path Length & Fade Margin, CCIR [***] by Availability, [***]-QAM ......... 8
Figure 2-6 - Path Length & Fade Margin for [***] GHz, CCIR [***], Vertical
Polarization by Availability and Channelization ....................................... 9
Figure 2-7 - Path Length & Fade Margin for [***], CCIR [***], Horizontal
Polarization by Availability and Channelization ....................................... 9
Figure 2-8 - Path Length & Fade Margin for [***], CCIR [***], Vertical
Polarization by Availability and Channelization .......................................10
Figure 2-8 - Path Length & Fade Margin for [***], CCIR [***], Horizontal
Polarization by Availability and Channelization .......................................10
Figure 3-1 - BRU Simplified Block Diagram .............................................11
Figure 3-2 - Generic Sector Antenna Elevation Beam Pattern ............................12
Figure 3-3: ETSI [***] GHz[***] Sector Antenna Azimuth Beam Pattern ...................13
Figure 3-4: ETSI [***] GHz[***] Sector Antenna Azimuth Beam Pattern ...................14
Figure 3-5: Generic [***] GHz Sector Antenna Elevation Beam Pattern ...................15
Figure 3-6: [***]GHz[***] Sector Antenna Azimuth Beam Pattern .........................16
Figure 3-7 - Simplified Block Diagram of Subscriber Radio Unit ........................21
Figure 3-8 - [***]GHz SRU with Different Antenna ......................................22
Figure 3-9 - [***]GHz SRU with Integral Planar Antenna ................................22
Figure 3-10 - ETSI [***]GHz Integral Antenna Beam Pattern .............................23
Figure 3-11 - ETSI [***]GHz Directional Antenna Beam Pattern ..........................24
</TABLE>
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REVISION 0.6-1 PAGE 4 11 JANUARY 1999
<PAGE> 23
PRODUCT SPECIFICATION FOR AIRSTAR [***] GHz AND [***] GHz RADIOS NETRO
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TABLES
<TABLE>
<S> <C> <C>
Table 1-1: Outdoor Equipment Operating Environmental Specifications........................1
Table 1-2: System Component Physical Specifications........................................1
Table 2-1: [***] [***] GHz Band [***] MHz Channel Plan.....................................2
Table 2-2: [***] [***] GHz Channel Plan....................................................3
Table 2-3: Physical Layer Specifications...................................................6
Table 3-1: [***] [***] GHz Generic Sector Antenna Specifications..........................12
Table 3-2: [***] [***] GHz Sector Antenna Options.........................................12
Table 3-3: Generic Sector Antenna Elevation Specifications................................13
Table 3-4: [***] [***] GHz [***] Sector Antenna Azimuth Beam Pattern......................13
Table 3-5: [***] [***] GHz [***] Sector Antenna Azimuth Beam Pattern......................14
Table 3-6: [***] [***] GHz Sector Antenna Generic Specifications..........................15
Table 3-7: [***] GHz Sector Antenna Options...............................................15
Table 3-8: Generic [***] GHz Sector Antenna Elevation Beam Pattern........................16
Table 3-9: [***] GHz [***] Sector Antenna Azimuth Beam Pattern............................16
Table 3-10: Radio Unit Generic Performance Specifications.................................17
Table 3-11: [***] [***]GHz Radio Unit Performance Specifications..........................18
Table 3-12: [***] [***]GHz Radio Units Performance Specifications.........................19
Table 3-13: Radio Unit IF Interface Specifications........................................19
Table 3-14: Coaxial Cable Specification...................................................20
Table 3-15: Base Radio Unit Performance Statistics........................................20
Table 3-16: [***] [***] GHz Subscriber Antenna Options....................................21
Table 3-17: [***] [***] GHz Integral Antenna Specifications...............................22
Table 3-18: [***] [***] GHz Integral Antenna Beam Pattern.................................23
Table 3-19: Non-Integral Antenna Performance Specifications...............................24
Table 3-20: [***] [***] GHz Antenna Performance Specifications............................24
Table 3-21: [***] [***] GHz Subscriber Antenna Beam Pattern...............................25
Table 3-22: Base Radio Unit Performance Statistics........................................26
Table 4-1: System Reliability............................................................27
Table 4-2: Mean Time to Repair...........................................................27
</TABLE>
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PRODUCT SPECIFICATION FOR AIRSTAR [***]GHz AND [***]GHz RADIOS NETRO
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1 OVERVIEW
1.1 ABSTRACT
This document describes the functions, features and performance required for the
[***]GHz and [***]GHz Radio Units (BRU and SRU) of the AirStar product family.
This information is to be used by MTI during the manufacture of the BRU and SRU
as per the contract between Netro Corporation and MTI to ensure the product
manufactured by MTI meets Netro's required product specifications. Validation
and test coverage procedures are still in development and will be mutually
agreed at a later date.
1.2 GENERIC SYSTEM SPECIFICATIONS
The specifications for outdoor equipment are listed in the Table 1-1: Outdoor
Equipment Operating Environmental Specifications.
TABLE 1-1: OUTDOOR EQUIPMENT OPERATING ENVIRONMENTAL SPECIFICATIONS
<TABLE>
<CAPTION>
TYPE ITEM SPECIFICATIONS
---- ---- --------------
<S> <C> <C>
Storage Temperature [***]
Environmental Operating temperature [***]
Characteristics Wind loading Operational [***] km/hr
Survival [***] km/hr
Altitude [***] m
</TABLE>
1.3 MECHANICAL AND PACKAGING
TABLE 1-2: SYSTEM COMPONENT PHYSICAL SPECIFICATIONS
<TABLE>
<CAPTION>
SYSTEM DIMENSIONS (H X W X D) WEIGHT
------ ---------------------- ------
<S> <C> <C>
Base Radio Unit (BRU) - [***]GHz 41 cm x 11 cm x 39 cm 6.0 kg
Base Radio Unit (BRU) - [***]GHz 22 cm x 22 cm x 10 cm 9.0 kg
Subscriber Radio Unit (SRU) - [***] GHz 30.4 cm x 16 cm x 20 cm 6.0 kg
Subscriber Radio Unit (SRU) - [***]GHz 22 cm x 22 cm x 10 cm 9.0 kg
</TABLE>
2 AIR INTERFACE
2.1 FREQUENCY PLAN
The AirStar [***] will be operated in either the [***] GHz or [***] GHz [***]
frequency plan. The AirStar system now supports the [***] [***] GHz band
[***]GHz to [***]GHz with T/R spacing of [***]MHz, [***]MHz of step size,
supporting [***] MHz or [***] MHz channels.
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PRODUCT SPECIFICATION FOR AIRSTAR [***]GHz AND [***]GHz RADIOS NETRO
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TABLE 2-1: ETSI [***]GHZ BAND [***]MHZ CHANNEL PLAN
[***]
The associated channel plan for the lower half of the band is listed in Table
2-1: ETSI [***] GHz Band [***] MHz Channel Plan. The table assumes that base
station uses the lower duplex frequency for transmit, although this does not
need to be the case. In some regions, the upper half of the band may be also
used, which is not illustrated here.
The ETSI [***]GHz band is divided into four bands each corresponding to a unique
radio unit model:
- - Band [***] (downstream [***]): [***]GHz
- - Band [***] (downstream [***]): [***]GHz
- - Band [***] (upstream [***]): [***]GHz
- - Band [***] (upstream [***]): [***]GHz
With Release 2, the AirStar system supports the [***] [***] GHz frequency plan
in the range [***]GHz, with a T/R spacing of [***]MHz and [***]MHz of step size.
The system will be capable of supporting [***] MHz or [***] MHz channels. The
associated channel plans for each of the channels are listed below. The AirStar
system is configured that the [***] transmit, higher duplex frequency is used
for Base Station receive. Vice verse for Subscriber terminals. The center
frequencies are in Table 2-2: [***] [***] GHz Channel Plan.
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PRODUCT SPECIFICATION FOR AIRSTAR [***]GHz AND [***]GHz RADIOS NETRO
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TABLE 2-2: ETSI [***] GHZ CHANNEL PLAN
[***]
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SYSTEM FUNCTIONAL SPECIFICATION FOR AIRSTAR NETRO
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2.1.1 ETSI SPECTRUM MASK
ETSI SPECTRUM MASKS
[***]
FIGURE 2-1 - ESI SPECTRUM MASK [***]MHZ CHANNEL
For the [***]GHz and [***]GHz [***] version, the product has been designed to
comply with the ETSI spectrum mask defined below.
2.1.2 INTERFERENCE TOLERANCE FOR [***]
[***]
FIGURE 2-2 - BIT ERROR RATIO (EB/NO, CIR, [***])
The values in Figure 2-2 - Bit Error Ratio [***] are based on extensive forward
error correction. As stated earlier the AirStar system uses [***], which is used
in the upstream transmission. Without [***], the [***] effect could be
disastrous. The analysis below refers to the upstream direction because it is
has less . . .
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FEC overhead than the downstream direction. In the downstream [***] thus the
error performance is slightly better.
The degradation for [***] and [***] is tolerable because these values are well
within the link rain-fade margins. One view is that these are lost margins that
affect the link availability for subscriber terminals located in an interference
zone. But this view is too pessimistic.) [***] in linear unit's increases nearly
exponentially with distance. Therefore, in a [***] the interference source is
attenuated much more than the local source and [***] is lost.
At [***] the degradation is [***]. Therefore, a suitable frequency reuse scheme
will exclude coverage for areas with CIR below [***].
2.1.3. Frequency Reuse Assumptions
1. The base stations use directional (sectorial) antennas with front-to-back
ratio of at lease [***] dB, antenna pattern per ETSI specs (worst case).
2. The subscriber terminals use directional antennas with front-to-back ratio
of at least [***] dB.
3. Each sector transmits in [***]. If [***] are aggregated in one sector, they
are considered one frequency band for this analysis. Specifically, if four
[***] MHz channels are in use, a [***] reuse scheme allows to group channels
[***] and channels [***].
4. Cross polarization is not included. This degree of freedom is additional to
this analysis and can be added to [***], however horizontal polarization
will have a [***] then vertical polarization caused by [***].
5. The transmission if full duplex, Frequency [***]. All base stations transmit
in the same frequency band.
6. [***] AM modulation with strong FEC, such as BCH, [***] block.
7. All terminals have line of sight to their base station.
8. The area is a perfect plane where all base stations are visible (a worst
case for interference).
9. Any receiver can reject adjacent channels to a negligible interference. A
[***] dB rejection is sufficient for most situations discussed below.
10. Free space attenuation law (Inverse Square of distance).
2.1.4 Two-Frequency Arrangement
A [***] arrangement can be assembled by a square cell shape or by hexagonal
shape. An example of a square arrangement is shown in Figure 2-3 -
Two-[***] reuse scheme.
*** CONFIDENTIAL TREATMENT REQUESTED
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SYSTEM FUNCTIONAL SPECIFICATION FOR AIRSTAR NETRO
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[***]
FIGURE 2-3 - TWO-FREQUENCY SQUARE-CELL REUSE SCHEME
2.1.5 TWO-FREQUENCY ARRANGEMENT COVERAGE
Based on the assumptions above and the AirStar system elements analysis of
coverage of a two-frequency square pattern has shown that about [***] of
subscribers can have good CIR with the [***] mm subscriber antenna. A large,
[***]mm antenna increases CIRlimited coverage to virtually [***]. This
performance is due to the following key enabling features.
- - Interference-tolerant [***]QAM modulation
- - Directional subscriber terminal antennas
- - Sector antennas width with fast roll-off
- - A special square-zone reuse geometry
- - Extensive Forward Error Correction
2.2 PHYSICAL LAYER
The specifications for the physical layer of the air interface are given in
Table 2-3
TABLE 2-3: PHYSICAL LAYER SPECIFICATIONS
[***]
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2.2.1 SYSTEM GAIN CALCULATION
System gain is sum of transmit power output and receive sensitivity.
The system gain for ETSI [***] GHz will be [***] dB and [***] dB for [***] and
[***] MHz channelization, respectively.
The system gain for ETSI [***] GHz will be [***] dB and [***] dB for [***] and
[***] MHz channelization, respectively.
2.2.2 RANGE AND AVAILABILITY FOR [***]GHZ [***]
An indication of the potential range (cell size) at different availability
levels and in different climate zones is illustrated in the path length and fade
margin curves below. CCIR regions E and K are presented with [***] climatic
availability. The graphs are created based on [***] degree ([***] dBi) Base
Station antenna with the integral subscriber antenna.
LINK CURVE, [***]GHZ, [***]QAM, [***]DB NF, [***]DBM,
CCIR [***], VERTICAL POLARIZATION, [***]DBM THRESHOLD
[***]
FIGURE 2-4 PATH LENGTH & FADE MARGIN, CCIR [***]QAM
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LINK CURVE, [***]GHZ, [***][***], [***]DB NF, [***]DBM,
CCIR [***], VERTICAL POLARIZATION, [***]DBM THRESHOLD
[***]
FIGURE 2-5 - PATH LENGTH & FADE MARGIN, CCIR [***] BY AVAILABILITY, [***]QAM
2.2.3 RANGE AND AVAILABILITY FOR [***]GHZ ETSI
An indication of the potential range (cell size) at different availability
levels and in different climate zones is illustrated in the path length and fade
margin curves below. CCIR [***] are presented with [***] and [***] climatic
availability. The graphs have been created based on [***] degree ([***] dBi)
Base Station antennas with integral planar antennae.
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[***]
FIGURE 2-6 - PATH LENGTH & FADE MARGIN FOR [***] GHZ, CCIR [***], [***]
POLARIZATION BY AVAILABILITY AND CHANNELIZATION
[***]
FIGURE 2-7 - PATH LENGTH & FADE MARGIN FOR [***] GHZ, CCIR [***] POLARIZATION
BY AVAILABILITY AND CHANNELIZATION
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[***]
FIGURE 2-8 - PATH LENGTH & FADE MARGIN FOR [***] GHZ, CCIR [***],
[***] POLARIZATION BY AVAILABILITY AND CHANNELIZATION
[***]
FIGURE 2-9 - PATH LENGTH & FADE MARGIN FOR [***] GHZ, CCIR [***],
POLARIZATION BY AVAILABILITY AND CHANNELIZATION
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SYSTEM FUNCTIONAL SPECIFICATION FOR AIRSTAR NETRO
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3 SYSTEM COMPONENTS
3.1 Base Radio Unit (BRU)
The BRU is an outdoor unit, which includes [***] transmitter and receiver, as
well as a [***] antenna. It utilizes a frequency [***] which allows transmit and
receive to [***]. The main function of a BRU is to interface with the BMU/BMM
and perform [***] from and to an [***]. The integral antenna is [***] under
certain technical instructions.
Figure 3-1 illustrates a simplified system block diagram of the BRU. The
diagram aims to identify the key modules within the BRU.
[***]
[***]
Figure 3-1 - BRU Simplified Block Diagram
3.1.1 Antenna Performance Characteristics
3.1.1.1 Base Station Antenna Sectorization Options
Horn antennas are used for sectorized base station antennas in ETS [***] GHz
band. Planar antenna design is selected for [***] GHz [***] band.
3.1.1.2 Antenna Performance - [***] GHz
The BRU horn antenna interfaces to the front face of each BRU. The antenna is
available with various cell coverage patterns (detailed below). The antenna
includes a weather protection radome.
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SYSTEM FUNCTIONAL SPECIFICATION FOR AIRSTAR NETRO
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TABLE 3-1: ETSI [***] GHZ GENERIC SECTOR ANTENNA SPECIFICATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
[***]
</TABLE>
TABLE 3-2: ETSI [***] GHZ SECTOR ANTENNA OPTIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
[***]
</TABLE>
SECTOR ANTENNA RPE - ELEVATION
[***]
FIGURE 3-2- GENERIC SECTOR ANTENNA ELEVATION BEAM PATTERN
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SYSTEM FUNCTIONAL SPECIFICATION FOR AIRSTAR NETRO
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TABLE 3-3: GENERIC SECTOR ANTENNA ELEVATION SPECIFICATIONS
[***]
Sector antenna [***] RPE Azimuth
[***] Angle from bore sight (degrees)
FIGURE 3-3: [***] [***] GHZ [***] degrees SECTOR ANTENNA AZIMUTH BEAM PATTERN
TABLE 3-4: [***] [***] GHZ [***] SECTOR ANTENNA AZIMUTH BEAM PATTERN
[***]
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Sector antenna [***] degrees RPE - Azimuth
[***]
FIGURE 3-4: [***] [***] GHZ [***] SECTOR ANTENNA AZIMUTH BEAM PATTERN
TABLE 3-5: [***] [***] GHZ [***] degrees SECTOR ANTENNA AZIMUTH BEAM PATTERN
[***]
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3.1.1.3 ANTENNA PERFORMANCE - [***] GHZ
TABLE 3-6: [***] [***] GHZ SECTOR ANTENNA SPECIFICATIONS
[***]
TABLE 3-7: [***] GHZ SECTOR ANTENNA OPTIONS
[***]
[***] Angle from bore sight (degrees)
FIGURE 3-5: GENERIC [***] GHZ SECTOR ANTENNA ELEVATION BEAM PATTERN
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SYSTEM FUNCTIONAL SPECIFICATION FOR AIRSTAR NETRO
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TABLE 3-8: GENERIC [***] GHZ SECTOR ANTENNA ELEVATION BEAM PATTERN
[***]
FIGURE 3-6: [***] GHZ [***] SECTOR ANTENNA AZIMUTH BEAM PATTERN
TABLE 3-9: [***] GHZ [***] SECTOR ANTENNA AZIMUTH BEAM PATTERN
[***]
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3.1.2 RADIO UNIT PERFORMANCE SPECIFICATIONS
3.1.2.1 GENERIC RADIO UNIT PERFORMANCE SPECIFICATIONS
Radio Unit performance specifications common to all units are shown in Table
3-10: Radio Unit Generic Performance Specifications
[***]
3.1.2.2 ETSI [***] GHZ RADIO UNITS PERFORMANCE SPECIFICATIONS
The ETSI [***]GHz radio units performance specifications are shown in
Table 3-11: ETSI [***]GHz Radio Unit Performance Specifications
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TABLE 3-11: ETSI [***] GHZ RADIO UNIT PERFORMANCE SPECIFICATIONS
3.1.2.3 ETSI [***] GHZ RADIO UNITS PERFORMANCE SPECIFICATIONS
The ETSI [***] GHz radio units performance specifications are shown in Table
3-12.
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TABLE 3-12: ETSI [***] GHZ RADIO UNITS PERFORMANCE SPECIFICATIONS
[***]
3.1.3 RSL PORT
The SRU includes a Receive Signal Level (RSL) port, which is a BNC connector
that provides DC-level indication of RSL for radio adjustment.
3.1.4 IF INTERFACE
A single coax cable carries the transmit IF, receiver IF, up link telemetry,
down link telemetry, RF reference and DC power. The specification for the
signals on the IF interface are summarized in Table 3-13.
[***]
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The BRU and BMM IF interfaces are [***] Ohm TNC connectors. The BRU has an AGC
circuit on the IF interface to normalize the IF signals and overcome cable loss
due to varying lengths. Based on the cable AGC dynamic range, the IF cable type
can be employed based on the length requirement, for example LMR240 for less
than [***] meter and LMR400 for less than [***] meters.
Use only coaxial cable that meets the specifications in the Table below.
[***]
An undamaged, unconnected coaxial cable should have a very high resistance
between center and ground. Cables reading less than 10MOhms should be carefully
inspected for water ingress or connector corrosion.
3.1.5 BRU TELEMETRY
[***]
3.2 SUBSCRIBER RADIO UNIT (SRU)
The SRU is a compact outdoor unit, which includes radio frequency (RF)
transmitter and receiver, as well as an integral antenna. For certain
applications an optional non-integral antennae can be used to increase the link
performance. The SRU utilizes a frequency diplexer, which allows transmitter and
receiver to share the same antenna unit.
The main function of an SRU is to provide a link to the BRU and to interface
with SAS at an intermediate frequency (IF).
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[***]
[***]
FIGURE 3-7 - SIMPLIFIED BLOCK DIAGRAM OF SUBSCRIBER RADIO UNIT
The SRU in the standard configuration is a compact integrated transceiver as
illustrated by Figure 3-7 above
3.2.1 ANTENNA PERFORMANCE SPECIFICATIONS
3.2.1.1 [***] GHZ SRU ANTENNA GAIN
The ETSI [***] GHz subscriber terminal supports an integral [***] mm antenna, or
external [***] mm or [***] mm parabolic antenna listed in Table 3-16: [***]
[***] GHz Subscriber Antenna Options.
[***]
TABLE 3-16: ETSI [***] GHZ SUBSCRIBER ANTENNA OPTIONS
- - For the integral SRU, a [***]mm lens-corrected horn antenna is used, which
provides [***]dBi (nominal) in [***] GHz band. If a larger higher gain
non-integral antenna is required [***] or [***] antennae can be provided.
Figure 3-8 - [***] GHz SRU with Different Antennae illustrates SRU with integral
antenna and [***] non-integral antenna.
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[***]
3.2.1.2 [***] GHZ SUBSCRIBER TERMINAL ANTENNA
The ETSI [***] GHz subscriber terminal supports an integral planar antenna
capable of [***] dBi of gain, nominal, [***] dBi minimum.
[***]
3.2.1.3 SUBSCRIBER ANTENNA PROTECTION
The antenna is enclosed with the radio unit. An antenna radome is designed to be
hydrophobic to repel liquid water droplets and to minimize the accumulation of
snow and ice.
3.2.1.4 [***] [***] GHZ INTEGRAL ANTENNA
The [***] GHz integral antenna in the standard SRU is a high performance lens
corrected horn antenna. The antenna diameter is [***]mm. It is characterized in
Table 3-17.
TABLE 3-17: [***] [***] GHZ INTEGRAL ANTENNA SPECIFICATIONS
[***]
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[***]
FIGURE 3-10- ETSI [***] GHZ INTEGRAL ANTENNA BEAM PATTERN
TABLE 3-18: ETSI [***] GHZ INTEGRAL ANTENNA BEAM PATTERN
[***]
3.2.1.5 ETSI [***] GHZ NON-INTEGRAL ANTENNA OPTIONS
The optional antennas are standard ETSI and FCC approved high gain antennas used
extensively in the point to point market place. They are nominally [***]
and [***] diameters and have the characteristics detailed below.
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TABLE 3-19: NON-INTEGRAL ANTENNA PERFORMANCE SPECIFICATIONS
[***]
3.2.1.6 ETSI [***] GHZ INTEGRAL ANTENNA
The integral antenna in the standard [***]GHz SRU is a high performance planar
antenna. The frontal aspect dimensions are [***]. It is characterized by
the data presented below.
TABLE 3-20: ETSI [***] GHZ ANTENNA PERFORMANCE SPECIFICATIONS
[***]
[***]
FIGURE 3-11: ETSI [***] DIRECTIONAL ANTENNA BEAM PATTERN
[***] CONFIDENTIAL TREATMENT REQUESTED
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SYSTEM FUNCTIONAL SPECIFICATION FOR AIRSTAR NETRO
- --------------------------------------------------------------------------------
TABLE 3-21: ETSI [***] GHZ SUBSCRIBER ANTENNA BEAM PATTERN
[***]
3.2.2 RADIO UNIT PERFORMANCE CHARACTERISTICS
The same radio unit is used in the SRU as in the BRU with different packaging.
The subscriber radio units conform to the same generic radio unit specifications
summarized in Table 3-10. The ETSI [***] GHz SRU conforms to the same
specifications in Table 3-11. The ETSI [***] GHz SRU conforms to the same
specifications in Table 3-12.
3.2.3 TRANSMIT POWER CONTROL
The subscriber radio unit transmit power is controlled in a closed loop manner
via feedback from the BSC to the SAS in the CellMAC overhead, so that all
subscriber transmissions arrive at the base station at the same power level
regardless of range or rain fade conditions. The SRU transmit power shall be
dynamically controlled over the specified range in [***] dB increments with an
accuracy of [***] dB via CellMAC.
