<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 17, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
BERMUDA 3663 NOT APPLICABLE
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
CLARENDON HOUSE, 2 CHURCH STREET
P.O. BOX HM 1022
HAMILTON HM DX, BERMUDA
(441) 295-5950
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------------
THOMAS W. HUBBS
INTERWAVE COMMUNICATIONS, INC.
656 BAIR ISLAND ROAD, SUITE 108
REDWOOD CITY, CA 94063
(650) 482-2100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
<TABLE>
<S> <C>
COPIES TO:
ROBERT JACK, ESQ. NORA L. GIBSON, ESQ.
CHRISTOPHER D. MITCHELL, ESQ. PATRICK J. SHEA, ESQ.
SAMUEL S. NAM, ESQ. LINDSAY C. FREEMAN, ESQ.
JON P. LAYMAN, ESQ. JEANINE M. LARREA, ESQ.
JAMES JENSEN BROBECK, PHLEGER & HARRISON LLP
WILSON SONSINI GOODRICH & ROSATI ONE MARKET, SPEAR STREET TOWER
PROFESSIONAL CORPORATION SAN FRANCISCO, CA 94105
650 PAGE MILL ROAD (415) 442-0900
PALO ALTO, CALIFORNIA 94304
(650) 493-9300
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
please 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 earliest effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common shares, par value $0.001 per
share................................ 8,625,000 shares $10.00 $86,250,000.00 $22,770.00
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(a) under the Securities Act of
1933, as amended.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY , 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED
<PAGE>
PROSPECTUS
7,500,000 SHARES
[LOGO]
COMMON SHARES
$ PER SHARE
---------
We are selling 7,500,000 common shares. The underwriters named in this
prospectus may purchase up to 1,125,000 additional common shares from us to
cover over-allotments.
This is an initial public offering of our common shares. We currently expect
the initial public offering price to be between $8.00 and $10.00 per share. We
have received approval, subject to notice of issuance, to have our common shares
included for quotation on the Nasdaq National Market under the symbol "IWAV."
--------------
INVESTING IN OUR COMMON SHARES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 7.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
--------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
---------------- ----------------
<S> <C> <C>
Public Offering Price $ $
Underwriting Discount $ $
Proceeds to interWAVE (before expenses) $ $
</TABLE>
The underwriters are offering the shares subject to various conditions. The
underwriters expect to deliver the shares to purchasers on or about January ,
2000.
--------------
SALOMON SMITH BARNEY
BANC OF AMERICA SECURITIES LLC
SG COWEN
, 2000
<PAGE>
[Inside Front Cover, Gate Fold-out, and Inside Back Cover]
<TABLE>
<CAPTION>
<S> <C>
Inside Front Cover: The table of contents
Gate Fold-out:
Top Caption: Wireless Applications Enabling Global Communications
Left: Title-- Wireless Office Networks
Bullets-- - Reach Employees Regardless of Location
- Connect to Corporate Network
Pictures-- Four pictures along left side.
Picture one is of office buildings.
Picture two is of a man talking on a mobile phone outside
skyscrapers.
Picture three is of people talking inside an office
building.
Picture four is of people talking on mobile phones to each
other.
Center: Diagram of a global map showing where we have live and trial
networks deployed. The symbol of a star represents live
networks deployed in Australia, Austria, California, Central
African Republic, China, Congo, France, Gambia, Greece, Hong
Kong, Italy, Japan, Kosovo, North Carolina, New Jersey,
Somalia, Taiwan, Tajikistan, Thailand, Washington and the
United Kingdom. The symbol of a yellow circle represents
trial networks deployed in Australia, California, China,
France, Germany, Sri Lanka, South Africa, Taiwan, and the
United Kingdom.
Right: Title-- Community Networks
Bullets-- - Add Capacity in Heavy Usage Areas
- Provide Telephone Service to Remote and Rural Areas
- Serve Special Applications Such As Military and Community
Relief Efforts
Pictures-- Four pictures along right side.
Picture one is of a community.
Picture two is of an oil rig.
Picture three is of a subway.
Picture four is of a mobile wireless network in a Humvee.
Inside Back Cover:
Title: interWAVE Provides Full Wireless Network Capabilities Within
A Single Compact Enclosure
Top Left: Diagram of six buildings in a circle linked by a red line.
In the center of the circle is the caption "Wireless Office
Networks." To the right of the circle is the caption
"Supports Corporate Networks." Below the circle is the
caption "Interoperability with Existing Corporate Networks."
Top Right: Diagram of a rural community. Above the diagram is the
caption "Community Networks." Below the diagram is the
caption "Interoperability with Equipment Providers."
Center: Picture of our Network In A Box with one arrow pointing to
the Wireless Office Networks in the top left corner, another
arrow pointing to the Community Networks in the upper right
corner, and the last arrow pointing to the bottom caption
"Public Telephone Network."
Bottom: In the bottom center there is a caption entitled "Public
Telephone Network." To the right of this caption is another
caption "Web-based Network Management." To the left of the
center caption there is another caption "Interoperability
with Public Telephone Systems."
</TABLE>
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary.......................................... 3
Risk Factors................................................ 7
Special Note Regarding Forward Looking Statements........... 17
Use of Proceeds............................................. 18
Dividend Policy............................................. 18
Capitalization.............................................. 19
Dilution.................................................... 20
Selected Consolidated Financial Data........................ 22
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 23
Business.................................................... 36
Management.................................................. 53
Certain Transactions........................................ 64
Principal Shareholders...................................... 72
Description of Share Capital................................ 76
Certain Bermuda Law Considerations.......................... 78
Taxation.................................................... 79
Shares Eligible for Future Sale............................. 82
Underwriting................................................ 84
Legal Matters............................................... 86
Experts..................................................... 86
Where You Can Find More Information......................... 86
Index to Consolidated Financial Statements.................. F-1
</TABLE>
------------------------
Until , 2000, all dealers that buy, sell or trade the common
shares, 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.
Consent under the Exchange Control Act, 1972 (and regulations thereunder)
has been obtained from the Bermuda Monetary Authority for the issue and transfer
of the common shares being offered pursuant to the offering. In addition, a copy
of this document has been delivered to the Registrar of Companies in Bermuda for
filing pursuant to the Companies Act, 1981 of Bermuda. In giving such consent
and in accepting this prospectus for filing, the Bermuda Monetary Authority and
the Registrar of Companies in Bermuda, respectively, accept no responsibility
for the financial soundness of any proposal or for the correctness of any of the
statements made or opinions expressed herein.
2
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
SINCE THIS IS ONLY A SUMMARY, IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT
MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY AND
CONSIDER THE INFORMATION UNDER "RISK FACTORS" AND IN OUR FINANCIAL STATEMENTS
AND THE NOTES RELATING TO THESE FINANCIAL STATEMENTS, TOGETHER WITH THE
INFORMATION INCLUDED ELSEWHERE IN THIS PROSPECTUS, BEFORE DECIDING WHETHER TO
INVEST IN OUR COMMON SHARES. OUR FISCAL YEAR ENDS ON THE FRIDAY NEAREST
JUNE 30. EXCEPT WHERE OTHERWISE NOTED, THE INFORMATION IN THIS PROSPECTUS IS
BASED UPON INFORMATION AS OF SEPTEMBER 30, 1999.
OUR COMPANY
We provide compact wireless communications systems using GSM, an
international standard for voice and data communications. We have pioneered what
we believe is the only commercially available system that provides all of the
infrastructure equipment and software necessary to support an entire wireless
network within a single, compact enclosure. We have designed our systems to
serve the following applications in a cost-effective manner:
- WIRELESS OFFICES. Our systems allow wireless users in organizations such
as large corporations, government entities and universities to maintain
contact with the organization's private telephone network whether the
users are in their offices, out of their offices or moving between
locations.
- COMMUNITY NETWORKS. Our systems enable wireless service providers to add
capacity in heavy usage areas and to provide telephone service in
previously unserved communities.
Our core product, WAVEXpress, delivers a comprehensive set of wireless
network capabilities which are based on the GSM standard. WAVEXpress systems can
serve as:
- a base station to receive and transmit voice and data signals over radio
frequencies;
- a switch to route voice and data signals to their correct destinations;
- a base station controller to manage voice and data signals between the
base station and the switch; or
- any combination of these functions depending on our system's hardware and
software configuration.
Our all-in-one solution, the Network In A Box, provides the capabilities of
a complete wireless network in an enclosure approximately the size of a personal
computer tower.
We market and sell our systems around the world utilizing a three-tiered
sales strategy which includes selling to communications equipment providers, to
systems integrators which integrate our systems with the products of other
companies and through our own direct sales force. Since 1997 we have sold over
1,000 units which have been installed in 17 countries worldwide. We have
established a strategic alliance with Nortel Networks, which accounted for 51%
of our revenues in 1999 and which owns approximately 24.0% of our fully diluted
shares.
OUR STRATEGY
Our goal is to be the premier global provider of cost-effective, compact
wireless systems in targeted segments of the GSM market. As key elements of our
strategy, we intend to:
- Provide wireless office systems that will replace traditional office
telephone equipment with wireless equipment
3
<PAGE>
- Deliver next generation solutions using the Internet Protocol, which is
the networking standard used to deliver voice and data over the Internet
- Further penetrate existing market opportunities
- Strengthen and expand relationships with communications equipment
providers
- Use technological leadership to provide competitive advantages for
wireless service providers
CORPORATE INFORMATION
We were incorporated in Bermuda on June 17, 1994. Our principal executive
office is located at Clarendon House, 2 Church Street, P.O. Box HM 1022,
Hamilton HM DX, Bermuda, and our telephone number is (441) 295-5950. Our
principal operating offices are located at 656 Bair Island Road, Redwood City,
California 94063, and our telephone number is (650) 482-2100. Our World Wide Web
address is www.iwv.com. Information on our web site does not constitute part of
this prospectus.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common shares offered........................ 7,500,000 shares
Common shares to be outstanding after
the offering............................... 40,626,003 shares
Use of proceeds.............................. To increase working capital, to fund both
capital investment and research and
development and for general corporate
purposes. See "Use of Proceeds."
Proposed Nasdaq National Market Symbol....... IWAV
</TABLE>
------------------------
Unless otherwise indicated, all information in this prospectus, including
the outstanding share information above is based on the number of shares
outstanding as of September 30, 1999 and:
- gives effect to the issuance of 1,526,663 Series I1 preferred shares sold
in November 1999;
- gives effect to the issuance of 45,818 common shares upon exercise of
options under our 1994 stock plan between September 30, 1999 and
November 5, 1999;
- gives effect to the exercise of a warrant for 2,000,000 preferred shares
that the warrant holder has committed to exercise on the effectiveness of
this offering;
- gives effect to the conversion of all outstanding preferred shares into
27,006,166 common shares immediately prior to the completion of the
offering;
- excludes 7,478,805 common shares issuable upon exercise of warrants
outstanding at September 30, 1999 at an exercise price ranging from $0.70
to $1.15 per share;
- excludes 5,130,509 common shares issuable upon the exercise of options
outstanding at September 30, 1999 at a weighted average exercise price of
$1.10 per share;
- excludes 2,607,805 common shares available for issuance under our 1999
option plan;
- excludes 300,000 common shares available for issuance under our 1999
employee share purchase plan; and
- assumes no exercise of the underwriters' over-allotment option.
------------------------
All dollar amounts in this prospectus are expressed in U.S. dollars, except
where we state otherwise.
5
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth our summary financial data. You should read
this information together with our consolidated financial statements, the notes
to those statements beginning on page F-1 of this prospectus, the information
under "Selected Financial Data," "Capitalization" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
The pro forma numbers in the table give effect to:
- proceeds from the sale of 1,526,663 Series I1 preferred shares which
closed in November 1999;
- the issuance of 45,818 common shares upon exercise of options under our
1994 stock plan between September 30, 1999 and November 5, 1999;
- the exercise of a warrant for 2,000,000 preferred shares that the warrant
holder has committed to exercise on the effectiveness of this offering;
and
- the conversion of all outstanding preferred shares into 27,006,166 common
shares immediately prior to the completion of the offering.
The capitalization on a pro forma as adjusted basis reflects the sale of
7,500,000 common shares offered by us at an assumed initial public offering
price of $9.00 per share after deducting the underwriting discount and estimated
offering expenses payable by us, and the receipt of net proceeds from this
offering.
Our consolidated financial statements were prepared in accordance with
generally accepted accounting principles in the United States. All dollar
amounts set forth below are stated in U.S. dollars. Our fiscal year ends on the
Friday nearest June 30, and our first fiscal quarter ends on the Friday nearest
September 30.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30,
------------------------------ -------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.................................. $ 1,841 $ 12,995 $ 17,293 $ 4,487 $ 5,377
Gross profit.................................. (1,776) 744 4,762 2,010 1,404
Loss from operations.......................... (29,245) (29,902) (22,106) (5,144) (7,066)
Net loss...................................... $(29,182) $(30,822) $(24,468) $(5,091) $(8,966)
======== ======== ======== ======= =======
Loss per share, basic and diluted............. $ (7.12) $ (6.68) $ (4.96) $ (1.05) $ (1.64)
======== ======== ======== ======= =======
Weighted average common shares outstanding.... 4,099 4,614 4,934 4,840 5,480
Pro forma net loss per share, basic and
diluted..................................... $ (0.77) $ (0.28)
======== =======
Shares used in computing pro forma net loss
per share, basic and diluted................ 31,599 31,599
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $12,988 $39,047 $100,622
Working capital........................................... 17,739 43,798 105,373
Total assets.............................................. 35,080 61,139 122,714
Long term debt, net of current portion.................... 261 261 261
Total shareholders' equity................................ 25,568 51,627 113,202
</TABLE>
6
<PAGE>
RISK FACTORS
INVESTING IN OUR COMMON SHARES INVOLVES A HIGH DEGREE OF RISK. IF ANY OF THE
FOLLOWING RISKS OCCUR, THE MARKET PRICE OF OUR COMMON SHARES COULD DECLINE AND
YOU COULD LOSE ALL OR PART OF YOUR INVESTMENT.
BECAUSE WE HAVE A LIMITED OPERATING HISTORY, WE CANNOT BE SURE THAT WE CAN
SUCCESSFULLY EXECUTE OUR BUSINESS STRATEGY
We did not record revenue from our first product sale until May 1997. We
have a limited history of generating significant revenues. Many of our products
have only recently been introduced and many of our customers are testing our
products for incorporation into live networks. Therefore, you have limited
historical financial data and operating results with which to evaluate our
business and our prospects. You must consider our prospects in light of the
early stage of our business in a new and rapidly evolving market. Our limited
operating history may make it difficult for you to assess, based on historical
information, whether we can successfully execute our business strategy. If we
are unable to successfully execute our business strategy, we would likely not
achieve anticipated levels of revenue growth. In this event, we would be unable
to achieve profitability or build a sustainable business.
WE HAVE A HISTORY OF LOSSES, EXPECT FUTURE LOSSES AND MAY NEVER ACHIEVE OR
SUSTAIN PROFITABILITY
As of September 30, 1999, we had an accumulated deficit of $118.7 million.
We incurred net losses of approximately $29.2 million, $30.8 million,
$24.5 million and $9.0 million in the fiscal years ended June 30, 1997, 1998 and
1999 and the three months ended September 30, 1999, respectively. We expect to
continue to incur net losses and these losses may be substantial. Furthermore,
we expect to generate significant negative cash flow in the future. We will need
to generate substantially higher revenues to achieve and sustain profitability
and positive cash flow. Our ability to generate future revenues and achieve
profitability will depend on a number of factors, many of which are beyond our
control. These factors include:
- the rate of market acceptance of compact mobile wireless systems;
- our ability to compete successfully against much larger GSM communications
equipment providers; and
- our ability to continue to expand our customer base.
Due to these factors, as well as other factors described in this risk factors
section, we may be unable to achieve or maintain profitability. If we are unable
to achieve or maintain profitability, we will be unable to build a sustainable
business. In this event, our share price and the value of your investment would
likely decline.
OUR QUARTERLY OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY AND MAY
FAIL TO MEET THE EXPECTATIONS OF SECURITIES ANALYSTS AND INVESTORS, WHICH MAY
CAUSE OUR SHARE PRICE TO DECLINE
Our quarterly operating results have fluctuated significantly in the past
and are likely to do so in the future. If our operating results do not meet the
expectations of securities analysts and investors, our share price is likely to
decline. The many factors that could cause our quarterly results to fluctuate
include:
- any delay in our introduction of new products or product enhancements;
- the size and timing of customer orders and our product shipments, which
have typically consisted of a relatively small number of units of wireless
network systems at the end of each quarter;
- the mix of products sold because our various products generate different
gross margins;
7
<PAGE>
- any delay in shipments caused by component shortages or other
manufacturing problems, extended product testing or regulatory issues;
- the timing of orders from and shipments to major customers, including
possible cancellation of orders and failure of major customers to meet
applicable minimum purchase commitments;
- the loss of a major customer;
- reductions in the selling prices of our products;
- cost pressures from shortages of skilled technical employees, increased
product development and engineering expenditures and other factors; and
- customer responses to announcements of new products and product
enhancements by competitors and the entry of new competitors into our
market.
Due to these and other factors, our results of operations could fluctuate
substantially in the future, and quarterly comparisons may not be reliable
indicators of future performance. In addition, because many of our expenses for
personnel, facilities and equipment are relatively fixed in nature, if revenues
fail to meet our expectations, we may not be able to reduce expenses
correspondingly. As a result, we would experience greater than expected net
losses. If we experience greater than expected net losses, our share price and
the value of your investment would likely decline.
WE RELY ON A SMALL NUMBER OF CUSTOMERS FOR MOST OF OUR REVENUES, AND A DECREASE
IN REVENUES FROM THESE CUSTOMERS COULD SERIOUSLY HARM OUR BUSINESS
A small number of customers have accounted for a significant portion of our
revenues to date. Net revenues from significant customers as a percentage of our
total net revenues in the two most recent fiscal years and the three months
ended September 30, 1999 were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR THREE MONTHS
ENDED ENDED
JUNE 30, SEPTEMBER 30,
---------------------- --------------
1998 1999 1999
-------- -------- --------------
<S> <C> <C> <C>
Nortel Networks.................................... 18% 51% 18%
ADC Telecommunications/Microcellular Systems,
Ltd.............................................. 47 20 21
Hutchison Telecommunications (Hong Kong)........... 21 8 5
HangZhou Topper Electric Corporation............... -- 2 38
</TABLE>
Nortel Networks is one of our principal shareholders, and a Nortel Networks
employee is a member of our board of directors. ADC Telecommunications and the
corporate parent of Hutchison Telecommunications are shareholders of ours.
Microcellular Systems, Ltd. was created by a spin-off from ADC
Telecommunications in May 1999.
We expect that the majority of our revenues will continue to depend on sales
to a small number of customers. If any key customers experience a downturn in
their business or shift their purchases to our competitors, our revenues and
operating results would decline.
We expect that for the foreseeable future a significant portion of our net
revenues will be derived from sales to Nortel Networks and Alcatel. If our
revenues, including those expected from Nortel Networks and Alcatel under our
purchase and distribution agreements, are lower than expected, we may not be
able to quickly reduce expenses because many of our expenses are fixed in the
near term. Nortel Networks and Alcatel have minimum purchase commitments under
their respective agreements. We rely on these commitments in making our
manufacturing commitments each quarter. We have also committed to Nortel
Networks and Alcatel that we will maintain quality, delivery, performance and
design standards for our systems. As a result, we bear the risk of carrying
excess inventory if Nortel Networks and Alcatel fail to meet their commitments
or if we fail to meet ours. From time to time, we
8
<PAGE>
have failed to deliver certain product features by specific milestone dates and,
as a result, we have renegotiated downward minimum quarterly commitments with
Nortel Networks, including in the three months ending September 30, 1999. We
cannot assure you that these minimum commitments will be met or that they will
not be renegotiated downward in the future. Failure of Nortel Networks or
Alcatel to meet minimum purchase commitments could cause our revenues and
operating results to decline.
WE CURRENTLY DEPEND ON TWO CONTRACT MANUFACTURERS FOR MOST OF OUR PRODUCTS AND
PLAN TO USE ONLY A SINGLE CONTRACT MANUFACTURER IN THE FUTURE AND THIS
TRANSITION COULD CAUSE DISRUPTIONS IN OUR BUSINESS
We depend on two contract manufacturers for most of our products. We do not
have long-term supply contracts with our contract manufacturers, and they are
not obligated to supply us with products for any specific period, in any
specific quantity or at any specific price, except as may be provided in a
particular purchase order. None of our products are manufactured by more than
one supplier, and we do not expect this to change for the foreseeable future.
We plan to consolidate the manufacture of our products with one of our
existing contract manufacturers, PEMSTAR, Inc., by the middle of calendar year
2000. We may lose revenue and damage our customer relationships if we do not
manage this consolidation effectively.