3.2.4 MOUNT
The mount is different for the antenna options as described below.
3.2.4.1 WIND LOADING
The SRU and mounts are designed to operate under wind gusts or sustained loads
of up to [***] km/hr, and survive up to [***] km/hr.
3.2.4.2 INTEGRAL ANTENNA MOUNT
The mechanical interface for the [***] GHz is a two-bolt attachment to the SRU
support cradle. The SRU cradle mounts to the outside wall or other mounting
surface at the subscriber premises.
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SYSTEM FUNCTIONAL SPECIFICATION FOR AIRSTAR NETRO
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For the [***]GHz system the mechanical interface is a one bolt attachment to the
SRU support cradle. The SRU cradle mounts to the outside wall or other mounting
surface at the subscriber premises. The mounting is intended to be low cost and
simple to install in common with a high volume subscriber application. Panning
in both azimuth and elevation is catered for, with a simple locking mechanism.
3.2.4.3 NON-INTEGRAL [***] GHZ ANTENNA MOUNT
The antenna is connected to a pole mount and the SRU is connected to the
antenna. This allows the radio transceiver to be removed without the need to
realign the antenna. The mounting system uses a waveguide flange and quick
release mounts, as is standard in the point to point area.
3.2.5 IF INTERFACE
The SAS-SRU IF interface is identical to the BRU-BMM IF interface.
3.2.6 SRU TELEMETRY
[***]
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SYSTEM FUNCTIONAL SPECIFICATION FOR AIRSTAR NETRO
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4 PRODUCT COMPLIANCE
4.1 RELIABILITY AND SERVICE AVAILABILITY
The MTBF specifications of the AirStar system components are listed in the Table
4-1: System Reliability. The MTBF values were calculated according to Bellcore
V5, Basic Calculation Mode, Method 1, Case 3.
TABLE 4-1: SYSTEM RELIABILITY
[***]
The reliability and service availability are further enhanced by the AirStar
system redundancy scheme, which will be discussed in section 3.1.2.
TABLE 4-2: MEAN TIME TO REPAIR
[***]
4.2 SAFETY AND PROTECTION REQUIREMENTS
The equipment shall meet the following standards:
- - IEC 950 / EN 41003 & 60950
- - LVD 73/23/EEC
4.3 ELECTROMAGNETIC COMPATIBILITY REQUIREMENTS
- - EMC 89/336/EC
4.3.1 RADIATED EMISSION
The equipment shall meet the following standards:
- - Cispr22/ EN 55022
4.3.2 CONDUCTED EMISSIONS
The equipment shall meet the following standards:
- - Cispr22/ EN 55022
- - EN 50082-1
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SYSTEM FUNCTIONAL SPECIFICATION FOR AIRSTAR NETRO
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4.3.3 RADIATED RF IMMUNITY
The equipment shall meet the following standards:
- - EN 50082-1
4.3.4 CONDUCTED IMMUNITY
The equipment shall meet the following standards:
- - EN 50082-1
4.3.5 ELECTROSTATIC DISCHARGE
The equipment shall meet the following standards:
- - EN 50082-1
4.3.6 REGULATORY AND SAFETY REQUIREMENTS METRO
- - BAP T211 ZV 11/26 Outdoor radio link requirements
- - MPTI414, MPT1420
4.4 STANDARDS
1.1.1 ATM FORUM DOCUMENTS
AF-UNI-001 0.002 ATM User Network Interface Specification Version 3.1
AF-SAA-0032 Circuit Emulation Interoperability Specification
AF-VTOA-0078 Circuit Emulation Interoperability Specification 2.0
AF-BICI-0013.003 BISDN Inter Carrier Interface (B-ICI) Specification
Version 2.0 (Integrated)
1.1.2 IETF DOCUMENTS
RFC1213 MIB II
RFC1406 Definitions of Managed Objects for the DS1 and El
Interface Types
RFC1483 Multiprotocol Encapsulation over ATM
RFC1695 ATM MIB
1.1.3 FRAME RELAY FORUM DOCUMENTS
FRF.5 Frame Relay/ATM Network Interworking
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SYSTEM FUNCTIONAL SPECIFICATION FOR AIRSTAR NETRO
- --------------------------------------------------------------------------------
1.1.4 ITU-T DOCUMENTS
G.703 Physical/Electrical Characteristics of Hierarchical
Digital Interfaces -General Aspects of digital
Transmission Systems; Terminal Equipments
G.704 Synchronous Frame Structures Used at Primary and
Secondary Hierarchical Levels (1991)
G.821 Error performance of an international digital connection
operating at a bit rate below the primary rate and
forming part of an integrated services digital network
G.823 The control of jitter and wander within digital networks
which are based on the 2048 kbit/s hierarchy
G.826 Recommendation G.826 (08/96) - Error performance
parameters and objectives for international, constant
bit rate digital paths at or above the primary rate
1.1.5 [***] DOCUMENTS
DEN/TM-04050-1 Point-to-multipoint digital radio systems in the band
[***] GHz with different access methods.
EN 55022 Limits and Methods of Measurement of Radio Disturbance
Characteristics of Information Technology Equipment
(1993), Including Amendments Al (1995) and A2 (1997)
EN 50082-1 Electromagnetic Compatibility - Generic Immunity Standard
Part I: Residential, Commercial and Light Industry
EN 50082-2 Electromagnetic Comparability - Generic Immunity Standard
Part 2: Industrial Environment
EN 60950 Safety of Information Technology Equipment, Including
Electrical Business Equipment, Including Amendments Al
(1993), A2 (1993), A3 (1995), A4 (1997) and All (1997),
IEC 950 (19910 Plus Amendment I (1992), Amendment 2
(1993), Amendment 3 (1995), and Amendment 4 (1996).
EN 41003 Particular Safety Requirements for Equipment to Be
Connected to Telecommunication Networks
ETS 300 019
prETS 300 431
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SYSTEM FUNCTIONAL SPECIFICATION FOR AIRSTAR NETRO
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PRODUCT SPECIFICATION
AIRSTAR [***] GHZ BASE STATION AND SUBSCRIBER
RADIO UNITS
EXCERPTED FROM [***] GHZ RADIO SUBSYSTEM SPECIFICATION - REVISION: 6
ORIGINAL DATE: 6 JANUARY 1999
AUTHOR: [***]
NOTICE
================================================================================
THIS DOCUMENT IS THE PROPERTY OF NETRO CORPORATION AND IS CONFIDENTIAL.
PUBLICATION, DUPLICATION, DISCLOSURE, OR USE FOR ANY PURPOSE NOT EXPRESSLY
AUTHORIZED BY NETRO CORPORATION IS PROHIBITED
================================================================================
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[***] GHz Point to Multipoint Radio Subsystem Specification
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1 ABSTRACT..............................................................................4
2 APPLICABLE DOCUMENTS..................................................................4
2.1 TRANSMISSION STANDARDS.........................................................4
2.2 EMC (EMISSIONS & IMMUNITY) AND ESD STANDARDS...................................4
2.3 TRAFFIC INTERFACE STANDARDS....................................................4
2.4 SAFETY STANDARDS...............................................................5
2.5 BELLCORE EQUIPMENT RELIABILITY AND AVAILABILITY
STANDARDS......................................................................5
2.6 ENVIRONMENTAL STANDARDS........................................................5
3 FUNCTIONAL REQUIREMENTS...............................................................6
3.1 AIR INTERFACE..................................................................6
3.1.1 RF Layer................................................................6
3.1.2 Channel Plan............................................................6
3.1.3 Physical Layer..........................................................7
3.1.4 Medium Access Control...................................................8
3.1.5 Receiver Sensitivity....................................................8
3.1.6 Air Interface Management................................................8
3.2 SUBSCRIBER RADIO UNIT (SRU)....................................................9
3.2.1 Antenna Gain & Beamwidth................................................9
3.2.2 Antenna Beam Pattern...................................................10
3.2.3 Radio Unit Performance Specifications..................................10
3.2.4 Transmit Power.........................................................11
3.2.5 Transmit Power Control.................................................11
3.2.6 RSL Test Port..........................................................12
3.2.7 Reliability............................................................12
3.2.8 Physical Requirements..................................................12
3.2.9 Mounting...............................................................12
3.2.10 SAS-SRU Interface......................................................13
3.3 BASE RADIO UNIT (BRU).........................................................14
3.3.1 Radio Unit Performance.................................................14
3.3.2 Antenna Performance....................................................14
3.3.3 Reliability............................................................17
3.3.4 Physical Requirements..................................................18
3.3.5 Mounting...............................................................18
3.3.6 BRU-BMM Interface......................................................18
3.4 SYSTEM LEVEL REQUIREMENTS.....................................................19
3.4.1 Transport Latency......................................................19
3.4.2 Operation Duty Cycle...................................................19
3.4.3 Equipment Labeling.....................................................19
4 ENVIRONMENTAL REQUIREMENTS...........................................................20
4.1 TEMPERATURE RANGE.............................................................20
4.1.1 Base Station Temperature Range.........................................20
4.1.2 Subscriber Equipment Temperature Range.................................20
</TABLE>
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<TABLE>
<S> <C> <C>
4.2 HUMIDITY......................................................................20
4.2.1 Outdoor Humidity.......................................................20
4.3 WINDLOADING...................................................................20
4.3.1 Outdoor Operational wind Loading.......................................20
4.3.2 Outdoor Survival wind Loading..........................................20
4.4 SHOCK & VIBRATION.............................................................20
4.5 EMI/STATIC DISCHARGE..........................................................20
4.6 ELECTROMAGNETIC COMPATIBILITY (EMC)...........................................21
4.7 FLAMMABILITY..................................................................21
4.8 RAIN AND DUST.................................................................21
4.9 OPERATIONAL ALTITUDE..........................................................21
4.10 SYSTEM AVAILABILITY...........................................................21
4.11 RELIABILITY...................................................................21
4.12 SERVICEABILITY.................................................................21
</TABLE>
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[***] GHz Point to Multipoint Radio Subsystem Specification
1 ABSTRACT
This document describes the functions, features and performance required for the
[***]GHz Radio Units (BRU and SRU) of the AirStar product family. This
information is to be used by MTI during the manufacture of the BRU and SRU as
per the contract between Netro Corporation and MTI to ensure the product
manufactured by MTI meets Netro's required product specifications. Validation
and test coverage procedures are still in development and will be mutually
agreed at a later date.
2 APPLICABLE DOCUMENTS
This section lists documents and standards that are referenced in or are
applicable, in whole or in part, to this point-to-multipoint radio
specification.
2.1 TRANSMISSION STANDARDS
R 2.1-1 FCC Part 101 Fixed Microwave Services
R 2.1-2 FCC Order 97-391 Rules Regarding the [***]GHz Bands
2.2 EMC (EMISSIONS & IMMUNITY) AND ESD STANDARDS
R 2.2-1 FCC Part 15 Class B
R 2.2-2 Bellcore GR-1089-CORE Electromagnetic Compatibility and Electrical
Safety - Criteria for Network Telecommunications Equipment
R 2.2-3 ETSI ETS 300 385 Radio Equipment & Systems; Electromagnetic
Compatibility Standard for Digital Fixed Radio Links & Ancillary
Equipment with Data Rates at around 2 Mbit/sec and above.
2.3 TRAFFIC INTERFACE STANDARDS
R 2.3-1 ITU-T G.703 Physical Electrical Characteristics of Hierarchical Digital
Interfaces -General Aspects of Digital Transmission Systems; Terminal
Equipment
R 2.3-2 ITU-T G.824 Control of Jitter and Wander within Digital Networks
Which Are Based on the 1544 Kbit/s Hierarchy
R 2.3-3 ANSI T1.102 Digital Hierarchy - Electrical Interfaces ANSI TI.104
Exchange/Interexchange Carrier Interfaces - Individual Channel
Signaling Protocols (Oct 14 1997)
R 2.34 ANSI T1.403 Telecommunications - Network-to-Customer Installation
- DSI Metallic Interface; Revision of ANSI T1.403-1989
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2.4 SAFETY STANDARDS
R 2.4-1 UL 1459 UL Standard for Safety of Telephone Equipment, 3rd
Edition (Nov 14 1997)
R 2.4-2 UL 1950 UL Standard for Safety of Information Technology
Equipment, Jul 1 1997
R 2.4-3 EN 60950 Safety of Information Technology Equipment, Including
Electrical Business Equipment
R 2.4-4 EN 41003 Particular Safety Requirements for Equipment to Be Connected
to Telecommunication Networks
2.5 BELLCORE EQUIPMENT RELIABILITY AND AVAILABILITY STANDARDS
R 2.5-1 TR NWV-000332 Issue 5, Reliability Prediction Procedure for
Electronic Equipment
2.6 ENVIRONMENTAL STANDARDS
R 2.6-1 ETS 300 019 Equipment Engineering (EE); Environmental Conditions
and Environmental Tests for Telecommunications Equipment.
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[***] GHz Point to Multipoint Radio Subsystem Specification
3 FUNCTIONAL REQUIREMENTS
3.1 AIR INTERFACE
3.1.1 RF LAYER
3.1.1.1 Frequency Range
R 3.1-1 The output frequency range shall be from [***] GHz to [***] GHz.
3.1.1.2 T/R Spacing
R 3.1-2 The frequency interval between transmit and receive frequencies
shall be [***] MHz.
3.1.1.3 Out-of-Band RF Power
R 3.1-3 The out-of-band RF power shall conform to FCC Part 101.
3.1.2 CHANNEL PLAN
R 3.1-4 The system shall support the [***] GHz frequency plan in the
range [***] GHz to [***] GHz, with a [***] spacing of [***] MHz and
[***] MHz of step size.
R 3.1-5 The system shall be capable of supporting [***] MHz channels.
R 3.1-6 It is desired that the system be able to support [***] MHz channels
using [***]QAM modulation.
R 3.1-7 The center frequencies for the associated channelization are
listed in Table 3-1. The AirStar system is configured that the lower
duplex frequency is used for Base Station transmit, higher duplex
frequency is used for Base Station receive and vice versa for
Subscriber terminals.
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[***] GHz Point to Multipoint Radio Subsystem Specification
Table 3-1: FCC [***] GHz Channel Plan, [***] MHz Channelization
[***]
3.1.3 PHYSICAL LAYER
3.1.3.1 Modulation Type
R 3.1-8 Modulation for the air interface shall be [***] QAM or [***] QAM.
3.1.3.2 Bandwidth Options, Channel Bit and Symbol Rates
R 3.1-9 The air interface shall support the channel symbol rates and ATM
payload rates in Table 3-2.
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[***]
3.1.3.3 Spectral Shape
R 3.1-10 Spectral shape shall conform to an (alpha) = [***] square root
raised cosine.
3.1.4 MEDIUM ACCESS CONTROL
3.1.4.1 Forward Error Correction Encoding
R 3.1-11 Forward error correction on the upstream data shall have a
coding gain not less than that of a [***] code.
R 3.1-12 Forward error correction on the downstream data shall have a
coding gain not less than that of a [***] code.
3.1.4.2 Scrambling
R 3.1-13 Self-synchronous scrambling with a [***] order or higher
polynomial truncated to the length of the packet shall be used.
3.1.5 RECEIVER SENSITIVITY
R 3.1-14 The typical received input RF power (measured at the antenna
output port) to achieve a decoded [***] shall be as shown in the
table below.
The receiver sensitivity for a decoded BER of [***] is nominally [***] dB higher
than for [***].
[***]
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3.1.6 AIR INTERFACE MANAGEMENT
3.1.6.1 Configuration
R 3.1-15 The air interface shall support the configuration parameters in
Table 34 via the out of band management interface via SNMP
Table 34: CellMAC Configurable Parameters for each Frequency Channel
[***]
3.2 SUBSCRIBER RADIO UNIT (SRU)
The Subscriber Radio Unit (SRU) shown on the following page is designed to fit
in a variety of customer premise environments. It is built with an integral
directional antenna and weighs less than [***] kg. The standard subscriber
antenna is a [***]mm lens-corrected horn. This provides a gain of [***]dBi
minimum in [***]GHz, [***]GHz band, [***]dBi minimum in [***] GHz band. The
radiation pattern subscriber radio unit exceeds the requirements for ETSI point
to multi-point equipment. If higher gain is required, the non-integral version
of the antennas can be used. These provide a gain up to [***]dBi minimum.
In general, the [***] GHz band is divided into four bands:
- Band 1: [***] GHz
- Band 3: [***] GHz
- Band 2: [***] GHz
- Band 4: [***] GHz
The band [***] and band [***], band [***] and band [***] are paired up for
transmit and receive radio operation with T/R separation of [***] MHz.
3.2.1 ANTENNA GAIN & BEAMWIDTH
R 3.2-1 The SRU antennas shall have characteristics in Table 3-5
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Table 3-5: Subscriber Antenna Options
[***]
3.2.2 ANTENNA BEAM PATTERN
R 3.2-2 The integral antenna shall meet the co-polar and cross-polar
discrimination listed in Table 3-6 and illustrated in Figure 3-1.
Directional Antenna RPE
[***]
Figure 3-1 -- SRU Integral Antenna Co-Polar and Cross-Polar Discrimination
[***]
3.2.3 RADIO UNIT PERFORMANCE SPECIFICATIONS
3.2.3.1 Generic Performance Specifications
R 3.2-3 All radio units shall meet the performance specifications shown
in Table 3-7.
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[***] GHz Point to Multipoint Radio Subsystem Specification
Table 3-7: Radio Unit Generic Performance Specifications
[***]
3.2.3.2 [***] [***] GHz Radio Unit Performance Specifications
R 3.2-4 The [***] [***] GHz radio units shall meet the performance
specifications in Table 3-8.
Table 3-8: [***] [***] GHz Radio Unit Performance Specifications
[***]
3.2.4 TRANSMIT POWER
R 3.2-5 The maximum transmit power measured at the input port to the antenna
shall be a minimum of [***] dBm [***] dB for [***] QAM and [***] dBm
[***] dB for [***] QAM.
3.2.5 TRANSMIT POWER CONTROL
R 3.2-6 The subscriber transmit power shall be controlled to an accuracy
of [***] dB inclusive of all feed forward mechanisms based on SRU RSL
and closed loop feedback mechanisms from the base station RSL.
R 3.2-7 The subscriber transmit power control dynamic range shall be [***]
dB for [***] QAM and [***] dB for [***] QAM.
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3.2.6 RSL TEST PORT
R 3.2-8 The SRU shall have a test point with a DC voltage level
corresponding to the aggregate received power
3.2.6.1 Relative Accuracy
R 3.2-9 The RF power shall vary monotonically with the DC test point
voltage over the entire dynamic range of the SRU.
The RSL test point does not provide a calibrated RSL to DC voltage
transfer function.
3.2.6.2 RSL Measurement Precision
R 3.2-10 The RSL to DC voltage transfer function shall have a minimum
precision of [***] dB per [***] mV.
3.2.6.3 Connector
R 3.2-11 A BNC female connector with protective cap shall be used as the
received power test point.
3.2.7 RELIABILITY
3.2.7.1 Mean Time to Failure
R 3.2-12 The MTTF of the SRU shall be [***], minimum.
3.2.7.2 Mean Time to Repair
R 3.2-13 The maximum mean time to repair (MTTR) of an SRU shall be [***]
excluding travel and access time.
The specified MTTR excludes repair of the cabling to/from the SRU.
R 3.2-14 Field replacement of the entire SRU shall be the method of
repair. 3.2.7.2
3.2.8 PHYSICAL REQUIREMENTS
3.2.8.1 SRU Dimensions
R 3.2-15 The SRU shall have nominal dimensions of 30 cm X 16 cm X 20 cm
using the integral antenna.
3.2.8.2 SRU Cooling
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R 3.2-16 The SRU shall not require the use of fans or any other rotating
equipment for the purposes of augmenting equipment cooling or
maintaining system environmental specifications.
3.2.9 MOUNTING
R 3.2-17 The SRU shall have wall mount and pole mount options. The pole
mount option includes both 3" and 4" poles.
R 3.2-18 The SRU shall have an optional mounting mechanism which enables
SRU replacement without the need for realignment.
3.2.9.1 Initial Alignment Accuracy
R 3.2-19 The antenna mounting mechanism shall be capable of continuous
alignment to achieve an arbitrary pointing error.
3.2.9.2 Sustained Alignment Accuracy
R 3.2-20 The antenna mounting shall have the capability of maintaining a
pointing error of less than [***] dB over all operational environmental
conditions, over the mean lifetime of the radio unit.
3.2.9.3 Realignment After SRU Replacement
R 3.2-21 The mount shall enable replacement of the SRU without requiring
realignment when in a pole mount configuration.
3.2.10 SAS-SRU INTERFACE
3.2.10.1 IF connector
R 3.2-22 The IF connector shall be of type TNC, with [***] impedance
R 3.2-23 A single [***] coax cable shall be used to carry transmit and
receive IF signals, SRU control and telemetry, and DC power
3.2.10.2 SRU Configuration
R 3.2-24 The SRU shall support configuration of the transmit and receive
frequencies and transmit power level via the coax connection to the
SAS.
3.2.10.3 SRU Telemetry
R 3.2-25 The SRU shall report the performance statistics shown in Table
3-9 via telemetry to the SAS. These values are reportable via SNMP
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[***]
3.2.10.4 SRU Prime Power
R 3.2-26 The SRU shall be powered via the coaxial cable connection to the SAS.
3.2.10.5 Intrabuilding Cabling
R 3.2-27 Intrabuilding wiring between the SAS and the SRU shall be a
maximum of 300 meters using LMR4OO coaxial cable.
This provides for up to [***] of cable loss between the SAS and SRU.
3.3 BASE RADIO UNIT (BRU)
3.3.1 RADIO UNIT PERFORMANCE
3.3.1.1 Center Frequency Uncertainty
R 3.3-1 Tuning accuracy shall be within [***] of the center frequency
over the operational environmental range.
3.3.1.2 Transmit Power
R 3.3-2 The maximum transmit power measured at the input port of the antenna
shall be a minimum of [***] dBm [***] dB for [***]QAM, [***] dBm [***]
dB for [***] QAM.
R 3.3-3 The BRU transmit power shall be settable to within an accuracy of [***]
dB.
3.3.2 ANTENNA PERFORMANCE
3.3.2.1 Antenna Gain & Beamwidth
R 3.3-4 The base station antenna sectorization options shall be according
to Table 3-10:
Table 3-10: Base Station Antenna Sectorization Options
[***]
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3.3.2.2 Co-Polar and Cross-Polar Discrimination
R 3.3-5 The elevation pattern for all base sector antennas shall be as
shown in Figure 3-2 and listed in Table 3-11.
R 3.3-6 The azimuth pattern for the [***] and [***] base sector antennas
shall be as shown in Figure 3-3 and Figure 34 and listed in
Table 3-12 and Table 3-13, respectively.
[***]
Figure 3-2 - Base Sector Antenna Elevation
Co-Polar and Cross-Polar Discrimination
Table 3-11: Base Sector Antenna Elevation
Co-Polar and Cross-Polar Discrimination
[***]
Options for narrower beamwidths in elevation will be explored in the future to
improve system gain.
[***] CONFIDENTIAL TREATMENT REQUESTED
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[***] GHz Point to Multipoint Radio Subsystem Specification
Sector antenna [***] RPE - Azimuth
[***]
Figure 3-3: Base Sector Antenna [***] Azimuth Co-Polar and Cross-Polar
Discrimination
Table 3-12: Base Sector Antenna [***] Azimuth Co-Polar and Cross-Polar
Discrimination
[***]
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[***] GHz Point to Multipoint Radio Subsystem Specification
Sector antenna 450 RPE - Azimuth
[***]
Figure 3-4: Base Sector Antenna [***] Azimuth Co-Polar and Cross-Polar
Discrimination
Table 3-13: Base Sector Antenna [***] Azimuth Co-Polar and Cross-Polar
Discrimination
[***]
3.3.3 RELIABILITY
3.3.3.1 MTTF
R 3.3-7 The MTTF of the outdoor Base Radio Unit shall be 10 years, minimum.
3.3.3.2 MTTR
R 3.3-8 The mean time to repair (MTTR) of a Base Radio Unit shall be a
maximum of 30 minutes, excluding travel and access time.
This repair time excludes repairs to any cabling to/from the BRU.
R 3.3-9 Field replacement of the entire BRU shall be the method of repair.
3.3.3.3 Redundancy
R 3.3-10 Base Radio Unit redundancy shall be provided by duplicating the
BRU in its entirety -i.e. 1:1 equipment redundancy.
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3.3.4 PHYSICAL REQUIREMENTS
3.3.4.1 Prime Power
R 3.3-11 The BRU shall be powered via the coaxial cable connection from
the indoor unit.
3.3.4.2 Dimensions
R 3.3-12 A Base Radio Unit, exclusive of the antenna, configured as a PMP
radio shall have nominal dimensions of 41 cm X 11 cm X 17 cm.
R 3.3-13 A Base Radio Unit configured as a PTP single building radio has
nominal dimensions of 30 cm X 16 cm X 20 cm using the integral antenna.
3.3.5 MOUNTING
R 3.3-14 The BRU shall have wall mount and pole mount options.
R 3.3-15 The pole mounting option shall accommodate both 3" and 4" poles.
R 3.3-16 The SRU shall have an optional mounting mechanism which enables
SRU replacement without the need for realignment
3.3.5.1 Mounting Independence
R 3.3-17 Different sector and single building BRUs shall be independently
mountable.
3.3.5.2 Initial Alignment Accuracy
R 3.3-18 The antenna mounting shall have a continuously variable
alignment mechanism capable of aligning any base station antenna an
arbitrary pointing error.
3.3.5.3 Sector Antenna Alignment Range
R 3.3-19 Sector antennas shall have an elevation angle alignment range
from [***] to [***] degrees.
3.3.5.4 Sustained Alignment
R 3.3-20 The antenna mounting shall have the capability of maintaining a
pointing error of less than [***] degree over all operational
environmental conditions for a period equal to the mean time to fail of
the radio unit.
3.3.6 BRU-BMM INTERFACE
R 3.3-21 A single [***] Ohm coax cable shall be used to carry transmit and
receive IF signals, BRU control and telemetry, and DC power between the
BMM and the BRU.
3.3.6.1 BRU Control
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[***] GHz Point to Multipoint Radio Subsystem Specification
R 3.3-22 The BRU shall support control of the transmit and receive
frequencies, transmit power level, and target receive signal level via
the coax connection to the BMM.
3.3.6.2 BRU Telemetry
R 3.3-23 The BRU shall report the performance statistics shown in Table
3-14 via telemetry to the BSC. These values are reportable via SNMP.
[***]
3.3.6.3 Intrabuilding Cabling
R 3.3-24 The intrabuilding wiring between the BRU and the indoor unit
(Base Modem Unit) shall be up to a maximum of [***] feet using LMR400
coaxial cable [***].
This provides for up to [***] dB of cable loss between the BMM and BRU.
3.4 SYSTEM LEVEL REQUIREMENTS
3.4.1 TRANSPORT LATENCY
R 3.4-1 The transport latency from signal ingress at the hub radio
equipment to egress from the end site radio equipment shall be less
than [***]. Similarily, the latency of the return path is less than
[***] ms.
3.4.2 OPERATION DUTY CYCLE
R 3.4-2 The scheduled hours of service for network equipment shall be 24
hours per day, 7 days per week, 365 days per year.
3.4.3 EQUIPMENT LABELING
R 3.4-3 All equipment shall have labels containing part number, serial
number, IEEE MAC address, and hardware revision attached to the
exterior of the equipment and clearly visible.
R 3.4-4 All product information on the label shall match what is reported
to the EMS.
R 3.4-5 Test points, fuses, visual indicators and adjustments shall be
located on the front panel of the equipment.
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[***] GHz Point to Multipoint Radio Subsystem Specification
R 3.4-6 Test points, fuses, visual indicators and adjustments shall be
clearly identified and labeled in English.
4 ENVIRONMENTAL REQUIREMENTS
4.1 TEMPERATURE RANGE
4.1.1 BASE STATION TEMPERATURE RANGE
R 4.1-1 Outdoor equipment (BRU) operating range shall be [***]
[***] Centigrade.
4.1.2 SUBSCRIBER EQUIPMENT TEMPERATURE RANGE
R 4.1-2 Outdoor equipment (SRU) operating range shall be from [***]
[***] C.
R 4.1-3 All packaged equipment shall be capable of sustaining transport
and storage temperatures from [***] C without
damage.
4.2 HUMIDITY
4.2.1 OUTDOOR HUMIDITY
R 4.2-1 Outdoor equipment shall tolerate condensing humidity in the range
of [***] relative humidity.
4.3 WIND LOADING
4.3.1 OUTDOOR OPERATIONAL WIND LOADING
R 4.3-1 Outdoor mounted equipment shall be capable of maintaining
operational specifications and be unaffected by wind induced mechanical
stresses caused by sustained winds or wind gusts not to exceed [***]
[***]
4.3.2 OUTDOOR SURVIVAL WIND LOADING
R 4.3-2 Outdoor mounted equipment shall be capable of surviving without
physical damage maximum sustained wind speeds of [***]
4.4 SHOCK & VIBRATION
R 4.4-1 All radio equipment shall maintain operational specifications and
shall be physically and electrically unaffected by a sustained
vibration according to the ETSI standard ETS 300 019.
4.5 EMI/STATIC DISCHARGE
R 4.5-1 All radio equipment shall be immune to the effects of static
discharge according to Bellcore Standard GR 1089.
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[***] GHz Point to Multipoint Radio Subsystem Specification
4.6 ELECTROMAGNETIC COMPATIBILITY (EMC)
R 4.6-1 All radio equipment shall meet GR-1089-CORE.
4.7 FLAMMABILITY
R 4.7-1 All materials shall comply with the requirements necessary to
obtain a UL/CE mark.
4.8 RAIN AND DUST
R 4.8-1 All outdoor equipment radio equipment shall meet or exceed ETSI
Type 3.3 ratings for immunity to any degrading effects of wind driven
rain, ice and dust as specified in ETS 300019.
4.9 OPERATIONAL ALTITUDE
R 4.9-1 All radio equipment shall maintain operational specifications
over a range of altitudes or equivalent air pressures from 30 meters
below sea level to 4500 meters above mean sea level.
4.10 SYSTEM AVAILABILITY
R 4.10-1 The system shall support delivery of services with [***]
availability.
4.11 RELIABILITY
R 4.11-1 The MTBF design goals of the AirStar system components are
listed in Table 4-1. The MTBF shall be calculated in accordance with
Bellcore V5, Basic Calculation Mode, Method 1, Case 3.
Table 4-1: System Reliability
[***]
4.12 SERVICEABILITY
R 4.12-1 The system components shall meet the mean time to repair
requirements in Table 4-2. In all cases, the method of repair shall be
field replacement.
Table 4-2: System Serviceability
[***]
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[***] GHz Point to Multipoint Radio Subsystem Specification
Appendix C
QUALITY STANDARDS AND REPORTS
(A) Manufacturer hereby represents and warrants that it is, and will continue
to be ISO 9000 registered and commits to ensure that all sub-contractors
or contract manufacturing manufacturers, which contribute to the design,
development, production, delivery and service of material will become ISO
9000 registered by an accredited Registrar within eighteen (18) months
after first purchase order is placed by Purchaser.
(B) Manufacturer commits to having a continuous improvement program in place
which will allow it to attain and maintain "acceptable" ratings (or
equivalent) on all quality system elements as periodically performed by
Purchaser. An "acceptable" element is defined as one where the quality
system meets the "general intent" of the quality system and is fully
deployed to maintain the quality system and product quality. No
significant deficiencies encountered that would jeopardize the quality
system, and product quality and/or reliability.
(C) Manufacturer commits to establish key quality control ("QC") verification
points throughout the manufacturing process. These verification points
should be located in-process as well as after material has completed all
manufacturing operations. The scope of these QC verification points shall
be validated through visual or mechanical inspections and/or tests, and
with the use of statistically valid sampling plans, that material conforms
to Manufacturer's manufacturing, product and process specifications,
standards of acceptable workmanship, as well as other specification's
which may be provided by Purchaser. Purchaser reserves the right to review
these QC points and make suggestions for improvement. Manufacturer commits
to address these suggestions through the implementation of appropriate
corrective actions.
(D) Manufacturer commits to establish an end of the line Quality Assurance
product audit on material by three (3) months after first purchase order.
The focus of this audit shall be to replicate user application of material
as specified by Purchaser's customer. Test and examination of material
under the quality audit shall be at a system level, and shall include but
is not limited to:
a) Exercising said material over the full spectrum of temperature ranges
over which material is designed to operate.
b) Full operation of material over a period of time not less than 72
hours.
c) A system for continuous monitoring of all primary product functions
and fault detection of the material while under this test.
Manufacturer shall continuously review customer return data to ensure that
the scope of the product quality assurance audit function includes the
requirement(s)/condition(s) under which the return failed.
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[***] GHz Point to Multipoint Radio Subsystem Specification
Manufacturer shall perform a detailed failure mode analysis of all
material found defective through the quality assurance audit in line with
the requirements and process outlined in paragraph F.
Manufacturer agrees to provide to Purchaser on a monthly basis, results of
the quality assurance product audit in a format specified by Purchaser.
(E) Manufacturer commits to establishing a program of tracking monthly,
quarterly, and annual return rates for the product manufactured under this
contract. The Manufacturer agrees to update and report on returns on a
quarterly basis to Purchaser.
(F) Manufacturer commits to establishing a system for tracking and analysis
all material returned by Purchaser to it, as well as any material failures
which occur through Purchaser's end of the line quality assurance audit.
For all material in the above two categories, Manufacturer shall perform a
failure mode analysis, which at a minimum will be down to the component
level. Component level failure modes will be recorded, and failed
components found defective will be accumulated for the purpose of
determining repetitive occurrences.
Material shall be considered defective if it fails to meet the warranty
specifications under this Agreement (including performance and appearance
Specifications) or if during customer testing, installation, or use, the
material fails to operate as expected or specified.
If the analysis of a return is found to be within the specifications of
this agreement (i.e., a no trouble found condition), then Manufacturer
shall track these no trouble found conditions and notify Purchaser of said
findings at a minimum of a monthly interval, so that appropriate
investigative measures may be taken to determine the root cause.
(G) If the return rate is found to exceed a mutually agreed to acceptable rate
or repetitive occurrences are observed with regard to component level
failures then the Manufacturer shall provide a written Corrective Action
Report to Purchaser, explaining in detail the nature of the problem
detected, and the step(s) Manufacturer proposes to correct the problem. As
part of the plan to correct the problem, it is agreed that the
Manufacturer shall:
a) Incorporate the remedy in affected material.
b) Ship all subsequent material incorporating the required modification
correcting the problem at no additional charge to Purchaser; and
c) Create a mutually agreed to plan to address the scope of correction
and the proper course of actions to be taken by Manufacturer and
Purchaser.
Manufacturer and Purchaser shall mutually agree in writing as to the
implementation schedule of the corrective action plan. Manufacturer agrees
to use its best efforts to implement the plan in accordance with the
agreed upon schedule. It is also agreed that
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[***] GHz Point to Multipoint Radio Subsystem Specification
Purchaser shall be entitled to postpone at no charge to Purchaser, further
deliveries of orders until such time as the remedy is implemented
consistent with this Article.
(H) As part of a program of continuous improvement, Manufacturer agrees to
establish annually, improvement goals for a series of key quality
objectives. These goals should include, but are not limited to a) customer
return rates b) Quality Assurance product quality audit defect rates, c)
final system test yields. Manufacturer agrees to track these goals on a
monthly basis, and to commit the resources necessary for the attainment of
these goals.
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[***] GHz Point to Multipoint Radio Subsystem Specification
Appendix E
RELEASE SCHEDULE FOR EXCLUSIVITY
<TABLE>
<CAPTION>
FREQUENCY LIMITED AVAILABILITY DATE GENERAL AVAILABILITY DATE
- --------- ------------------------- -------------------------
<S> <C> <C>
[***] [***] [***]
[***] [***] [***]
[***] [***] [***]
</TABLE>
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<PAGE> 78
MANUFACTURING AND ENGINEERING SERVICES AGREEMENT
BETWEEN
NETRO CORPORATION AND
MICROELECTRONICS TECHNOLOGY INC.
JANUARY 11,1999
Please refer to section 5 of the Agreement. This appendix D dated January 20,
1999 replaces the preliminary Appendix D attached to the Agreement.
[***]
[***] CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 79
NOTES:
Completion of the project definition means a resource plan is completed and
agreed upon in writing by both parties.
The units are to be tested against a mutually agreed written test plan. This
test plan to be prepared and finalized ahead of the delivery of the units to
prevent the qualification from being gated by this activity.
The units described as "pilot" are the units which are candidates to become the
"beta" deliverables from Netro under its gate process. They are intended to be a
"production" quality but to be built from early product documentation. These
designs are intended to migrate to "limited availability" and then "general
availability" without significant redesign.
The last milestone for each frequency marks the point at which the
responsibility for the project is transferred from the Engineering to the
Manufacturing organization in each company.
Netro Corporation Microelectronics Technology Inc.
By: /s/ GIDEON BEN-EFRAIM By: /s/ CHI C. HSIEH
-------------------------------- -----------------------------------
Gideon Ben-Efraim Dr. Chi C. Hsieh
CEO President
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<PAGE> 80
First Amendment ("Amendment") dated March 19,1999 to Manufacturing and
Engineering Services Agreement dated January 11,1999 between Netro
Corporation and Microelectronics Technology, Inc. ("Agreement").
The parties desire to amend the Agreement as provided in this Amendment, and
accordingly agree as follows:
1. Section 4 b(vi) of the Agreement is deleted in its entirety and replaced by
the following:
"(vi) Payment. Payment is due and payable thirty (30) calendar days from the
date of issuance of the invoice or shipment of the Products, which ever is
later."
2. Section 4 d of the Agreement is deleted in its entirety and replaced with the
following:
"d Purchases from Purchaser. Manufacturer will from time to time as mutually
agreed by the parties purchase certain components, equipment and or inventory
from Purchaser on the terms specified in Section 4 b (vi) pursuant to purchase
orders issued by Manufacturer.
3. Capitalized terms used in this Amendment shall have the meanings defined in
the Agreement.
4. This Amendment shall apply to all past purchase orders issued by either party
under the Agreement regardless of the payment terms stated on the purchase
order.
5. Except as expressly amended by this Amendment, the Agreement shall remain in
full force and effect.
The parties have signed this Amendment as of the date indicated in the preamble.
Netro Corporation Microelectronics Technology, Inc.
By By
-------------------------------- -----------------------------------
CEO President
<PAGE> 1
Exhibit 10.11
OEM AGREEMENT
(Cisco as Seller)
This OEM Agreement (the "Agreement") is made as of the 7th of December, 1998
(the "Effective Date") by and between Cisco Systems, Inc., a California
corporation, having principal offices at 170 West Tasman Drive, San Jose,
California 95134-1706 ("Cisco") and Netro Corporation, a California corporation
having its principal place of business at 3860 North First Street, San Jose,
California 95134 ("Netro").
RECITALS
A. Netro has been purchasing from Cisco the Cisco MGX 8220 shelves and
associated products, software and firmware by means of purchase orders over the
past several months. These shelves have been, in turn, integrated with Netro's
Base Station Controller boards and resold to third parties as a part of the
"AirStar" wireless communications systems developed by Netro.
B. Netro is developing an independent solution, which will permit it to
sell its systems without relying on the Cisco MGX 8220 shelves; however, Netro
requires on-going access to the Cisco MGX 8220 shelves for resale during this
development period. Cisco desires to sell the Cisco MGX 8220 shelves and
associated products, software and firmware to Netro during the development
period to enable Netro to transition to an independent solution.
C. Netro also desires access to certain Cisco technology and intellectual
property in order to transition to an independent solution. Cisco desires to
license such technology to Netro under a separate license agreement that will be
executed contemporaneously with this Agreement (the "Technology Agreement").
D. The parties now desire to enter into an agreement pursuant to which
Cisco agrees to sell and Netro agrees to purchase a limited number of the
Products under the terms and conditions set forth herein.
NOW, therefore, in consideration of the terms and conditions of this
Agreement, the parties agree as follows:
1. DEFINITIONS
Terms used in this Agreement not otherwise defined elsewhere shall have
the meanings ascribed to them below.
1.1 "Netro's Boards" shall mean the boards developed by Netro for
integration and use with the Products. "Netro's Boards" are more fully described
in Appendix A attached hereto.
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<PAGE> 2
1.2 "Products" shall mean collectively Cisco's [***] shelves and
associated components and firmware. "Products" are more fully described in
Appendix A & B attached hereto.
1.3 "Purchase Order" shall mean the formal order issued by Netro for the
purchase of Products. The Purchase Order shall include the following items: (a)
identification of each item of Products by model or part number; (b) quantity
requested; confirmation of price; (d) shipment instructions, including
identification of requested carrier, delivery schedule and destination; and (e)
reference to the terms and conditions of this Agreement.
1.4 "Purchase Period" shall mean a period of time commencing on the
Effective Date and ending [***] thereafter. During the "Purchase Period" Netro
will be permitted to purchase Products from Cisco and Cisco will sell Products
to Netro subject to the terms and conditions of this Agreement.
1.5 "Software" shall mean those software products developed by or for
Cisco for integration and use with the Products and provided to Netro under this
Agreement. "Software" is more fully described in Appendix A attached hereto.
"Software" includes any associated documentation, bug fixes, upgrade, revisions,
enhancements or modifications provided to Netro by Cisco under this Agreement.
1.6 "Technology Agreement" shall mean the "Technology Agreement," to be
executed contemporaneously with this Agreement, pursuant to which Cisco will
license to Netro certain rights to the design of a specified subset of the
Products.
2. PURCHASE AND SALE
2.1 Netro shall have the right to purchase Products from Cisco and Cisco
will sell to Netro on the terms and conditions of this Agreement and to resell,
lease or otherwise distribute as follows:
(a) Netro may purchase no more than [***] units of the Products (in terms
of complete systems as more fully described in Appendix A) during the Purchase
Period. In addition, Netro may purchase adequate components, such as trunk
cards, to ensure the proper product mix for these [***] complete systems. Any
complete system purchased by Cisco from Netro after Netro has integrated Netro's
Board with the Product shall not count toward the [***] unit limit.
(b) Netro may purchase the Products for integration with Netro's Boards.
Netro may resell, lease or distribute the Products only after they have been
integrated with Netro's Boards.
(c) Netro may resell, lease or distribute the Products directly to its
end-user customers or through multiple tiers of distribution, for use with or
attachment to any vendor's ATM, switch or mux.
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<PAGE> 3
(d) Netro must brand, promote, market and sell the Products as Netro's own
products using Netro's own trademarks, trade names and trade dress.
Additionally, Netro is responsible for re-labeling the Products, by removing
Cisco labels or completely covering Cisco labels, so that only Netro's name
appears on the Product. Netro may not partially remove, cover or deface Cisco's
label in a manner that may cause damage to Cisco's trademark rights. Therefore,
Netro agrees that upon request Netro will permit Cisco to inspect samples of the
relabeled Products and Netro will correct any improper labeling identified by
Cisco.
(e) Netro must load the Software onto each unit of the Products.
Netro acknowledges that failure to comply with Section 2.1(d) or Section
2.1(e) shall constitute a breach of the Agreement and shall entitle Cisco to
terminate this Agreement pursuant to Section 13. This acknowledgment shall,
however, in no way imply that breaches of this Agreement by Netro are limited to
a breach of Section 2.1(d) or Section 2.1(e).
2.2 Netro shall not have the right to purchase the Products from Cisco and
resell, lease or otherwise distribute except as specified in Section 2.1.
Further, the following restrictions shall apply to Netro's purchase rights:
(a) Netro may not resell the Products on a stand-alone basis without
Cisco's prior written consent.
(b) Netro may not distribute the Products without first loading the
Software onto each unit. Further, Netro may only make up to [***] copies of the
Software, each of which must be loaded onto a Product. Netro agrees to
indemnify, defend and hold Cisco harmless from and against any claim, liability
or damages which may result from reproducing, using or distributing any third
party software contained in the Software in a manner not expressly authorized
under this Agreement (e.g., Netro distributes the Software on a stand alone
basis or Netro distributes more than [***] copies of the Software).
(c) Netro may not purchase more than [***] of the Products (in terms of
completed systems as more fully described in Appendix A).
(d) Netro may not purchase the Products after the end of the Purchase
Period even if Netro has purchased less [***] units of the Products (in terms of
completed systems as more fully described in Appendix A).
2.3 Software License. Cisco hereby grants Netro a non-exclusive license to
use the Software solely in conjunction with, and as incorporated on, such
Products, subject to payment of license fees as included in the purchase price
for each Product. Netro may sublicense such rights to use the Software only to
its customers, subdistributors (subject to the condition as set forth in Section
2.2(b) and their customers (and any customers' lessees) who purchase the
Products provided that any such customer must execute an end user agreement
meeting the requirements of Section 2.4. Netro receives no title or ownership
rights to the Software. Except for the license granted in this Section 2.3, all
right, title and interest in the Software shall remain
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<PAGE> 4
the exclusive property of Cisco or its licensors. Except as may otherwise
expressly be set forth in this Agreement, this Agreement does not entitle Netro
to the receipt or use of, or access to, Software source code or any right to
reproduce the Software or the documentation. None of Netro or any of its
sublicensees shall decompile, reverse engineer or otherwise attempt to gain
access to the Software source code.
2.4 End-User License. Distribution of Software shall be subject to Netro's
end user customers being bound by an end user license agreement which at the
least shall (i) grant each such customer a nontransferable, non-exclusive, fully
paid license to use the Software solely in conjunction with, and as incorporated
on, the Products obtained from the Netro and solely for such customer's internal
business purposes; (ii) indicate that Cisco and its licensors are the owners of
the Software; (iii) prohibit the customer from decompiling, reverse engineering
or otherwise attempting to gain access to the Software source code; (iv)
identify Cisco as a third-party beneficiary of the End User Agreement; and (v)
indicate that Cisco accepts the rights of a third party beneficiary. Netro shall
prepare a translation of such End User Agreement to be used for informational
purposes only; the English version of the End User Agreement shall control at
all times. Netro will provide Cisco with copies of End User Agreements executed
by customers, upon request. Netro will use its best efforts to ensure that all
customers abide by the terms of their End User Agreements. Upon request by
Cisco, Netro will keep Cisco apprised of its activities to enforce such
provisions with particular customers. Netro shall ensure that Cisco will have
the right to enforce such agreements as a third-party beneficiary. Netro agrees
that (i) Cisco may join Netro as a named plaintiff in any suit brought by Cisco
against customers and (ii) Netro will take such other actions, give such
information and render such aid, as may be necessary to allow Cisco to bring and
prosecute such suits.
3. PURCHASE PRICE AND DISCOUNT
3.1 Price. The purchase price to Netro for the Products pursuant to this
Agreement shall be [***] off Cisco's then-current list price, a copy of which is
attached hereto as Appendix A. Appendix A shall be revised or replaced if
Cisco's list prices change.