There are risks associated with our dependence on contract manufacturers,
including the contract manufacturer's control of capacity allocation, labor
relations, production quality and other aspects of the manufacturing process. If
we are unable to obtain our products from manufacturers on schedule, revenues
from the sale of those products may be delayed or lost, and our reputation,
relationship with customers and our business could be harmed. In addition, in
the event that a contract manufacturer must be replaced, the disruption to our
business and the expense associated with obtaining and qualifying a new contract
manufacturer could be substantial. If problems with our contract manufacturers
cause us to miss customer delivery schedules or result in unforeseen product
quality problems, we may lose customers. As a result, our revenues and our
future growth prospects would likely decline.
BECAUSE SOME OF OUR KEY COMPONENTS COME FROM A SINGLE SOURCE, OR REQUIRE LONG
LEAD TIMES, WE COULD EXPERIENCE UNEXPECTED INTERRUPTIONS WHICH COULD CAUSE OUR
OPERATING RESULTS TO SUFFER
We believe that a number of our suppliers are sole sources for key
components. These key components are complex and difficult to manufacture and
require long lead times. In the event of a reduction or interruption of supply,
or a degradation in quality, as many as six months could be required before we
would begin receiving adequate supplies from other suppliers. Supply
interruptions could delay product shipments, causing our revenues and operating
results to decline.
WE DO NOT TYPICALLY HAVE A SALES BACKLOG AND THEREFORE MAY INCUR EXPENSES FOR
EXCESS INVENTORY OR BE UNABLE TO MEET CUSTOMER REQUIREMENTS
We do not have a significant backlog because our customers typically give us
firm purchase orders with short lead times before requested shipment. However,
our contract manufacturers require commitments from us so that they can allocate
capacity and be assured of having adequate components and supplies from third
parties. Failure by us to accurately estimate product demand could cause us to
incur expenses related to excess inventory or prohibit us from meeting customer
requirements.
OUR PRODUCTS ARE COMPLEX AND MAY HAVE ERRORS OR DEFECTS THAT ARE DETECTED ONLY
AFTER DEPLOYMENT IN COMPLEX NETWORKS, WHICH MAY HARM OUR BUSINESS
Our products are highly complex and are designed to be deployed in complex
networks. Although our products are tested during manufacturing and prior to
deployment, they can only be fully tested when deployed in networks with
high-call volume. Consequently, our customers may discover errors
9
<PAGE>
after the products have been fully deployed. If we are unable to fix errors or
other problems that may be identified in full deployment, we could experience:
- costs associated with the remediation of any problems;
- loss of or delay in revenues;
- loss of customers;
- failure to achieve market acceptance and loss of market share;
- diversion of deployment resources;
- increased service and warranty costs;
- legal actions by our customers; and
- increased insurance costs.
In addition, our products often are integrated with other network
components. There may be incompatibilities between these components and our
products that could significantly harm the service provider or its subscribers.
Product problems in the field could require us to incur costs to remedy the
problems and subject us to liability for damages caused by the problems. These
problems could also harm our reputation and competitive position in the
industry.
WE MAY EXPERIENCE DIFFICULTIES IN THE INTRODUCTION OF NEW OR ENHANCED PRODUCTS
THAT COULD RESULT IN SIGNIFICANT, UNEXPECTED EXPENSES OR DELAY THEIR LAUNCH,
WHICH WOULD HARM OUR BUSINESS
The development of new or enhanced products is a complex and uncertain
process. We may experience design, manufacturing, marketing and other
difficulties that could delay or prevent our development, introduction or
marketing of new products or product enhancements. We must also effectively
manage the transition from old products to new or enhanced products. In
particular, we are currently developing a system providing voice communication
over the Internet for commercial release in fiscal year 2000. We cannot assure
you that we will be able to develop, introduce or manage this or any other new
products or product enhancements in a timely manner or at all. Failure to
develop new products or product enhancements in a timely manner would
substantially decrease market acceptance and sales of our products.
FAILURE TO COMPLY WITH REGULATIONS AFFECTING THE TELECOMMUNICATIONS INDUSTRY
COULD SERIOUSLY HARM OUR BUSINESS AND RESULTS OF OPERATIONS
Our failure to comply with government regulations relating to the
telecommunications industry in countries where our products are deployed and
failure to comply with any changes to those regulations could seriously harm our
business and results of operations. We have not completed all activities
necessary to comply with existing regulations and requirements in some of the
countries in which we intend to sell our products. Compliance with the
regulations of numerous countries could be costly and require delays in
deployments.
OUR FAILURE TO COMPLY WITH EVOLVING INDUSTRY STANDARDS COULD DELAY OUR
INTRODUCTION OF NEW PRODUCTS
An international consortium of standards bodies is working to establish the
specifications of the third generation wireless standard and its
interoperability with existing standards. Any failure of our products to comply
could delay their introduction and require costly and time consuming engineering
changes. After the next generation standard is adopted, any delays in our
introduction of next generation products could impair our ability to grow
revenues in the future. As a result, we may be unable to achieve or sustain
profitability.
10
<PAGE>
OUR MARKET OPPORTUNITY COULD BE SIGNIFICANTLY DIMINISHED IN THE EVENT THAT GSM
OR ANY SUBSEQUENT GSM-BASED STANDARDS DO NOT CONTINUE TO BE OR ARE NOT WIDELY
ADOPTED
Our products are designed to utilize only GSM, an international standard for
voice and data communications. There are other competing standards including
code division multiple access, or CDMA, and time division mutiple access, or
TDMA. We currently do not have plans to offer products that utilize these
standards. In the event that GSM or any GSM-based standards do not continue to
be or are not broadly adopted, our market opportunity could be significantly
limited, which would seriously harm our business.
WE HAVE A LONG SALES CYCLE, WHICH COULD CONTRIBUTE TO FLUCTUATIONS IN OUR
RESULTS OF OPERATIONS AND SHARE PRICE
Our sales cycle is typically long and unpredictable, making it difficult to
plan our business. The long sales cycle also requires us to invest resources in
a possible transaction that may not be recovered if we do not successfully
conclude the transaction. Factors that affect the length of our sales cycle
include:
- time required for testing and evaluation of our products before they are
deployed in a network;
- size of the deployment;
- complexity of the customer's network environment; and
- the degree of system configuration necessary to deploy our products.
In addition, the emerging and evolving nature of the market for the systems
we sell may lead prospective customers to postpone their purchasing decisions.
General concerns regarding year 2000 compliance may further delay purchase
decisions by prospective customers. Our long and unpredictable sales cycle can
result in delayed revenues, difficulty in matching revenues with expenses and
increased expenditures, which together may contribute to declines in our results
of operations and our share price.
INTENSE COMPETITION IN THE GSM WIRELESS MARKET COULD PREVENT US FROM INCREASING
OR SUSTAINING REVENUES OR ACHIEVING OR SUSTAINING PROFITABILITY
The GSM wireless market is rapidly evolving and highly competitive. We
cannot assure you that we will have the financial resources, technical expertise
or marketing, manufacturing, distribution and support capabilities to compete
successfully in the future. We expect that competition in each of our markets
will increase in the future. We currently compete against GSM communications
equipment providers such as Ericsson, Lucent, Motorola, Nokia and Siemens. In
some market applications, we also compete with our customers Alcatel and Nortel
Networks. All of the major GSM communications equipment providers have broad
product lines that include at least partial GSM solutions that address our
target markets.
Many of our competitors and potential competitors have substantially greater
name recognition and technical, financial and sales and marketing resources than
we have. Such competitors may undertake more extensive marketing campaigns,
adopt more aggressive pricing policies and devote substantially more resources
to developing new products than we can. Trends toward increased consolidation in
the telecommunications industry may increase the size and resources of some of
our current competitors and could affect some of our current relationships.
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 seriously harm our business. We cannot assure
you that we will be able to compete successfully against current or future
competitors. Competitive pressures we face may cause our revenues or growth to
decline and may therefore seriously harm our business and results of operations.
11
<PAGE>
IF WE ARE UNABLE TO MANAGE OUR GLOBAL OPERATIONS EFFECTIVELY, OUR BUSINESS WOULD
BE SERIOUSLY HARMED
Substantially all of our revenue to date has been derived from systems
intended for installation outside of the United States. In addition to the
regulatory issues discussed previously, our operations are subject to the
following risks and uncertainties:
- legal uncertainties regarding liability, tariffs and other trade barriers;
- greater difficulty in accounts receivable collection and longer collection
periods;
- costs of staffing and managing operations in several countries;
- difficulties in protecting intellectual property rights;
- changes in currency exchange rates which may make our U.S.
dollar-denominated products less competitive in global markets;
- the impact of recessions in global economies; and
- political and economic instability.
We expect to establish manufacturing operations in China during calendar
year 2000 which may subject us to all of the risks listed above, particularly
the difficulty of protecting intellectual property rights.
IF WE FAIL TO IMPROVE OUR OPERATIONAL SYSTEMS AND CONTROLS TO MANAGE FUTURE
GROWTH, OUR BUSINESS COULD BE SERIOUSLY HARMED
We plan to continue to expand our operations significantly to pursue
existing and potential market opportunities. This growth places significant
demands on our management and our operational resources. In order to manage
growth effectively, we must implement and improve our operational systems,
procedures and controls on a timely basis. In addition, we expect that we will
need to expand our principal U.S. facilities in the next six to 12 months and
may be required to move our offices to a different location. A move could be
disruptive to our operations and could delay production or development
activities.
IF WE ARE UNABLE TO HIRE OR RETAIN KEY PERSONNEL, WE MIGHT NOT BE ABLE TO
OPERATE OUR BUSINESS SUCCESSFULLY
Our business is highly dependent on our ability to attract, retain and
motivate qualified technical and management personnel. Competition is intense
for qualified personnel in our industry and in Northern California, where most
of our engineering personnel are located, and we may not be successful in
attracting and retaining these personnel. We do not have non-compete agreements
with any of our key employees. We currently do not maintain key person life
insurance on any of our key executives. Our success also depends upon the
continuing contributions of our key management and our research, product
development, sales and marketing and manufacturing personnel. Many of these
would be difficult to replace, in particular Dr. Priscilla Lu, our Chief
Executive Officer and Chairman of the Board, Ian Sugarbroad, our President and
Chief Operating Officer and Thomas Hubbs, our Executive Vice President and Chief
Financial Officer.
OUR INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS MAY BE INSUFFICIENT TO PROTECT
OUR COMPETITIVE POSITION
We cannot assure you that the protection offered by our U.S. patents will be
sufficient or that any of our pending U.S. or foreign patent applications will
result in the issuance of patents. In addition, competitors in the United States
and other countries, many of whom have substantially greater resources, may
apply for and obtain patents that will prevent or interfere with our ability to
make and sell our products in the U.S. and/or abroad. Unauthorized parties may
attempt to design around our patents, copy or otherwise obtain and use our
products. We cannot be certain that the steps we have
12
<PAGE>
taken will prevent unauthorized use of our technology, particularly in countries
where the laws may not protect our proprietary rights as fully as in the United
States. Failure to protect our proprietary rights could harm our competitive
position and therefore cause our revenues and operating results to decline.
On June 28, 1999, we filed a complaint against JetCell Corporation in the
United States District Court for the Northern District of California alleging
misappropriation of trade secrets and patent infringement. JetCell has filed a
series of counterclaims against us, which include allegations of unfair trade
practices, unfair competition, defamation, patent misuse and patent invalidity.
We are unable to predict the outcome of this litigation and do not expect it to
be resolved in the near future. The legal proceedings may be distracting to our
management and expensive and the outcome could be adverse to us. If the outcome
is adverse to us, we could experience more competition or could be required to
license our technology, either of which could harm our business and financial
results. See "Legal Proceedings."
CLAIMS THAT WE INFRINGE THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS COULD RESULT IN
SIGNIFICANT EXPENSES AND RESTRICTIONS ON OUR ABILITY TO SELL OUR PRODUCTS IN
PARTICULAR MARKETS
From time to time, third parties may assert patent, copyright, trademark and
other intellectual property rights to technologies that are important to our
business. Any claims could result in costly litigation, divert the efforts of
our technical and management personnel, cause product shipment delays, require
us to enter into royalty or licensing agreements or prevent us from making or
selling certain products. Any of these could seriously harm our operating
results. Royalty or licensing agreements, if available, may not be available on
commercially reasonable terms, if at all. In addition, in some of our sales
agreements, we agree to indemnify our customers for any expenses or liabilities
resulting from claimed infringements of patents, trademarks or copyrights of
third parties. Costs associated with these indemnification obligations could be
significant and could cause our operating results and stock price to decline.
WE MAY NOT BE ABLE TO LICENSE NECESSARY THIRD-PARTY TECHNOLOGY OR IT MAY BE
EXPENSIVE TO DO SO
From time to time, we may be required to license technology from third
parties to develop new products or product enhancements. We cannot assure you
that third-party licenses will be available to us on commercially reasonable
terms, if at all. The inability to obtain any third-party license required to
develop new products and product enhancements could require us to obtain
substitute technology of lower quality or performance standards or at greater
cost which could seriously harm our competitive position, revenues and growth
prospects.
There are a number of general GSM patents held by different companies which
may impact our technology. We have not received any notice from any third
parties that our proprietary assets conflict with or infringe upon the rights of
others.
WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS WHICH WOULD LIMIT OUR
ABILITY TO GROW AND COMPETE EFFECTIVELY, RESULTING IN SUBSTANTIAL HARM TO OUR
BUSINESS AND RESULTS OF OPERATIONS
We may require additional funding, which may not be available on terms which
are favorable to us. Currently, we do not have a credit facility or any lines of
credit. If we issue equity securities, existing shareholders may experience
dilution or the new equity securities may have rights, preferences and
privileges senior to those of existing shareholders. If additional funds are
raised through the issuance of debt securities, such securities would have
rights, preferences and privileges senior to holders of common shares. If we
cannot raise funds on terms favorable to us, we may not be able to develop or
enhance our products, take advantage of future opportunities or respond to
competitive pressures or unanticipated requirements. See "Use of Proceeds,"
"Dilution" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" for more information on
our capital requirements.
13
<PAGE>
IF WE, OUR SUPPLIERS OR OUR CUSTOMERS FAIL TO BE YEAR 2000 COMPLIANT, OUR
BUSINESS COULD BE SEVERELY DISRUPTED
The risk that software or hardware may inaccurately process dates beginning
in the year 2000 and beyond presents several potential problems for our
business. In particular, we are subject to the following:
- 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 expenses to us;
- shutdowns or slowdowns of our business as a result of a failure of our
internal management systems, 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 contract
manufacturers or suppliers; and
- reductions or deferrals in sales activities as a result of year 2000
compliance problems of our customers.
Our products may contain undetected errors or defects associated with year
2000 date functions. Known or unknown errors or defects in our products could
result in delay or loss of revenue, diversion of development resources, damage
to our reputation, product liability claims or increased service and warranty
costs, any of which could significantly harm our business and operating results.
Some industry analysts have predicted significant litigation regarding year 2000
compliance issues. It is uncertain whether or to what extent we may be affected
by any litigation.
If we, our contract manufacturers, suppliers or customers fail to identify
and correct any year 2000 problems or unanticipated or unremedied year 2000
problems arise, these failures or problems could result in an interruption in or
a failure of our normal business activities and operations. If a year 2000
problem related to a contract manufacturer or supplier occurs, it may be
difficult to determine which suppliers' products have caused the problem. These
failures could interrupt our operations and damage our relationships with our
customers. Due to the general uncertainty inherent in the year 2000 problem, we
are unable to determine at this time whether any external year 2000 failures
will harm us.
Any failure by us, our contract manufacturers or any of our suppliers to be
year 2000 compliant could seriously interrupt our manufacturing process, thereby
substantially reducing our revenues.
We believe our year 2000 worst case scenario would be the failure of a sole
or limited source supplier to be year 2000 compliant. Our failure or the failure
of one of these suppliers to be year 2000 compliant could seriously interrupt
our manufacturing process, thereby substantially reducing our revenues. We have
not yet developed a contingency plan to address situations that may result if we
are unable to achieve year 2000 readiness of our critical operations.
CONTROL BY OUR EXISTING SHAREHOLDERS COULD DISCOURAGE THE POTENTIAL ACQUISITION
OF OUR BUSINESS
Upon completion of this offering, our executive officers, directors and 5%
or greater shareholders and their affiliates will own 27,689,403 shares or
approximately 65.6% of our outstanding common shares. Acting together, these
shareholders would be able to control all matters requiring approval by
shareholders, including the election of directors. This concentration of
ownership could have the effect of delaying or preventing a change in control of
our business or otherwise discouraging a potential acquirer from attempting to
obtain control of us, which could prevent our shareholders from realizing a
premium over the market price for their common shares.
14
<PAGE>
OUR BYE-LAWS MAY DISCOURAGE POTENTIAL ACQUISITIONS OF OUR BUSINESS
Some of our bye-laws and Bermuda law may discourage, delay or prevent a
merger or acquisition that shareholders may consider favorable. This may reduce
the market price of our common shares. A summary of these provisions is included
in "Description of Share Capital--Antitakeover Effects of Some Provisions of
Memorandum of Association and Bye-laws."
OUR BYE-LAWS PROVIDE FOR WAIVER OF CLAIMS BY SHAREHOLDERS AND INDEMNIFY
DIRECTORS AND OFFICERS
Our bye-laws provide for a broad indemnification of actions of directors and
officers. Under the bye-laws, the shareholders agree to waive claims against
directors and officers for their actions in the performance of their duties,
except for acts of fraud or dishonesty. These waivers will not apply to claims
arising under the United States federal securities laws and will not apply to
the extent that they conflict with provisions of the laws of Bermuda or with the
fiduciary duties of our directors and officers.
OUR OPERATIONS BASED IN BERMUDA MAY BE SUBJECT TO UNITED STATES TAXATION, WHICH
COULD SIGNIFICANTLY HARM OUR BUSINESS AND OPERATING RESULTS
Except for our United States subsidiary, we do not consider ourselves to be
engaged in a trade or business in the United States. Our United States
subsidiary is subject to United States taxation on its worldwide income, and
dividends from our United States subsidiary are subject to United States
witholding tax. We and our non-U.S. subsidiaries would, however, be subject to
United States federal income tax on income related to the conduct of a trade or
business in the U.S. If we were determined to be subject to United States
taxation, our financial results would be significantly harmed. We cannot assure
you that the Internal Revenue Service will not contend that our Bermuda-based
operations are engaged in a United States trade or business and, therefore, are
subject to United States income taxation. See "Taxation" for more information on
the tax consequences of operating outside the United States.
A SUBSTANTIAL NUMBER OF OUR COMMON SHARES WILL BECOME AVAILABLE FOR SALE IN THE
PUBLIC MARKET SIMULTANEOUSLY, WHICH COULD CAUSE THE MARKET PRICE OF OUR SHARES
TO DECLINE
Sales of substantial amounts of our common shares in the public market
following this offering or the awareness that a large number of shares is
available for sale could cause the market price of our common shares to decline.
Upon the expiration of lock-up agreements restricting the sale of shares by our
current shareholders, 26,359,343 of our common shares will become eligible for
immediate sale. Prior to such expiration date, Salomon Smith Barney may, in its
sole discretion and at any time, release all or any portion of the securities
subject to lock-up agreements. Sales of our common shares held by existing
shareholders could cause the market price of our stock to decline.
WE MAY APPLY THE PROCEEDS OF THIS OFFERING TO USES THAT DO NOT IMPROVE OUR
OPERATING RESULTS OR MARKET VALUE
We will have considerable discretion to use the net proceeds of this
offering for our business, and you will not have the opportunity as part of your
investment decision to assess whether the proceeds are being used appropriately.
The net proceeds may be used for corporate purposes that do not improve our
operating results or our market value. Pending application of the net proceeds,
they may be placed in investments that do not produce income or that lose value.
See "Use of Proceeds" for more information on our application of the net
proceeds.
15
<PAGE>
INVESTORS IN THIS OFFERING WILL EXPERIENCE AN IMMEDIATE AND SUBSTANTIAL DILUTION
IN THE BOOK VALUE OF THEIR INVESTMENT
The per share book value of the common shares, adjusted to reflect the net
proceeds we receive from this offering, will be substantially below the price
paid by new investors in this offering. Investors in this offering will
therefore incur immediate and substantial dilution of $6.28 per share (at an
assumed initial public offering price of $9.00). See "Dilution."
BECAUSE WE DO NOT INTEND TO PAY ANY CASH DIVIDENDS ON OUR COMMON SHARES, HOLDERS
OF OUR COMMON SHARES WILL NOT BE ABLE TO RECEIVE A RETURN ON THEIR SHARES UNLESS
THEY SELL THEM
We have never paid or declared any cash dividends on our common shares or
other securities and intend to retain any future earnings to finance the
development and expansion of our business. We do not anticipate paying any cash
dividends on our common shares in the foreseeable future. Unless we pay
dividends, our shareholders will not be able to receive a return on their shares
unless they sell them.