4. PURCHASE ORDERS
4.1 Ordering Period. Netro shall purchase the Products pursuant to this
Agreement by issuance of its Purchase Orders within the Purchase Period. This
Agreement shall control the purchase of all Products by Netro from Cisco, and no
terms in any Purchase Order, invoice, acknowledgment or like document shall
serve to add to or modify the terms of such sales unless agreed to in a writing
signed by both parties
4.2 Purchase Order and Acceptance. Purchase Orders may be made by
telephone and, in such event, shall be followed by a hard copy (including
facsimile) confirming the Purchase Order within five (5) days. Cisco shall
promptly acknowledge Purchase Orders submitted by Netro and, if such Purchase
Orders conform to the terms and conditions of this Agreement and Netro is in
compliance with the terms and conditions of this Agreement, then Cisco will
accept the Purchase Order. Purchase Orders shall specify a lead time not less
than Cisco's then current
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standard lead time, which shall be thirty (30) days unless Cisco notifies Netro
to the contrary. Cisco shall use reasonable efforts to notify Netro of the
acceptance or rejection of a purchase order within ten (10) days of receipt of
the purchase order, however, no purchase order will be binding upon Cisco until
accepted by Cisco in writing. Partial shipment of an order will not constitute
acceptance of an entire order. Cisco shall use reasonable efforts to ship
Products covered by a Purchase Order so as to ensure receipt prior to the
corresponding confirmed delivery date. Netro's sole and exclusive remedy if
Cisco fails to so ship such Products at that time shall be to require Cisco to
reschedule delivery within fourteen (14) days of the original scheduled delivery
date.
4.3 Forecasts. Not less than five (5) days after the Effective Date, Netro
shall deliver to Cisco its good faith, non-binding forecast of Netro's estimated
demand for the during the first two (2) calendar quarter of the Purchase Period.
Netro shall deliver to Cisco a good faith, non-binding forecast for each
additional calendar quarter at least sixty (60) days prior to the commencement
of such calendar quarter. The submission of a forecast shall not require Netro
to make any purchases and does not constitute an order.
4.4 Cancellation. Netro may cancel, postpone or reschedule delivery of the
Products ordered pursuant to Purchase Orders upon notice to Cisco prior to
scheduled delivery as set forth below. Any cancellation of delivery of the
Products less than ninety (90) days prior to the scheduled delivery date shall
be subject to a cancellation charge to Netro based on the table below. A
postponement or postponements which are to a date more than thirty (30) days
after the original scheduled delivery date and which are made at Netro's request
may at Cisco's option by written notice to Netro be treated as a cancellation
pursuant to this Section 4.4. The provisions of this Section 4.4 shall survive
any termination of this Agreement with respect to Purchase Orders issued prior
to such termination.
<TABLE>
<CAPTION>
Cancellation
Number of Days Charge
Before Scheduled (Percentage of
Delivery (Purchase Price):
- ----------------- ------------------
<S> <C>
More than 90 days [***]
90 days - 61 days [***]
60 days - 46 days [***]
45 days - 31 days [***]
30 days or less [***]
</TABLE>
5. DELIVERY TITLE AND SHIPMENT
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5.1 Delivery. Delivery ("Delivery") will be made Ex Works Cisco's facility
at the address listed above per INCOTERMS 1990.
5.2 Title. Title for the Products, except as to Software, and risk of loss
or damage shall pass to Netro as of Delivery.
5.3 Shipping. All Products delivered pursuant to the terms of this
Agreement shall be suitably packed for shipment in shipping cartons reasonably
designed to prevent damage, marked for shipment to the address specified in
Netro's Purchase Order (which may be Netro's customer's address), and delivered
to a carrier or forwarding agent chosen by Netro. Should Netro fail to designate
a carrier, forwarding agent or type of conveyance, Cisco shall make such
designation in conformance with its standard shipping practices.
6. PAYMENT AND REPORTS
6.1 Payment Terms. Netro shall pay for the Products delivered hereunder in
US dollars, net thirty (30) days from the later of Delivery or the date of
Cisco's invoice. Overdue payments shall be subject to a monthly charge of the
lesser of [***] per month or the maximum rate allowed by law. Cisco reserves the
right to change credit terms, when, in Cisco's sole opinion, the financial
condition and past payment history of Netro so warrant such a change. Any such
change in the credit terms provided herein will be notified to Netro. Netro will
pay all of Cisco's costs and expenses (including reasonable attorneys' fees) to
enforce and preserve Cisco's rights under this Section 6.1. In the event that
Netro becomes delinquent in the payment of any sum due hereunder, Cisco may
suspend performance until such delinquency is corrected.
6.2 Taxes. Netro shall pay sums equal to taxes (including, without
limitation, sales, withholding, value-added and similar taxes) and customs
duties paid or payable (however designated, levied, or based) on amounts payable
to Cisco hereunder or on Netro's or a Netro customer's use or possession of the
Products under or in accordance with the provisions of this Agreement, but
exclusive of national and local taxes based on Cisco's net income.
6.3 Reports. Netro shall provide Cisco monthly point of sale reports
showing the following information:
(a) sales activity the preceding calendar month,
(b) end user's and purchaser's name, vertical market, and ship-to
(country, state, province, city, zip/postal code, and
(c) for each end user ship to address:
(i) units sold but not installed or not consigned, and
(ii) units on loan, under evaluation or demonstration.
[***] CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 7
Each piece of information indicated above shall come in separate fields. The
reports shall be delivered to Cisco in electronic, delimited text format to:
Shastri Divakaruni (e-mail: [email protected], phone: 408-527-2379). This
information shall be subject to the confidentiality obligations set forth in
Section 16 and shall not be used for competitive purposes.
7. ACCEPTANCE
Netro or its designated party shall inspect the Products within thirty
(30) days of Delivery. Any Product which fails to conform to the specifications
(as attached hereto as Appendix B) may be rejected by Netro and returned to
Cisco in accordance with the procedure described in Section 8.3, for repair or
replacement, at Cisco's option. Any Products not so rejected will be deemed
accepted at the end of the thirty (30) day period.
8. WARRANTY AND IN-WARRANTY REPLACEMENT
8.1 Products Warranty. For a period of [***] from the date of Delivery
(the "Warranty Period"), Cisco warrants that the hardware portions of the
Products shall be free of defects in material and workmanship. In the event that
Cisco receives notice from Netro during the Warranty Period that any Product
does not conform to the requirements of this warranty, Cisco shall, at its
option, repair or replace the non conforming Products. Products repaired or
replaced shall be rewarranted for [***] in accordance with the above.
8.2 Software Warranty. Cisco warrants that the media on which the Software
is recorded will be free from defects in materials and workmanship under normal
use for a period of [***] from the date of delivery. Netro's sole and exclusive
remedy, and Cisco's sole and exclusive liability, under this warranty will be
replacement of the media.
8.3 Warranty Procedures. An item may only be returned with the prior
written approval of Cisco in accordance with Cisco's standard warranty
procedures. Once Cisco authorizes the return of any defective item, Netro will
ship such Product to the designated repair facility, freight prepaid, in its
original shipping container or in a container of equivalent protective
constitution. All other fees (including but not limited to customs clearance)
shall be borne by Netro. Any transportation costs incurred in connection with
the re-delivery of a repaired or replaced item to Netro shall be borne by Cisco,
provided that such costs shall be borne by Netro if Cisco reasonably determines
that the item is not nonconforming. If Cisco reasonably determines that the
allegedly defective item is not covered by the terms of the warranty provided
hereunder or that a warranty claim is made after the warranty period, the cost
of repair by Cisco, including all shipping expenses, shall be reimbursed by
Netro. CISCO SHALL HAVE NO LIABILITY WITH RESPECT TO DATA CONTAINED IN ANY
SYSTEM RETURNED TO CISCO.
8.4 Exclusions. The express warranties set forth in Sections 8.1 and 8.2
above shall not apply to defects in Products: (i) caused through no fault of
Cisco during shipment to or from Netro, (ii) caused by the use or operation of
Products in an application or environment other than that intended or
recommended by Cisco, (iii) caused by any of Netro's Boards or any other
[***] CONFIDENTIAL TREATMENT REQUESTED
-7-
<PAGE> 8
components, software or materials supplied by Netro, (iv) caused by integration
services performed by Netro, (iv) caused by modifications or alterations made to
the Products by any party other than Cisco, (vi) caused by the unauthorized use
of the Products by Netro, a customer or any other third party, (vii) caused by
failure of Netro to comply with any of the return procedures specified in this
Agreement, or (viii) which are the result of the Products being subjected to
unusual physical or electrical stress.
8.5 Stored Data. Netro will be responsible for saving or backing up data
contained in any Product returned to Cisco for in-warranty or out-of-warranty
repairs or service. CISCO WILL HAVE NO RESPONSIBILITY FOR SUCH DATA AND WILL
HAVE NO LIABILITY ARISING OUT OF ANY DAMAGE TO OR LOSS OF SUCH DATA WHILE THE
PRODUCT IS IN CISCO'S POSSESSION.
8.6 Disclaimer. EXCEPT FOR THE ABOVE EXPRESS WARRANTIES SET FORTH IN
SECTIONS 8.1 AND 8.2 ABOVE, CISCO MAKES AND NETRO RECEIVES NO WARRANTIES OR
CONDITIONS, EXPRESS, IMPLIED, STATUTORY, OR IN ANY OTHER PROVISION OF THIS
AGREEMENT OR PRIOR COMMUNICATION WITH NETRO, AND CISCO SPECIFICALLY DISCLAIMS
ANY IMPLIED WARRANTY OR CONDITION OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR OF ERROR-FREE AND UNINTERRUPTED USE OF SOFTWARE OR HARDWARE. CISCO
DOES NOT WARRANT OR REPRESENT THAT ALL ERRORS IN THE SOFTWARE OR ASSOCIATED
DOCUMENTATION WILL BE CORRECTED.
9. OUT-OF-WARRANTY REPAIR AND SPARE PARTS
Cisco shall provide out-of-warranty repair and spare parts for all
Products purchased under this Agreement for a period of one (1) year after the
termination or expiration of this Agreement in accordance with Cisco's then
standard policy, or any Netro Service Agreement in effect between the parties.
Repairs and spare parts shall be warranted for ninety days, subject to the terms
and conditions of warranty set forth in Section 8, above.
10. SUPPORT
10.1 Product and Software Support. Netro will be responsible for providing
direct support to its customers for the Products and Software, including all
Level 1 Support and Level 2 Support, as defined below. Cisco will provide Level
3 Support, as defined below, to Netro. Cisco's support will be provided and
billed to Netro on a time and materials basis. Netro agrees to provide Cisco a
telephone call transfer mechanism for Netro service calls intended for Netro but
received by Cisco. The companies each designate an engineer as the single point
of contact for support requests from Netro as follows: for Cisco: initially
Shastri Divakaruni (e-mail: [email protected], phone: 408-527-2379) but only
until such time as Cisco notifies Netro in writing of another point of contact,
and for Netro: Zohar Lotan. Either party may change the point of contact by
prior written notice to the other party. The Cisco engineer shall be available
by pager Monday through Friday, 9:00 am - 5:00 PM Pacific Time, excluding Cisco
holidays.
-8-
<PAGE> 9
For purposes of this Agreement, level 1, level 2 and level 3 support shall have
the meanings set forth below:
(a) "Level 1 Support" includes the ability to provide general Product and
Software information and configuration support; collect relevant technical
problem identification information; perform base problem determination; provide
basic support on the standard protocols and features,
(b) "Level 2 Support" includes Level 1 Support plus the ability to support
problem isolation and Product or Software specification defect determination;
provide lab simulation and interoperability testing; define an action plan;
analyze traces; provide advanced support on all protocols and features;
reproduce problems in a lab, diagnose problems remotely and provide Cisco with
complete steps to reproduce a problem.
(c) "Level 3 Support" includes fixing only those problems identified and
proven unambiguously to be in Product or Software. Such Level 3 Support shall
terminate upon the earlier to occur of the termination or expiration of this
Agreement or thirty-six (36) months from the First Customer Shipment (FCS) of
the Software. The requirement for Cisco to provide level 3 support is as
follows:
- - Interface for the support is through Netro Engineering. Only 1 to 2 engineers
will be designated as point of contact for this interface.
- - Netro Engineer(s) should be familiar with the product.
- - Netro engineering will first reproduce, isolate and identify the problem in
Product or Software before requesting the support.
- - Problem has to be well documented and sent to Cisco engineering contact,
preferably by email.
- - Netro will provide at least two fully functional systems with their service
modules for the purpose of debugging and fixing the problem. Netro will also
assist Cisco engineer in configuring the system for the required application.
10.2 No Software Revisions. Cisco will not be required to provide any new
feature releases of Software to Netro.
10.3 Documentation. Cisco shall provide Netro with documentation
("Documentation") free of charge, in order to permit Netro to sell and support
the Products efficiently. All such documentation will be camera ready and will
also be provided in electronic format stored in a manner acceptable to Netro.
Cisco hereby grants Netro a fully paid, non-exclusive license to modify, use,
incorporate and reproduce such documentation, provided that either Cisco or
Netro's copyright notice is reproduced on all such Documentation. Netro shall be
solely responsible for the accuracy of all of its modifications.
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<PAGE> 10
11. AGENCY COMPLIANCE AND CERTIFICATION RESPONSIBILITIES.
11.1 Netro will be solely responsible for EMI/RFI, Immunity, Safety and
Homologation of the Products as integrated with Netro's Boards. These
responsibilities may include, but are not limited to, the following:
(a) Translation into English of specifications and other documents
from local regulatory agencies and/or test houses,
(b) Acquisition of technical standards, regulatory procedures and
forms,
(c) Submission of documents and product registrations,
(d) Product testing, debugging and fixing problems to meet
regulatory compliance requirements,
(e) Coordination of any field trials which may be required.
11.2 Cisco may, in its sole discretion, provide Netro with assistance in
connection with Netro's compliance activities.
12. DESIGN, PURCHASE AND MANUFACTURING RIGHTS.
12.1 Design License for the Products. Contemporaneously with the execution
of this Agreement, the parties shall execute the Technology Agreement pursuant
to which Cisco shall grant to Netro an irrevocable, fully paid up, worldwide,
non-exclusive right and license to the design of a specified subset of the
Products for purposes of permitting Netro to modify such design and to make or
have made derivatives of the Products for sale by Netro.
12.2 Cisco's Purchase Rights. In the event that Cisco elects to become an
OEM reseller or integrator of Netro's AirStar system, Netro agrees to grant
Cisco the following rights:
(a) Cisco may purchase from Netro's suppliers Netro's Board and any
new version of Netro's Board which incorporates upgrades, enhancements,
modifications or improvements made by Netro. Netro agrees upon Cisco's request
to arrange for Cisco to make purchases of Netro's Board directly from Netro's
suppliers upon the same price, terms and conditions as Netro purchases Netro's
Board.
(b) Cisco may purchase AirStar systems, including Netro's Board (and
any new version of Netro's Board which incorporates upgrades, enhancements,
modifications or improvements made by Netro) directly from Netro for a price,
and under terms and conditions, no less favorable than Netro offers its most
favored customer purchasing similar volumes of products in similar
circumstances. The parties agree that this subsection does not permit Cisco to
purchase custom versions of the AirStar systems or Netro's Boards, where custom
is defined to include versions of such products that are developed for sale to a
single customer or that are developed as a result of customer funded research
and development.
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<PAGE> 11
(c) Cisco may resell and distribute Netro's Boards and the AirStar
system directly to end-users or indirectly to end users through Cisco's
distributors, systems integrators, value added resellers and resellers.
If appropriate, the parties shall negotiate in good faith the terms and
conditions of an OEM agreement for Netro's Board and the AirStar system. Cisco
agrees not to reverse engineer Netro's Board or to decompile, reverse engineer
or otherwise attempt to gain access to the source code for Netro's Board.
12.3 Limitation. Except as expressly set forth in this Agreement the
Technology Agreement referenced above, Cisco does not grant and Netro does not
receive any additional rights or licenses, including, without limitation, rights
to use any Cisco trade name, trademark or trade dress or the right to use the
design of the Product for any purpose other than manufacture and sale of
derivative Products integrated with Netro's Board.
13. TERM
13.1 Term. This Agreement shall commence as of the Effective Date and
shall continue through the Purchase Period, unless earlier terminated in
accordance with this Section 13. Termination shall not excuse either party from
payment of amounts owed to the other party prior to termination.
13.2 Termination for Breach. Either party may terminate this Agreement
and/or cancel any or all Purchase Orders for undelivered Products upon written
notice to the other party if such other party fails to correct any failure to
fulfill any of its obligations under this Agreement, within thirty (30) days
after receipt of notice specifying such failure, except in the case of breaches
of the payment obligation, where termination shall be effective fifteen (15)
days from the date of notice if the default is not cured. Termination shall not
be deemed an exclusive remedy, and the parties shall retain any right to seek
other remedies in law or equity which might be available on account of breach of
the Agreement.
13.3 Termination by Cisco. Cisco may terminate the Agreement upon thirty
(30) days' written notice to Netro in the event there is a change of control of
Netro resulting in any of the competitors of Cisco named in Appendix C acquiring
control of Netro; provided, however, that Netro shall be permitted to place a
"last time" purchase order for Products within such the thirty (30) day period
following Cisco's notice. A change of control is deemed to occur if (a) 50% or
more of the voting stock of Netro is acquired, directly or indirectly, by a
third party, (b) if a third party is able to appoint or cause to be appointed a
majority of the members of the board or directors of Netro, or otherwise control
the management of Netro or, in the event that Netro is not organized as a
corporation, if a third party is able to appoint or cause to be appointed a
majority of the management committee of Netro, or (c) if all or substantially
all of Netro assets are acquired or transferred to a third party by merger,
acquisition or other form of consolidation.
13.4 No Liability For Expiration or Dealer Termination. Cisco shall not,
by reason of the expiration or termination of this Agreement, be liable to Netro
for compensation,
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<PAGE> 12
reimbursement or damages on account of any loss of prospective profits or
anticipated sales or on account of expenditures, investments, leases, or
commitments made in connection with this Agreement or the anticipation of
extended performance hereunder.
13.4 Survival. The provisions of Sections 6, 8, 9, 10, 11, 14, 15, 16 and
17 shall survive any termination or expiration of this Agreement.
14. LIMITATION OF LIABILITY. CISCO'S LIABILITY ARISING OUT OF THIS AGREEMENT
AND/OR SALE OF THE PRODUCTS SHALL BE LIMITED TO THE LESSER OF $500,000 OR THE
AMOUNT PAID BY NETRO TO CISCO IN THE TWELVE (12) MONTH PERIOD PRIOR TO THE EVENT
WHICH GAVE RISE TO THE LIABILITY. IN NO EVENT SHALL CISCO HAVE ANY LIABILITY FOR
ANY LOST PROFITS, LOSS OF DATA OR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR
SERVICES, OR FOR ANY SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES ARISING OUT OF
THIS AGREEMENT, UNDER ANY THEORY OF LIABILITY, INCLUDING, WITHOUT LIMITATION,
THOSE RESULTING FROM THE USE OF PRODUCTS PURCHASED HEREUNDER, OR THE FAILURE OF
THE PRODUCTS TO PERFORM, OR FOR ANY OTHER REASON. THESE LIMITATIONS SHALL APPLY
NOTWITHSTANDING THE FAILURE OF THE ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. THE
PARTIES AGREE THAT THEY ARE EACH SOPHISTICATED ENTITIES KNOWLEDGEABLE ABOUT
TELECOMMUNICATIONS PRODUCTS, AND THIS LIMITATION IS REASONABLE AND NEGOTIATED
FOR CONSIDERATION OF THE TERMS AND CONDITIONS OF THIS AGREEMENT.
15. INTELLECTUAL PROPERTY INDEMNIFICATION.
15.1 Cisco's Obligation.
(a) Indemnity. Cisco agrees to defend and hold Netro harmless against any
loss, liability or expense (including reasonable attorneys fees) paid to third
parties arising from any action or claim brought or threatened against Netro
alleging that the Products under normal use infringe any third party's patent,
copyright, trademark, trade secret or other intellectual property right. Cisco
will be released from its obligations under this Section 15.1 unless Netro
provides Cisco with (i) prompt written notice of such claim or action, (ii) sole
control and authority over the defense or settlement of such claim or action and
(iii) proper and full information and reasonable assistance to defend and/or
settle any such claim or action.
(b) Remedy. In the event that the Products are held, or in Cisco's sole
opinion, may be held to constitute such an infringement, Cisco may, at its
option and expense, (i) obtain for Netro the right to continue to use such
Products as intended or (ii) modify the Products so that they become
non-infringing. If neither of the foregoing alternatives is in Cisco's sole
opinion reasonably available to Cisco, Cisco shall accept return of the
infringing Products and refund to Netro the depreciated value of the Products,
as measured over a thirty-six (36) month life span.
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<PAGE> 13
(c) Limitations. Notwithstanding the provisions of Section 14 above, Cisco
assumes no liability for infringement claims arising from (i) combination of the
Products with other products not provided by Cisco, where the Products alone
would not infringe, (ii) the modification of the Products unless such
modification was made or authorized by Cisco, where such infringement would not
have occurred but for such modifications, (iii) integration of Netro's Boards
and the Product, where such infringement would not have occurred but for such
integration, (iv) Cisco's compliance with specifications provided by Netro, (v)
any marking or branding placed on the Products by, or at the request of, Netro,
or (vi) any third-party products furnished hereunder to complete Netro's order
which are not ordinarily supplied by Cisco. Further, Netro agrees to defend and
hold Cisco harmless against any loss, liability or expense (including reasonable
attorneys' fees) paid to third parties arising from any action or claim brought
or threatened against Cisco and based on or as a result of any or items (i)
through (vi) above.
(d) DISCLAIMER. THE FOREGOING STATES THE ENTIRE LIABILITY AND OBLIGATIONS
OF CISCO AND THE EXCLUSIVE REMEDY OF NETRO, WITH RESPECT TO ANY ALLEGED OR
ACTUAL INFRINGEMENT OF PATENTS, COPYRIGHTS, TRADE SECRETS, TRADEMARKS OR OTHER
INTELLECTUAL PROPERTY RIGHTS BY THE PRODUCTS.
16. CONFIDENTIAL INFORMATION PROPRIETARY RIGHTS
16.1 Confidentiality. All confidential information disclosed by either
party to the other in connection with this Agreement shall be subject to the
provisions of the Mutual Nondisclosure Agreement dated and effective February 5,
1998 between Cisco and Netro.
16.2 Proprietary Rights. Netro shall not remove any proprietary notices
incorporated in, marked on, or fixed to the Products by Cisco. Netro confirms
that Cisco owns all right, title, and interest in the product lines that include
the Products and in all of Cisco's patents, trademarks, trade names, inventions,
copyrights, know-how, and trade secrets relating to the design, manufacture,
operation or service of the Products. The use by Netro of any of these property
rights is authorized only to the extent expressly provided in this Agreement and
only for the purposes herein set forth, and upon termination of this Agreement
for any reason such authorization shall cease. The Products are sold and the
Software is licensed by Cisco subject, in every case, to the condition that such
sale or license does not convey any license, expressly or by implication, to
manufacture, duplicate, or otherwise copy or reproduce the Products or Software,
through reverse engineering or any other means. Netro agrees to take appropriate
steps with its customers, as Cisco may request, to inform them of and assure
their compliance with the restrictions contained in this Section 16.2. Nothing
herein shall grant to Netro any right, title or interest in such trademarks. At
no time during or after the term of this Agreement shall Netro challenge or
assist others to challenge the trademarks or the registration thereof or attempt
to register any trademarks, marks or trade names confusingly similar to the
trademarks.
17. MISCELLANEOUS
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<PAGE> 14
17.1 Assignment. This Agreement and all rights and obligations hereunder,
excepting the right to receive payment, are personal to the parties hereto and
may not be assigned in whole or in part by either party without the prior
written consent of the other, except pursuant to a merger, consolidation or sale
or substantially all of the assets or capital stock of the assigning party which
does not result in termination of this Agreement under Section 13.3.
17.2 Governing Law. This Agreement shall be construed and the respective
rights of the parties hereto determined according to the laws to the State of
California, without giving effect to the principles of conflict of laws thereof.
The 1980 United Nations Convention on Contracts for the International Sale of
Goods shall not apply.
17.3 Venue. The exclusive jurisdiction and venue of any action with
respect to the subject matter of this agreement shall be the state courts for
the State of California for the County of Santa Clara or the United States
District Court for the Northern District of California and each party submits
itself to the exclusive jurisdiction and venue of such courts for the purpose of
any such action.
17.4 Export Controls. Cisco and Netro shall comply in all respects with
all United States laws and regulations as will from time to time govern the
license and delivery of technology and Products abroad by persons subject to the
jurisdiction of the United States, including the Export Administration Act of
1979, as amended, any successor legislation, and the Export Administration
Regulations issued by the Department of Commerce, International Trade
Administration, Bureau of Export Administration.
17.5 Notices. All notices, waivers and consents in connection with this
Agreement shall be in writing and shall be deemed given when delivered by hand
or received by certified mail, postage prepaid, return receipt requested, or
sent by facsimile transmission (confirming the same by mail) or internationally
recognized overnight courier service. All notices or communications between
Netro and Cisco pertaining to this Agreement shall be addressed as follows:
If to Cisco:
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, California 95134-1706
Attn.: General Counsel
If to Netro:
Netro Corporation
3860 North First Street
San Jose, California 95134
Attn.: Chief Financial Officer
or to such other address as a party may direct in writing.
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<PAGE> 15
17.7 Amendments. This Agreement may be amended or supplemented only in
writing designated as such an amendment or supplement and signed by a duly
authorized officer of both parties.
17.8 Waiver. Except as specifically provided in a waiver signed by a duly
authorized officer of the party seeking enforcement, the failure to enforce or
the waiver of any term of this Agreement shall not constitute the waiver of such
term at any time or in any circumstance and shall not give rise to any
restriction on or condition to the prompt, full and strict enforcement of the
terms of this Agreement.
17.9 References. The paragraph headings and the recitals used herein are
for convenience of reference only and shall not alter or affect the terms, or
interpretation, of this Agreement.
17.10 Force Majeure. Neither Cisco nor Netro shall be liable to the other
for any default hereunder (other than with respect to payment) if such default
is caused by an event beyond such party's control, including without limitation
acts or failures to act of the other party, floods, fires, governmental acts or
directives, unavailability of transportation or supply, strikes and acts of God
(collectively known as a "Force Majeure Event"). In the event of a threatened
default or default as a result of any of the above causes, the defaulting party
shall exercise its best efforts to avoid and cure such default. In the event
such an event prevents performance hereunder for a period in excess of ninety
(90) days, then the non-defaulting party may elect to terminate this Agreement
and/or cancel or suspend any Purchase Orders hereunder by notice to the
defaulting party.
17.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same agreement.
17.12 Publicity. Each party and their representatives shall not issue or
cause to be issued any press release, public announcement or other public
statement with respect to the transactions contemplated by this Agreement
without the prior written consent of the other party, which consent may be
withheld at such other party's sole discretion (except as required by law or
government regulation, in which case the other party shall have the opportunity
to request confidential treatment of the proposed disclosure, including
obtaining protective orders or permission to redact any information which will
be publicly available).
17.13 Mutual Release.
(a) Netro's Release. In consideration of the rights and licenses granted
to Netro under this Agreement and the Technology Agreement, Netro hereby
releases and forever discharges Cisco and its direct or indirect assigns,
parents, predecessors, successors, subsidiaries or affiliated corporations or
business entities, past and present, as well as its directors, officers,
partners, shareholders, agents, employees, attorneys, servants, successors and
assigns, past and present, and each of them, from any and all claims, liens,
demands, causes of action, obligations,
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<PAGE> 16
damages and liabilities, known or unknown, that Netro has had in the past, or
now has, or may have in the future against Cisco, or any other persons or
entities, arising directly or indirectly out of or related in any way to any
prior business dealings, negotiations, discussions or agreements between parties
or their predecessors, successors, subsidiaries or affiliated corporations or
business entities, past and present, as well as its directors, officers,
partners, shareholders, agents, employees, attorneys, servants successors and
assigns, past and present. Netro agrees and covenants that it will not ever
institute any suit or action at law or in equity against Cisco by reason of any
claims or causes of action described above.
(b) Netro's Waiver of Unknown Claims. Netro expressly understands and
acknowledges that it is possible that unknown losses or claims exist or that
present losses may have been underestimated in amount or severity, and that it
explicitly took that into consideration in entering into this Agreement. With
knowledge of the possibility of unknown claims, a portion of the consideration
provided for herein was given in exchange for a full accord, satisfaction and
discharge of all such claims. Consequently, Netro acknowledges and agrees that
it is fully aware of and hereby waives all rights or benefits which it may now
or in the future have under the provisions of California Civil Code Section
1542, which section has been explained fully by counsel and which provides as
follows:
A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with debtor.
(c) Cisco's Release. Cisco hereby releases and forever discharges Netro
and its direct or indirect assigns, parents, predecessors, successors,
subsidiaries or affiliated corporations or business entities, past and present,
as well as its directors, officers, partners, shareholders, agents, employees,
attorneys, servants successors and assigns, past and present, and each of them,
from any and all claims, liens, demands, causes of action, obligations, damages
and liabilities, known or unknown, that Cisco has had in the past, or now has,
or may have in the future against Netro, or any other persons or entities,
arising directly or indirectly out of or related in any way to any prior
business dealings, negotiations, discussions or agreements between parties or
their predecessors, successors, subsidiaries or affiliated corporations or
business entities, past and present, as well as its directors, officers,
partners, shareholders, agents, employees, attorneys, servants successors and
assigns, past and present. Cisco agrees and covenants that it will not ever
institute any suit or action at law or in equity against Netro by reason of any
claims or causes of action described above.
(d) Cisco's Waiver of Unknown Claims. Cisco expressly understands and
acknowledges that it is possible that unknown losses or claims exist or that
present losses may have been underestimated in amount or severity, and that it
explicitly took that into consideration in entering into this Agreement. With
knowledge of the possibility of unknown claims, a portion of the consideration
provided for herein was given in exchange for a full accord, satisfaction and
discharge of all such claims. Consequently, Cisco acknowledges and agrees that
it is fully aware of and hereby waives all rights or benefits which it may now
or in the future have under the
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<PAGE> 17
provisions of California Civil Code Section 1542, which section has been
explained fully by counsel and which provides as follows:
A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with debtor.
(e) Limitation. The parties acknowledge and agree that the mutual releases
and waivers contained in Sections 17.13(a), (b), (c) and (d) above do not apply
to claims, liens, demands, causes of action, obligations, damages and
liabilities arising out of, or relating to, (1) any purchase orders for the
Products placed Netro and accepted by Cisco prior to the Effective Date of this
Agreement or (2) a breach of the terms and conditions of this Agreement or the
Technology Agreement.
17.14 Entire Agreement. The Technology Agreement and this Agreement,
including any Appendices, schedules and tables attached hereto which either have
been specifically referred to herein or have been initialed by the parties,
constitute the entire agreement between the parties with respect to the subject
matter. This Agreement supersedes all prior discussions, understandings,
agreements and representations with respect to the subject matter hereof.
17.15 Relationship of the Parties. The parties are independent contractors
under this Agreement and no other relationship is intended, including a
partnership, franchise, joint venture, agency, employer/employee, fiduciary,
master/servant relationship, or other special relationship. Neither party shall
act in a manner which expresses or implies a relationship other than that of
independent contractor, nor bind the other party. The parties acknowledge and
agree that any breach of the foregoing sentence shall be deemed a material
breach of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
CISCO SYSTEMS, INC. NETRO CORPORATION
By: /s/ CISCO SYSTEMS By: /s/ GIDEON BEN-EFRAIM
----------------------------------- -----------------------------------
Name: Name: Gideon Ben-Efraim
----------------------------------- -----------------------------------
Title: Title: CEO
----------------------------------- -----------------------------------
12/10/98
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Appendix A
1.1 Netro's Boards
BSC-E-2000-00
BWSM in Cisco Terminology
1.2 Products
<TABLE>
<CAPTION>
PRODUCT NUMBER PRODUCT DESCRIPTION LIST PRICE
- -------------- ------------------- ----------
<S> <C> <C>
[***]
[***] MGX8220, 16-Slot, Rack-Mount, ASC, ASC-BC [***]
[***] Redundant ASC: Includes ASC-BC [***]
[***] MGX 8220 Controller Card, Enhanced [***]
[***] Redundant ASC2: Includes ASC-BC [***]
[***] Broadband Network Module-One T3 Port [***]
[***] Broadband Network Module-One E3 Port [***]
[***] BNM Back Card with DB15 Clock Connector [***]
[***] BNM Back Card with BNC Clock Connector [***]
[***] Broadband Network Module with one SONET/SDH (155 Mbps) Port [***]
[***] BNM Back Card with a Single Mode Fiber Interface [***]
[***] Power Cord with AS 3112 Plug (Australia, New Zealand) [***]
[***] Power Cord with CEE 7/7 plug (Continental Europe) [***]
[***] Power Cord with BS 1363 plug (Great Britain, Ireland) [***]
[***] Power Cord with CEI 23-16/VII plug (Italy) [***]
[***] Power Cord with NEMA L6-20 Twistlock plug (North America) [***]
</TABLE>
[***] CONFIDENTIAL TREATMENT REQUESTED
-18-
<PAGE> 19
<TABLE>
<S> <C> <C>
[***]
MGX8220DC Power Entry Module [***]
[***]
[***] AC Power Option 1 - one 875 Watt, one AC Input [***]
[***] AC Power Option 2 - two 875 Watt, one AC Input [***]
[***] AC Power Option 3 - two 875 Watt, two AC Input [***]
[***] MGX 8220 Controller Card, Enhanced [***]
[***] MGX8220 Base Unit - Spare (without backplane) [***]
[***] MGX8220 Controller Card Back Card [***]
[***] MGX8220 Controller Card [***]
[***] AC PS Rack encl. 1 AC line input [***]
[***] AC PS Rack encl. 2 AC line inputs [***]
[***] 875 W AC Power Supply [***]
[***] Mounting Kit To Install MGX8220 Chassis In A 23" Rack [***]
[***] Mounting Kit To Install AC, Cooling or ESP in a 23" Rack [***]
[***] Shot Cable, AC Shelf to MGX8220 [***]
[***] Long Cable, AC Shelf to MGX8220 [***]
[***]
[***] MGX8220 Two Shelf Cooling [***]
[***] MGX8220 Additional Two Shelf Cooling [***]
[***]
[***] AXIS concentrator, 16-slot, rack mount, ASC, ASC-BC [***]
[***] Redundant concentrator controller - Includes the Rack Card [***]
[***] ASC back card [***]
[***] Broadband network module (BNM)-1 T3 port [***]
[***] Broadband network module (BNM)-1 E3 port [***]
</TABLE>
[***] CONFIDENTIAL TREATMENT REQUESTED
-19-
<PAGE> 20
<TABLE>
<S> <C> <C>
[***] Broadband network module (BNM)-155 Mbps [***]
[***] T3/E3 BNM back card with DB15 clock connector [***]
[***] T3/E3 BNM back card with BNC clock connector [***]
[***] OC-3/STM-1 BNM back card [***]
[***] Firmware media kit for use with AXIS concentrator [***]
</TABLE>
[***] CONFIDENTIAL TREATMENT REQUESTED
-20-
<PAGE> 21
1.3 SOFTWARE
Cisco will modify its basic [***] software for Netro. The Netro version will
support connection to BPX through the standard UNI format mode and will have
substantially the same functionality and performance as the basic [***]
software, except for the following changes and feature restrictions:
(1) This new release of software for Netro will be called "NETRO.019" or
NETRO.Oxxx
(2) The existing AXIS default prompt would be changed to NETRO and would look
like "NETRO.ShelfName.Shelf #.ShelfStatus" where ShelfStatus of "a" means active
and "s" means standby.
(3) The standard prompt would look like "ShelfName.Shelf #.ShelfStatus"
(4) NETRO.Oxxx s/w release would only support [***] and a choice of [***] or
[***] or [***].
(5) NETRO.Oxxx s/w release would not recognize and support [***] or [***].
(6) NETRO.Oxxx s/w release would only recognize and support Netro [***] in a
bounded Axis shelf. Any other type of [***] would be supported.
(7) NETRO.Oxxx would not include any [***] contents.
(8) NETRO.Oxxx would not support [***].
(9) NETRO.Oxxx uplink interface will only support [***] format.
(10) NETRO.Oxxx s/w release would not provide any support for [***], policing or
congestion management.
(11) NETRO.Oxxx s/w would not provide any [***], for example, services and
protocols specific to [***], [***], [***], [***], [***] etc.
[***] CONFIDENTIAL TREATMENT REQUESTED
-21-
<PAGE> 22
APPENDIX B
Specifications for the Product
Cisco MGX 8220 Specifications
MECHANICAL CONFIGURATION
- - [***] Slots
[***] slots reserved for [***]
[***] slots reserved for [***]
[***] slots reserved for [***]
[***] slots reserved for [***] Not Included in the Product
Ten available for function modules - Not provided by Cisco
DIMENSIONS
- - 8.75 x 17.45 x 20 in. (21.8 x 43.6 x 50 cm)
- - 19 in. (48.3 cm) rack mountable
POWER REQUIREMENT
- - 48 VDC or 110/22OVAC
- - 400 watts
- - Redundant power feeds
CAPACITY
- - [***] Mbps ATM cell bus
SUBSCRIBER INTERFACES
- - Provided by Netro Service modules
- - TRUNK INTERFACES
- - [***]
- - [***]
- - Redundancy
- - [***] optional common equipment redundancy
- - [***] redundancy support for Netro BWSM
NETWORK MANAGEMENT
- - Simple Network Management Protocol (SNMP) configuration and monitoring
- - Trivial File Transfer Protocol (TETP) software download
- - TFTP statistics collection
- - Connection Management Permanent virtual circuits (PVCs)
[***] CONFIDENTIAL TREATMENT REQUESTED
-22-
<PAGE> 23
Appendix C
List of Cisco's Competitors
[***]
[***]
[***]
[***]
[***]
And any subsidiaries or controlled affiliates of the above.
[***] CONFIDENTIAL TREATMENT REQUESTED
-23-
<PAGE> 1
Exhibit 10.11.1
TECHNOLOGY AGREEMENT
This Technology Agreement ("Agreement") is made and entered into on the 7th day
of December, 1998 ("Effective Date"), by and between Cisco Systems, Inc.
("Cisco"), a California corporation, located at 170 West Tasman Drive, San Jose
California 95134, and Netro Corporation ("Netro"), a California corporation,
located at 3860 North First Street, Santa Clara California 95134.
WHEREAS, contemporaneously with the execution of this Agreement Cisco and Netro
entered into an OEM Agreement (the "OEM Agreement") pursuant to which Cisco
agreed to sell to Netro Cisco's [***] shelves for a fifteen month time
period; and
WHEREAS, Cisco desires to license Netro the design of the [***] shelves to
enable Netro to develop, distribute and sell its own version of MGX 8220
shelves.
NOW THEREFORE, in consideration of the mutual promises set forth below, the
parties agree as follows:
1.0 DEFINITIONS
1.1 "Cisco's Product" means that portion of Cisco's [***] shelf
product as more fully described in Exhibit A attached hereto.
1.2 "Design Documentation" means any schematics of Cisco's Product or
other technical information provided by Cisco to Netro in order for Netro to
develop Netro's Derivative Products. "Design Documentation" is more fully
described on Exhibit A attached hereto.
1.3 "Netro's Board Products" means Netro's Board Products which Netro
will integrate and distribute with Netro's Derivative Products. "Netro's Board
Products" are more fully described in Exhibit A attached hereto.
1.4 "Netro's Derivative Products" means the shelf products developed by
Netro based on Cisco's Product's design. Netro will develop Netro's Derivative
Products using the Design Documentation provided by Cisco.
1.5 "Netro's Integrated Products" means the combination of Netro's
Derivative Products, Netro's Board Products and any other required components or
software.
2.0 DERIVATIVE PRODUCT DEVELOPMENT
2.1 Cisco's Obligations. Within ten (10) days of Effective Date, Cisco
will provide the Design Documentation to Netro. Further, Cisco will identify its
vendors of Cisco's Product and provide an introduction for Netro to such
suppliers so that Netro may make arrangements for the manufacture and supply of
Netro's Derivative Products.
2.2 Netro's Obligations. Netro will perform all work required for the
development of Netro's Derivative Products, Netro's Board Products and Netro's
Integrated Products. Netro will
[***] CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 2
be responsible for entering into all necessary manufacturing and supply
arrangements for Netro's Derivative Products, Netro's Board Products and Netro's
Integrated Products. Netro will be responsible for the development of all
software required for use with Netro's Derivative Products, Netro's Board
Products and Netro's Integrated Products. Netro shall not distribute any
software provided to it by Cisco (e.g., software provided under the OEM
Agreement or otherwise) with Netro's Derivative Product or Netro's Integrated
Products. Netro must brand, promote, market and sell the Products as Netro's own
products using Netro's own trademarks, trade names and trade dress. Netro may
not use any of Cisco's trademarks, trade names or trade dress in connection with
the marketing, sale or distribution of Netro's Derivative Products or Netro's
Integrated Products.
2.3 Regulatory Compliance. Netro will be solely responsible for
obtaining all applicable safety or emissions approvals and for network
compliance. Cisco shall have no obligations whatsoever to assist Netro in
achieving compliance to regulations.
2.4 Third Party Licenses. Netro will be solely responsible for obtaining
any third party licenses required to develop, distribute and sell the Netro's
Board Products and Netro's Integrated Products.
3.0 OWNERSHIP AND LICENSE GRANTS
3.1 Cisco's Ownership Rights. Cisco will retain ownership of all right,
title and interest (including all patents, copyrights, trademarks, trade secrets
and other intellectual property rights) in Cisco's Product, Netro's Derivative
Products, and Design Documentation,. The parties acknowledge and agree that such
ownership rights includes ownership of any modifications that Netro makes to the
design of Cisco's Product or the Design Documents ("Modifications") required to
create Netro's Derivative Products and Netro hereby assigns to Cisco any and all
intellectual property rights Netro may acquire in the Modifications and Netro's
Derivative Products. Netro will sign all documents necessary to effect such
assignment.
3.2 Netro's Ownership Rights. Netro will retain ownership of all right,
title and interest (including all patents, copyrights, trademarks, trade secrets
and other intellectual property rights) in Netro's Board Products and Netro's
Integrated Product (excluding Cisco's rights to Cisco's Product, Netro's
Derivative Product and the Design Documentation).
3.3 Right to Create, Manufacture and Distribute Netro's Derivative
Products and Netro's Integrated Products. Subject to the terms and conditions of
this Agreement, Cisco hereby grants Netro a non-exclusive, non-transferable,
non-sublicensable, irrevocable, fully paid up, worldwide, license to (i) use and
modify the Design Documentation solely for purposes of creating Netro's
Derivative Products from which Netro can build Netro's Integrated Products, (ii)
manufacture or have manufactured Netro's Derivative Products, (iii) sell and
distribute Netro's Derivative Products solely as integrated into Netro's
Integrated Products, through multiple tiers of distribution, (iv) purchase
Netro's Derivative Products from Cisco's suppliers solely for use in Netro's
manufacturing Netro's Integrated Products pursuant to this Agreement, and (v)
use Modifications (but not the underlying design of Cisco's Product) for any
purpose. Cisco grants and Netro receives no rights to purchase Netro's
Derivative Products, components for Netro's
-2-
<PAGE> 3
Derivative Products or any other products from Cisco's suppliers under any
purchase arrangement that Cisco has with such suppliers.
3.4 No Other Rights or Licenses. Except as expressly set forth in this
Agreement, Cisco grants and Netro receives no other rights or licenses,
including, without limitation, any rights to use Cisco's trademarks, service
marks, trade names or trade dress. Netro is strictly prohibited from using any
of Cisco's trademarks, service marks, trade names or trade dress in connection
with the marketing, sale or distribution of Netro's Integrated Products or
Netro's Derivative Products.
4.0 [***] FEES. Netro will [***] in connection with the rights and licenses
granted under this Agreement.
5.0 NO SUPPORT. Cisco will not be required to provide any transfer, consulting
or engineering support to Netro during Netro's development of Netro's Derivative
Products. Cisco will not be required to provide any training under this
Agreement. Further, Cisco will not be required to provide any type of customer
support whatsoever under this Agreement, including, without limitation, support
for Netro's Integrated Products, or the Netro's Derivative Products. Netro
acknowledges and agrees that it shall be solely responsible for all support for
Netro's Integrated Products and Netro's Derivative Products.
6.0 EXPORT CONTROLS. Netro hereby acknowledges that the Design Documentation or
derivatives thereof supplied by Cisco hereunder and Netro's Integrated Products
created by Netro (hereafter referred to as "Products and Technology") are
subject to export controls under the laws and regulations of the United States
(U.S.). Netro shall comply with such laws and regulations and agrees not to
export, re-export or transfer Products and Technology without first obtaining
all required U.S. Government authorizations or licenses. Netro shall be solely
responsible for securing such authorizations or licenses.
7.0 CONFIDENTIALITY, PROPRIETARY NOTICES AND LEGENDS
7.1 Confidential Information. Netro acknowledges that, in connection
with this Agreement it may obtain information relating to Cisco or Cisco's which
is of a confidential and proprietary nature ("Confidential Information"). Such
Confidential Information may include, but is not limited to, trade secrets, know
how, inventions, techniques, processes, programs, schematics, software source
documents, data, customer lists, financial information, and sales and marketing
plans or information which Netro knows or has reason to know is confidential,
proprietary or trade secret information of Cisco. Netro shall at all times, both
during the term of this Agreement and for a period of at least three (3) years
after its termination, keep in trust and confidence all such Confidential
Information, and shall not use such Confidential Information other than as
expressly authorized by Cisco under this Agreement, nor shall Netro disclose any
such Confidential Information to third parties without Cisco's written consent.
Netro further agrees to immediately return to Cisco all Confidential Information
(including copies thereof) in Netro's possession, custody, or control upon
termination of this Agreement at any time and for any reason. The obligations of
confidentiality shall not apply to information which (a) has entered the public
domain except where such entry is the result of Netro's breach of this
Agreement; (b)
[***] CONFIDENTIAL TREATMENT REQUESTED
-3-
<PAGE> 4
prior to disclosure hereunder was already rightfully in Netro's possession; or
(c) subsequent to disclosure hereunder is obtained by Netro on a nonconfidential
basis from a third party who has the right to disclose such information to the
Netro.
7.2 Publicity. Neither party shall disclose, advertise, or publish the
terms and conditions of this Agreement without the prior written consent of the
other party. Any press release or publication regarding this Agreement is
subject to prior review and written approval of the parties.
8.0 WARRANTY DISCLAIMER. ALL MATERIALS PROVIDED BY CISCO HEREUNDER ARE PROVIDED
ON AN AS-IS BASIS WITHOUT WARRANTY OF ANY KIND BY CISCO OR ITS SUPPLIERS. CISCO
DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF
NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
9.0 NETRO'S INDEMNITY. Netro will indemnify, defend and hold Cisco harmless for
any loss or damage arising out of Netro's use of the Design Documentation or it
use or distribution of Netro's Derivative Products or Netro's Integrated
Products.
10.0 LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING ELSE HEREIN, ALL
LIABILITY OF CISCO AND ITS SUPPLIERS UNDER THIS AGREEMENT OR OTHERWISE SHALL BE
LIMITED TO [***]. THIS LIMITATION OF LIABILITY IS CUMULATIVE AND NOT PER
INCIDENT.
11.0 CONSEQUENTIAL DAMAGES WAIVER. IN NO EVENT SHALL CISCO OR ITS SUPPLIERS BE
LIABLE FOR ANY INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES, LOST PROFITS, OR
LOST DATA, OR ANY OTHER INDIRECT DAMAGES, WHETHER ARISING IN CONTRACT, TORT
(INCLUDING NEGLIGENCE) OR OTHERWISE, EVEN IF CISCO OR ITS SUPPLIERS HAVE BEEN
INFORMED OF THE POSSIBILITY THEREOF.