THERE HAS BEEN NO PRIOR MARKET FOR OUR COMMON SHARES, AND OUR SHARE PRICE MAY
DECLINE AFTER THIS OFFERING
The initial public offering price may not be indicative of the price that
will prevail in the open market after this offering. An active trading market
for our common shares may not develop or be sustained after this offering. The
market price of our common shares is likely to be highly volatile and could be
subject to wide fluctuations in response to various factors, some of which are
beyond our control, including:
- actual or anticipated fluctuations in our results of operations;
- changes in financial estimates of our operating results by securities
analysts;
- changes in conditions and trends in the wireless communications market and
in the market valuations of communications equipment companies;
- fluctuations in the valuation of companies perceived by investors to be
comparable to us;
- announcements of new products and product enhancements by competitors and
the entry of new competitors into our market;
- loss of or decrease in sales to a major customer or failure to complete
significant transactions;
- share market price and volume fluctuations attributable to inconsistent
trading volume levels of our shares; and
- general market and global economic conditions.
Furthermore, the stock markets have experienced extreme price and volume
fluctuations that have affected and continue to affect the market prices of
equity securities of many technology companies. These fluctuations often have
been unrelated or disproportionate to the operating performance of those
companies. Market fluctuations as well as general economic, political and market
conditions such as recessions, interest rate changes or international currency
fluctuations, may negatively impact the market price of our common shares.
16
<PAGE>
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This prospectus, including the sections entitled "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," contains forward-looking information.
This forward-looking information is subject to risks and uncertainties including
the factors listed under "Risk Factors," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business," as well as
elsewhere in this prospectus. In some cases, you can identify forward-looking
statements by terminology such as "may," "will," "should," "expects," "intends,"
"plans," "anticipates," "believes," "estimates," "predicts," "potential" or
"continue," or the negative of these terms or other comparable terminology.
These statements are only predictions and may be inaccurate. Actual events or
results may differ materially. In evaluating these statements, you should
specifically consider various factors, including the risks outlined under "Risk
Factors." These factors may cause our actual results to differ materially from
any forward-looking statement. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements.
17
<PAGE>
USE OF PROCEEDS
Based on an assumed initial public offering price of $9.00 per share, our
net proceeds from the sale of the 7.5 million common shares that we are offering
will be approximately $61.6 million after deducting the underwriting discount
and estimated expenses payable by us in connection with this offering. If the
underwriters exercise their over allotment option in full, our net proceeds will
be approximately $71.0 million.
The principal purposes of this offering are to increase our working capital,
to fund both capital investment and research and development and other general
corporate purposes. See "Management Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources." Pending
any use of the net proceeds for the above purposes, we intend to invest the
funds in short-term, interest-bearing, investment grade securities. Other than
estimated capital expenditures of approximately $4.5 million in fiscal 2000 and
increased facility rent of approximately $1.0 million per year commencing
January 1, 2000, we have not identified specific uses for the net proceeds from
this offering. We will invest a portion of the proceeds to accelerate research
and development relating to our products based on the Internet Protocol and our
development of new products utilizing the next generation of wireless standards.
The amounts we actually expend in these areas may vary significantly and will
depend on a number of factors, including our future revenues. Accordingly,
management will retain broad discretion in the allocation of the net proceeds of
this offering. You will not have the opportunity to evaluate the economic,
financial or other information on which we base our decisions on how to use the
proceeds.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital shares. We
currently expect to retain any future earnings for developing and expanding our
business, and therefore we do not currently expect to pay cash dividends in the
foreseeable future.
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<PAGE>
CAPITALIZATION
The following table set forth our capitalization as of September 30, 1999:
- on an actual basis;
- on a pro forma basis after giving effect to:
- the sale of 1,526,663 Series I1 preferred shares which closed in
November 1999;
- the issuance of 45,818 common shares upon exercise of options under our
1994 stock plan between September 30, 1999 and November 5, 1999;
- the exercise of a warrant for 2,000,000 preferred shares that the
warrant holder has committed to exercise on the effectiveness of this
offering; and
- the conversion of all outstanding preferred shares into 27,006,166
common shares immediately prior to the completion of the offering;
- on a pro forma as adjusted basis, after giving effect to the sale of
7,500,000 common shares offered by us at an assumed initial public
offering price of $9.00 per share after deducting the underwriting
discount and estimated offering expenses payable by us, and the receipt of
net proceeds from this offering.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Cash and cash equivalents................................... $ 12,988 $ 39,047 $ 100,622
Current portion of long-term debt........................... 680 680 680
Long-term debt, net of current portion...................... 261 261 261
Convertible preferred shares, $0.83 par value:
Authorized 56,500,000 shares; issued and outstanding
23,479,503 shares (actual); no shares (pro forma and as
adjusted)............................................... 19,488 -- --
Common shares, $0.001 par value:
Authorized 100,000,000 shares; issued and outstanding
6,074,019 shares (actual); 33,126,003 shares (pro
forma); 40,626,003 shares (as adjusted)................. 6 33 41
Additional paid-in capital.................................. 140,075 185,595 247,162
Deferred compensation....................................... (10,166) (10,166) (10,166)
Services receivable from shareholder........................ (4,784) (4,784) (4,784)
Note receivable from shareholder............................ (416) (416) (416)
Accumulated other comprehensive income...................... 51 51 51
Accumulated deficit......................................... (118,686) (118,686) (118,686)
--------- --------- ---------
Total shareholders' equity.................................. 25,568 51,627 113,202
--------- --------- ---------
Total capitalization........................................ $ 25,829 $ 51,888 $ 113,463
========= ========= =========
</TABLE>
Common shares exclude:
- 5,130,509 common shares issuable upon the exercise of options outstanding
at September 30, 1999 at a weighted average exercise price of $1.10 per
share;
- 7,478,805 common shares issuable upon exercise of warrants outstanding at
September 30, 1999 at an exercise price ranging from $0.70 to $1.15 per
share;
- 2,607,805 common shares available for issuance under our 1999 option plan;
and
- 300,000 common shares available for issuance under our 1999 employee share
purchase plan.
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<PAGE>
DILUTION
Our pro forma net tangible book value as of September 30, 1999 was
approximately $48.9 million or approximately $1.48 per share. Pro forma net
tangible book value per share represents pro forma tangible assets less total
liabilities, divided by our pro forma number of outstanding common shares after
giving effect to, on a pro forma basis:
- the sale of 1,526,663 Series I1 preferred shares which closed in November
1999;
- the issuance of 45,818 common shares upon exercise of options under our
1994 stock plan between September 30, 1999 and November 5, 1999;
- the exercise of a warrant for 2,000,000 preferred shares that the warrant
holder has committed to exercise on the effectiveness of this offering;
and
- the conversion of all outstanding preferred shares into 27,006,166 common
shares immediately prior to the completion of the offering.
Without taking into account any changes in such pro forma net tangible book
value per share after September 30, 1999, other than to give effect to the sale
of the common shares in this offering at an assumed initial public offering
price of $9.00 per share after deducting the underwriting discount and estimated
expenses payable by us and the receipt of the net proceeds of such sale, the pro
forma net tangible book value as of September 30, 1999 would have been
approximately $110.5 million or approximately $2.72 per share. This represents
an immediate increase in pro forma net tangible book value per share of $1.24 to
existing shareholders and an immediate dilution of $6.28 per share to new
investors. The following table sets forth this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $9.00
Pro forma net tangible book value per share at
September 30, 1999...................................... $1.48
Increase in pro forma net tangible book value per share
attributable to new investors........................... 1.24
-----
Pro forma net tangible book value per share after the
offering.................................................. 2.72
-----
Dilution in pro forma net tangible book value per share to
new investors............................................. $6.28
=====
</TABLE>
The following table summarizes on a pro forma basis as of September 30, 1999
the differences between the number of common shares purchased from us, the total
consideration paid and the average price per share paid by existing shareholders
and by the new investors in the offering, before deducting the underwriting
discounts and commissions and estimated offering expenses payable by us, at an
assumed initial public offering price of $9.00 per share.
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE PAID
--------------------- ----------------------- ----------
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- -------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C>
Existing shareholders..................... 33,126,003 82% $144,498,000 68% $4.36
New investors............................. 7,500,000 18% 67,500,000 32% 9.00
---------- ---- ------------ ----
Total................................... 40,626,003 100% $211,998,000 100%
========== ==== ============ ====
</TABLE>
20
<PAGE>
The foregoing discussion and table includes the exercise of a warrant for
2,000,000 preferred shares that the warrant holder has committed to exercise and
the closing of the sale of Series I1 preferred shares and excludes:
- 5,130,509 common shares issuable upon the exercise of options outstanding
at September 30, 1999 at a weighted average exercise price of $1.10 per
share;
- 7,478,805 common shares issuable upon exercise of warrants outstanding at
September 30, 1999 at exercise prices ranging from $0.70 to $1.15 per
share;
- 2,607,805 common shares available for issuance under our 1999 option plan;
and
- 300,000 common shares available for issuance under our 1999 employee share
purchase plan.
If all options and warrants outstanding at September 30, 1999 were
exercised, the pro forma net tangible book value per share immediately after
completion of the offering would be $2.29, which represents an immediate
dilution in net tangible book value per share of $6.71 to purchasers of common
shares in the offering. See "Management--Employee Benefit Plans" and the notes
to our consolidated financial statements for more information on our option
plans.
21
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read together
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements, including the related
notes found elsewhere in this prospectus. The statement of operations data for
the fiscal years ended June 30, 1997, 1998 and 1999 and the balance sheet data
as of June 30, 1998 and 1999 are derived from the audited consolidated financial
statements of interWAVE included elsewhere in this prospectus, which have been
audited by KPMG LLP, independent auditors. The statement of operations data for
the fiscal years ended June 30, 1995 and 1996 and the balance sheet data as of
June 30, 1995, 1996 and 1997 are derived from unaudited consolidated financial
statements not included in this prospectus. The statement of operations data for
the periods ended September 30, 1998 and 1999 and the balance sheet data as of
September 30, 1999 are unaudited.
Our consolidated financial statements are prepared in accordance with U.S.
GAAP. All dollar amounts are expressed in U.S. dollars. Our fiscal year ends on
the Friday nearest June 30.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1998 1999
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.................................. $ -- $ -- $ 1,841 $ 12,995 $ 17,293 $ 4,487 $ 5,377
Cost of revenues.............................. -- -- 3,617 12,251 12,531 2,477 3,973
------- -------- -------- -------- -------- ------- -------
Gross profit.................................. -- -- (1,776) 744 4,762 2,010 1,404
------- -------- -------- -------- -------- ------- -------
Operating expenses:
Research and development.................... 3,415 11,268 14,169 15,300 14,174 3,872 3,562
Selling, general and administrative......... 1,065 4,818 6,923 7,742 7,440 1,759 2,088
Amortization of deferred stock
compensation.............................. 908 4,422 6,377 7,604 5,254 1,523 2,820
------- -------- -------- -------- -------- ------- -------
Total operating expenses...................... 5,388 20,508 27,469 30,646 26,868 7,154 8,470
------- -------- -------- -------- -------- ------- -------
Loss from operations.......................... (5,388) (20,508) (29,245) (29,902) (22,106) (5,144) (7,066)
Interest expense.............................. (9) (66) (479) (1,115) (2,403) (49) (1,959)
Other income.................................. 103 620 653 415 154 102 59
------- -------- -------- -------- -------- ------- -------
Net loss before income taxes.................. (5,294) (19,954) (29,071) (30,602) (24,355) (5,091) (8,966)
Income tax expense............................ -- -- 111 220 113 -- --
------- -------- -------- -------- -------- ------- -------
Net loss...................................... $(5,294) $(19,954) $(29,182) $(30,822) $(24,468) $(5,091) $(8,966)
======= ======== ======== ======== ======== ======= =======
Basic and diluted net loss per share.......... $ (1.55) $ (5.36) $ (7.12) $ (6.68) $ (4.96) (1.05) (1.64)
======= ======== ======== ======== ======== ======= =======
Weighted average common shares outstanding
basic and diluted........................... 3,422 3,720 4,099 4,614 4,934 4,840 5,480
======= ======== ======== ======== ======== ======= =======
Basic and diluted pro forma net loss per share
(unaudited)................................. $ (0.77) (0.28)
======== =======
Shares used in computing pro forma net loss
per share, basic and diluted (unaudited).... 31,599 31,599
======== =======
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
---------------------------------------------------- -------------
1995 1996 1997 1998 1999 1999
-------- -------- -------- -------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $11,206 $25,768 $14,862 $ 7,340 $ 3,919 $12,988
Working capital........................................... 10,476 23,519 14,785 10,770 1,608 17,739
Total assets.............................................. 12,992 34,779 34,986 29,613 26,568 35,080
Long-term debt, net of current portion.................... 134 6,364 1,288 1,074 486 261
Total shareholders' equity................................ 12,037 24,046 21,447 18,453 8,800 25,568
</TABLE>
The pro forma financial data presented above reflects the exercise of
outstanding warrants to purchase 2,000,000 preferred shares upon the closing of
the offering, the sale of 1,526,663 shares of Series I1 preferred shares and the
conversion upon the closing of the offering of all outstanding preferred shares
into 27,006,166 common shares.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ TOGETHER WITH OUR CONSOLIDATED
FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS PROSPECTUS.
OUR FISCAL YEAR ENDS ON THE FRIDAY NEAREST JUNE 30.
OVERVIEW
We provide compact wireless communications systems for the GSM market. We
were incorporated in June 1994 and recorded our first product sale in May 1997.
Our systems were initially deployed to add capacity and coverage to existing
systems, primarily in Asia. Deployments of community networks began in 1998,
primarily in China and Africa. Trials of our wireless office systems commenced
in 1999 in both Europe and Asia. Prior to May 1997, we had no sales and our
operations consisted primarily of various start-up activities, such as research
and development, recruiting personnel, conducting customer field trials and
raising capital. We generated net revenues of $1.8 million in 1997,
$13.0 million in 1998, $17.3 million in 1999 and $5.4 million in the three
months ended September 30, 1999. We incurred net losses of $29.2 million in
1997, $30.8 million in 1998, $24.5 million in 1999 and $9.0 million in the three
months ended September 30, 1999. As of September 30, 1999, we had an accumulated
deficit of $118.7 million.
We operate in a single business segment. We generate net revenues from sales
of our systems and, in connection with our direct sales activity, from
installation, maintenance contracts and support of those systems. Revenue
derived from systems sales, comprised of unit sales of our WAVEXpress base
station and base station controller, our WAVEXchange, our Network In A Box and
our WAVEView management system, constituted 96% of net revenues in 1997, 92% of
net revenues in 1998 and 88% of net revenues in 1999. Revenue is recognized when
all of the following have occurred: the system has been shipped, title and risk
of loss have passed to the customer, we have the right to invoice the customer,
collection of the receivable is probable and we have fulfilled all contractual
obligations to the customer. Revenue from installation is recognized as the
services are performed to the extent of direct installation costs incurred, and
the excess is deferred and recognized over the estimated life of the product,
while revenue from extended warranty coverage and customer support is recognized
ratably over the period of the service contract. Trial sales directly to
wireless service providers are not recognized as revenue until the trial is
completed. Trials of our systems conducted by communications equipment providers
and systems integrators are typically shipped from inventory held by those
parties and do not result in incremental revenue to us.
Currently, our revenues are generated by sales to communications equipment
providers and system integrators that may either sell our systems on a
stand-alone basis or integrate them with their systems and by our direct sales
force. In fiscal year 1999, sales to communications equipment providers
represented 61% of total revenues, sales to systems integrators accounted for
23% of total revenues and direct sales to wireless service providers represented
16% of total revenues.
Net revenues outside the United States represented approximately 83%, 49%,
30% and 27% of total net revenues in fiscal years 1997, 1998, 1999 and for the
three months ended September 30, 1999, respectively. We have derived and expect
to continue to derive a majority of our revenues from products installed outside
the U.S. by both non-U.S. and U.S. based communications equipment providers,
systems integrators and wireless service providers, subjecting our revenue
stream to risks from economic uncertainties, currency fluctuations, political
instability and uncertain cultural and regulatory environments. All of our
revenues are in U.S. dollars, which reduces our exposure to fluctuations in
revenues attributable to changes in currency exchange rates. In addition, we
face risks inherent in conducting global business. These risks include extended
collection time for receivables, reduced ability to enforce obligations and
reduced protection for our intellectual property.
We recorded revenue from our first product sale in May 1997. We have a
limited history of generating significant revenues, and many of our products
have only recently been introduced. We
23
<PAGE>
have incurred substantial operating losses since our inception and we expect to
incur net losses in the future which may be substantial. Most of our expenses
are fixed in the near term, and we may not be able to quickly reduce spending if
our revenue is lower than anticipated. Therefore, net losses in a given quarter
could be greater than expected. You have limited historical financial data and
operating results with which to evaluate our business and our prospects. You
must consider our prospects in light of the early stage of our business in a new
and rapidly evolving market. This makes it difficult to assess whether we can
successfully execute our business strategy. See "Risk Factors."
Communications equipment providers, system integrators and wireless service
providers typically perform numerous tests and extensively evaluate products
before incorporating them into their networks. The time required for testing,
evaluation and design of our systems into the service provider's network
typically ranges from six to twelve months. During the trial period we sell a
limited number of units. The successful completion of the trial phase often
results in another sale of additional units intended for deployment in
commercial service. Our business could be adversely affected if a significant
customer reduces or delays orders during our sales cycle or chooses not to
deploy networks incorporating our systems.
Cost of revenues consists of material costs, direct labor costs, warranty
costs, royalties, overhead related to manufacturing our products, amortization
of intangible assets, and customer support costs. Gross profit is affected by
changes in the average selling price of our products and the proportion of our
net revenue derived from the sale of products and services, and our mix of
products. Our WAVEXchange and Network In A Box products contain software
features that earn us a higher relative gross profit than our WAVEXpress/BTS.
Revenue derived from indirect sales typically carries a lower gross profit
percentage than direct sales.
Research and development expenses consist primarily of compensation and
related costs for research and development personnel and expenses for testing
facilities and equipment. All research and development costs are expensed as
they are incurred. We expect to continue to make substantial investments in
research and development and anticipate that these expenses will continue to
increase in absolute dollars.
Selling, general and administrative expenses consist primarily of
compensation and related costs for sales and sales support personnel, marketing
personnel, financial, accounting, human resource and general management
personnel, sales commissions, marketing programs, legal and professional
services, travel expenses, bad debt expenses and other general corporate
expenses. We expect to incur substantial expenditures related to sales and
marketing activities, the recruitment of additional sales and marketing
personnel and the expansion of our domestic and international distribution
channels. We expect selling, general and administrative expenses to increase in
absolute dollars due to the addition of sales and marketing personnel and due to
the additional costs related to the anticipated growth of our business and
operation as a public company.
We are planning to consolidate our manufacturing activities with a single
contract manufacturer. Accordingly, our dependence on this manufacturer will
increase. Problems encountered during the consolidation or future problems
relating to the manufacturer's inability to meet our quality and delivery
specifications could harm our operating results.
Since our inception, we have used share option programs for key employees as
compensation to attract strong business and technical talent. We have recorded
compensation expense for our option grants. The expense is equal to the excess
of the fair market price on the date of grant or sale over the option exercise
price. Of the total deferred compensation, approximately $6.4 million,
$7.6 million, $5.3 million and $2.8 million was amortized in fiscal years 1997,
1998, 1999 and the three months ended September 30, 1999, respectively. The
balance in deferred compensation of $10.2 million at September 30, 1999 is being
amortized on an accelerated basis over the vesting period of the applicable
options, which is typically four years.
24
<PAGE>
Our products operate on the GSM standard. GSM competes with other digital
standards, including code division multiple access, or CDMA, and time division
multiple access, or TDMA. GSM also competes with analog standards. In the event
that TDMA or CDMA become the dominant digital wireless communication standard in
geographic markets we are seeking to address, the acceptance of our products and
our revenues and operating results would be harmed.
Our industry is intensely competitive, and many of our competitors are major
telecommunications equipment providers with resources that are significantly
greater than ours. In addition to competitive pressures, we will also likely
encounter declining sales prices and profit margins over time as products
mature.