12.0 TERMINATION OF CISCO'S OBLIGATIONS
12.1 Termination. All of Cisco's obligations under this Agreement shall
terminate upon the earlier to occur of:
(a) One (1) year from the Effective Date,
(b) Upon delivery of the Design Documentation and identification and
introduction of Cisco's suppliers to Netro both as set forth in Section 2.1,
(c) Either party ceases to carry on business as a going concern, either
party becomes the object of the institution of voluntary or involuntary
proceedings in bankruptcy or liquidation, or a receiver is appointed with
respect to a substantial part of its assets,
(d) Netro breaches any of the material provisions of this Agreement and
fails to remedy such breach within thirty (30) days after written notification
by Cisco, or
[***] CONFIDENTIAL TREATMENT REQUESTED
-4-
<PAGE> 5
(e) Cisco terminates the OEM Agreement due to a breach by Netro.
12.3 Effect of Termination. Sections 2.2 through 2.4, Sections 3 through
II and Section 13 shall survive any termination of this Agreement.
13.0 GENERAL
13.1 Governing Law and Venue. The validity, interpretation, and
performance of this Agreement shall be controlled by and construed under the
laws of the State of California, United States of America, as if performed
wholly within the state and without giving effect to the principles of conflict
of law. The parties specifically disclaim the UN Convention on Contracts for the
International Sale of Goods. The exclusive jurisdiction and venue of any action
with respect to the subject matter of this agreement shall be the state courts
for the State of California for the County of Santa Clara or the United States
District Court for the Northern District of California and each party submits
itself to the exclusive jurisdiction and venue of such courts for the purpose of
any such action.
13.2 Assignment. Neither this Agreement nor any rights under this
Agreement, other than monies due or to become due, shall be assigned or
otherwise transferred by either without the prior written consent of the other.
This Agreement shall bind and inure to the benefit of the successors and
permitted assigns of the parties.
13.3 Notices. All notices required or permitted under this Agreement
will be in writing and will be deemed given: (a) when delivered personally; (b)
when sent by confirmed facsimile (followed by the actual document in air
mail/air courier); (c) three (3) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid (or six (6) days for
international mail); or (d) one (1) day after deposit with a commercial express
courier specifying next day delivery (or two (2) days for international courier
packages specifying 2-day delivery), with written verification of receipt. All
communications will be sent to the addresses set forth on the cover sheet of
this Agreement or such other address as may be designated by a party by giving
written notice to the other party pursuant to this paragraph.
13.4 No Agency. This Agreement does not create any agency, partnership,
joint venture or franchise relationship. Neither party has the right or
authority to, and shall not, assume or create any obligation of any nature
whatsoever on behalf of the other party or bind the other party in any respect
whatsoever.
13.5 Force Majeure. Except for the obligation to pay monies due and
owing, neither party shall be liable for any delay or failure in performance due
to events outside the defaulting party's reasonable control, including without
limitation acts of God, earthquake, labor disputes, shortages or supplies,
riots, war, fire, epidemics, or delays of common carriers or other circumstances
beyond its reasonable control. The obligations and rights of the excused party
shall be extended on a day to day basis for the time period equal to the period
of the excusable delay.
13.6 Waiver. No waiver of rights under this Agreement by either party
shall constitute a subsequent waiver of such right or any other right under this
Agreement.
-5-
<PAGE> 6
13.7 Compliance with Laws. Netro shall obtain all licenses, permits and
approvals required by any government and shall comply with all applicable laws,
rules, policies and procedures of any government where the Netro Products are to
be sold, used or deployed (collectively "Applicable Laws"). Netro will indemnify
and hold harmless Cisco for any violation or alleged violation of any Applicable
Laws. Netro hereby represents and warrants that: (a) it shall comply with all
Applicable Laws; (b) this Agreement and each of its terms are in full
conformance and in compliance with such laws; and (c) it shall not act in any
fashion or take any action which will render Cisco liable for a violation of the
U.S. Foreign Corrupt Practices Act, which prohibits the offering, giving or
promising to offer or give, directly or indirectly, money or anything of value
to any official of a government, political party or instrumentality thereof in
order to assist it or Cisco in obtaining or retaining business. Netro shall use
its best efforts to regularly and continuously inform Cisco of any requirements
of laws, statutes, ordinances, governmental authorities directly or indirectly
affecting this Agreement, the sale, use and distribution of Netro Products, or
Cisco's trade name, trademarks or other commercial, industrial or intellectual
property interests, including, but not limited to, certification of the Netro
Products from the proper authorities in the Territory.
13.8 Severability. In the event that any of the terms of this Agreement
become or are declared to be illegal or otherwise unenforceable by any Court of
competent jurisdiction, such term(s) shall be null and void and shall be deemed
deleted from this Agreement. All remaining terms of this Agreement shall remain
in full force and effect. Notwithstanding the foregoing, if this paragraph
becomes applicable and, as a result, the value of this Agreement is materially
impaired for either party, as determined by such party in its sole discretion,
then the affected party may terminate this Agreement by written notice to the
other.
13.9 Attorneys' Fees. In any suit or proceeding relating to this
Agreement, the prevailing party will have the right to recover from the other
its costs and reasonable fees and expenses of attorneys, accountants, and other
professionals incurred in connection with the suit of proceeding, including
costs, fees and expenses upon appeal, separately from and in addition to any
other amount included in such judgment. This provision is intended to be
severable from the other provisions of this Agreement, and shall survive and not
be merged into any such judgment.
13.10 Entire Agreement. This Agreement, the OEM Agreement, and the
Exhibits hereto constitute the entire agreement between the parties hereto with
respect to the subject matter of this Agreement and replaces any prior oral or
written communications between the parties. There are no conditions,
understandings, agreements, representations, or warranties, expressed or
implied, which are not specified herein. This Agreement may only be modified by
a written document executed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed. Each party warrants and represents that its respective
signatories whose signatures appear below have been and are on the date of
signature duly authorized to execute this Agreement.
Cisco Systems, Inc. Netro Corporation
-6-
<PAGE> 7
Signature: Signature:
By: By:
(Typed or Printed Name) (Typed or Printed Name)
Title: Title:
Date: Date:
-7-
<PAGE> 8
Exhibit A
1. CISCO PRODUCT
AXIS multiservice concentrator, [***], rack mount, ASC, ASC-BC,
specifically:
[***]
2. DESIGN DOCUMENTATION
Cisco's bill of material for Cisco's Product and Cisco's schematics,
drawings and other design documentation required for the manufacture of Cisco's
Product.
3. NETRO'S BOARDS
[***]
[***] CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 1
Exhibit 10.12
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of March
__, 1995 between Netro Corporation, a California corporation (the "Company"),
and Gideon Ben-Efraim, an individual ("Employee"). This Agreement shall have an
effective date (the "Effective Date") of December 1, 1994.
In consideration of the promises and the terms and conditions set forth
in this Agreement, the parties agree as follows:
1. POSITION. During the term of this Agreement, the Company will
employ Employee, and Employee will serve the Company, as its Chairman of the
Board of Directors and Chief Executive Officer and President. In the event that
another individual is hired to serve as Chief Executive Officer of the Company
(following consultation with Employee) in the future, Employee shall continue as
Chairman (but not as the CEO or, unless otherwise determined by the Board of
Directors, as the President) and will continue to play an active role in the
operations and management of the Company, including in the areas of marketing,
engineering, strategic planning and corporate relationships, with leadership
responsibilities and authority in such areas.
2. DUTIES. During the period of Employee's employment relationship
with the Company, Employee will devote his best efforts to the interests of the
Company. Employee will not engage in other employment or consultancy without the
prior written consent of the Company, except where he has provided prior written
notice to the Company of his intention to engage in any such activities which in
his reasonable opinion are not adverse to the best interests of the Company and
the Company has not objected to such engagement in writing within ten (10)
business days thereafter. Employee agrees to abide faithfully by all Company
rules, regulations and policies. In the event of any conflict between the
Company's rules, regulations or policies and the terms of this Agreement or
other written agreements between the Company and Employee, the terms of this
Agreement or such other agreement will control.
3. COMPENSATION AND BENEFITS.
3.1 BASE SALARY. The Company agrees to pay Employee a base salary
of $120,000 per year (the "Initial Base Salary"), payable in accordance with the
Company's customary payroll practices, from the Effective Date of this Agreement
until the first closing (the "Initial Base Salary Period") of the Company's
Series A Preferred Stock financing in which the Company sells a minimum of
$2,500,000 of its securities (the "Financing"). Immediately following such
closing, Employee's base salary shall be increased to $145,000 year (the
"Regular Base Salary"), payable in accordance with the Company's customary
payroll practices. Further, promptly following such closing, the Company shall
pay Employee an amount equal to the difference between the Regular Base Salary
and the Initial Base Salary over the Initial Base Salary Period. Employee's base
salary shall be subject to annual review by the Board of Directors, and
increases to such base salary, if any, shall be determined by the Board of
Directors, consistent with the salaries of other senior executives of the
Company. Notwithstanding the foregoing, Employee's base salary shall be at least
equal to the base salary of the Company's Chief Executive Officer, if hired,
unless agreed otherwise by Employee in
<PAGE> 2
writing or by affirmative vote as a member of the Company's Board of Directors.
The provision set forth in the preceding sentence shall terminate and be of no
further force or effect upon the consummation of the sale of the Company's
securities pursuant to a registration statement filed by the Company under the
Securities Act of 1933, as amended, in connection with the firm commitment
underwritten offering of its securities to the general public.
3.2 CASH BONUSES. Employee shall receive an initial cash bonus
equal to 20% of Employee's Regular Base Salary (or such higher salary as is set
by the Board of Directors), to be paid immediately following the closing of the
Financing. Employee shall further be entitled to participate in the Company's
annual executive bonus plan as may be adopted by the Board of Directors or
modified from time to time; provided, however, that Employee's bonus under such
annual bonus plan shall be at least equal to the bonus received by the Company's
Chief Executive Officer, if hired, under such bonus plan until the consummation
of the sale of the Company's securities pursuant to a registration statement
filed by the Company under the Securities Act of 1933, as amended, in connection
with the firm commitment underwritten offering of its securities to the general
public.
3.3 START-UP INCENTIVE. Upon execution of this Agreement, the
Company shall pay Employee $12,082 plus an amount equal to all out-of-pocket
start-up costs of the Company incurred by Employee (upon submission to the
Company by Employee of a written expense report).
3.4 ADDITIONAL BENEFITS. Employee will be eligible to participate
in the Company's employee benefit plans of general application, including
without limitation those plans covering medical, disability and life insurance
(in an amount equal to two years' base salary) in accordance with the rules
established for individual participation in any such plan and applicable law.
Employee will receive two paid vacation days per month and will receive such
other benefits as the Company generally provides to its senior executives and
the Chief Executive Officer (exclusive of relocation related allowances or
assistance).
3.5 EXPENSES. The Company will reimburse Employee for all
reasonable and necessary expenses incurred by Employee in connection with the
Company's business, provided that such expenses are in accordance with the
Company's applicable policies and are properly documented and accounted for in
accordance with the requirements of the Internal Revenue Service.
4. SEVERANCE.
4.1 DEFINITION OF CAUSE. For purposes of this Section 4, "cause"
shall mean conviction of a felony.
4.2 DEFINITION OF CHANGE OF CONTROL. For purposes of this Section
4, a "Change of Control" shall mean: (i) a merger transaction or a sale of stock
by existing shareholders of the Company to a single purchaser or group of
affiliated purchasers, as a result of either of which actions shareholders of
the Company's voting capital stock immediately prior to the effective date of
such transaction or sale do not own at least a majority of the outstanding
-2-
<PAGE> 3
shares of the Company's voting capital stock (or other equivalent evidence of
ownership) immediately following such transaction or sale; or (ii) a sale of all
or substantially all of the Company's assets to a third party.
4.3 TERMINATION OF EMPLOYMENT OTHER THAN FOR CAUSE. In the event
that (i) Employee's employment relationship with the Company is terminated by
the Company other than for cause, (ii) Employee voluntarily terminates his
employment relationship with the Company within one hundred eighty (180) days of
the commencement of employment of a Chief Executive Officer not previously
approved by Employee in writing or by affirmative vote as a member of the
Company's Board of Directors, (iii) Employee voluntarily terminates his
employment relationship with the Company within thirty (30) days of a change in
Employee's main place of employment to a location more than forty (40) miles
from Employee's current residence without his consent, or (iv) Employee
voluntarily terminates his employment relationship with the Company within 60
days of a failure by the Company to comply with any material provision of this
Agreement which has not been cured within thirty (30) days of written notice
thereof by Employee to the Board of Directors, Employee shall be entitled to
severance payments equal to twelve (12) months of Employee's then-current base
salary (payable during such 12 month period on the Company's normal payroll
dates) and shall be entitled to receive continued benefits under the Company's
benefit plans of general application (other than further accrual of vacation
time, which shall cease upon termination of the employment relationship) during
such 12-month period, and Employee agrees in exchange for such severance
payments and benefits continuation to execute a release in reasonable form
provided by the Company releasing each party and its affiliates or related
parties from all claims, known and unknown, which such party may have against
the other party or its affiliates or related parties other than as related to
the payment of such severance, the provision of such benefits or the continued
operation of the applicable provisions of agreements relating to confidential
information which the parties have previously executed.
4.4 TERMINATION OF EMPLOYMENT FOR CAUSE, DEATH OR DISABILITY. In
the event that Employee's employment relationship with the Company is terminated
for cause or is terminated due to his death or a disability which renders him
unable to perform substantially the functions of his position, Employee shall
not be entitled to the severance payments described in Section 4.3.
4.5 STOCK VESTING MATTERS. Notwithstanding the vesting schedule
contained in Section 3(a) of the Common Stock Purchase Agreement dated January
13, 1995 between the Company and Gideon and Bina Ben-Efraim, Trustees of the
Gideon Ben-Efraim and Bina Ben-Efraim Family Trust dated July 29, 1994 (the
"Stock Purchase Agreement"), the parties agree that the following provisions
shall apply under the circumstances enumerated below: (i) All of the then
Unvested Shares shall be released from the Company's repurchase option in the
event that the Company is a party to a merger transaction or if a sale of stock
by existing shareholders of the Company to a single purchaser or group of
affiliated purchasers occurs, as a result of either of which actions
shareholders of the Company's voting capital stock immediately prior to the
effective date of such transaction or sale do not own at least a majority of the
outstanding shares of the Company's voting capital stock (or other equivalent
evidence of ownership) immediately
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<PAGE> 4
following such transaction or sale, or if the Company sells all or substantially
all of its assets to a third party; (ii) in addition to the Shares already
released from the Company's original repurchase option, an additional
twenty-five percent ( 25%) of the Shares shall be released from the Company's
repurchase option in the event that the Company hires a Chief Executive Officer
without first obtaining the prior approval of Purchaser and the Purchaser elects
to terminate his employment with the Company within one hundred eighty (180)
days of commencement of employment by such Chief Executive Officer; (iii) in
addition to the Shares already released from the Company's original repurchase
option, an additional twenty-five percent ( 25%) of the Shares shall be released
from the Company's repurchase option, if Purchaser's employment relationship
with the Company is terminated by the Company other than for cause; and (iv) if
Purchaser's employment relationship with the Company is terminated due to his
death or disability (as defined below), then (a) a total of twenty-five percent
(25%) of the Shares shall be released from the Company's repurchase option (in
lieu of what would otherwise have been released under the original repurchase
option) in the event that Purchaser dies or becomes disabled less than one year
after the Vesting Commencement Date, (b) a total of fifty percent (50%) of the
Shares shall be released from the repurchase option (in lieu of what would
otherwise have been released under the original repurchase option) in the event
that Purchaser dies or becomes disabled one year or more but less than two years
after the Vesting Commencement Date, and (c) only that number of Shares provided
by the terms of Section 3(a) of the Stock Purchase Agreement shall be released
from the Company's original repurchase option in the event Purchaser dies or
becomes disabled two years or more after the Vesting Commencement Date. For
purposes of the foregoing paragraph, capitalized terms shall have the meanings
ascribed to them in the Stock Purchase Agreement. For purposes of the foregoing
paragraph, "disability or "disabled" shall refer to a disability which renders
the Employee unable to perform substantially the functions of his position by
reason of any medically determinable substantial physical or mental impairment
which can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than 12 months as certified by a
licensed physician
5. REGISTRATION RIGHTS. In the event that the Company grants
registration rights to any of its officers or investors with respect to any
shares of the Company's capital stock or other securities issued to them, the
Company shall grant no less favorable registration rights to Employee with
respect to his shares of Common Stock, whether or not Employee is then employed
by the Company.
6. CONFIDENTIALITY AGREEMENT. Employee shall sign a Confidentiality
and Inventions Agreement in the form attached hereto as Exhibit A.
7. MISCELLANEOUS.
7.1 SEVERABILITY. If any provision of this Agreement shall be
found by any arbitrator or court of competent jurisdiction to be invalid or
unenforceable, then the parties hereby waive such provision to the extent that
it is found to be invalid or unenforceable and to the extent that to do so would
not deprive one of the parties of the substantial benefit of its bargain. Such
provision shall, to the extent allowable by law and the preceding sentence, be
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<PAGE> 5
modified by such arbitrator or court so that it becomes enforceable consistent
with the intent of this Agreement and, as modified, shall be enforced as any
other provision hereof, all the other provisions continuing in full force and
effect.
7.2 NO WAIVER. The failure by either party at any time to require
performance or compliance by the other of any of its obligations or agreements
shall in no way affect the right to require such performance or compliance at
any time thereafter. The waiver by either party of a breach of any provision
hereof shall not be taken or held to be a waiver of any preceding or succeeding
breach of such provision or as a waiver of the provision itself. No waiver of
any kind shall be effective or binding, unless it is in writing and is signed by
the party against whom such waiver is sought to be enforced.
7.3 ASSIGNMENT. This Agreement and all rights hereunder are
personal to Employee and may not be transferred or assigned by Employee at any
time. The Company may assign its rights, together with its obligations
hereunder, to any parent, subsidiary, affiliate or successor, or in connection
with any sale, transfer or other disposition of all or substantially all of its
business and assets, provided, however, that any such assignee assumes the
Company's obligations hereunder, and that such assignment shall be subject to
the severance provisions described in Section 4 to the extent applicable.
7.4 WITHHOLDING. All sums payable to Employee hereunder shall be
reduced by all federal, state, local and other withholding and similar taxes and
payments required by applicable law.
7.5 ENTIRE AGREEMENT. This Agreement, together with the
Confidentiality and Inventions Agreement attached hereto as Exhibit A, the
Common Stock Purchase Agreement dated January 13, 1995 and the Indemnification
Agreement dated November 14, 1994, constitute the entire and only agreements
between the parties relating to the subject matter hereof and thereof, and
supersede any and all previous contracts, arrangements or understandings with
respect hereto and thereto. This Agreement represents the mutual understanding
of the parties and shall not be interpreted against either party by reason of
its drafting or preparation.
7.6 AMENDMENT. This Agreement may be amended, modified,
superseded or canceled only by an agreement in writing executed by both parties
hereto.
7.7 NOTICES. All notices and other communications required or
permitted under this Agreement shall be in writing and hand delivered, sent by
telecopier, sent by certified first class mail, postage pre-paid, or sent by
nationally recognized express courier service. Such notices and other
communications shall be effective upon receipt if hand delivered or sent by
telecopier, three business days after mailing if sent by mail, and one business
day after dispatch if sent by express courier, to the following addresses, or
such other addresses as any party shall notify the other parties:
If to the Company: Netro Corporation
1032 Elwell Court, Suite 210
Palo Alto, CA 94303
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<PAGE> 6
Attention: Secretary
Telecopier: (415) 969-1388
If to Employee: Gideon Ben-Efraim
10891 Santa Teresa Drive
Cupertino, CA 95014
7.8 BINDING NATURE. This Agreement shall be binding upon, and
inure to the benefit of, the successors and personal representatives of the
respective parties hereto.
7.9 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall in no way affect the meaning or interpretation
of this Agreement. In this Agreement, the singular includes the plural, the
plural includes the singular, the masculine gender includes both male and female
referents.
7.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which,
taken together, constitute one and the same agreement.
7.11 GOVERNING LAW. This Agreement and the rights and obligations
of the parties hereto shall be construed in accordance with the laws of the
State of California, without giving effect to the principles of conflict of
laws.
7.12 ATTORNEY'S FEES. In the event that a dispute arises
concerning this Agreement or any of the terms of this Agreement or the
performance thereof, the prevailing party in any action or proceeding concerning
such dispute shall be entitled to have its reasonable attorney's fees and costs
of litigation paid by the non-prevailing party.
IN WITNESS WHEREOF, the Company and Employee have executed this
Agreement as of the date first above written.
NETRO CORPORATION EMPLOYEE
By: __________________________ __________________________
Gideon Ben-Efraim
Its:__________________________
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<PAGE> 7
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement is made as of June 2, 1995 by and
between Netro Corporation, a California corporation (the "Company") and Gideon
Ben-Efraim, an individual (the "Employee").
WHEREAS, the Company and the Employee entered into an Employment
Agreement dated March 27, 1995 (the "Employment Agreement"); and
WHEREAS, the Company and the Employee desire to amend certain sections
of the Employment Agreement;
NOW THEREFORE, pursuant to the provisions of Section 7.6 of the
Employment Agreement, the undersigned agree as follows:
1. Section 1 of the Employment Agreement shall be amended to read
in its entirety as follows:
"1. POSITION. The Company will employ Employee, and Employee will
serve the Company, as its Chairman of the Board of Directors and Chief Executive
Officer and President until such officer relationships are modified in
accordance with the provisions of the balance of this Section 1 or until
Employee's employment relationship with the Company is terminated by either the
Company or Employee. In the event that another individual is hired to serve as
Chief Executive Officer of the Company (following consultation with Employee) in
the future, Employee shall, so long as he remains an employee of the Company,
continue as Chairman (but not as the CEO or, unless otherwise determined by the
Board of Directors, as the President) and will continue to play an active role
in the operations and management of the Company, including in the areas of
marketing, engineering, strategic planning and corporate relationships, with
leadership responsibilities and authority in such areas."
2. Section 3.4 of the Employment Agreement shall be amended to read
in its entirety as follows:
"3.4 ADDITIONAL BENEFITS. Employee will be eligible to
participate in the Company's employee benefit plans of general application,
including without limitation those plans covering medical, disability and life
insurance (in an amount equal to two years' base salary) in accordance with the
rules established for individual participation in any such plan and applicable
law. Employee will receive paid vacation in accordance with the Company's
vacation policy then in effect (provided that in any case Employee will not
receive fewer paid vacation days than any person appointed in the future as the
Company's Chief Executive Officer or as other senior officers of the Company)
and will receive such other benefits as the Company generally provides to its
senior executives and the Chief Executive Officer (exclusive of relocation
related allowances or assistance)."
<PAGE> 8
3. Section 4.3 of the Employment Agreement shall be amended to read
in its entirety as follows:
"4.3 TERMINATION OF EMPLOYMENT OTHER THAN FOR CAUSE. In the event
that (i) Employee's employment relationship with the Company is terminated by
the Company other than for cause, (ii) Employee voluntarily terminates his
employment relationship with the Company within one hundred eighty (180) days of
the commencement of employment of a Chief Executive Officer not previously
approved by Employee in writing or by his affirmative vote as a member of the
Company's Board of Directors, (iii) Employee voluntarily terminates his
employment relationship with the Company within thirty (30) days of a change in
Employee's main place of employment to a location outside what is generally
recognized as the Silicon Valley within Northern California, (including all of
Santa Clara County and adjoining cities), without his consent, or (iv) Employee
voluntarily terminates his employment relationship with the Company within 60
days of a failure by the Company to comply with any material provision of this
Agreement which has not been cured within thirty (30) days of written notice
thereof by Employee to the Board of Directors, Employee shall be entitled to
severance payments equal to twelve (12) months of Employee's then-current base
salary (payable during such 12 month period on the Company's normal payroll
dates) and shall be entitled to receive continued benefits under the Company's
benefit plans of general application (other than further accrual of vacation
time, which shall cease upon termination of the employment relationship) during
such 12-month period, and Employee agrees in exchange for such severance
payments and benefits continuation to execute a release in reasonable form
provided by the Company releasing each party and its affiliates or related
parties from all claims, known and unknown, which such party may have against
the other party or its affiliates or related parties other than as related to
the payment of such severance, the provision of such benefits or the continued
operation of the applicable provisions of agreements relating to confidential
information which the parties have previously executed."
4. All other provisions of the Employment Agreement shall remain in
full force and effect.
The foregoing Amendment to Employment Agreement is hereby executed as of
the date first above written.
"COMPANY"
NETRO CORPORATION,
a California corporation
By: _____________________________________
Title: __________________________________
"EMPLOYEE"
_________________________________________
Gideon Ben-Efraim
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<PAGE> 1
Exhibit 10.13
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is made and entered
into effective as of September 15, 1998, by and between (Employee) (the
"Employee") and Netro Corporation, a California corporation (the "Company").
RECITALS
A. It is expected that another company or other entity may from time to
time consider the possibility of acquiring the Company or that a change in
control may otherwise occur, with or without the approval of the Company's Board
of Directors (the "Board"). The Board recognizes that such consideration can be
a distraction to the Employee, an executive officer of the Company, and can
cause the Employee to consider alternative employment opportunities. The Board
has determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued dedication and
objectivity of the Employee, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined below) of the Company.
B. The Board believes that it is in the best interests of the Company
and its stockholders to provide the Employee with an incentive to continue his
or her employment with the Company, which for purposes of this Agreement as it
relates to Employee's employment shall include a majority-owned subsidiary of
the Company.
C. The Board believes that it is imperative to provide the Employee with
certain benefits upon termination of the Employee's employment in connection
with a Change of Control, which benefits are intended to provide the Employee
with financial security and provide sufficient encouragement to the Employee to
remain with the Company notwithstanding the possibility of a Change of Control.
D. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by the Employee, to agree
to the terms provided in this Agreement.
E. Certain capitalized terms used in the Agreement are defined in
Section 3 below.
In consideration of the mutual covenants contained in this Agreement,
and in consideration of the continuing employment of Employee by the Company,
the parties agree as follows:
1. At-Will Employment. The Company and the Employee acknowledge
that the Employee's employment is and shall continue to be at-will, as defined
under applicable law. If the Employee's employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control, the
Employee shall not be entitled to any benefits, other than (A) as provided by
this Agreement, (B) as may be available in accordance with the terms of the
Company's established employee plans and written policies at the time of
termination, (C) as may be provided in Employee's Offer Letter/Employment
Agreement with the Company dated _____________, or (D) as may be approved by the
Board of Directors of the Company in its discretion. The terms of this Agreement
shall terminate upon the earlier of (i) the date on which Employee ceases to be
employed as an executive officer of the Company, other than as a result of
<PAGE> 2
an involuntary termination by the Company without Cause (ii) the date that all
obligations of the parties hereunder have been satisfied, or (iii) one (1) year
after a Change of Control. A termination of the terms of this Agreement pursuant
to the preceding sentence shall be effective for all purposes, except that such
termination shall not affect the provision of benefits on account of a
termination of employment occurring prior to the termination of the terms of
this Agreement.
2. Change of Control.
(a) Termination Following A Change of Control. Subject to
Sections 4 and 5 below, if the Employee's employment with the Company is
terminated at any time within one (1) year after a Change of Control, then the
Employee shall be entitled to receive severance benefits as follows:
(i) Voluntary Resignation. If the Employee voluntarily
resigns from the Company (other than as an Involuntary Termination (as defined
below) or if the Company terminates the Employee's employment for Cause (as
defined below)), then the Employee shall not be entitled to receive severance
payments. The Employee's benefits will be terminated under the Company's then
existing benefit plans and policies in accordance with such plans and policies
in effect on the date of termination and in accordance with the terms of the
Employee's Offer Letter/Employment Agreement or as otherwise determined by the
Board of Directors of the Company.
(ii) Involuntary Termination. If the Employee's employment
is terminated as a result of an Involuntary Termination other than for Cause,
each stock option to purchase the Company's Common Stock granted to Employee
over the course of his or her employment with the Company (or share of Common
Stock purchased by Employee and subject to a repurchase option in favor of the
Company) and held by Employee on the date of termination of employment shall
become immediately vested (or the repurchase option shall be released) on such
date as to that number of shares that would have vested in accordance with the
terms of such option (or underlying Common Stock Purchase Agreement) (assuming
that Employee had remained in Continuous Status as an Employee, as defined in
the relevant plan and agreement) for two (2) years after the next monthly
vesting date following such termination (e.g., if such option vested as to
additional shares on the 17th day of each month, and such termination were to
occur on the 18th of a month, then the foregoing two (2) year period would begin
after the 17th day of the following month). In the case of options, each such
option shall be exercisable in accordance with the provisions of the option
agreement and plan pursuant to which such option was granted.
(iii) Involuntary Termination for Cause. If the Employee's
employment is terminated for Cause, then the Employee shall not be entitled to
receive severance benefits. The Employee's benefits will be terminated under the
Company's then existing benefit plans and policies in accordance with such plans
and policies in effect on the date of termination.
(b) Termination Apart from A Change of Control. In the event the
Employee's employment terminates for any reason, either prior to the occurrence
of a Change of Control or after one year period following the effective date of
a Change of Control, then the Employee shall not be entitled to receive any
severance benefits under this Agreement. The Employee's benefits will be
terminated under the terms of the Company's then existing benefit plans and
policies in accordance
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<PAGE> 3
with such plans and policies in effect on the date of termination and in
accordance with the terms of the Employee's Offer Letter/Employment Agreement or
as otherwise determined by the Board of Directors of the Company.
3. Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:
(a) Change of Control. "Change of Control" shall mean the
occurrence of any of the following events:
(i) Ownership. Any "Person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is
or becomes the "Beneficial Owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing more than
thirty percent (30%) or more of the total voting power represented by the
Company's then outstanding voting securities without the approval of the Board
of Directors of the Company;
(ii) Merger/Sale of Assets. A merger or consolidation of
the Company whether or not approved by the Board of Directors of the Company,
other than a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets; or
(iii) Change in Board Composition. A change in the
composition of the Board of Directors of the Company, as a result of which fewer
than a majority of the directors are Incumbent Directors. "Incumbent Directors"
shall mean directors who either (A) are directors of the Company as of December
31, 1997 or (B) are elected, or nominated for election, to the Board of
Directors of the Company with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination (but shall
not include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company).
(b) Cause. "Cause" shall mean (i) gross negligence or willful
misconduct in the performance of the Employee's duties to the Company where such
gross negligence or willful misconduct has resulted or is likely to result in
substantial and material damage to the Company or its subsidiaries, (ii)
repeated unexplained or unjustified absence from the Company, (iii) a material
and willful violation of any federal or state law; (iv) commission of any act of
fraud with respect to the Company; or (v) conviction of a felony or a crime
involving moral
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<PAGE> 4
turpitude causing material harm to the standing and reputation of the Company,
in each case as determined in good faith by the Board of Directors of the
Company.
(c) Involuntary Termination. "Involuntary Termination" shall
include any termination by the Company other than for Cause and the Employee's
voluntary termination, upon 30 days prior written notice to the Company,
following (i) a material reduction or change in job duties, responsibilities and
requirements from the Employee's duties, responsibilities and requirements prior
to the Change of Control or in the materiality of those responsibilities (for
example, a division president is a material change from the CEO of the Company,
and a division controller is a material change from the CFO of the Company),
(ii) any reduction of the Employee's total compensation and benefits (including
a refusal by the Acquiror to assume any stock option or stock purchase agreement
in its entirety); or (iii) the Employee's refusal to relocate to a location more
than 50 miles from the Company's current location.
4. Limitation on Payments.
(a) In the event that the severance benefits provided for in this
Agreement to the Employee (i) constitute "parachute payments" within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code")
and (ii) but for this Section, would be subject to the excise tax imposed by
Section 4999 of the Code, then the Employee's benefits under Section 2 shall be
payable either: (i) in full, or (ii) as to such lesser amount which would result
in no portion of such severance benefits being subject to excise tax under
Section 4999 of the Code, whichever of the foregoing amounts, taking into
account the applicable federal, state and local income taxes and the excise tax
imposed by Section 4999, results in the receipt by the Employee on an after-tax
basis, of the greatest amount of benefits under Section 2, notwithstanding that
all or some portion of such benefits may be taxable under Section 4999 of the
Code. Unless the Company and the Employee otherwise agree in writing, any
determination required under this Section 4 shall be made in writing by the
Company's independent public accountants (the "Accountants"), whose
determination shall be conclusive and binding upon the Employee and the Company
for all purposes. For purposes of making the calculations required by this
Section 4, the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Section 280G and 4999 of the Code.
The Company and the Employee shall furnish to the Accountants such information
and documents as the Accountants may reasonably request in order to make a
determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 4.
(b) The payment of severance benefits provided for in this
Agreement shall be subject to all applicable income, employment and social tax
rules and regulations.
5. Successors. Any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of the Employee's rights
hereunder shall inure
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<PAGE> 5
to the benefit of, and be enforceable by, the Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
6. Notice. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. Mailed notices to the Employee
shall be addressed to the Employee at the home address which the Employee most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.
7. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement (whether by
seeking new employment or in any other manner), nor, except as otherwise
provided in this Agreement, shall any such payment be reduced by any earnings
that the Employee may receive from any other source.
(b) Waiver. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by the Employee and by an authorized officer of the
Company (other than the Employee). No waiver by either party of any breach of,
or of compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of the
same condition or provision at another time.
(c) Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement
supersedes any agreement of the same title and concerning similar subject matter
dated prior to the date of this Agreement, and by execution of this Agreement
both parties agree that any such predecessor agreement shall be deemed null and
void.
(d) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California without reference to conflict of laws provisions.
(e) Severability. If any term or provision of this Agreement or
the application thereof to any circumstance shall, in any jurisdiction and to
any extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
terms and provisions of this Agreement or the application of such terms and
provisions to circumstances other than those as to which it is held invalid or
unenforceable, and a suitable and equitable term or provision shall be
substituted therefor to carry out, insofar as may be valid and enforceable, the
intent and purpose of the invalid or unenforceable term or provision.
(f) Arbitration. Any dispute or controversy arising under or in
connection with this Agreement may be settled at the option of either party by
binding arbitration in the County of
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<PAGE> 6
Santa Clara, California, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Punitive damages shall not
be awarded.
(g) Legal Fees and Expenses. The parties shall each bear their
own expenses, legal fees and other fees incurred in connection with this
Agreement.
(h) No Assignment of Benefits. The rights of any person to
payments or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this subsection (h) shall be
void.
(i) Employment Taxes. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.
(j) Assignment by Company. The Company may assign its rights
under this Agreement to an affiliate, and an affiliate may assign its rights
under this Agreement to another affiliate of the Company or to the Company;
provided, however, that no assignment shall be made if the net worth of the
assignee is less than the net worth of the Company at the time of assignment. In
the case of any such assignment, the term "Company" when used in a section of
this Agreement shall mean the corporation that actually employs the Employee.
(k) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
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<PAGE> 7
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
NETRO CORPORATION <<EMPLOYEE>>
By: ______________________________ ______________________________
Title: ___________________________
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<PAGE> 1
EXHIBIT 10.14
NETRO CORPORATION
AMENDED AND RESTATED RIGHTS AGREEMENT
This Amended and Restated Rights Agreement (the "Agreement") is entered
into as of the 18th day of June, 1999, by and among Netro Corporation, a
California corporation (the "Company"), the Series A Purchasers, Series B
Purchasers, Series C Purchasers, the Series D Purchasers and the Ben-Efraims,
all as identified on Exhibit A hereto and shall be effective for all purposes
upon the consummation of the Initial Closing under the Series D Preferred Stock
Purchase Agreement of even date herewith (the "Effective Date"). The Series A
Purchasers, Series B Purchasers, Series C Purchasers and Series D Purchasers
shall be referred to collectively herein as the "Purchasers." The Purchasers and
the Ben-Efraims shall be referred to collectively herein as the "Investors."
RECITALS
A. Pursuant to a Rights Agreement dated June 2, 1995 (the "June 1995
Rights Agreement"), the Company, the Series A Purchasers and the Ben-Efraims
acquired certain registration rights as to securities purchased pursuant to the
Series A Preferred Stock Purchase Agreement dated June 2, 1995 and the Common
Stock Purchase Agreement dated January 13, 1995, respectively.
B. Pursuant to a Rights Agreement dated November 22, 1995 (the "November
1995 Rights Agreement"), the Company, the Series A Purchasers and the
Ben-Efraims agreed to amend and restate the registration rights acquired
pursuant to the June 1995 Rights Agreement in their entirety as set forth in the
November 1995 Rights Agreement, and to include the Series B Purchasers as
parties thereto such that the June 1995 Rights Agreement was of no further force
or effect.
C. Pursuant to a Rights Agreement dated July 31, 1996 (the "July 1996
Rights Agreement"), the Company, the Series A Purchasers, the Series B
Purchasers and the Ben-Efraims agreed to amend and restate the registration
rights acquired pursuant to the November 1995 Rights Agreement in their entirety
as set forth in the July 1996 Rights Agreement, and to include the Initial
Series C Purchasers as parties thereto such that the November 1995 Rights
Agreement was of no further force or effect.
D. Pursuant to an Amended and Restated Rights Agreement dated July 24,
1997 (the "1997 Rights Agreement"), the Company, the Series A Purchasers, the
Series B Purchasers, certain of the Series C Purchasers, and the Ben-Efraims,
agreed to amend and restate the registration rights acquired pursuant to the
July 1996 Rights Agreement in their entirety as set forth in the July 1997
Rights Agreement, and to include certain additional Series C Purchasers as
parties thereto such that the July 1996 Rights Agreement was of no further force
or effect.
E. Pursuant to an Amended and Restated Rights Agreement dated November
1997 (the "November 1997 Rights Agreement"), the Company, the Series A
Purchasers, the Series B Purchasers, certain of the Series C Purchasers, and the
Ben-Efraims, agreed to amend and restate
<PAGE> 2
the registration rights acquired pursuant to the 1997 Rights Agreement in their
entirety as set forth in the November 1997 Rights Agreement, and to include
certain additional Series C Purchasers as parties thereto such that the 1997
Rights Agreement was of no further force or effect.
F. Pursuant to an Amended and Restated Rights Agreement dated December
19, 1997 (the "December 1997 Rights Agreement"), the Company, the Series A
Purchasers, the Series B Purchasers, the Series C Purchasers and the
Ben-Efraims, agreed to amend and restate the registration rights acquired
pursuant to the November 1997 Rights Agreement in their entirety as set forth in
the December 1997 Rights Agreement, and to include certain of the Series D
Purchasers as parties thereto such that the November 1997 Rights Agreement was
of no further force or effect.
G. Pursuant to an Amended and Restated Rights Agreement dated July 13,
1998 (the "July 1998 Rights Agreement"), the Company, the Series A Purchasers,
the Series B Purchasers, the Series C Purchasers, certain of the Series D
Purchasers and the Ben-Efraims, agreed to amend and restate the registration
rights acquired pursuant to the December 1997 Rights Agreement in their entirety
as set forth in the July 1998 Rights Agreement, and to include certain of the
Series D Purchasers as parties thereto such that the December 1997 Rights
Agreement was of no further force or effect.
H. Pursuant to an Amended and Restated Rights Agreement dated January 9,
1999 (the "January 1999 Rights Agreement"), the Company, the Series A
Purchasers, the Series B Purchasers, the Series C Purchasers, certain of the
Series D Purchasers and the Ben-Efraims, agreed to amend and restate the
registration rights acquired pursuant to the July 1998 Rights Agreement in their
entirety as set forth in the January 1999 Rights Agreement, and to include
certain of the Series D Purchasers as parties thereto such that the July 1998
Rights Agreement was of no further force or effect.
I. In connection with the closing of a certain Series D Preferred Stock
financing between the Company and certain additional Series D Purchasers and
with the approval of the majority of Common Stock of the Company issued or
issuable upon conversion of the outstanding Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock of the
Company, the Series A Purchasers, the Series B Purchasers, the Series C
Purchasers, the Series D Purchasers, and the Ben-Efraims, intend to amend and
restate the January 1999 Rights Agreement, as allowed in Sections 3.7 and 3.8
thereof to read as set forth herein so that all rights of the Investors to
participation and registration under Securities Act of 1933 as amended, shall
upon the effectiveness of this agreement, be consolidated and restated herein
and the provisions of the January 1999 Rights Agreement shall be of no further
force or effect.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
SECTION 1
Restrictions on Transferability;
<PAGE> 3
Registration Rights
1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
"Common Shares" shall mean the shares of Common Stock
outstanding and issuable upon the exercise of options listed on Exhibit A
hereto.
"Conversion Shares" means the Common Stock issued or issuable
upon conversion of the Preferred ----------------- Shares.
"Holder" shall mean any Investor holding Registrable Securities,
and any person holding Registrable Securities to whom the rights under this
Agreement have been transferred in accordance with Section 1.14 hereof.
"Initiating Holders" shall mean Holders in the aggregate of not
less than fifty percent (50%) of the Registrable Securities; provided, however,
that the Gideon Ben-Efraim and Bina Ben-Efraim Family Trust dated July 29, 1994
(the "Trust") shall be counted as a Holder for purposes of calculating the
foregoing fifty percent (50%) of the Registrable Securities only if Mr. Gideon
Ben-Efraim, Trustee of the Trust, shall not then be employed by the Company.
"Preferred Shares" shall mean the shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock listed on Exhibit A hereto together with the shares of Series C Preferred
Stock and Series D Preferred Stock issuable upon exercise of the warrants listed
on Exhibit A hereto.
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registrable Securities" means (i) the Common Shares; (ii) the
Conversion Shares; and (iii) any Common Stock of the Company issued or issuable
in respect of the Common Shares, Preferred Shares or Conversion Shares or other
securities issued or issuable with respect to the Preferred Shares, Conversion
Shares or Common Shares upon any stock split, stock dividend, recapitalization,
or similar event, or any Common Stock otherwise issued or issuable with respect
to the Common Shares, Conversion Shares or Preferred Shares; provided, however,
that shares of Common Stock or other securities shall only be treated as
Registrable Securities if and so long as they have not been (x) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (y) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale.
"Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 1.5, 1.6 and 1.7 of this Agreement,
including, without limitation, all
<PAGE> 4
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
and the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company).
"Restricted Securities" shall mean the securities of the Company
required to bear the legend set forth in Section 1.3 of this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and all fees and disbursements of counsel for the
Holders (except as provided by Section 1.9).
1.2 Restrictions. The Preferred Shares, the Conversion Shares and the
Common Shares shall not be sold, assigned, transferred or pledged except upon
the conditions specified in this Agreement, which conditions are intended to
ensure compliance with the provisions of the Securities Act. The Investors will
cause any proposed purchaser, assignee, transferee or pledgee of the Preferred
Shares, the Conversion Shares or the Common Shares to agree to take and hold
such securities subject to the provisions and upon the conditions specified in
this Agreement.
1.3 Restrictive Legend. Each certificate representing (i) the Preferred
Shares, (ii) the Conversion Shares, (iii) the Common Shares and (iv) any other
securities issued in respect of the securities referenced in clauses (i), (ii)
and (iii) upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, shall (unless otherwise permitted by the
provisions of Section 1.4 below) be stamped or otherwise imprinted with legends
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. SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE
OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF
COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REASONABLY ACCEPTABLE TO
IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT."
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY."
Each Investor and Holder consents to the Company making a notation on
its records and giving instructions to any transfer agent of the Restricted
Securities in order to implement the restrictions on transfer established in
this Section 1.
<PAGE> 5
1.4 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 1. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities, unless there is in
effect a registration statement under the Securities Act covering the proposed
transfer, the holder thereof shall give written notice to the Company 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 such holder's expense by either (i) an unqualified written
opinion of legal counsel who shall, and whose legal opinion shall be, reasonably
satisfactory to the Company, addressed to the Company, to the effect that the
proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "no action" letter from the
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 the holder to the
Company. The Company will not require such a legal opinion or "no action" letter
(a) in any transaction in compliance with Rule 144, (b) in any transaction in
which an Investor which is a corporation distributes Restricted Securities after
six (6) months after the purchase thereof solely to its majority-owned
subsidiaries or affiliates for no consideration, or (c) in any transaction in
which an Investor which is a partnership distributes Restricted Securities after
six (6) months after the purchase thereof solely to partners thereof for no
consideration, provided that each transferee agrees in writing to be subject to
the terms of this Section 1.4. 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 1.3 above, except that such certificate shall not bear such restrictive
legend if, in the opinion of counsel for such holder and the Company, such
legend is not required in order to establish compliance with any provisions of
the Securities Act.
1.5 Request for Registration.
(a) In case the Company shall receive from the Initiating
Holders a written request that the Company effect any registration,
qualification or compliance with respect to the Registrable Securities, the
Company will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to
effect such registration, qualification or compliance (including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act and any other governmental requirements or regulations) as may be
so requested and as would permit or facilitate the sale and distribution of all
or such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within twenty (20) days after receipt of such written notice from
the Company; provided, however, that the Company shall not be obligated to take
any action to effect
<PAGE> 6
any such registration, qualification or compliance pursuant to this Section 1.5:
(1) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(2) Prior to the earlier of (i) two (2) years
from the date of this Agreement or (ii) six months following the Company's
initial public offering;
(3) During the period ending on the date three
(3) months immediately following the effective date of, any registration
statement pertaining to securities of the Company (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan);
(4) After the Company has effected two (2) such
registration pursuant to this subparagraph 1.5(a), such registration has been
declared or ordered effective and the securities offered pursuant to such
registration have been sold; or
(5) If the Company shall furnish to such Holders
a certificate, signed by the President of the Company, stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 1.5 shall be deferred for a single period
not to exceed one hundred-twenty (120) days from the date of receipt of written
request from the Initiating Holders.
Subject to the foregoing clauses (1) through (5), the Company shall file
a registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to
Section 1.5 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 1.5(a)(i). The right of any Holder to registration pursuant to Section
1.5 shall be conditioned upon such Holder's participation in the underwriting
arrangements required by this Section 1.5 and the inclusion of such Holder's
Registrable Securities in the underwriting, to the extent requested, to the
extent provided in this Agreement.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by a majority in interest of the Initiating Holders (which managing underwriter
shall be reasonably acceptable to the Company). Notwithstanding any other
provision of this Section 1.5, if the managing underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Company shall so advise all
Holders of Registrable Securities and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all Holders thereof in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities held by such Holders at the
time of filing the
<PAGE> 7
registration statement. No Registrable Securities excluded from the underwriting
by reason of the underwriter's marketing limitation shall be included in such
registration. To facilitate the allocation of shares in accordance with the
above provisions, the Company or the underwriters may round the number of shares
allocated to any Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to one hundred eighty (180) days
after the effective date of such registration.