RESULTS OF OPERATIONS
The following table presents certain consolidated statement of operations
data for the periods indicated as a percentage of net revenues.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEARS ENDED JUNE 30, SEPTEMBER 30,
------------------------------------ ----------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
As a Percentage of Net
Revenues:
Net revenues.............. 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cost of revenues.......... 196.5 94.3 72.5 55.2 73.9
-------- -------- -------- ------ ------
Gross margin.............. (96.5) 5.7 27.5 44.8 26.1
Operating expenses:
Research and development.. 769.6 117.7 82.0 86.3 66.2
Selling, general and
administrative.......... 376.0 59.6 43.0 39.2 38.8
Amortization of deferred
stock compensation...... 346.4 58.5 30.4 33.9 52.4
-------- -------- -------- ------ ------
Total operating expenses.... 1,492.1 235.8 155.4 159.4 157.5
-------- -------- -------- ------ ------
Loss from operations...... (1,588.5) (230.1) (127.8) (114.6) (131.4)
Interest expense.......... (26.0) (8.6) (13.9) (1.1) (36.4)
Other income (loss) net... 35.5 3.2 0.9 2.3 1.1
-------- -------- -------- ------ ------
Loss before income
taxes................... (1,579.1) (235.5) (140.8) (113.5) (166.7)
Income tax expense........ (6.0) (1.7) (0.7) -- --
-------- -------- -------- ------ ------
Net loss.................. (1,585.1)% (237.2)% (141.5)% (113.5)% (166.7)%
======== ======== ======== ====== ======
</TABLE>
25
<PAGE>
Sales to major customers are as follows (in thousands):
<TABLE>
<CAPTION>
NET REVENUES
-----------------------------------------------------
THREE MONTHS
FISCAL YEARS ENDED
ENDED JUNE 30, SEPTEMBER 30,
------------------------------ --------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Nortel Networks............... $ -- $2,392 $8,797 $2,379 $ 942
ADC Telecommunications/
Microcellular Systems,
Ltd......................... 279 6,099 3,449 1,405 1,122
Hutchison Telecommunications
(Hong Kong)................. 1,251 2,754 1,409 200 257
Total Access Communications... 8 1,750 505 -- 500
HangZhou Topper Electric
Corporation................. -- -- 400 -- 2,068
Alcatel....................... -- -- 1,217 503 88
<CAPTION>
% OF TOTAL NET REVENUES
--------------------------------------------------------
THREE MONTHS
FISCAL YEARS ENDED
ENDED JUNE 30, SEPTEMBER 30,
------------------------------- ----------------------
1997 1998 1999 1998 1999
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Nortel Networks............... --% 18% 51% 53% 18%
ADC Telecommunications/
Microcellular Systems,
Ltd......................... 15 47 20 31 21
Hutchison Telecommunications
(Hong Kong)................. 68 21 8 4 5
Total Access Communications... -- 13 3 -- 9
HangZhou Topper Electric
Corporation................. -- -- 2 -- 38
Alcatel....................... -- -- 7 11 2
</TABLE>
The percentage of net revenues on a fiscal year basis comprised by sales to
Nortel Networks may decline due in part to the broadening of our customer base.
Nortel Networks is a principal shareholder of ours and an employee of Nortel
Networks serves on our board of directors. ADC Telecommunications, Alcatel and
the corporate parent of Hutchinson Telecommunications are shareholders of ours.
Microcellular Systems was created by a spin-off from ADC Telecommunications. Due
in part to general improvements in economic conditions in several key Asian
markets, we may experience increased sales in Asia in future periods.
We have also begun negotiations for a purchase/resale agreement with Intasys
Corporation, one of our shareholders. Intasys plans to market our products in
Canada. As of September 30, 1999, we had recorded $2.8 million in services
receivable from shareholder as a result of our issuance to Intasys of a warrant
to purchase 615,000 common shares at $1.00 per share. This warrant expires on
the effectiveness of our initial public offering. See Note 9 to the consolidated
financial statements.
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
NET REVENUES
Net revenues increased 20% or $0.9 million from $4.5 million for the three
months ended September 30, 1998 to $5.4 million for the three months ended
September 30, 1999. This increase was due to continued increases in the number
of active customers and the continued deployment of our systems. Four customers
accounted for all of our net revenues in the three months ended September 1998
while 11 customers accounted for all of our net revenues in the three months
ended September 1999. Sales to Nortel Networks and ADC Telecommunications
accounted for 53% and 31%, respectively, of net revenues in the three months
ended September 30, 1998, while sales to HangZhou Topper Electric Corporation
and Microcellular Systems in the United Kingdom accounted for 38% and 21%,
respectively, of net revenues in the three months ended September 30, 1999.
COST OF REVENUES
Cost of net revenues increased 60% or $1.5 million during the three months
ended September 30, 1999 compared with the three months ended September 30,
1998. As a percentage of net revenues, cost of revenues increased from 55% for
the three months ended September 30, 1998 to 74% for the three months ended
September 30, 1999, due to the mix of products sold. In the three months ended
September 30, 1998, 38% of net revenues was attributed to our WAVEXchange and
Network In A Box products, which earn higher gross profits, while 43% was
attributed to our WAVEXpress/BTS, which earns lower gross profits. In the three
months ended September 30, 1999, 24% of net revenues was attributed to our
WAVEXchange and Network In A Box products, which earn higher gross profits,
26
<PAGE>
while 65% was attributed to our WAVEXpress/BTS, which earns lower gross profits.
The product mix in any quarter will vary depending on the customer's application
and network design, and therefore our gross profits will fluctuate. Due to the
relatively short time that we have been shipping our complete product line, we
are unable to forecast with certainty our product mix on a quarterly basis.
However, we expect that our gross profits will fluctuate on a quarterly basis.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses declined approximately $0.3 million or 8%
from $3.9 million for the three months ended September 30, 1998 to $3.6 million
for the three months ended September 30, 1999. The decrease was primarily due to
a $0.5 million reduction in non-recurring engineering costs and engineering
contractor expenses, partially offset by a $0.2 million increase in engineering
staff and recruiting expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased $329,000 or 19%
during the three months ended September 30, 1999 compared with the three months
ended September 30, 1998. Approximately $274,000 of the increase was due to
increased sales and administration personnel and approximately $61,000 was due
to increased sales commissions on higher revenue. Selling, general and
administrative expenses are expected to continue to increase as we expand our
marketing and sales support staff to support the increased number of customers
we serve and as we increase our general, administrative and management expenses
to provide support as a public company. For example, our chief financial officer
joined our payroll in July 1999, and our president and chief operating officer
joined our payroll in September 1999.
AMORTIZATION OF DEFERRED STOCK COMPENSATION
Amortization of deferred stock compensation increased $1,297,000 or 85%
during the three months ended September 30, 1999 compared with the three months
ended September 30, 1998. During the three months ended September 30, 1999,
options to purchase 1,973,750 common shares were granted at an average exercise
price of $1.45 resulting in an addition to deferred stock compensation expense
of $9.3 million.
INTEREST EXPENSE
Interest expense increased from $49,000 in the three months ended
September 30, 1998 to $1,959,000 in the three months ended September 30, 1999.
Of the 1999 amount, $1,744,000 was due to amortization of the discount ascribed
to the warrants issued in conjunction with the bridge loan financing. See
"Note (8) to Consolidated Financial Statements." The notes were converted to
Series H1 preferred shares as of September 10, 1999. As a result of the
conversion of the notes into Series H1 preferred shares in September, the
unamortized discount was converted to additional paid-in-capital, and no further
interest expense will be incurred relative to the bridge loan financing. Should
we elect to borrow funds under our committed revolving line of credit, we will
incur interest expense during any periods when amounts are outstanding under the
line. At current interest rates, the maximum borrowings under the available line
would result in quarterly interest expense of approximately $112,000. There are
no current plans to draw down any of the available funds under this revolving
line of credit.
27
<PAGE>
COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
NET REVENUES
We began generating revenue in May 1997. Net revenues increased
$11.2 million, from $1.8 million in 1997 to $13.0 million in 1998. This increase
was due primarily to the generation of revenue in four quarters of 1998 versus
only two months of 1997.
Net revenues increased $4.3 million or 33%, from $13.0 million in 1998 to
$17.3 million in 1999. This increase was principally due to increased sales to
Nortel Networks, who began marketing our products in the fourth quarter of 1998.
Nortel Networks accounted for $8.8 million of our 1999 net revenues, an increase
of $6.4 million over 1998. This increase, however, was offset by a reduction in
sales, through ADC Telecommunications who, with our consent, assigned our
distribution agreement to Microcellular Systems, a new company formed by a group
of former ADC Telecommunications employees in the spring of 1999. ADC
Telecommunications accounted for $3.4 million of our sales in 1999 and
$6.1 million in 1998. Also, in the second half of fiscal 1998, wireless service
providers in Asia were adversely impacted by local economic conditions and
accordingly curtailed their planned programs to deploy our products aggressively
in their networks. Thus, sales to Hutchison Telecommunications (Hong Kong) and
Total Access Communications each declined to less than 10% of our revenues in
fiscal 1999. Net revenues in 1999 included $1.0 million related to training and
support services provided to a communications equipment provider. We incurred
$0.2 million of expenses related to this net revenue.
COST OF REVENUES
Cost of revenues increased $8.7 million from $3.6 million in 1997 to
$12.3 million in 1998. This increase is primarily attributable to the increase
in net revenues described above. As a percentage of net revenues, cost of
revenues decreased from 196% in 1997 to 94% in 1998, due primarily to a smaller
rate of increase in customer support costs than in net revenues. The 1998 cost
of revenues includes an approximately $1.4 million charge due to an inventory
write-off of product originally ordered to satisfy anticipated product orders
from our Asian customers in the second half of fiscal 1998, but which could not
be shipped due to the economic status in that region.
Cost of revenues increased $0.2 million from $12.3 million in 1998 to
$12.5 million in 1999. As a percentage of net revenues, cost of revenues
decreased from 94% in 1998 to 72% in 1999. The decrease in the percentage of net
revenues was primarily due to lower cost of revenues associated with the
WAVEXchange and Network In A Box products introduced in the first half of fiscal
1998.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased $1.1 million or 8% from $14.2
million in 1997 to $15.3 million in 1998. This increase in 1998 was primarily
due to an increase in non-recurring engineering costs of $1.3 million in
conjunction with regulatory testing and development of our radios, depreciation
expenses of $0.6 million, and facilities related expenses of $0.9 million. The
1997 expenses included $1.7 million in preproduction manufacturing and service
support expenses. These expenses were classified as costs of revenue in 1998.
Research and development expenses decreased $1.1 million or 7% from $15.3
million in 1998 to $14.2 million in 1999 due to a reduction in non-recurring
engineering costs and engineering contractor expenses of $1.1 million, as well
as due to reduced hiring and relocation expenses of $0.3 million and
$0.5 million for prototype materials. These reductions were offset with other
expense increases including additional personnel costs of $0.4 million,
increased depreciation expense of $0.2 million and intangible amortization of
$0.3 million.
We anticipate an acceleration in research and development expenditures. From
1997 through 1999, however, the growth in our research and development
expenditures was affected by our
28
<PAGE>
difficulties in attracting and retaining trained personnel. Nevertheless, we
have recently begun to increase our research and development expenses with an
increase in research and development staff from 67 employees at June 30, 1999 to
75 employees at September 30, 1999. We expect to continue to add staff to future
product development activities, including products utilizing the Internet
Protocol and products utilizing the next generation of wireless standards.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased $0.8 million from
$6.9 million in 1997 to $7.7 million in 1998. This increase consists of the
addition of employees in our Hong Kong and Beijing offices to support our direct
sales activity in the Pacific region and expenses associated with our
participation in the 1998 GSM World Congress in Cannes, France.
Selling, general and administrative expenses declined $0.3 million from
$7.7 million in 1998 to $7.4 million in 1999. This decrease was due to a shift
in our sales strategy to emphasize indirect sales channels. Selling general and
administrative expenses began increasing in the fourth quarter of 1999 as we
began making investments in marketing programs and increasing our presence in
Hong Kong and Paris.
AMORTIZATION OF DEFERRED STOCK COMPENSATION
Amortization of deferred stock compensation increased $1.2 million from
$6.4 million in 1997 to $7.6 million in 1998. Amortization of deferred stock
compensation decreased $2.3 million from $7.6 million in 1998 to $5.3 million in
1999.
INCOME TAXES
There is no income tax on income earned in Bermuda.
In 1997, 1998 and 1999 our U.S. subsidiary incurred net losses for United
States federal and state income tax purposes; and we recorded a provision for
income taxes of $111,000, $220,000 and $113,000, respectively, related to
current international income tax provided on the profits attributable to our
foreign operations. As of June 30, 1999, we had $23.8 million of federal and
$12.7 million of state net operating loss carryforwards to offset future taxable
income. The difference between available net operating losses and our
accumulated deficit as reported for financial statement purposes is principally
because losses incurred in Bermuda are not subject to a carry-forward since
there is no tax on income earned in Bermuda, and the losses attributable to our
U.S. subsidiary relate to the manufacturing and development operations of our
U.S. subsidiary and not to our global sales and marketing activity.
QUARTERLY RESULTS OF OPERATIONS
The following presents net revenues for our seven most recent quarters ended
October 1, 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------------
MAR 27, JUNE 26, SEPT 25, DEC 25, MAR 25, JULY 2, OCT 1,
1998 1998 1998 1998 1999 1999 1999
-------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues............... $ 1,009 $ 5,465 $ 4,487 $ 4,097 $ 4,024 $ 4,685 $ 5,377
</TABLE>
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 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 wireless
communications industry. We may not be able to address these risks and
difficulties successfully. In addition, we may not be able to continue to add
new
29
<PAGE>
customers on a regular basis and our revenue may not grow, 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. It is likely that in some
future quarter our operating results will fall below the expectations of
securities analysts and investors. In this event, the market price of our common
share could significantly decline.
See "Risk Factors--Our quarterly operating results are likely to fluctuate
significantly and may fail to meet the expectations of securities analysts and
investors, causing our stock price to decline" for more information on the
factors affecting our quarterly results.
Our sales cycle, which is typically between six and twelve months,
contributes to fluctuations in our quarterly operating results. Further, the
emerging and evolving nature of the market for systems such as our Network In A
Box 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.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through the sale
of preferred equity securities and more recently through the sale of secured
convertible notes and warrants.
The following tables describe the preferred share issuances and debt
financings that have funded our operations from inception through November 30,
1999:
PREFERRED STOCK FINANCINGS
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C> <C> <S> <C>
WARRANTS
CONSIDERATION PRICE PREFERRED OR
($ PER SHARES OPTIONS EXERCISE
DATE CLOSED SERIES MILLIONS) SHARE ISSUED ISSUED PRICE/SHARE PRINCIPAL INVESTOR(S) NOTES
<CAPTION>
<C> <C> <C> <C> <C> <C> <C> <S> <C>
8/94 A $ 2.8 $ 0.83 3,400,000 1,000,000 $1.00 EXCELlink (1)
8/94 B $ 3.2 $ 1.20 2,670,000 -- -- Mainwell
1/95 C $ 1.5 $ 1.50 1,000,000 -- -- EXCELlink, Sasson
5/95 D $14.0 $ 3.00 4,680,000 100,000 $0.30 Mayfield, Morgan Stanley, (2)
Sasson
3/96 E $25.7 $10.00 2,567,167 -- -- Holodeck Ltd. (3)
5/97 F $17.3 $11.50 1,500,000 -- -- UCOM Company
International Limited
3/98 G $24.5 $ 5.35 3,714,286 2,000,000 $7.00 Nortel Networks (4)
6/99 H $ 2.5 $ 7.00 360,000 -- -- ADC Telecommunications (5)
9/99 H1 $12.0 $ 6.23 1,715,715 See $1.00 Intasys, DAMAC, MediaTel (6)
Note 6
11/99 I1 $12.2 $ 8.00 1,526,663 -- -- Alcatel USA
</TABLE>
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(1) A warrant to purchase an additional 1,000,000 Series A preferred shares at
$1.00 per share was issued to EXCELlink and was exercised in May 1995.
EXCELlink subsequently transferred the 1,000,000 Series A preferred to third
parties.
(2) 80,000 of the 4,680,000 Series D preferred shares were sold to 15
sophisticated individual investors. Stock options to purchase a total of
100,000 common shares were issued to the Mayfield entities and were
exercised in March 1997.
(3) All Series E preferred shares were sold to 75 sophisticated individual
investors. Holodeck purchased 400,000 Series E preferred shares.
(4) Nortel Networks was the sole investor in the Series G preferred financing.
The 3,714,286 Series G preferred shares listed includes shares issued in
exchange for patent license rights and services to be rendered under an
original equipment manufacturing agreement. The warrant issued to Nortel
Networks is for 2,000,000 Series G preferred shares at $7.00 per share.
Using the Black-Scholes option valuation model, $4,629,000 of the amount
raised in the Series G preferred financing is attributed to the warrant.
Additional information regarding this preferred stock financing is provided
under "Certain Transactions-Series G Preferred Financing" and "Consolidated
Financial Statements-Note 9".
(5) The purchase price for the 360,000 Series H preferred shares listed was paid
by the cancellation and satisfaction of all outstanding invoices and
indebtedness by us for services performed by ADC Telecommunications.
(6) In addition to the 1,715,715 Series H1 preferred shares listed, an
additional 1,872,335 Series H1 preferred shares were issued upon the
automatic conversion of our 1999 convertible note and warrant financing.
Additional information regarding the conversion is provided under "Certain
Transactions-Convertible Note and Warrant Financing".
Each preferred share converts automatically into 1 common share upon completion
of our initial public offering.
DEBT FINANCINGS
<TABLE>
<CAPTION>
<C> <C> <C> <S> <C> <C>
FUNDS
BORROWED ($ ANNUAL
DATE CLOSED MILLIONS) RATE DESCRIPTION OF DEBT PRINCIPAL INVESTOR(S) NOTES
<CAPTION>
<C> <C> <C> <S> <C> <C>
5/96 $ 6.0 12% Note Convertible into Series E Holodeck Ltd. (1)
Preferred Shares
2/97-8/97 $ 1.6 (2) Note Payable PhoenixCor (2)
12/98-6/99 $12.7 8% Notes Convertible into Series H1 EXCELlink, Holodeck, Mayfield, (3)
Preferred Shares Morgan Stanley, Nortel Networks,
UCOM, other shareholders
</TABLE>
(1) The note and all accrued interest was paid in full in May 1998.
(2) Financing of capital equipment under a $2.5 million secured line of credit.
The line of credit has expired. The current outstanding balance is
$0.7 million. The interest rate is 6% above average term treasury notes.
(3) Notes payable, convertible by their terms upon closing of at least
$10 million in permanent preferred share financing which occurred on
September 10, 1999, including interest accrued at 8% per annum through
September 10, 1999.
During the second quarter of fiscal 1999, we experienced a shortage of cash.
As a result, in December 1998 we initiated a bridge loan and warrant financing
with our principal investors. Nortel Networks loaned us $1.4 million in
December. An additional $3.7 million was loaned to us in March 1999 by Nortel
Networks, EXCELlink, Mayfield Funds and Morgan Stanley Dean Witter Venture
Partners. In May and June 1999, other preferred investors loaned us
$7.6 million. Each of our
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then preferred shareholders were given the opportunity to participate in this
financing and, if they participated at a minimum percentage of their initial
investment, we granted them the right to exchange their existing preferred
shares for a more senior security in the same series. In conjunction with these
loans, we issued five year warrants to purchase 6,345,931 common shares at $0.70
per share. These warrants were valued using the Black-Scholes model at
$5,877,018. Approximately 95% of our preferred shareholders participated at
least to their minimum level to attain the senior security. See Note 8 to the
Consolidated Financial Statements.
As of September 30, 1999, cash and cash equivalents were $13.0 million. In
November 1999, we received $12.0 million in net proceeds from the sale of
additional preferred shares.
We expect the net proceeds of this offering to be $61.6 million, based on an
assumed offering price of $9.00 and after deducting underwriting discounts and
estimated offering expenses. In addition, as a result of the exercise of
warrants which would otherwise expire on the effectiveness of the offering, we
could receive additional proceeds of up to $15.1 million. We plan to use
$4.5 million of the net proceeds for capital expenditures during fiscal 2000. We
also will use a portion of the net proceeds to fund increased facility rent of
$1.0 million per year beginning in fiscal 2000. We expect to use the remainder
of the net proceeds for general corporate purposes including research and
development and working capital.
Cash used in operating activities was $1.2 million for the three months
ended September 30, 1999, $13.3 million in 1999, and $21.0 million in 1998.
Cash used in investing activities was $1.0 million for the three months
ended September 30, 1999, $2.0 million in 1999 primarily for capital equipment
purchases, and cash provided by investing activities was $0.3 million in 1998
resulting from the sale of short term investments partially offset by capital
equipment purchases.
Cash provided by financing activities was $11.4 million for the three months
ended September 30, 1999, $11.8 million in 1999, and $13.1 million in 1998. Cash
provided by financing activities in 1999 was primarily due to issuances of
convertible notes and warrants while in 1998 cash provided by financing
activities was primarily due to issuances of preferred shares and sale of a
related warrant, partly offset by payments on notes payable to shareholders.
Our accounts receivable balances have been dominated by large amounts due
from our principal customers who are all large, internationally recognized
corporations. While terms of sale vary from customer to customer, payment
practices of these large corporations have resulted in delays in collection and
our quarterly days sales outstanding was 134 days based on the accounts
receivable as of June 30, 1999. Based on quarterly sales and accounts receivable
as of September 30, 1999 we reduced quarterly days sales outstanding to 109
days. Depending on the mix of sales to U.S. and non-U.S. based customers, and
depending on the mix of terms of sale, our days sales outstanding will fluctuate
from period to period.
In November 1999 we received a commitment for a $5 million revolving line of
credit from a commercial bank. This credit facility would allow us to borrow up
to 70% of eligible accounts receivable at interest rates equal to the bank
reference rate plus 1.25%. The lender would obtain a security interest in
essentially all of our assets, and advances would be subject to our compliance
with quarterly financial covenants including minimum tangible net worth, minimum
earnings before interest, taxes, depreciation and amortization, and compliance
with selected balance sheet ratios. While the lender has provided a firm
commitment, we cannot be certain that we will execute a loan agreement.
We have no material commitments other than obligations under our facilities
leases. See note 11 of Notes to Consolidated Financial statements for more
information on our facilities leases. 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,
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and on research and development laboratory and test equipment, as the capital
required for volume manufacturing is being committed by our contract
manufacturers. We provide six or twelve month forecasts to our contract
manufacturers. We generally commit to purchase products to be delivered within
the next 60 days covered by these forecasts with cancellation fees. As of
December 1, 1999, we had committed to make purchases totaling $4.4 million from
these manufacturers in the next 60 days. In addition, in specific instances we
may agree to assume liability for limited quantities of specialized components
with lead times beyond this 60-day period.
In future periods, we generally anticipate significant increases in our
working capital needs on a period-to-period basis primarily as a result of
planned increases in sales and marketing activity. In conjunction with the
expected increases in sales, we expect higher levels of inventory and trade
accounts receivable. While we also expect an increase in trade accounts payable
and other liabilities, we do not expect that they will offset the increases in
inventory and trade 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. The growth of our
business and operation as a public company will require additional personnel and
related costs, resulting in increases in our selling, general and administrative
expenses.
We believe that the net proceeds of this offering, together with our
existing cash balances, will be sufficient to meet our capital requirements at
least through the next 12 months. However, we may need or could elect to seek
additional funding prior to that time. In November 1999, we received a
commitment from a financial institution for a revolving line of credit in the
amount of $5,000,000 for a one year term subject to advances against eligible
accounts receivable. In the event that we need to raise additional funds, we may
not be able to do so on terms favorable to us. Furthermore, if we issue equity
securities, shareholders may experience dilution or the new equity securities
may have rights, preferences and privileges senior to those of existing holders
of common shares. If additional funds are raised through the issuance of debt
securities, such securities would have rights, preferences and privileges senior
to holders of common shares, and the terms. If we cannot raise funds on terms
favorable to us, we may not be able to develop or enhance our products, take
advantage of future opportunities or respond to competitive pressures or
unanticipated requirements. See "Use of Proceeds," "Dilution" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" for more information on our capital
requirements.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. As a result, software that
records only the last two digits of the calendar year may not be able to
distinguish between 20th and 21st century dates. This may result in software
failures or the creation of erroneous results.
We have largely completed our year 2000 readiness compliance and tested
current versions of our products and vendor's software. We believe all current
versions of our products are "year 2000 compliant," as defined below, when
configured and used in accordance with the related documentation, and provided
that the underlying operating system of the computer on which our products run
and any other software used with or in the computer on which our products run,
are compliant.
We define "year 2000 compliant" as the ability to:
- correctly handle date information needed for the December 31, 1999 to
January 1, 2000 date change;
- function according to the product documentation provided for this date
change, without changes in operation resulting from the advent of a new
century, assuming correct configuration;
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- if the date elements in interfaces and data storage specify the century,
store and provide output of date information in ways that are unambiguous
as to century; and
- recognize the year 2000 as a leap year.
We have tested software obtained from third parties that is incorporated
into our products, and we believe that licensed software is year 2000 compliant.
Despite testing by us and by current and potential clients, and assurances from
developers of products incorporated into our products, our products may contain
undetected errors or defects associated with year 2000 date functions. Known or
unknown errors or defects in our products could result in delay or loss of
revenue, diversion of development resources, damage to our reputation, or
increased service and warranty costs, any of which could materially adversely
affect our business, operating results or financial condition. Some industry
analysts have predicted significant litigation regarding year 2000 compliance
issues, and we are aware of such lawsuits against other vendors. Because of the
unprecedented nature of such litigation, it is uncertain whether or to what
extent we may be affected by it.
We have initiated an assessment of our material internal information
technology systems, including both our own software products and third party
software and hardware technology. We have completed testing and we believe that
we are compliant. If our information technology systems are not year 2000
compliant, we may not have allowed sufficient time for remediation of any
deficiencies. To the extent that we are not able to test the technology provided
by third party vendors, we are seeking assurances from vendors that their
systems are year 2000 compliant. We have completed the inventory/ assessment of
licensed software included in our products and have confirmed that the licensed
software that we incorporate in our products is year 2000 compliant. This
confirmation has been achieved through a combination of internal testing,
vendor's year 2000 Readiness Disclosures, and an ongoing certification program
addressing all of our suppliers and vendors.
We are not currently aware of any material operational issues or costs
associated with preparing our internal information technology for the year 2000.
Our costs incurred through September 30, 1999, have totaled less than $25,000.
We expect to incur less than $100,000 in costs to complete our year 2000
compliance efforts. However, we may experience material unanticipated problems
and costs caused by undetected errors or defects in the technology used in our
internal information technology systems.
We do not currently have any information concerning the year 2000 compliance
status of some of our customers. If our current or future customers fail to
achieve year 2000 compliance or if they divert technology expenditures to
address year 2000 compliance problems, our business could suffer.
We have funded our year 2000 plan from available cash and have not
separately accounted for these costs in the past. To date, these costs have not
been material. We expect to incur additional costs related to the year 2000 plan
for administrative personnel to manage the project, outside contractor
assistance, technical support for our products, product engineering and customer
satisfaction. In addition, we may experience material problems and costs with
year 2000 compliance that could adversely affect our business, results of
operations, and financial condition.
We have developed and documented contingency plans for business partners
deemed to be at risk. We have also developed contingency plans for all of our
business areas. In addition, we have contingency plans for critical internal
inventory items, hardware and software, used in our internal infrastructure and
our product cycle. These plans have been documented and distributed to
potentially affected users of our systems. The overall cost of developing and
implementing our plan may be material. Finally, we are also subject to external
forces that might generally affect industry and commerce, such as utility or
transportation company year 2000 compliance failures and related service
interruptions.
We believe our year 2000 worst case scenario would be the failure of a sole
or limited source supplier to be year 2000 compliant. Our failure or the failure
of one of these suppliers to be year 2000
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compliant could seriously interrupt our manufacturing process, thereby
substantially reducing our revenues.
FINANCIAL MARKET RISK
Our financial market risk includes risks associated with international
operations and related foreign currencies. We anticipate that international
sales will continue to account for a significant portion of our consolidated
revenue. Our international sales are in U.S. dollars and therefore are not
subject to foreign currency exchange risk. Expenses of our international
operations are denominated in each country's local currency and therefore are
subject to foreign currency exchange risk; however, through June 30, 1999, we
have not experienced any significant negative impact on our operations as a
result of fluctuations in foreign currency exchange rates.
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BUSINESS
OVERVIEW
We provide compact wireless communications systems using GSM, an
international standard for voice and data communications. We have pioneered what
we believe is the only commercially available system that provides all of the
infrastructure equipment and software necessary to support an entire wireless
network within a single, compact enclosure. We have designed our systems to
serve the following applications in a cost-effective manner:
- WIRELESS OFFICES. Our systems allow wireless users in organizations such
as large corporations, government entities and universities to maintain
contact with the organization's private telephone network whether the
users are in their offices, out of their offices or moving between
locations.
- COMMUNITY NETWORKS. Our systems enable wireless service providers to add
capacity in heavy usage areas and to provide telephone service in
previously unserved communities.
Our core product, WAVEXpress, delivers a comprehensive set of wireless
network capabilities which are based on the GSM standard. WAVEXpress systems can
serve as:
- a base station to receive and transmit voice and data signals over radio
frequencies;
- a switch to route voice and data signals to their correct destinations;
- a base station controller to manage voice and data signals between the
base station and the switch; or
- any combination of these functions depending on our system's hardware and
software configuration.
Our all-in-one solution, the Network In A Box, provides the capabilities of
a complete wireless network in an enclosure approximately the size of a personal
computer tower.
We market and sell our solutions around the world utilizing a three-tiered
sales strategy which includes selling to communications equipment providers, to
systems integrators which integrate our systems with the products of other
companies and through our own direct sales force. Since 1997 we have sold over
1,000 units which have been installed in 17 countries worldwide. We have
established a strategic alliance with Nortel Networks, which accounted for 51%
of our revenues in 1999 and which owns 24.0% of our outstanding shares. We have
also recently entered into a strategic alliance with Alcatel Business Systems,
which included the purchase by Alcatel USA of 4.6% of our outstanding shares.
These alliances include purchase and distribution agreements through which both
companies will market our products to their customers.
INDUSTRY
RAPID GROWTH FOR MOBILE WIRELESS COMMUNICATIONS
In recent years, worldwide demand for mobile wireless communications has
increased dramatically. According to International Data Corporation, the
worldwide wireless market is expected to grow from 303 million users in 1998 to
approximately 1.1 billion by 2003, a compounded annual growth rate of
approximately 29%. This rapid growth has been driven by the increasing
availability, functionality and affordability of wireless products and services.
Changes in the worldwide regulatory environment, including the elimination
of monopolies for public communications services, privatization of
government-owned communications organizations and competitive licensing of radio
frequency spectrum by regulatory authorities, have led to an increase in the
number of communications service providers seeking to meet the rapidly growing
demand for mobile wireless communications. In Europe, for example, recent
European Union directives prohibit member countries from restricting competitive
access to mobile and local service after January 1, 1998. In the United States,
the Telecommunications Act of 1996 opened local telephone networks to new
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competition. Similar trends in developing countries are creating significant
opportunities for new entrants in the communications market. This increasingly
competitive environment is rapidly driving down the prices that end-users pay
for services.
COMMUNICATIONS EQUIPMENT MARKET
Wireless service providers are investing in expanding and upgrading their
networks to add capacity and keep pace with the demand for value-added services.
These investments are being driven by increased competition, strong subscriber
growth and new product innovation. Such investments enable wireless service
providers to extend geographic coverage, improve call quality, and deliver
enhanced features and services. Despite reductions in the cost of communications
equipment, service providers' capital budgets have continued to increase
substantially. According to Dataquest, the digital wireless communications
equipment market is expected to grow from approximately $31 billion in 1998 to
over $41 billion by the end of 2002. Growth rates experienced by the industry as
a whole may not, however, reflect growth rates that we will experience. In
addition, recessionary conditions in Asia have resulted in reduced demand for
wireless communications systems.
GLOBAL SYSTEM FOR MOBILE COMMUNICATIONS STANDARD
The GSM standard competes primarily with the code division multiple access
standard, or CDMA, the time division multiple access standard, or TDMA, and
analog standards. According to The Comprehensive Guide to Wireless Technologies,
all of the digital standards, including GSM, CDMA and TDMA, offer clearer voice
communications than the older analog standards. We believe that digital
standards will attract even more users in the future as functions such as
high-speed data communications become available. The GSM standard allows users
to receive text messages and allows users to roam across international
boundaries without an interruption in service. The TDMA and CDMA standards
provide similar advanced messaging capabilities, but do not allow users to roam
internationally because the phones do not have a removable personal identity
card, like GSM phones, to identify the user to the network regardless of
location. Without this portable identity card, roaming of the user's phone is
limited to networks that operate in the same frequency range as the user's home
network. CDMA, which uses a wide frequency range with unique mathematical codes
to distinguish different users, does not have a maximum number of calls it can
handle at a given time, but rather can accommodate additional calls only by
slightly degrading the quality of all ongoing calls. GSM and TDMA, which
transmit and receive information in predefined time slots in a narrowly defined
frequency range, cannot expand the maximum number of calls to accommodate surges
in demand.
According to International Data Corporation, GSM is the world's most widely
accepted digital wireless standard with 132 million users in 1998 and is
projected to grow to 556 million users by 2003. In 1998, GSM accounted for
approximately 44% of the world wireless market while CDMA, TDMA and analog
accounted for 8%, 6% and 31% of the world market, respectively. GSM is the
dominant standard in Europe as a result of the European Union's decision to
endorse a single unifying digital standard in the 1980s. In Asia, the rate of
acceptance of the GSM standard is growing rapidly as wireless service providers
have selected GSM to offer differentiated services and to increase capacity. On
November 1, 1999, the GSM Association and the Universal Wireless Communications
Consortium, the governing bodies of the GSM and TDMA standards, respectively,
announced an agreement to jointly develop standards that enable GSM and TDMA
systems to operate together. International standards organizations are also
working to develop the next generation of standards that will replace all three
of these technologies.
Early in the history of the wireless market, analog standards achieved a
strong presence in the United States while the GSM standard was being adopted in
Europe. According to Allied Business Intelligence, Inc., at the end of 1998
there were 3 million GSM users in the United States, which represented 4.3% of
all wireless users in the United States. Today, although the acceptance of the
GSM standard in North America is in its early stages, increased penetration of
the GSM standard is being driven by its ability to support international
roaming, and will be further driven by its advanced
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data transmission and messaging capabilities. GSM has been adopted in North
America by communications service providers, including Microcell, OmniPoint,
PacBell and VoiceStream. Both CDMA and TDMA have a significant presence in the
United States. Sprint PCS and GTE have deployed CDMA and AT&T Wireless has
deployed TDMA in the United States.
NEXT GENERATION WIRELESS STANDARD
An international consortium of standards bodies is working to establish the
specifications of the next generation of wireless standards, often referred to
as the third generation wireless standard, and to ensure its interoperability
with existing network standards. Since the installed base of wireless networks
was not designed to be interoperable with what we expect will be the next
generation standard, significant capital expenditures will be required to update
them. We believe wireless service providers will attempt to preserve their
previous investments in infrastructure and will seek incremental solutions that
will facilitate upgrading to the next generation wireless standard while
ensuring interoperability among disparate networks. Industry analysts expect the
next generation standard to use the Internet Protocol to enable high speed data
transmissions over wireless networks. The Internet Protocol is the networking
standard used to communicate voice and data across the Internet. Using the
Internet Protocol for wireless network access would provide potential
cost-savings for wireless service providers by allowing them to use the existing
Internet infrastructure. We expect these developments will increase the demand
for cost-effective, flexible, wireless networks that can be easily upgraded to
the emerging next generation standard.
KEY DEVELOPING MARKET OPPORTUNITIES
Rapid technological innovation in wireless communications is creating new
and varied market opportunities.
WIRELESS OFFICES. Wireless office networks combine the mobility and
flexibility of wireless communications with all of the features of traditional
wireline networks, and enable organizations such as large corporations,
government entities and universities to integrate their private office networks
with public wireless networks. This integration enables abbreviated dialing
while the user remains within the private office network. After the user leaves
the office building, incoming calls are routed to the user's mobile phone via
the public wireless network. Wireless office networks can increase productivity
by making it possible to reach employees through a single phone number at all
times, regardless of location, while providing significant cost savings for the
organization. The wireless office market enables wireless service providers to
expand their customer base, reduce subscriber turnover, provide customized
billing and establish a presence from which to offer wireless data networks. The
Yankee Group estimates the market for GSM wireless office networks will be
10.9 million distinct phone lines in 2002 in the European corporate market
alone. GSM wireless office networks compete with a digital European cordless
telephone standard known as DECT. In 1998, DECT had an installed base of
1.6 million wireless office lines in Europe compared to 410,000 for GSM.
However, unlike GSM, the DECT standard does not permit roaming outside the
office premises. While some handset vendors either offer or are considering
offering phones that support both DECT and GSM, the Yankee Group expects a
limited market for such a product for both technical and economic reasons. The
Yankee Group estimates the European market for DECT wireless office networks
will be 4.7 million wireless office lines in 2002.
COMMUNITY NETWORKS. Community networks enable the introduction of wireless
service to areas that are currently not served by wireless providers or that may
not have any telephone service. Wireless solutions such as wireless local loop
networks offer the most cost-effective way to provide telephone service to areas
with no current service. Wireless local loop networks are wireless
communications systems that connect users to the public telephone network using
radio signals as a substitute for traditional telephone connections. These
markets offer substantial growth potential due to the relatively low level of
rural and remote telephone service penetration and the continued need for
low-cost communications services. According to Frost & Sullivan, the wireless
local loop market is
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expected to grow from approximately $4.6 billion in 1998 to $16.5 billion in
2002. Wireless solutions provide a high-value proposition in developing
countries since these solutions are generally less expensive than establishing a
traditional telephone infrastructure, according to Frost & Sullivan. To succeed
in the community networks market, we believe wireless service providers need to
employ network systems that minimize initial capital expenditures while
providing the flexibility to scale cost-effectively as demand grows. In
addition, wireless service providers need to minimize ongoing operating costs,
the largest of which are the charges associated with routing calls through a
central switch, where traditionally all calls are processed.
PRIMARY OBJECTIVES OF THE WIRELESS SERVICE PROVIDER
To better serve their existing user base and to gain market share, wireless
service providers are focused on the following primary objectives:
COST-EFFECTIVE NETWORK DEPLOYMENT. The deployment of traditional wireless
networks requires significant capital expenditures. A typical wireless network
consists of a switch to route voice and data signals to their correct
destinations, multiple base station controllers to aggregate and manage voice
and data signals between the switch and the base station and many base stations
to transmit and receive voice and data signals over radio frequencies. Wireless
networks are typically designed to support large user bases. Service providers
need cost-effective ways to address smaller user bases. As service providers
face increasing price competition, they will depend on communications equipment
providers for cost-effective and technologically advanced infrastructure
systems.
EXTENSION OF COVERAGE. In the past, wireless networks have been deployed
primarily in urban centers and other heavy usage areas. Increasing demand for
improved service over wider geographic areas has prompted wireless service
providers to accelerate the expansion of their networks. In addition, wireless
service providers are deploying networks in locations where service has
previously been inadequate or prohibitively expensive to provide.
IMPROVED QUALITY OF SERVICE. Currently, wireless networks in metropolitan
areas are prone to a lower quality of service when heavy usage causes capacity
limits to be exceeded. Furthermore, wireless service in buildings, tunnels and
subways is often interrupted or unavailable. Similarly, wireless services in
remote areas are often limited due to the lack of a fully-developed wireless
infrastructure. Improving the quality of wireless service involves increasing
network capacity and capabilities to address current network constraints.
VALUE-ADDED SERVICES. The extreme competition faced by wireless service
providers requires them to offer differentiated, value-added services including
the ability to roam across regional, national and international boundaries
without an interruption in service, access to high-speed data transmission and
other features such as voicemail and caller ID. In order to address increasing
competitive pressures, wireless service providers must use flexible systems that
enable them to deploy numerous services in a timely and cost-efficient manner.
As wireless service providers seek to achieve these objectives in an
extremely competitive market, they will increasingly require communications
equipment providers to develop wireless network solutions that enable the
flexible, cost-effective delivery of value-added services and that are capable
of being easily adapted to the next generation wireless standard.
THE INTERWAVE SOLUTION
Our systems offer a number of important advantages to GSM service providers,
including:
COMPACT, FLEXIBLE AND MODULAR
Our WAVEXpress products provide a comprehensive set of GSM network
capabilities. We believe that we provide the only commercially available system
that supports an entire GSM network within a single enclosure approximately the
size of a personal computer tower. The WAVEXpress system can
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serve as a base station, base station controller, switch or any combination of
these functions depending on our system's hardware and software configuration.
The WAVEXpress product uses only four hardware modules which enables the system
to be updated and enhanced by simply exchanging specific hardware modules and
upgrading software. Our compact and modular system enables wireless service
providers to implement wireless office networks, to fill in coverage blind
spots, to increase capacity in heavy usage areas and to provide service to
previously unserved areas.
COST-EFFECTIVE NETWORK DEPLOYMENT AND OPERATION
Our compact, flexible systems enable us to be a price leader, reducing both
initial and incremental capital expenditures for network deployment by wireless
service providers. The flexible nature of our products enable wireless service
providers to rapidly add capacity to their networks in a cost-effective manner.
In addition, there are only four WAVEXpress hardware modules, which result in
reduced maintenance and training costs, and a reduction in capital necessary to
maintain spare parts in inventory. Furthermore, we have a patented switch
technology that allows the network to determine whether a call should be
directed to its destination by the local network or by a central switch. This
proprietary switch capability allows a wireless service provider to reduce its
dependence on the central switch and increase network efficiency, resulting in
lower operating costs.
INTEROPERABILITY WITH EXISTING GSM NETWORKS
We maintain strict adherence to GSM standards to ensure that our systems are
compatible with other communications equipment providers' products. We have
proven our systems' interoperability in live networks with equipment from all
major communications equipment providers, including Alcatel, Ericsson, Lucent,
Nokia, Nortel Networks and Siemens. Our systems are also compatible with
existing private telephone systems. Interoperability enables wireless service
providers to upgrade their existing systems without having to replace their
entire network, facilitating the introduction of new capabilities and services
in a timely and cost-effective manner. We plan to maintain our systems'
interoperability despite changes to software, equipment configuration, network
design and upgrades to the various network standards.
RAPID TIME-TO-MARKET FOR NEW, VALUE-ADDED SERVICES
Service providers using our wireless network systems can achieve rapid
time-to-market for new services which they can offer to new and existing users.
Our flexible design enables the system to be readily upgraded through simple
hardware additions and software reconfigurations. These features allow service
providers to decrease the implementation time required to offer new services to
customers. Our WAVEView products also allow for the control of all functions and
components of the network through a single management system. This enables
service providers to customize and expand service offerings to users without
deploying additional systems that require incremental training and testing. Our
expandable systems provide small, low-cost alternatives to expensive digital
communications infrastructure equipment. Furthermore, since our systems are
based on the Internet Protocol, we believe wireless service providers will be
able to easily adapt to the next generation wireless standard through simple
software upgrades or specific hardware replacements, instead of time-consuming
deployment of and costly investment in new network equipment.
STRATEGY
Our goal is to be the premier global provider of cost-effective, compact
wireless systems in targeted segments of the GSM market. The key elements of our
strategy include:
PROVIDE GSM WIRELESS OFFICE SYSTEMS
We intend to provide cost-effective network systems for large organizations
such as corporations, universities and government entities. We have developed a
wireless office system that can function as a stand-alone network or as an
add-on to a new or existing network. Our system, and specifically our
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switch technology, reduces costs for an organization by allowing a user's calls
to any campus to stay inside the organization's network. Nortel Networks and
Alcatel are actively marketing our wireless office system.
DELIVER NEXT GENERATION SOLUTIONS USING THE INTERNET PROTOCOL
Our research and development efforts are focused on using our WAVEXpress
products to offer voice and data communications over the Internet. We plan to
capitalize on the flexibility of our system design to speed our customers'
transition to the emerging next generation standard once its specifications are
finalized. Our fully-functional, GSM voice communications system that uses the
Internet Protocol was demonstrated at the February 1999 GSM World Congress. We
expect this system to be commercially available in early 2000.
FURTHER PENETRATE EXISTING MARKET OPPORTUNITIES
To date, our sales have been predominantly to wireless service providers
seeking to fill gaps in coverage, to increase capacity in heavy usage areas and
to provide wireless service to previously unserved areas. We believe that these
applications will continue to represent a significant market opportunity for our
systems. As our customers expand their networks, we plan to generate additional
orders. We intend to convert existing trials into large-scale commercial
deployments. Currently, we are involved in 16 trials in nine countries. We also
believe that our visibility as an early provider of network solutions that use
the Internet Protocol will lead to new deployments with new and existing
customers. For example, Alcatel will integrate our products that use the
Internet Protocol with their corporate office networking products and market
them through their enterprise solutions division.
STRENGTHEN AND EXPAND RELATIONSHIPS WITH COMMUNICATIONS EQUIPMENT PROVIDERS
We intend to use our strategic relationships with communications equipment
providers such as Nortel Networks, Alcatel and Sagem to expand our geographic
coverage and increase the market share for our solutions. Our relationships with
these equipment providers allow us to benefit from their sales forces selling
our products and enable us to reach new customers and strengthen our position
with existing customers. Communications equipment providers bundle our solutions
with their products to address the needs of wireless service providers. Our
sales are also enhanced by equipment providers' abilities to offer service and
support for our systems. We believe that strengthening these relationships and
selectively establishing new relationships will help us to generate new sales.
USE TECHNOLOGICAL LEADERSHIP TO PROVIDE COMPETITIVE ADVANTAGES FOR WIRELESS
SERVICE PROVIDERS
We intend to use our leading-edge technology and intellectual property to
expand the capabilities of our network systems, streamline system upgrades and
simplify the purchasing process. Furthermore, we intend to update our equipment
to use the latest generation Power PC processor which will provide significantly
more processing power and enhance the service providers' ability to handle heavy
data usage. Upcoming enhancements to our systems include the implementation of a
Web-based system to manage wireless networks, which will provide all monitoring,
configuration and maintenance capabilities. This will enable rapid emergency
response and enhance overall system management. Further, our system will be
upgraded to use the latest generation PowerPC processor, giving our systems
significantly more processing power to enhance service providers' ability to
handle heavy data usage. Finally, we intend to develop a Web-based system to
enable service providers to configure and purchase our solutions online,
streamlining the purchasing process and reducing related purchasing costs.
[A diagram of our WAVEXpress Network In A Box Configuration. The first
caption points to the switch. The second caption points to the base station
controller. The third caption points to the base station. There is a Note below
which states "Our WAVEXpress products use the same compact enclosure. The
hardware and software configuration varies based on the users' requirements."]
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PRODUCT LINES
We operate in a single business segment, the manufacture and sale of
compact, wireless communication systems. We have two product lines, WAVEXpress
and WAVEView.
WAVEXPRESS
Our core WAVEXpress product can house any combination of our switch, our
base station controller and our base station in a single compact enclosure. The
WAVEXpress system is approximately the size of a personal computer tower and
weighs less than 50 pounds. Our WAVEXpress product line represented 80% and 88%
of our net revenues for fiscal year 1999 and the three months ending
September 30, 1999, respectively.
WAVEXCHANGE. The WAVEXchange is a wireless switch that routes calls and is
designed to allow the network to process calls locally rather than at a central
switch, thereby reducing operating costs. The small size and configurability of
the WAVEXchange enable wireless service providers to deploy value-added services
rapidly. The WAVEXchange can be integrated with existing private telephone
networks. The WAVEXchange is the only GSM switch on the market that can act
either as a base station controller extension of a central switch or as a local
switch, on a call-by-call basis. The WAVEXchange uses standard GSM interfaces
and can be configured with up to 16 connections that support up to 4,000 users,
depending on the requirements of the network. We began shipping WAVEXchange
products in June 1998.
WAVEXPRESS/BSC. The WAVEXpress/BSC is a compact base station controller
that aggregates and manages the communications between the WAVEXpress/BTS and
the central switch or a local WAVEXchange switch. The wall-mountable
WAVEXpress/BSC, one of the smallest GSM base station controllers on the market,
connects to any central switch supporting the GSM standard. The WAVEXpress can
be configured with up to 16 connections depending on the requirements of the
network. We began shipping the WAVEXpress/BSC in December 1996.
WAVEXPRESS/BTS AND TURBOWAVE/BTS. The WAVEXpress/BTS is a base station
which accommodates up to three radios providing up to 22 simultaneous
communication channels. Versions of the WAVEXpress/BTS are available in all
three GSM frequency bands: 900 MHz and 1800 MHz for Europe and Asia and 1900 MHz
for the Americas. The WAVEXpress/BTS connects the user to the network with no
need for additional components. In addition, we offer a higher powered version
of the WAVEXpress/BTS, the TurboWAVE, which is available in two configurations.
The TurboWAVE offers broader geographic coverage with over 20 kilometers of
range. In covering a longer range, the TurboWAVE offers the service provider
benefits from increased coverage, greater reduction in transmission costs and
lower infrastructure costs per user. We began shipping the WAVEXpress/BTS in
December 1996 and the TurboWAVE/BTS in December 1997.
NETWORK IN A BOX. The Network In A Box offers the ability to support a
complete GSM network by integrating the switch, base station controller and base
station in a single WAVEXpress unit. The Network In A Box is designed for rapid
deployment and provides easy network expansion as usage and coverage
requirements increase. Ideally suited for wireless office networks, the Network
In A Box can support a stand-alone GSM network or it can integrate with most
private telephone networks to provide wireless GSM interoperability with a
corporate telephone network. We have a patented switch technology which allows a
single Network In A Box to act as a wireless extension to a private telephone
network and as an extension to a public wireless network on a call-by-call
basis. In remote and rural communities, the Network In A Box enables rapid
deployment of GSM capabilities. Since a high percentage of calls stay within the
local network, transmission costs to a central switch are minimized. Coverage
and capacity can be increased quickly and easily by adding WAVEXpress/BTS and
WAVEXpress/BSC units to the network. The Network In A Box can also serve as a
cost-efficient GSM starter network allowing wireless service providers to match
their infrastructure expenditures to usage growth. We began shipping the Network
In A Box in August 1998.
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WAVEXPRESS/BS PLUS. The WAVEXpress/BS Plus combines the functions of a base
station controller and base station in a single product. A WAVEXpress/BS Plus
can support up to 600 users and up to three external WAVEXpress/BTS base
stations to serve up to 2,400 users.
WAVEVIEW
WAVEVIEW. The WAVEView is a management system for wireless service network
components. Our system simplifies the process of deploying new network
components, allowing the user to manage all aspects of wireless user profiles.
The WAVEView also allows wireless service providers to monitor network faults in
real-time and includes a comprehensive help function that guides users through
management tasks. We began shipping WAVEView in May 1998. Our WAVEView product
line represented 8% and 6% of our net revenue for fiscal year 1999 and the three
months ending September 30, 1999, respectively.
<TABLE>
PRODUCT NAME FUNCTION PRODUCT FEATURES
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
WAVEXchange Wireless switch that routes - Small size, low price per user
telephone calls through the GSM - Design allows capacity to be
network and can also act as a base increased by adding components
station controller - Can accomodate up to 4,000
users
WAVEXpress/BSC Base station controller that - Supports up to 16 connections
supports up to 30 base stations,
depending on the configuration
WAVEXpress/BTS Base station that supports the - Accommodates up to three radios
radio interface between wireless and 22 channels
phones and the rest of the network
TurboWAVE/BTS A WAVEXpress/BTS with high- - Extends range to over 20
powered radio transmitters kilometers
</TABLE>
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<PAGE>
<TABLE>
PRODUCT NAME FUNCTION PRODUCT FEATURES
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Network In A Box All-in-one wireless network that - Incorporates all of the
includes the switch, base station functionality of the WAVEXchange,
control and base station functions WAVEXpress/BSC and
in a single enclosure WAVEXpress/BTS in a single
enclosure
- Supports up to two radios and
500 users
WAVEView Management system that manages - Operates on a standard UNIX
multiple base stations, base system with multiple system
station controllers and switches administrators. UNIX is a
standard computer operating
system used for technical
applications worldwide.
- Supports remote connections and
dial-in access
</TABLE>
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APPLICATIONS OF OUR NETWORK SYSTEMS
Our network systems allow wireless service providers to expand capacity and
coverage on a permanent or emergency basis, to operate wireless office networks
and to provide service to remote and rural areas. The following case studies
show how our network solutions have been implemented to create value for
wireless service providers:
<TABLE>
<S> <C>
WIRELESS OFFICE NETWORK
PROBLEM: Employees spend little time in offices and
have difficulty staying in contact as they
travel between campus sites. Corporation
wants to provide abbreviated dialing and
other services over a wireless network, with
access to the public network
INTERWAVE SOLUTION: Network In A Box, WAVEView
VALUE PROPOSITION: - increase user base and overall minutes of
use
- centralize management of telephone,
wireless and data networks
- switch calls at local network level to
reduce transmission costs
- create different rate structure from main
network
- employees can have same phone number at
work and home
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
COMMUNITY NETWORKS
Fill-in Capacity Coverage
PROBLEM: Need to provide wireless service in the
subways in Beijing
INTERWAVE SOLUTION: WAVEXpress/BTS, WAVEXpress/BSC, WAVEView
VALUE PROPOSITION: - increase existing customer usage
- improve network coverage
- improve network quality
- small size and ease of installation
Mobile, Temporary Capacity Expansion
PROBLEM: Wireless service provider wants to deliver
service to natural disaster area to aid
relief efforts
INTERWAVE SOLUTION: Network In A Box, WAVEView
VALUE PROPOSITION: - enhance humanitarian relief efforts
- increase customer usage
- generate additional roaming revenue
Rural and Remote Services
PROBLEM: Wireless service provider wants to establish
cost-effective communications service to
rural regions in the Democratic Republic of
Congo
INTERWAVE SOLUTION: WAVEXpress/BTS, WAVEXpress/BSC, WAVEXchange,
WAVEView
VALUE PROPOSITION: - provide basic telephone services in the
Democratic Republic of Congo
- minimize initial capital investment
- allow service provider to add capacity in
a cost-effective manner as user base grows
- switch calls at local network level to
reduce transmission cost
</TABLE>
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<PAGE>
CUSTOMERS
We have developed relationships with communications equipment providers,
systems integrators and wireless service providers. The following table
identifies our customers, the applications of our products and the intended end
users of communications networks employing our products. For the fiscal year
ended June 30, 1999, 51% of our revenues were derived from sales to Nortel
Networks and 20% of our revenues were derived from sales to ADC
Telecommunications. The other customers listed in the table each represented
less than 10% of our revenues for the fiscal year ended June 30, 1999.
<TABLE>
CUSTOMER APPLICATION END USERS
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMUNICATIONS EQUIPMENT PROVIDERS:
Nortel Networks - Rural and remote - Wireless users in
community networks developing countries
- Wireless office - Large organizations
networks
Alcatel(1) - Wireless office - Large organizations
networks
Sagem(1) - Specialized mobile - Large organizations and
radio military personnel
SYSTEMS INTEGRATORS:
Microcellular Systems(2) - Fill-in capacity - Subway passengers in
Beijing
HangZhou Topper Electric Corporation - Mobile, temporary - Dislocated people and
capacity expansion emergency workers in
disaster areas
WIRELESS SERVICE PROVIDERS:
Hutchison Telecommunications (Hong Kong) - Fill-in capacity - Wireless users in
Hong Kong
Total Access Communications - Fill-in capacity - Wireless users in
Bangkok
</TABLE>
(1) Currently engaged in testing of our products for incorporation into
networks.
(2) Created by a spin-off from ADC Telecommunications in May 1999.
SALES AND MARKETING
We market and sell our solutions around the world utilizing a three-tiered
sales strategy which includes selling to communications equipment providers, to
systems integrators that integrate our systems with the products of other
companies and through our own direct sales force.
We currently have 29 systems which are deployed in networks in Australia,
Austria, Central African Republic, China, Democratic Republic of Congo, France,
Gambia, Greece, Italy, Japan, Kosovo, Somalia, Taiwan, Tajikistan, Thailand, the
United Kingdom and the United States. We also have 16 trial systems located in
networks in Australia, China, France, Germany, South Africa, Sri Lanka, Taiwan,
the United Kingdom and the United States. We have provided additional
information about the geographic segments in which we operate in Note 14 to our
consolidated financial statements.
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<PAGE>
COMMUNICATIONS EQUIPMENT PROVIDERS
NORTEL NETWORKS. In March 1998, we entered into a five-year purchase and
distribution agreement with Nortel Networks. According to the terms of the
agreement, Nortel Networks has agreed to minimum purchase commitments of our
products on a quarterly basis through December 2000. The agreement requires that
we provide certain product features by various milestone dates. In addition, the
agreement precludes us from entering into similar agreements with Ericsson and
Nokia until January 2001.
The agreement was amended in April 1999 with respect to Nortel Networks'
obligations to meet specific quarterly purchase commitments and to specify our
requirements to meet certain product development milestones that are important
to Nortel Networks. In the first six quarters since the original agreement was
executed, Nortel Networks has purchased over $12 million of our products.
The agreement with Nortel Networks is one of a number of agreements executed
as part of a strategic alliance between our two companies. We also entered into
a patent license agreement whereby we acquired a license to certain patents held
by Nortel Networks and a technical information agreement whereby services for
systems testing facilities and equipment are provided. We have entered into a
number of financing transactions with Nortel Networks. Nortel Networks has made
an aggregate investment of $29.5 million in our company consisting of
$25.0 million in cash and delivery of license and technical information
agreements valued at $4.5 million. Assuming the exercise of all warrants held by
Nortel Networks, they own approximately 24.0% of our outstanding shares and will
own approximately 20.1% of our common shares following the offering. See
"Certain Transactions".
ALCATEL. In July 1998, we entered into a two-year, non-exclusive purchase
and distribution agreement with Alcatel CIT. This agreement targeted specific
wireless service providers located in Western Europe where Alcatel CIT has a
significant supplier presence. Through September 30, 1999, Alcatel CIT had
purchased approximately $1.3 million of our products for initial testing along
with training and support services. In October 1999, we entered into a new
two-year, non-exclusive purchase and distribution agreement with Alcatel
Business Systems. Under this agreement, Alcatel Business Systems will integrate
our products, including those that use the Internet Protocol, with their
corporate office networking products and market them through their enterprise
solutions division. Alcatel Business Systems will provide us with $450,000 in
engineering funds. Alcatel Business Systems, which has made minimum purchase
commitments through December 2001 under the agreement, intends to resell our
products primarily to their corporate office customers. Under the agreement, we
agree to modify our products to contain certain features by various milestone
dates. In November 1999, Alcatel USA invested approximately $12.2 million in our
company by purchasing for cash approximately 1.5 million preferred shares at
$8.00 per share. As a result, Alcatel USA currently owns approximately 4.6% of
our outstanding shares.
SAGEM. In February 1999, we entered into a five-year, non-exclusive
purchase and distribution agreement with Sagem, S.A. Through September 1999,
Sagem had purchased approximately $500,000 of our products for internal testing
and sales demonstration. Sagem is not currently obligated to meet any minimum
volume purchase commitments.
SYSTEMS INTEGRATORS
ADC TELECOMMUNICATIONS/MICROCELLULAR SYSTEMS. In early 1997, we entered a
four-year, non-exclusive distribution agreement with ADC Telecommunications,
which led to nearly $9.8 million in revenue between 1997 and early 1999. In
May 1999, ADC Telecommunications assigned the agreement to Microcellular
Systems, a company started by former ADC Telecommunications mobile systems
division employees. Microcellular Systems, headquartered in the U.K., is
targeted at providing systems integration and service/support to specific key
wireless service providers in Western Europe. Microcellular Systems accounted
for $1.1 million of our revenue representing 21% of our net revenue
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<PAGE>
for the three months ended September 30, 1999. Microcellular Systems is not
currently obligated to meet any minimum volume purchase commitments. ADC
Telecommunications also provided us with development support and testing
services. Between July 1998 and March 1999, we worked closely with the company
to jointly develop products for the North American market. In conjunction with
this activity, ADC Telecommunications acquired 360,000 shares of our preferred
shares in exchange for development services valued at approximately
$2.5 million. This agreement concluded in May 1999.
HANGZHOU TOPPER ELECTRIC CORPORATION. In June 1999, we began selling our
products in China through HangZhou Topper Electric, a private company
incorporated in China. We have sold $2.5 million of our products to HangZhou
Topper Electric through September 30, 1999. Sales to HangZhou Topper Electric
represented 38% of our revenues in the three months ended September 30, 1999. We
intend to enter into a joint venture agreement with HangZhou Topper Electric
whereby the joint venture will manufacture our products for the China market, as
well as develop new products. HangZhou Topper Electric is not currently
obligated to meet any minimum volume purchase commitments.
DIRECT SALES
We established a direct sales presence in Hong Kong in late 1995 and in
Paris in mid-1996. As a result, we have established a five-year cooperation
agreement with Telstra, headquartered in Australia, and a multi-year cooperation
agreement with France Telecom, headquartered in Paris, providing us with
information sharing opportunities with them. Through two GSM wireless service
providers, Hutchison Telecommunications (Hong Kong), a unit of Hutchison
Whampoa, and Total Access Communications, a subsidiary of UCOM Group of
Thailand, we have deployed our network solutions in Hong Kong and Bangkok,
respectively.
CUSTOMER SUPPORT--CUSTOMER ADVOCACY/ENGINEERING SERVICES
Our support organization provides pre-sale, installation and post-sale
support to wireless service providers who have purchased systems directly from
us. We offer 24-hour telephone support seven days a week. We provide manuals and
extensive training to support their deployment and operation of our systems. We
offer an ongoing maintenance program for our products, which consists of product
enhancements, product updates and technical support. System operators may renew
maintenance and support on an annual basis by paying a maintenance fee. We also
provide extensive support to communication equipment providers and systems
integrators through product training, 24-hour help-desk support and emergency
problem resolution. In addition, we work closely with their first-line support
organizations to insure that they have the necessary skills and specific product
knowledge to assist their customers with installation, management and other
network support requirements.
RESEARCH AND DEVELOPMENT
To maintain our technology leadership position, we focus our research and
development efforts on improving the functionality and performance of our
current products and developing new products. We obtain extensive development
input from our customers and actively monitor changes in the marketplace. We are
currently investing significant resources to:
- develop high-speed data capabilities while significantly reducing
manufacturing costs;
- expand the capacity of our base station;
- modify our WAVEView management system to adapt to the Internet Protocol;
and
- deliver product enhancements that allow communications equipment providers
to offer additional value-added services required by wireless service
providers.
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We believe our future success will depend, in part, on our ability to
continue to develop and introduce new products and enhancements to our existing
products. Our research and development expenditures totaled approximately
$14.2 million, $15.3 million and $14.2 million in the fiscal years ended
June 30, 1997, 1998 and 1999, respectively.
We perform our research and product development activities in our Redwood
City and Hong Kong offices. As of September 30, 1999, our research and
development staff consisted of 75 full-time or contracted employees, that we
supplement from time to time with independent contractors and outside
development resources.
PROPRIETARY RIGHTS
Our success and ability to compete depends in part upon our proprietary
technology. We rely on a combination of patent, copyright and trade secret laws
as well as non-disclosure agreements to protect our proprietary technology. We
currently hold 14 United States patents and have 15 United States patent
applications pending. Many of these patent applications have also been filed in
a number of other countries. We cannot be certain that patents will be issued
with respect to pending or future patent applications or that our patents will
be upheld as valid or will be sufficient to prevent the development of
competitive products. We seek to protect our intellectual property rights by
limiting access to the distribution of our software, documentation and other
proprietary information. In addition, we have entered into confidentiality
agreements with our employees and certain customers, vendors and strategic
partners. Despite these efforts, it may be possible for unauthorized third
parties to copy certain portions of our products, to design around our patents,
or to reverse-engineer or otherwise obtain and use our proprietary information.
In addition, we cannot be certain that others will not develop substantially
equivalent or superceding proprietary technology, or that equivalent products
will not be marketed in competition with our products, thereby substantially
reducing the value of our proprietary rights. We are also subject to the risk of
adverse claims and litigation alleging infringement of the intellectual property
rights of others. In this regard, there can be no assurance that third parties
will not assert infringement claims in the future with respect to our current or
future products or that any such claims will not require us to enter into
license arrangements or result in protracted and costly litigation, regardless
of the merits of such claims.
No assurance can be given that any necessary licenses will be available or
that, if available, such licenses can be obtained on commercially reasonable
terms. In addition, the laws of some countries do not protect our proprietary
rights to the same extent as do the laws of the United States. Accordingly, we
may not be able to protect our proprietary rights against unauthorized
third-party copying or use, which could significantly harm our business.
In March, 1998, we acquired a license to certain GSM related patents held by
Nortel Networks in conjunction with Nortel Networks' equity investment in us.
MANUFACTURING
We rely heavily on contract manufacturers to provide labor and
capital-intensive production capacity. We currently use two primary
contractors--PEMSTAR Inc.'s Quadrus contract manufacturing division and
GSS/ARRAY Technology.
PEMSTAR, Inc. is responsible for manufacturing the majority of our
components and final system assembly. PEMSTAR has over 140,000 square feet of
manufacturing space in San Jose, California. Our initial manufacturing agreement
was signed in October 1995. GSS/ARRAY Technology is responsible for the
manufacture of our radio modules which they build for us pursuant to periodic
purchase orders. GSS/ARRAY has 100,000 square feet of total space in San Jose,
California and was recently acquired by ACT Manufacturing.
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<PAGE>
While relying on contractors for most of our manufacturing needs, we also
conduct final assembly and systems test operations at our Redwood City facility.
These functions are expected to be transferred to our contract manufacturers by
the middle of calendar year 2000. Accordingly, our dependence on our
manufacturers will increase. Problems encountered during the consolidation or
future problems relating to our manufacturers' inability to meet our quality and
delivery specifications could harm our operating results.
Since we typically have long sales cycles, we rely on a detailed sales
forecast to determine our production requirements and meet the ordering needs of
our contract manufacturers. We utilize the sales forecast to control our
inventory levels, and due to the hardware and software configuration of our
product line we are able to easily reconfigure our products in order to respond
to specific customer purchase orders in a timely manner. Our business is
generally not subject to any cyclicality, but rather our customers place
periodic purchase orders with us based on their requirements for our products.
Our systems include a number of components which come from sole source
suppliers such as Lucent, Motorola and Xilinx. Our contract manufacturers
procure these components from distributors or directly from the sole source
manufacturer. We do not have any contracts with these sole source suppliers, but
we communicate with them frequently in order to insure the continuing
availability of components. Generally, if a manufacturer decides to discontinue
a critical component, it would provide enough time for us and our contract
manufacturers to locate alternative components. However, we might be required to
redesign our products or take other steps which could delay their availability.
We plan to consolidate the manufacturing of all of our products with PEMSTAR
by the middle of calendar year 2000.
COMPETITION
The GSM wireless market is rapidly evolving and highly competitive. We
believe that our business is affected by the following competitive factors:
- conformity to industry standards;
- breadth of product line;
- implementation of additional product features and enhancements, including
improvements in product performance, reliability, size and scalability;
- cost;
- ease of deployment;
- sales and distribution capability; and
- and technical support and service.
We expect that competition in each of our markets will increase in the
future. We currently compete against GSM communications equipment providers such
as Ericsson, Lucent, Motorola, Nokia, and Siemens. We also compete with the TDMA
and CDMA product offerings from these same communications equipment providers
and expect that a number of them will develop competing data communications
products and technologies in the near future. We also compete with the CDMA
product offerings of Samsung and LG. While Alcatel and Nortel Networks are our
customers, we do compete in several market applications. Most of these leading
GSM communications equipment providers focus on solutions that address large
numbers of subscribers. Equipment providers are beginning to focus on markets
with smaller subscriber bases as we do currently. All of the major GSM
communications equipment providers have at least partial GSM solutions that
address our target markets.
50
<PAGE>
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 seriously harm our business. We cannot assure
you that we will be able to compete successfully against current or future
competitors or to preclude us from making or selling certain products or that
competitive pressures we face will not seriously harm our business and results
of operations.
EMPLOYEES
As of September 30, 1999, we employed or contracted 166 full-time persons,
including 20 in operations, 50 in marketing, sales and customer support, 75 in
research and development and 21 in finance and administration. Of these
employees, 14 were contract employees who were primarily engaged in software
engineering and systems integration and testing. None of our employees is
represented by a labor union and we have experienced no work stoppages to date.
We believe our relationship with our employees is good.
FACILITIES
Our principal administrative and engineering facilities are located in
leased facilities totaling approximately 28,500 square feet located in Redwood
City, California. We have recently signed a lease for approximately 56,000
square feet in Menlo Park, California for our principal administrative and
engineering facilties. The five-year lease commences December 15, 1999. We
expect to sublet the premises in Redwood City following our relocation in early
2000 until the expiration of our Redwood City lease in 2002. However, we cannot
be certain that we will be successful in subletting the facilities or that
subletting the facilities will allow us to cover all of our current costs under
the lease. In addition, we lease sales, service and systems testing facilities
totaling approximately 5,900 square feet in Hong Kong and approximately 3,500
square feet in Paris, France. The leases for the Hong Kong facilities expire in
2001 and 2003 and the lease for the Paris facility expires in 2005.
GOVERNMENT REGULATION
We must obtain regulatory approval for our products to be used in some
jurisdictions. Regulators in Europe, Asia and North America have approved our
products as being compliant with GSM standards. We may sell and deploy our
products in these jurisdictions and in other jurisdictions which rely on these
jurisdictions for approvals. In some cases, specific country compliance testing
may be required. The delays inherent in this regulatory approval process may
cause the rescheduling, postponement or cancellation of the installation of our
products by our customers which, in turn, may significantly reduce sales of
products to such customers.
We are also subject to US government export controls. We rely on our
customers to inform us when they plan to deliver our products to other countries
and we regularly inform our customers of the export controls with which they
must comply.
LEGAL PROCEEDINGS
On June 28, 1999, we filed a complaint against JetCell Corporation in the
United States District Court for the Northern District of California (INTERWAVE
COMMUNICATIONS INTERNATIONAL LTD., V. JETCELL CORPORATION, Case No. C99-3125)
alleging misappropriation of trade secrets and infringement of United States
Patent Nos. 5,734,979 and 5,818,824. One of the founders of JetCell Corporation
is a former employee of interWAVE and JetCell also employs another former
employee of interWAVE. The complaint seeks injunctive relief and damages. On
July 19, 1999, JetCell filed an answer to the complaint and a series of
counterclaims against us. The answer denied the allegations made in the
complaint and the counterclaims included allegations against us of unfair trade
practices, unfair competition, defamation, patent misuse and patent invalidity.
The answer and counterclaims seek
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<PAGE>
injunctive relief, damages, invalidation of our patents and a dismissal of the
complaint. On August 9, 1999, we filed an answer to JetCell's counterclaims
denying the allegations made in the counterclaims. We are unable to predict the
outcome of the litigation and do not expect it to be resolved in the near
future. However, if we are unable to settle these proceedings in a satisfactory
manner, the legal proceedings may be time consuming and expensive and the
outcome could be adverse to us. If the outcome is adverse to us, we would
experience more competition in our markets and may be required to license
technology required for our products, either of which could harm our business
and financial results.
We may from time to time become a party to various legal proceedings arising
in the ordinary course of our business. However, other than as described above,
we are not currently involved in any material legal proceedings.
interWAVE, Network In A Box, TurboWAVE, WAVEview, WAVEXchange, WAVEXpress,
WAVEXpress BS Plus are trademarks of interWAVE. Nortel Networks is a trademark
of Nortel Networks Corporation. Other trademarks or service marks appearing in
this prospectus belong to their respective holders.
52
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information regarding our directors,
executive officers and key employees, as of November 4, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ------------------------------------------
<S> <C> <C>
Priscilla M. Lu........................... 47 Chief Executive Officer and Chairman of
the Board
Ian V. Sugarbroad......................... 53 President and Chief Operating Officer
Thomas W. Hubbs........................... 55 Executive Vice President and Chief
Financial Officer
Roger C. Cheung........................... 50 Vice President of Engineering
Denis A. Cote............................. 45 Vice President of Worldwide Sales
Edward W. Futcher......................... 45 Vice President of Technology
Michele D. Hogan.......................... 51 Vice President of Finance
H. David Jones............................ 54 Vice President of Product Marketing
Frank Seto................................ 43 Vice President of Operations
Roderick E. Thorne........................ 58 Vice President of Compliance and Quality
Lork Sang Chow............................ 65 Director
Pascal R. Debon........................... 52 Director
Kevin A. Fong(2).......................... 45 Director
William J. Harding(1)..................... 52 Director
James S. Loh.............................. 48 Director
Moses K. Tsang (2)........................ 50 Director
Andrew C. Wang (1)(2)..................... 63 Director
</TABLE>
- ------------------------
(1) Member of the audit committee.
(2) Member of the compensation committee.
PRISCILLA M. LU founded our company in 1994 and has served as our Chief
Executive Officer and Chairman of the Board since June 1999 and as President
from June 1994 to August 1999. From 1992 to 1994, Dr. Lu was Vice President and
General Manager of the Network Systems Division at Network Equipment
Technologies, a wide-area network equipment provider. From June 1976 to December
1991, Dr. Lu worked for AT&T Bell Laboratories, a unit of AT&T that is now
Lucent Technologies, where she served as Business Unit Managing Director of the
Imaging and Multimedia Business Group and held other management positions.
Dr. Lu holds a B.S. and M.S. in Computer Science and Mathematics from the
University of Wisconsin and a Ph.D. in Electrical Engineering and Computer
Science from Northwestern University.
IAN V. SUGARBROAD has served as our President and Chief Operating Officer
since September 1999. From 1976 to August 1999, Mr. Sugarbroad worked for Nortel
Networks, a telecommunications equipment company. From January 1998 to August
1999, Mr. Sugarbroad was Vice President of Business Development, GSM Solutions,
located in Paris, France. From November 1996 to December 1997, Mr. Sugarbroad
was Vice President and General Manager of Nortel Networks wireless terminals
business in Dallas, Texas. Mr. Sugarbroad holds a B.Sc. in Physics from the
University of London and a M.Sc. in Physics and a M.B.A. from the University of
Western Ontario.
THOMAS W. HUBBS has served as our Executive Vice President and Chief
Financial Officer since July 1999 and as Senior Vice President and Chief
Financial Officer from December 1995 to April 1998. From November 1998 to
July 1999, Mr. Hubbs consulted with us in a variety of financial and business
development capacities. From April 1998 to October 1998, Mr. Hubbs served as
Senior Vice President
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<PAGE>
and Chief Financial Officer for Walker Interactive Systems, Inc., a financial
systems software provider. From February 1987 to August 1995, Mr. Hubbs served
as Vice President and Chief Financial Officer for VeriFone, Inc., a transaction
automation systems company. Mr. Hubbs is a board member of Celeritek, Inc.
Mr. Hubbs holds a B.S. degree in Business Administration from Lehigh University
and a M.B.A. from the University of Santa Clara.
ROGER C. CHEUNG has served as our Vice President of Engineering since
September 1999. From February 1994 to September 1999, Mr. Cheung was Chief
Architect, Computer Systems Development at Hewlett-Packard Company, a computer
and electronics equipment manufacturer. Dr. Cheung holds a B.S. degree in
Electrical Engineering from Lehigh University and a M.S. and Ph.D. in Electrical
Engineering from the University of California, Berkeley.
DENIS A. COTE has served as our Vice President of Worldwide Sales since
November 1998. From April 1979 until joining us in November 1998, Mr. Cote
worked for Harris Corporation, a telecommunications equipment supplier. From
November 1993 to November 1998, Mr. Cote was Vice President of World Wide
Marketing and Sales for Harris Farinon, a subsidiary of Harris Corporation.
Mr. Cote holds a B.S. in electrical engineering and a M.B.A. from the University
of Montreal.
EDWARD W. FUTCHER has served as our Vice President of Technology since
September 1999 and as our Vice President of Engineering from March 1998 to
September 1999 and was acting Vice President of Engineering from July 1997 to
March 1998. From May 1997 to July 1997, Dr. Futcher was Senior Director of
Systems and Software Development. From May 1994 to May 1997, he was Director of
Engineering at Tellabs, a telecommunications equipment supplier. From
October 1987 to May 1994, Dr. Futcher was the founder and President for
Novus, Inc., a software developer. Dr. Futcher holds a B.Sc. in Physics and a
Ph.D. in Theoretical Physics from the University of London.
MICHELE D. HOGAN has served as our Vice President of Finance since
August 1994. From July 1985 until January 1994, Ms. Hogan was employed by
Network Equipment Technologies, a wide-area network equipment provider, where
she served as Director of Operations, Finance. Ms. Hogan holds a B.S. in
Sociology from the University of Santa Clara, and a M.B.A. from San Jose State
University.
H. DAVID JONES has been Vice President of Product Marketing since
September 1999 and was Vice President of Sales from April 1996 to March 1997,
and Director of Sales from August 1994 to March 1996. From November 1998 until
September 1999, Mr. Jones consulted with us in a number of sales and marketing
capacities. From April 1997 until May 1998, he was co-founder and Vice President
of Sales and Marketing for Symmetry Communications Systems, Inc., a high speed
wireless communications company. He holds a B.S. in Business Administration from
Capital University and a M.B.A. from Ohio University.
FRANK SETO has served as our Vice President of Operations since October
1999. From July 1998 until October 1999, Mr. Seto was Director of Global
Operations Finance at Lucent Technologies, a telecommunications equipment
company. From August 1986 until July 1998, Mr. Seto was Manufacturing Operations
Controller and Divisional Controller at 3Com Corporation, an electronics
equipment manufacturer. Mr. Seto holds a B.S. in Business Administration from
the University of California, Berkeley and a M.B.A. from Golden Gate University.
RODERICK E. THORNE has served as our Vice President, Compliance and Quality
since September 1999, was our Director, Hardware Engineering from June 1996
until September 1999 and served in other roles from August 1994 until June 1996.
Mr. Thorne holds a B.S. in Electrical Engineering from Yale University and a
M.S. and Ph.D. in Electrical Engineering from the University of California,
Berkeley.
LORK SANG CHOW has served as a director of our company since 1994. Mr. Chow
has retired. Mr. Chow holds a diploma from Pui Ching Middle School.
54
<PAGE>
PASCAL R. DEBON has served as a director of our company since 1998.
Mr. Debon has been in general management positions with Nortel Networks since
1994. Mr. Debon is President of Wireless Solutions for Nortel Networks, based in
Dallas, Texas, and was formerly President of GSM Networks at Nortel Networks in
Paris. Mr. Debon holds a B.S. in Economics from l'Universite de Nanterre.
KEVIN A. FONG has served as a director of our company since 1995. Mr. Fong
has been a General Partner of Mayfield Fund, a venture capital firm, since 1989.
Mr. Fong is a board member of Legato Systems, Inc. and Vixel Corporation and
several private companies. Mr. Fong holds a B.S. in Electrical Engineering from
the University of California, Berkeley, and a M.S. in Electrical Engineering and
a M.B.A. from Stanford University.
WILLIAM J. HARDING has served as director of our company since July 1995.
Dr. Harding has been a Managing Member of Morgan Stanley Dean Witter Venture
Partners, a venture capital firm, since 1994. From 1985 to 1994, Dr. Harding was
a General Partner of J.H. Whitney & Co., an investment management company.
Dr. Harding is a board member of Commerce One, Inc. and Persistence
Software, Inc. Dr. Harding holds a B.S. in Engineering Mathematics and a M.S. in
Systems Engineering from the University of Arizona, and a Ph.D. in Engineering
from Arizona State University.
JAMES S. LOH has served as a director of our company since 1994. Mr. Loh was
recently appointed Vice Chairman, Barclays Capital, the investment banking
division of Barclays PLC, a global financial institution. From 1988 to 1999,
Mr. Loh was a Senior Vice President of UBS AG, a global investment bank and has
been a Principal at Mainwell Holdings, a venture capital firm, since 1993.
Mr. Loh has a B.Sc. in Business Economics from the University of Bridgeport and
a M.B.A. from the University of Chicago.
MOSES K. TSANG has served as a director of our company since 1994.
Mr. Tsang has been General Partner at Ankar Capital Management, a venture
capital firm, since 1999. From 1998 to 1999, Mr. Tsang was employed by Goldman
Sachs Asia LLC, an investment banking firm, as an Advisory Director. From 1994
to 1998, Mr. Tsang was a Limited Partner and during 1994 he served as Chairman.
Mr. Tsang has a B.S. from Minnesota State University and a M.S.W. from the
University of Iowa.
ANDREW C. WANG has served as a director of our company since 1994. Dr. Wang
has been Chairman of Industrial Technology Investment Corporation, a venture
capital firm, and Taiwan Mask Corporation, a semiconductor manufacturer, since
1989. From 1992 to 1997, Dr. Wang was President and Chief Executive Officer of
Optical Microwave Network, Inc., a microwave component company. From 1994 to
1997, Dr. Wang was Chairman and Chief Executive Officer of Mobile
Telesystems, Inc., a satellite communications company. Dr. Wang holds a B.S. in
Electrical Engineering from the National Taiwan University, a M.S. in Electrical
Engineering from the University of California, Berkeley, and a Ph.D. in
Electrical Engineering from Stanford University.
BOARD OF DIRECTORS
We currently have eight directors. Our directors hold office until the next
annual meeting of shareholders or until their successors are duly elected or
appointed. All eight of our directors were elected pursuant to voting
agreements between us and certain of our shareholders. The most recent voting
agreement required that the parties to the agreement vote all of their shares so
as to elect as directors two persons designated by holders of the common shares,
one person designated by EXCELlink Corporation, one person designated by
Mainwell Corporation, one person designated by Sasson International Holdings,
Inc., one person designated by Mayfield VII and Mayfield Associates Fund II, one
person designated by Morgan Stanley Venture Capital Fund II and one person
designated by Nortel Networks. All of the voting agreements terminate on the
effective date of our initial public offering. Following this offering, our
board of directors will be divided into three classes. The
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<PAGE>
directors in each class will serve for a three-year term, one class being
elected each year by our shareholders.
BOARD COMMITTEES
The audit committee currently consists of Messrs. Fong, Harding and Wang.
The audit committee reviews our annual audit and supervises independent auditors
that review the company's internal accounting procedures and financial
management practices.
The compensation committee currently consists of Messrs. Fong, Tsang and
Wang. The compensation committee makes recommendations concerning salaries,
stock options, incentives and other forms of compensation for directors,
officers and other employees of our company. The compensation committee also
administers our common share plans.
DIRECTOR COMPENSATION
Our 1999 option plan provides for grants of options to purchase common stock
to our directors who are not employees. Non-employee directors will receive
annual 10,000 share option grants annually on an ongoing basis, commencing with
our 2001 annual meeting. In November 1999, each of our non-employee directors
received an option to purchase 50,000 common shares at an exercise price of
$7.60 per share. In addition, our directors are reimbursed for expenses incurred
in connection with attending board and committee meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the compensation committee is currently, or has been
at any time since our formation, one of our officers or employees. During the
fiscal year ended June 30, 1999, no executive officer of our company served as a
member of the board of directors or compensation committee of any entity that
has one or more officers serving as a member of our board of directors or
compensation committee.
EXECUTIVE OFFICERS
Our executive officers are elected by, and serve at the discretion of, our
board of directors. There are no family relationships among our directors or
officers.
EXECUTIVE COMPENSATION
In fiscal year 1999, we paid an aggregate $917,582 in cash compensation to
the directors and officers named under the caption "Directors, Executive
Officers and Key Employees," as a group.
At November 5, 1999, our directors and officers, as a group, held options to
purchase a total 2,086,003 common shares, at exercise prices ranging from $0.30
to $5.25 per share. These options are scheduled to expire on various dates
between February 15, 2006 and March 18, 2009.
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<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation awarded to, earned by, or
paid to our Chief Executive Officer and the other four most highly compensated
executive officers, each of whose total cash compensation exceeded, or would
exceed on an annualized basis, $100,000 during the year ended June 30, 1999.
<TABLE>
<CAPTION>
OTHER
ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- --------------------------- -------- -------- -------- ------------
<S> <C> <C> <C> <C>
Priscilla M. Lu
Chief Executive Officer............................. 1999 $200,000 $ -- $21,443
Thomas W. Hubbs
Executive Vice President............................ 1999 210,600 -- --
Edward W. Futcher
Vice President, Technology.......................... 1999 155,961 $6,750 --
Michele B. Hogan
Vice President, Finance............................. 1999 140,961 19,500 --
Denis Cote
Vice President, Worldwide Sales..................... 1999 132,367 30,000 --
</TABLE>
Dr. Lu's other annual compensation consists of educational and child care
expenses for family members. On October 4, 1999, Dr. Lu's annual base salary was
increased to $285,000.
Thomas W. Hubbs, Executive Vice President and Chief Financial Officer,
rejoined us in July 1999. In the fiscal year ended June 30, 1999, Mr. Hubbs
served as our acting Chief Financial Officer on a consulting basis, and all
compensation in the table for Mr. Hubbs reflects consulting fees.
Mr. Cote's salary consists of $98,077 in salary and $34,290 in sales
commissions.
Ian V. Sugarbroad, President and Chief Operating Officer, joined us in
September 1999. Mr. Sugarbroad's salary on an annualized basis is $250,000.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to stock options
granted during fiscal year 1999 to the other four executive officers who
received salary compensation of more than $100,000 and who received option
grants in the last fiscal year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT
TOTAL ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF SHARE PRICE
SECURITIES GRANTED APPRECIATION FOR
UNDERLYING TO EMPLOYEES EXERCISE OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION ---------------------
NAME GRANTED 1999 PER SHARE DATE 5% 10%
- ---- ---------- ------------ --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Thomas W. Hubbs..................... 185,000 7.7% $0.70 03/18/09 $ 81,442 $206,390
Edward W. Futcher................... 80,000 3.3 0.70 03/18/09 35,218 89,250
20,000 0.8 1.15 07/28/08 14,465 36,656
Michele D. Hogan.................... 50,000 2.1 0.70 03/18/09 22,011 55,781
12,000 0.5 1.15 07/28/08 8,679 21,994
Denis Cote.......................... 140,000 5.8 1.15 11/12/08 101,252 256,593
40,000 1.7 0.70 03/18/09 17,609 44,625
</TABLE>
As of November 4, 1999, 121,250 of the options granted to Mr. Hubbs in the
last fiscal year have vested. The options vested 50% on the date of grant, and
the balance vest in a series of monthly
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<PAGE>
installments over the next two years of service. In the event the ownership of
our company changes substantially, 50% of Mr. Hubbs unvested options shall vest
automatically.
As of November 4, 1999, 17,917 of the options granted to Mr. Futcher in the
last fiscal year have vested. The options vest in a series of monthly
installments over the four years of service following the date of grant.
As of November 4, 1999, 11,042 of the options granted to Ms. Hogan in the
last fiscal year have vested. The options vest in a series of monthly
installments over the four years of service following the date of grant.
As of November 4, 1999, 90,833 of the options granted to Denis Cote in the
last fiscal year have vested. 100,000 of the options vest in a series of monthly
installments over the four years of service following the date grant. 40,000 of
the options vest upon achievement of revenue targets.
In accordance with the rules of the SEC, the above shows the potential
realizable value over the term of the option (the period from the grant date to
the expiration date) based on assumed rates of share price appreciation of 5%
and 10%, compounded annually. These amounts do not represent our estimate of
future share price. Actual gains, if any, on option exercises will depend on the
future performance of our common shares.
OPTION GRANTS SINCE END OF LAST FISCAL YEAR
The following table sets forth information with respect to stock options
granted from the end of the last fiscal year until November 4, 1999 to the
executive officers and directors. From the end of the last fiscal year until
November 4, 1999, options to purchase 2,366,747 common shares were granted at a
weighted average exercise price of 2.08.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT
----------------------------------- ASSUMED ANNUAL RATES
NUMBER OF OF SHARE PRICE VALUE OF
SECURITIES APPRECIATION FOR OPTION OPTION GRANT
UNDERLYING EXERCISE TERM AT ASSUMED
OPTIONS PRICE EXPIRATION ----------------------- INITIAL
NAME GRANTED PER SHARE DATE 5% 10% OFFERING PRICE
- ---- ---------- --------- ---------- --------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Ian V. Sugarbroad................... 500,000 $0.70 07/29/09 $220,113 $ 557,810 $4,150,000
Thomas W. Hubbs..................... 100,000 0.70 07/29/09 44,023 111,562 830,000
Roger C. Cheung..................... 390,000 1.50 08/26/09 367,903 932,339 2,925,000
Denis Cote.......................... 40,000 1.50 08/30/09 37,734 95,625 300,000
40,000 5.25 10/07/09 132,067 334,686 150,000
Michele D. Hogan.................... 30,000 1.50 08/26/09 28,300 71,718 225,000
H. David Jones...................... 100,000 1.50 08/27/09 94,334 293,061 750,000
50,000 5.25 10/07/09 165,085 418,357 187,500
Frank Seto.......................... 200,000 4.00 09/27/09 503,116 1,274,994 1,000,000
Roderick E. Thorne.................. 57,000 4.00 09/27/09 143,388 363,373 285,000
</TABLE>
In accordance with the rules of the SEC, the above shows the potential
realizable value over the term of the option (the period from the grant date to
the expiration date) based on assumed rates of share price appreciation of 5%
and 10%, compounded annually. These amounts do not represent our estimate of
future share price. Actual gains, if any, on option exercises will depend on the
future performance of our common shares.
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<PAGE>
YEAR-END OPTION VALUES
The following table sets forth information for our Chief Executive Officer
and our other executive officers who received salary compensation of more than
$100,000 in fiscal year ending June 30, 1999, relating to the number and value
of securities underlying exercisable and unexercisable options held at June 30,
1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
JUNE 30, 1999 (#) JUNE 30, 1999 ($)
------------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Priscilla M. Lu........................ 391,667 8,333 $3,395,753 $ 72,247
Thomas W. Hubbs........................ 106,250 78,750 881,875 653,625
Edward W. Futcher...................... 41,979 147,813 331,785 1,194,082
Michele D. Hogan....................... 2,960 60,292 24,210 494,528
Denis Cote............................. 22,500 157,500 177,750 1,253,250
</TABLE>
The value of unexercised in-the-money options represents the difference
between the fair market value of the underlying common shares using an assumed
initial public offering price of $9.00 per share and the exercise price of the
option, multiplied by the number of shares underlying the option.
EMPLOYMENT AGREEMENTS
In June 1999, we entered into an employment agreement with Thomas Hubbs, our
Executive Vice President and Chief Financial Officer. The agreement provides for
an annual base salary of $260,000 and quarterly bonuses up to 30% of his then
annual salary per year, beginning in fiscal year 2000, upon meeting corporate
objectives established by the board of directors. The agreement also provides
Mr. Hubbs with incentive stock options to purchase an aggregate of 100,000
common shares subject to time-based vesting over a four-year period. The
agreement provides that Mr. Hubbs is an employee at will, which means that his
employment may be terminated at any time at our sole discretion. The agreement
also provides that if Mr. Hubbs' duties or position is changed in a detrimental
manner towards him upon a sale of our assets or merger with or into another
entity, we will owe him severance of one year salary and accelerate the vesting
of some of his option shares.
In September 1999, we entered into an employment agreement with Ian
Sugarbroad, our President and Chief Operating Officer. The agreement provides
for an annual base salary of $250,000 and quarterly bonuses up to $50,000 per
year upon meeting revenue and expense targets. The agreement also provides
Mr. Sugarbroad with incentive stock options to purchase an aggregate of 300,000
common shares subject to time-based vesting over a four-year period. In
addition, Mr. Sugarbroad may earn up to 50,000 common shares for each of the
next four years in quarterly bonuses. The agreement provides that
Mr. Sugarbroad is an employee at will, which means that his employment may be
terminated at any time at our sole discretion. If we terminate Mr. Sugarbroad's
employment without cause, we must pay him up to 100% of his annual salary for
one year. The agreement also provides that if Mr. Sugarbroad's duties or
position is changed in a detrimental manner towards him upon a sale of our
assets or a merger with or into another entity, we will owe him severance of one
year salary and accelerate the vesting of some of his option shares.
EMPLOYEE BENEFIT PLANS
1999 OPTION PLAN
Our option plan was approved by our board in September 1999 and will be
submitted to our shareholders for their approval prior to the date of this
offering to become effective on the date of this offering. Our option plan
provides for the grant of incentive stock options to employees and for the
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<PAGE>
grant of nonstatutory stock options and share purchase rights to employees,
directors and consultants. Unless terminated sooner, this option plan will
terminate automatically in 2009. The 1999 option plan will have 2,607,805
initial shares available for grant, which were the reserved and unissued shares
under the 1994 stock plan The amount reserved under the option plan will
automatically increase at the end of each fiscal year by the lesser of 2,000,000
shares or 4.0% of outstanding shares on such date or an amount determined by the
board.
The option plan may be administered by the board or a committee of the
board, which committee must, in the case of options intended to qualify as
"performance-based compensation" consist of two or more "outside directors." The
administrator of the option plan has the power to determine the terms of the
options or share purchase rights granted, including the exercise price of each
option or share purchase right, the number of shares subject to each option or
share purchase right, the exercisability of options, and the form of
consideration payable upon exercise of an option or share purchase right. In
addition, the administrator has the authority to amend, suspend or terminate the
option plan, provided that no action by the administrator may affect any of the
common shares previously issued and sold or any option previously granted under
the option plan.
Options and share purchase rights granted under the option plan are not
generally transferable by the optionee, and each option and share purchase right
is exercisable during the lifetime of the optionee only by the optionee. Options
granted under the option plan must generally be exercised within three months
after the end of optionee's status as our employee, our director or as our
consultant. In the case of termination by reason of death or disability, an
option will generally remain exercisable for a period of 12 months. In no event
may an option be exercised later than the expiration of the option's term.
Options generally vest over a 4-year period at a rate of 1/4 of the shares
subject to the option after the first year and 1/48 of the shares subject to the
option each following month.
In the case of share purchase rights, unless the administrator determines
otherwise, the restricted share purchase agreement entered into at the time a
share purchase right is exercised grants us a repurchase option exercisable upon
the voluntary or involuntary termination of the purchaser's employment or
consulting relationship with us for any reason including death or disability.
The purchase price for shares repurchased pursuant to the restricted share
purchase agreement is the original price paid by the purchaser and may be paid
by cancellation of any indebtedness of the purchaser to us. The administrator
determines the rate at which a repurchase option will lapse.
The administrator determines the exercise price of nonstatutory stock
options granted under the option plan, but with respect to nonstatutory stock
options intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Internal Revenue Code, as amended, the exercise
price must at least be equal to the fair market value of the common shares on
the date of grant. The exercise price of all incentive stock options granted
under the option plan must be at least equal to the fair market value of the
common shares on the date of grant and the term of such option may not exceed
ten years. With respect to any participant who owns shares possessing more than
10% of the voting power of all classes of our outstanding capital shares, the
exercise price of any incentive stock option granted must equal at least 110% of
the fair market value on the grant date and the term of such incentive stock
option must not exceed five years. The administrator determines the term of all
other options.
Commencing with our 2001 annual meeting of shareholders, each of our
non-employee directors will automatically be granted an option to purchase
10,000 shares each year following the date of our annual shareholder's meeting,
if on such date he or she will have served on the board of directors for at
least the previous 6 months. Each option will have a term of 10 years and the
exercise price will be 100% of the fair market value per common share on the
date of grant. Each option will vest as to 1/12
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of the shares each month following the date of grant, provided the optionee
still serves as a director on those dates.
The option plan provides that in the event that we merge with or into
another corporation, sell substantially all of our assets or enter a similar
transaction, the successor corporation will assume or substitute each option or
right. If the outstanding options or rights are not assumed or substituted, the
administrator will provide notice to the optionee that he or she has the right
to exercise the option or right as to all of the shares subject to the option or
right, including shares which would not otherwise be exercisable, for a period
of 15 days from the date of the notice. The option or right will terminate upon
the expiration of the 15-day period.
1999 EMPLOYEE SHARE PURCHASE PLAN
Our employee share purchase plan was adopted by the board in September 1999
and will be submitted to our shareholders for their approval prior to the date
of this offering, to become effective on the date of this offering. A total of
300,000 of our common shares have been reserved for issuance under the employee
share purchase plan. The amount reserved under the employee share purchase plan
will be increased automatically at the end of each fiscal year in the amount of
the lesser of 200,000 shares, 0.5% of the outstanding shares on such date or an
amount determined by the board.
The board of directors or a committee appointed by the board of directors
administers the employee share purchase plan. The board of directors or its
committee has full and exclusive authority to interpret the terms of the
employee share purchase plan and determine eligibility.
The employee share purchase plan contains successive, overlapping 24-month
offering periods. Each offering period includes four 6-month purchase periods.
The offering periods generally start on the first trading day on May 1 and
November 1 of each year, except for the first offering period, which commences
on the date of this offering and ends on the last trading day before
October 31, 2001.
Employees are eligible to participate in our employee share purchase plan if
they are customarily employed by us or any participating subsidiary for at least
20 hours per week and more than five months in any calendar year, although any
employee who would own shares representing 5% or more of the total combined
voting power or value of all classes of our capital shares may not participate
in the employee share purchase plan. In addition, no employee of ours may be
granted an option to purchase shares under the plan if that person's right to
purchase shares under all of our employee share purchase plans accrues at a rate
that exceeds $25,000 worth of shares for each calendar year. The employee share
purchase plan permits participants to purchase common shares through payroll
deductions of up to 15% of the participant's compensation which includes the
participant's base straight time gross earnings, commissions, payments for
overtime, profit sharing payments, shift premium payments, incentive
compensation, incentive payments and bonuses. The maximum number of shares a
participant may purchase during any single offering period is 10,000 shares.
Amounts deducted and accumulated under the employee share purchase plan are
used to purchase common shares at the end of each 6-month purchase period. The
price of shares purchased under the employee share purchase plan is 85% of the
lower of the fair market value of the common shares at the beginning of the
offering period or after a purchase period end. If the offering period commences
on the date of this offering, the price of the shares purchased shall be the
price to the public of the shares offered in this offering. In the event the
fair market value at the end of a purchase period is less than the fair market
value at the beginning of the offering period, participants will be withdrawn
from the current offering period following their purchase of shares on the
purchase date and will be automatically re-enrolled in a new offering period.
Participants may end their participation at any time during an offering period
and will be paid their payroll deductions to date. Participation ends
automatically upon termination of employment with us. Rights granted under the
employee share
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purchase plan are not transferable by a participant other than by will, the laws
of descent and distribution, or as otherwise provided under the employee share
purchase plan.
The employee share purchase plan provides that, in the event that we merge
with or into another corporation or sell substantially all of our assets, each
outstanding right to purchase shares under the employee share purchase plan
during the offering period then in progress may be assumed or substituted for by
the successor corporation. If the successor corporation refuses such assumption
or substitution, the offering period then in progress will be shortened and a
new purchase date will be set at or prior to the closing of that transaction
after which time the employee share purchase plan will terminate.
The employee share purchase plan will terminate in 2009. The board has the
authority to amend or terminate the employee share purchase plan, except that no
such action may adversely affect any outstanding rights to purchase shares under
the employee share purchase plan.
1994 STOCK PLAN
This stock plan was adopted on July 13, 1994. This plan provides for the
grant of incentive stock options to our employees, including employee directors,
and nonstatutory stock options and stock purchase rights to our employees,
directors and consultants. We have reserved 10,730,000 common shares for
issuance under this plan. As of September 30, 1999, options to purchase
5,130,509 common shares were outstanding at a weighted average exercise price of
$1.10, 2,991,686 shares had been issued upon exercise of outstanding options,
and 2,607,805 shares were available for future grant and have been added to the
1999 option plan.
This stock plan is administered by our board of directors or by a committee
appointed by our board of directors. The administrator determines the terms of
options granted under the option plan, including the number of shares subject to
the option, exercise price, term and exercisability. Unless terminated earlier
by our board of directors, this option plan shall terminate on July 12, 2004.
Incentive stock options granted under the option plan must have an exercise
price of at least 100% of the fair market value of the common shares on the date
of grant and at least 110% of the fair market value in the case of an optionee
who holds more than 10% of the total voting power of all classes of our shares.
Nonstatutory stock options granted under the option plan must have an exercise
price of at least 85% of the fair market value of the common shares on the date
of grant. If an optionee holds more than 10% of the voting power of all classes
of our capital shares, any options granted to that optionee must have an
exercise price of at least 110% of the fair market value of the common shares on
the date of grant. Payment of the exercise price may be made in cash or other
consideration as determined by the administrator. The term of an incentive stock
option cannot exceed 10 years, and the term of an incentive stock option granted
to a holder of more than 10% of our voting power cannot exceed five years.
No option may be transferred by the optionee other than by will or the laws
of descent or distribution. Each option may be exercised during the lifetime of
the optionee only by the optionee or permitted transferee. Options granted under
the option plan generally must be exercised within 90 days after termination of
the optionee's status as our employee, our director or our consultant, or within
6 months if termination is due to the disability of the optionee or 12 months if
termination is due to the death of the optionee, but in no event later than the
expiration of the option's term.
In the event that we merge with or into another corporation, or sell
substantially all of our assets, each outstanding option may be assumed or an
equivalent option substituted by the successor organization. However, if the
successor corporation does not agree to assume or substitute the option, the
option will terminate. Our board of directors has the authority to amend or
terminate the option plan provided that no action that impairs the rights of any
holder of an outstanding option may be
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taken without the holder's consent. In addition, our shareholders must approve
any modification to the option plan.
401(K) PLAN
In 1995, we adopted a 401(k) plan covering our full-time employees located
in the United States. The 401(k) plan is intended to qualify under
Section 401(k) of the Internal Revenue Code, so that contributions to the 401(k)
plan by employees or by us, and the investment earnings thereon, are not taxable
to employees until withdrawn from the 401(k) plan, and so that we can deduct our
contributions, if any, when made. Pursuant to the 401(k) plan, employees may
elect to reduce their current compensation by up to the lesser of 20% of their
annual pre-tax gross compensation or the statutorily prescribed annual limit of
$10,000 in 1999 and to have the amount of the reduction contributed to the
401(k) plan. Matching contributions by us, if any, are vested when made; all
other contributions, and earnings on such contributions, are at all times fully
vested. We did not contribute to the plan in the fiscal year ending June 30,
1999, but have agreed to match up to $1,000 of employee contributions in a
calendar year beginning with the fiscal year ending June 30, 2000.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Our bye-laws provide that we shall indemnify our directors, officers,
employees and other agents but for acts of fraud and dishonesty on the part of
indemnified parties. Our bye-laws also permit us to secure insurance on behalf
of any officer, director, employee or other agent for any liability arising out
of his or her actions in such capacity, regardless of whether our bye-laws
expressly permit indemnification.
WE WILL BE ENTERING INTO AGREEMENTS TO INDEMNIFY OUR DIRECTORS AND EXECUTIVE
OFFICERS, IN ADDITION TO THE INDEMNIFICATION PROVIDED FOR IN OUR BYE-LAWS. These
agreements, among other things, will indemnify our directors and executive
officers for certain expenses including attorneys' fees, judgments, fines and
settlement amounts incurred by any director or executive officer in any action
or proceeding, including any action by or in our right arising out of that
person's services as a director, officer, employee, agent or fiduciary for us,
any subsidiary of ours or any other company or enterprise to which the person
provides services at our request. The agreements do not provide for
indemnification in cases where
- the claim is brought by the indemnified party;
- the indemnified party has not acted in good faith;
- the claim arises under section 16(b) of the exchange act; or
- the indemnified party has engaged in acts, omissions or transactions for
which the indemnified party is prohibited from receiving indemnification
under the agreement or applicable law.
We believe that these provisions and agreements are necessary to attract and
retain qualified persons as directors and executive officers.
At present, there is no pending litigation or proceeding involving any of
our directors or officers in which indemnification is required or permitted, and
we are not aware of any threatened litigation or proceeding that may result in a
claim for such indemnification.
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CERTAIN TRANSACTIONS
SERIES G PREFERRED FINANCING
SERIES G PREFERRED SHARES AND WARRANTS
In March and April 1998, we sold 3,714,286 Series G preferred shares and a
warrant to purchase 2,000,000 shares of Series G preferred shares at $7.00 per
share to Nortel Networks for an aggregate purchase price of $24,500,000. We
incurred financing costs of $1,756,000 in association with this financing.
Consideration of the purchase price consisted of:
- a cash payment by Nortel Networks of $20,000,000
- the signing and delivery of a technology patent license agreement by
Nortel Networks granting us a license to certain Nortel Networks' patents
with a value of $1,000,000 and;
- the signing and delivery of a technical information agreement by Nortel
Networks granting us access to Nortel Networks' technical assistance,
testing services and other documentation and support with a value to us of
$3,500,000
The warrant to purchase 2,000,000 