1.6 Company Registration.
(a) Notice of Registration. If at any time or from time to time,
the Company shall determine to register any of its securities, either for its
own account or the account of a security holder or holders other than (i) a
registration relating solely to employee benefit plans, or (ii) a registration
relating solely to a Commission Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof;
and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved in such registration, all the Registrable Securities specified in a
written request or requests made within twenty (20) days after receipt of such
written notice from the Company by any Holder, but only to the extent that such
inclusion will not diminish the number of securities included by the Company or
by holders of the Company's securities who have demanded such registration.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.6(a)(i). In such event, the right of any Holder to
registration pursuant to Section 1.6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company (or by the
holders who have demanded such registration). Notwithstanding any other
provision of this Section 1.6, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the Registrable Securities to
be included in such registration to a minimum of 25% of the total shares to be
included in such underwriting or exclude them entirely in the case of the
Company's initial public offering. The Company shall so advise all Holders and
the other holders distributing their securities through such underwriting
pursuant to piggyback registration rights similar to this Section 1.6, and the
number of shares of Registrable Securities and other securities that may be
included in the registration and underwriting shall be allocated among all
Holders and other holders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by
<PAGE> 8
such Holders and other securities held by other holders at the time of filing
the registration statement. To facilitate the allocation of shares in accordance
with the above provisions, the Company or the underwriters may round the number
of shares allocated to any Holder or other holder to the nearest 100 shares. If
any Holder or other holder disapproves of the terms of any such underwriting, he
or she may elect to withdraw therefrom by written notice to the Company and the
managing underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to one hundred eighty (180) days
after the effective date of the registration statement relating thereto.
(c) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 1.6 prior to the effectiveness of such registration, whether or not any
Holder has elected to include securities in such registration.
1.7 Registration on Form S-3.
(a) If any Holder requests that the Company file a registration
statement on Form S-3 (or any successor form to Form S-3) for a public offering
of shares of the Registrable Securities, the reasonably anticipated aggregate
price to the public of which, net of underwriting discounts and commissions,
would exceed $500,000, and the Company is a registrant entitled to use Form S-3
to register the Registrable Securities for such an offering, the Company shall
use its best efforts to cause such Registrable Securities to be registered for
the offering on such form; provided, however, that the Company shall not be
required to effect more than one registration pursuant to this Section 1.7 in
any twelve (12) month period. The Company will (i) promptly give written notice
of the proposed registration to all other Holders, and (ii) as soon as
practicable, use its best efforts to effect such registration (including,
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act and any other governmental requirements or regulations)
as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within twenty (20) days after receipt
of such written notice from the Company. The substantive provisions of Section
1.5(b) shall be applicable to each registration initiated under this Section
1.7.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 1.7: (i) in any particular
jurisdiction in which the Company would be required to execute a general consent
to service of process in effecting such registration, qualification or
compliance unless the Company is already subject to service in such jurisdiction
and except as may be required by the Securities Act, (ii) during the period
ending on a date three (3) months following the effective date of, a
registration statement (other than with respect to a registration statement
relating to a Rule 145 transaction, an offering solely to employees or any other
registration which is not appropriate for the registration of Registrable
Securities), or (iii) if the Company shall furnish to such Holder a certificate
signed by the President of the Company stating that, in the good faith judgment
of the Board of Directors, it would be seriously
<PAGE> 9
detrimental to the Company or its shareholders for registration statements to be
filed in the near future, then the Company's obligation to use its best efforts
to file a registration statement shall be deferred for a single period not to
exceed one hundred twenty (120) days from the receipt of the request to file
such registration by such Holder or Holders.
1.8 Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not enter into any agreement granting
any holder or prospective holder of any securities of the Company registration
rights with respect to such securities unless such shares or securities are
entitled to be included in registrations only to the extent that the inclusion
of such securities will not diminish the amount of Registrable Securities that
are included.
1.9 Expenses of Registration. All Registration Expenses incurred in
connection with any registration pursuant to Sections 1.5 and 1.6 and the
reasonable cost of one special legal counsel to represent all of the Holders
together in any such registration shall be borne by the Company, provided that
the Company shall not be required to pay the Registration Expenses of any
registration proceeding begun pursuant to Section 1.5, the request of which has
been subsequently withdrawn by the Initiating Holders. In such case, the holders
of Registrable Securities to have been registered shall bear all such
Registration Expenses pro rata on the basis of the number of shares to have been
registered unless the Holders holding a majority of the Registrable Securities,
as appropriate, agree to forfeit their right to one demand registration pursuant
to Section 1.5. Notwithstanding the foregoing, however, if at the time of the
withdrawal, the Holders have learned of a material adverse change in the
condition, business or prospects of the Company from that known to such Holders
at the time of their request, of which the Company had knowledge at the time of
the request, then the Holders shall not be required to pay any of said
Registration Expenses or to forfeit the right to one demand registration. Unless
otherwise stated, all other Selling Expenses relating to securities registered
on behalf of the Holders and all Registration Expenses incurred in connection
with any registration pursuant to Section 1.7 shall be borne by the Holders of
the registered securities included in such registration pro rata on the basis of
the number of shares so registered.
1.10 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
eighty (180) days or until the distribution described in the registration
statement has been completed; and
(b) Furnish to the Holders participating in such registration
and to the underwriters of the securities being registered such reasonable
number of copies of the registration statement, preliminary prospectus, final
prospectus and such other documents as such underwriters may reasonably request
in order to facilitate the public offering of such securities.
1.11 Indemnification.
<PAGE> 10
(a) The Company will indemnify each Holder, each of its
trustees, officers and directors and partners, and each person controlling such
Holder within the meaning of Section 15 of the Securities Act, with respect to
which registration, qualification or compliance has been effected pursuant to
this Section 1, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or any violation by the Company of any rule or regulation
promulgated under the Securities Act applicable to the Company in connection
with any such registration, qualification or compliance, and the Company will
reimburse each such Holder, each of its officers and directors, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder, controlling person or underwriter and stated to be specifically for use
therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder and
stated to be specifically for use therein; provided, however, that the liability
of a Holder for indemnification under this Section 1.11(b) shall not exceed the
gross proceeds from the offering received by such Holder.
(c) Each party entitled to indemnification under this Section
1.11 (the
<PAGE> 11
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 1 unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
1.12 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 1.
1.13 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act");
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
(c) So long as an Investor owns any Restricted Securities, to
furnish to the Investor forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company and other information in the possession of or
reasonably obtainable by the Company as an Investor may reasonably request in
availing itself of any rule or regulation of the Commission allowing an Investor
to sell any such securities without registration.
1.14 Transfer of Registration Rights. The rights to cause the Company to
register
<PAGE> 12
securities granted Investors under Sections 1.5, 1.6 and 1.7 may be assigned to
a transferee or assignee reasonably acceptable to the Company in connection with
any transfer or assignment of Registrable Securities by an Investor (together
with any affiliate); provided, that (a) such transfer may otherwise be effected
in accordance with applicable securities laws, (b) notice of such assignment is
given to the Company, and (c) such transferee or assignee (i) is a wholly-owned
subsidiary or constituent partner (including limited partners) of such Investor,
or (ii) acquires from such Investor the lesser of (a) 100,000 or more shares of
Restricted Securities (as appropriately adjusted for stock splits and the like)
or (b) all of the Restricted Securities then owned by such Investor.
1.15 Standoff Agreement. Each Investor, and any transferee of shares
held by an Investor, agrees in connection with the initial registration of the
Company's securities that, upon request of the Company or the underwriters
managing any underwritten initial public offering of the Company's securities,
not to sell, make any short sale of, loan, grant any option for the purchase of,
or otherwise dispose of any Registrable Securities (other than those included in
the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days from the effective date of such registration) as may
be requested by the Company or such managing underwriters; provided that the
officers and directors of the Company who own stock of the Company also agree to
such restrictions.
1.16 Termination of Rights. The rights of any particular Holder to cause
the Company to register securities under Sections 1.5, 1.6 and 1.7 shall
terminate with respect to such Holder following a bona fide firm underwritten
public offering of shares of the Company's Common Stock registered under the
Securities Act (provided the aggregate offering price, net of underwriting
discounts and commissions, exceeds ten million dollars ($10,000,000)) at such
time as such Holder is able to dispose of all its Registrable Securities in one
three-month period pursuant to the provisions of Rule 144; provided, that such
Holder holds Registrable Securities constituting less than 1% of the outstanding
voting stock of the Company.
SECTION 2
Right of Participation
2.1 Purchasers' Right of Participation.
(a) Right of Participation. Subject to the terms and conditions
contained in this Section 2.1, the Company hereby grants to each Purchaser the
right of participation to purchase its Pro Rata Portion of any New Securities
(as defined in subsection 2.1(b)) which the Company may, from time to time,
propose to sell and issue. A Purchaser's "Pro Rata Portion" for purposes of this
Section 2.1 is the ratio that (x) the sum of the number of shares of the
Company's Common Stock then held by such Purchaser and the total number of
shares of the Company's Common Stock issuable upon conversion of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock then held by such Purchaser bears to (y) the sum of the total
number of shares of the Company's Common Stock then outstanding and the total
number of shares of the Company's Common Stock issuable upon conversion of the
then outstanding Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock
<PAGE> 13
and Series D Preferred Stock.
(b) Definition of New Securities. Except as set forth below,
"New Securities" shall mean any shares of capital stock of the Company,
including Common Stock and Preferred Stock, whether authorized or not, and
rights, options or warrants to purchase said shares of Common Stock or Preferred
Stock, and securities of any type whatsoever that are, or may become,
convertible into said shares of Common Stock or Preferred Stock. Notwithstanding
the foregoing, "New Securities" does not include (i) the Common Shares, the
Preferred Shares or the Conversion Shares, (ii) securities offered to the public
generally pursuant to a registration statement under the Securities Act, (iii)
securities issued pursuant to the acquisition of another corporation by the
Company by merger, purchase of substantially all of the assets or shares or
other reorganization whereby the Company or its shareholders own not less than a
majority of the voting power of the surviving or successor corporation, (iv)
shares of the Company's Common Stock or related options or warrants convertible
into or exercisable for such Common Stock issued to employees, officers and
directors of, and consultants to, the Company, pursuant to any arrangement
approved by the Board of Directors of the Company, (v) shares of the Company's
Common Stock or related options or warrants convertible into or exercisable for
such Common Stock issued to customers and vendors of the Company pursuant to any
arrangement unanimously approved by the Board of Directors of the Company; (vi)
shares of the Company's Common Stock or related options convertible into or
exercisable for such Common Stock issued to banks, commercial lenders, lessors
and other financial institutions in connection with the borrowing of money or
the leasing of equipment by the Company, (vii) stock issued pursuant to any
rights or agreements, including, without limitation, convertible securities,
options and warrants, provided that the Company shall have complied with the
rights of participation established by this Section 2.1 with respect to the
initial sale or grant by the Company of such rights or agreements, or (viii)
stock issued in connection with any stock split, stock dividend or
recapitalization by the Company.
(c) Notice of Right. In the event the Company proposes to
undertake an issuance of New Securities, it shall give each Purchaser written
notice of its intention, describing the type of New Securities and the price and
terms upon which the Company proposes to issue the same. Each Purchaser shall
have twenty (20) days from the date of receipt of any such notice to agree to
purchase shares of such New Securities (up to the amount referred to in
subsection 2.1(a)), for the price and upon the terms specified in the notice, by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased.
(d) Exercise of Right. If any Purchaser exercises its right of
participation under this Agreement, the closing of the purchase of the New
Securities with respect to which such right has been exercised shall take place
within ninety (90) calendar days after the Purchaser gives notice of such
exercise, which period of time shall be extended in order to comply with
applicable laws and regulations. Upon exercise of such right of participation,
the Company and the Purchaser shall be legally obligated to consummate the
purchase contemplated thereby and shall use their best efforts to secure any
approvals required in connection therewith.
(e) Lapse and Reinstatement of Right. In the event a Purchaser
fails to exercise the right of participation provided in this Section 2.1 within
said twenty (20) day period, the Company shall have ninety (90) days thereafter
to sell or enter into an agreement (pursuant to
<PAGE> 14
which the sale of New Securities covered thereby shall be closed, if at all,
within sixty (60) days from the date of said agreement) to sell the New
Securities not elected to be purchased by such Purchaser at the price and upon
the terms no more favorable to the purchasers of such securities than specified
in the Company's notice. In the event the Company has not sold the New
Securities or entered into an agreement to sell the New Securities within said
ninety (90) day period (or sold and issued New Securities in accordance with the
foregoing within sixty (60) days from the date of said agreement), the Company
shall not thereafter issue or sell any New Securities without first offering
such securities to the Purchasers in the manner provided above.
(f) Assignment. The right of the Purchasers to purchase any part
of the New Securities may be assigned in whole or in part to any partner,
subsidiary, affiliate or shareholder of a Purchaser, or other persons or
organizations who acquire the lesser of (i) 100,000 or more shares of Restricted
Securities (as adjusted for stock splits and the like) or (ii) all of the
Restricted Securities then owned by such Purchaser.
2.2 Termination of Participation Right. The rights of participation
granted under Section 2.1 of this Agreement shall terminate on and be of no
further force or effect upon the earlier of (i) the consummation of the
Company's sale of its Common Stock in an underwritten public offering pursuant
to an effective registration statement filed under the Securities Act
immediately subsequent to which the Company shall be obligated to file annual
and quarterly reports with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act or (ii) the registration by the Company of a class of its equity
securities under Section 12(b) or 12(g) of the Exchange Act.
2.3 Waiver of Prior Right. Pursuant to the terms of the June 1995 Rights
Agreement, the November 1995 Rights Agreement, the July 1996 Rights Agreement,
the 1997 Rights Agreement, the November 1997 Rights Agreement, the December 1997
Rights Agreement and the July 1998 Rights Agreement, the Purchasers hereby waive
any right of pro rata participation which may have accrued to them in the past
with respect to any prior issuance of securities by the Company, including the
issuance of shares of Series D Preferred Stock to certain Series D Purchasers in
connection herewith.
SECTION 3
Miscellaneous
3.1 Assignment. Except as otherwise provided in this Agreement, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties to this
Agreement.
3.2 Third Parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties to this Agreement, and
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
3.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California in the United States of America
without giving effect to the conflicts of laws principles thereof.
<PAGE> 15
3.4 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
3.5 Notices. Any notice, demand or request required or permitted to be
given under this Agreement shall be in writing and shall be deemed sufficient
when delivered personally by a recognized international courier (e.g., Federal
Express or DHL) or sent by confirmed facsimile, and addressed, if to the
Company, at its principal place of business, attention the President, and if to
a Purchaser, at their address as shown on the stock records of the Company. Such
notice shall be effective upon receipt by the organization being notified.
3.6 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, portions of such provisions, or such
provisions in their entirety, to the extent necessary, shall be severed from
this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
3.7 Amendment and Waiver. Any provision of this Agreement may be amended
or waived with the written consent of the Company and the Holders of at least a
majority of the outstanding shares of the Registrable Securities, so long as the
effect is to treat all Holders equally. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each Holder of Registrable
Securities and the Company. In addition, the Company may waive performance of
any obligation owing to it, as to some or all of the Holders of Registrable
Securities, or agree to accept alternatives to such performance, without
obtaining the consent of any Holder of Registrable Securities. In the event that
an underwriting agreement is entered into between the Company and any Holder,
and such underwriting agreement contains terms differing from this Agreement, as
to any such Holder the terms of such underwriting agreement shall govern.
3.8 Effect of Amendment or Waiver. The Investors and their successors
and assigns acknowledge that by the operation of Section 3.7 of this Agreement
the holders of a majority of the outstanding Registrable Securities, acting in
conjunction with the Company, will have the right and power to diminish or
eliminate any or all rights or increase any or all obligations pursuant to this
Agreement.
3.9 Rights of Holders. Each holder of Registrable Securities shall have
the absolute right to exercise or refrain from exercising any right or rights
that such holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.
3.10 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party to this Agreement, upon any breach or
default of the other party, shall impair any such right, power or remedy of such
non-breaching party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver,
<PAGE> 16
permit, consent or approval of any kind or character on the part of any party of
any breach or default under this Agreement, or any waiver on the part of any
party of any provisions or conditions of this Agreement, must be made in writing
and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
3.11 Additional Parties. The Investors agree that any additional persons
who become "Purchasers" under the Purchase Agreement at any "Subsequent Closing"
as such term is described in the Purchase Agreement shall become "Purchasers"
under this Agreement without further action by any other Investor.
<PAGE> 17
The parties hereto have executed this Amended and Restated Rights
Agreement as of the day of _____, ______, and it shall be effective for all
purposes as of the Effective Date.
COMPANY: INVESTORS:
NETRO CORPORATION,
a California corporation (Print Name of Investor)
By: By:
Gideon Ben-Efraim,
President & CEO Title:
Address: 3680 N. First Street Address:
San Jose, CA 95134
(Print Name of Investor)
By:
Title:
Address:
<PAGE> 18
EXHIBIT A
The Ben-Efraims (Common Stock)
<TABLE>
<CAPTION>
Shareholder Number of Shares
- ----------- ----------------
<S> <C>
Gideon and Bina Ben-Efraim, Trustees of the Gideon
Ben-Efraim and Bina Ben-Efraim Family Trust dated July
29, 1994 2,800,000
Amir Ben-Efraim 400,000
Nadav Ben-Efraim 400,000
Nadav Ben-Efraim, Custodian for Yair Jacob Ben-Efraim 400,000
Gideon Ben-Efraim (options) 400,000
TOTAL: 4,400,000
</TABLE>
<PAGE> 19
The Series A Purchasers (Series A Preferred Stock)
<TABLE>
<CAPTION>
Shareholder Number of Shares
- ----------- ----------------
<S> <C>
AT&T Venture Company, L.P. 3,222,222
Venture Law Group Retirement Savings Plan U/A DTD 2/1/93
FBO Elias J. Blawie 11,110
Brentwood Associates VI, L.P. 1,333,334
Jerusalem Pacific Ventures, L.P. 1,481,480
Craig W. Johnson 27,776
Beams Technology Investments Ltd. (formerly Due Diligence
Ltd.) 22,222
Mofet Israel Technology Fund Ltd. 740,742
Venture Law Group Retirement Savings Plan U/A DTD 2/1/93
FBO Tae Hea Nahm 5,554
U.S. Venture Partners IV 2,787,222
Second Ventures II, L.P. 338,334
U.S.V.P. Entrepreneur Partners II, L.P. 96,666
Vebacom GmbH 2,222,222
VLG Investments 1994 33,334
VLG Investments 1995 33,332
StrataCom, Inc. 1,111,110
TOTAL: 13,466,660
</TABLE>
<PAGE> 20
The Series B Purchasers (Series B Preferred Stock)
<TABLE>
<CAPTION>
Shareholder Number of Shares
- ----------- ----------------
<S> <C>
AT&T Venture Company, L.P. 725,000
Brentwood Associates VI, L.P. 1,250,000
Jerusalem Pacific Ventures, L.P. 150,000
Norwest Equity Partners V, L.P. 1,250,000
U.S.V.P. Entrepreneur Partners II, L.P. 21,750
StrataCom, Inc. 250,000
Second Ventures II, L.P. 76,126
U.S. Venture Partners IV, L.P. 627,124
Fitzwilson, Robert C. Trustee of the Robert C
Fitzwilson Trust U/A Dated 6/24/1987 56,500
Vebacom GmbH 500,000
Mofet Israel Technology Fund Ltd. 150,000
TOTAL: 5,056,500
</TABLE>
<PAGE> 21
The Series C Purchasers (Series C Preferred Stock)
<TABLE>
<CAPTION>
Shareholder Number of Shares
- ----------- ----------------
<S> <C>
Pan Dacom GmbH 285,714
AT&T Venture Company, L.P. 142,858
Brentwood Associates VI, L.P. 292,858
U.S. Venture Partners IV, L.P. 61,136
Second Ventures II, L.P. 7,422
U.S.V.P. Entrepreneur Partners II, L.P. 2,120
Norwest Equity Partners V, L.P. 71,428
Cisco Systems, Inc. 82,142
Korea Technology Banking Corporation 160,679
Robert C. Fitzwilson, Trustee of the Robert C
Fitzwilson Trust U/A Dated 6/24/1987 234,071
John Bush and Rita Lynn Simpson, TTEES, The Simpson
Family Trust UTD 1/12/199 35,714
Susan Jackson, Trustee of the Susan Jackson Trust U/A
DTD 9/15/89 241,071
Robertson, Stephens & Company 28,572
Robert W. Wilmot & Mary J. Wilmot, trustees of the
Wilmot Living Trust u/d/t April 18th, 1995 142,858
Citicorp 1,428,572
German American Capital Corporation 160,681
21st Century Communications T-E Partners, L.P. 164,780
</TABLE>
<PAGE> 22
Series C Purchasers (Series C Preferred Stock) - continued
<TABLE>
<CAPTION>
Shareholder Number of Shares
- ----------- ----------------
<S> <C>
21st Century Communications Partners, L.P. 484,306
21st Century Communications Foreign Partners, L.P. 65,200
Brentwood Affiliates Fund, L.P. 35,714
GS Capital Partners II, L.P. 268,899
GS Capital Partners II Offshore, L.P. 106,898
Goldman, Sachs & Co. Verwaltungs GmbH 9,918
Xylan Corporation 285,714
Van Wagoner Capital Management 714,285
Stone Street Fund 1997, L.P. 28,849
Bridge Street Fund 1997, L.P. 14,008
Vebacom GmbH 230,000
Comdisco, Inc. 35,715
Comdisco, Inc. (warrants) 28,750
Hasso Plattner 714,286
Richard M. Moley 50,000
Josef Berger 24,000
Wireless ATM Investors 379,786
Tae Hea Nahm 2,857
TOTAL: 7,021,861
</TABLE>
<PAGE> 23
The Series D Purchasers (Series D Preferred Stock)
<TABLE>
<CAPTION>
Shareholder Number of Shares
- ----------- ----------------
<S> <C>
Italtel SpA 1,285,347
Comdisco, Inc. (warrants) 8,997
Al Shams Holdings Ltd. 642,674
Jerold and Marjorie Principato, JTWROS 25,707
Deborah E. Lindsey, M.D 12,854
J. Douglas Principato 12,853
Garry Pammer 6,425
ML IBK Positions 642,674
DRW Investors LLC 64,267
Venture Fund I, LP 125,991
Brentwood Associates VI, L.P. 86,110
Brentwood Affiliates Fund, L.P. 3,588
U.S. Venture Partners IV, L.P. 107,058
Second Ventures II, L.P. 12,996
USVP Entrepreneur Partners II, L.P. 3,713
Norwest Equity Partners V, A Minnesota Limited Liability 40,705
Partnership
Citicorp 44,006
Hasso Plattner 128,535
Dynamic Securities & Holdings Inc. 64,267
Sasson International Holdings Inc. 192,802
Comdisco, Inc. 1,928
</TABLE>
<PAGE> 24
The Series D Purchasers (Series D Preferred Stock) - continued
<TABLE>
<CAPTION>
Shareholder Number of Shares
- ----------- ----------------
<S> <C>
Van Wagoner Capital Management 283,572
Chi Hsieh 12,853
Lynn Koo 128,535
TOTAL: 3,938,457
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made part of this
registration statement.
/s/ ARTHUR ANDERSEN LLP
San Jose, California
June 21, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 MAR-31-1999
<CASH> 6,094 7,954
<SECURITIES> 9,034 14,894
<RECEIVABLES> 1,659 1,890
<ALLOWANCES> 509 120
<INVENTORY> 4,315 4,004
<CURRENT-ASSETS> 20,836 29,089
<PP&E> 11,291 11,846
<DEPRECIATION> 5,657 6,521
<TOTAL-ASSETS> 26,788 34,762
<CURRENT-LIABILITIES> 8,313 11,074
<BONDS> 4,582 4,807
0 0
81,073 92,853
<COMMON> 1,224 3,409
<OTHER-SE> (68,404) (77,381)
<TOTAL-LIABILITY-AND-EQUITY> 26,788 34,762
<SALES> 4,322 2,130
<TOTAL-REVENUES> 5,438 2,142
<CGS> 9,640 1,649
<TOTAL-COSTS> 9,640 1,649
<OTHER-EXPENSES> 24,468 7,476
<LOSS-PROVISION> 462 0
<INTEREST-EXPENSE> (304) 39
<INCOME-PRETAX> (28,828) (7,022)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (28,828) (7,022)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (28,828) (7,022)
<EPS-BASIC> (4.07) (0.86)
<EPS-DILUTED> (4.07) (0.86)
</TABLE>
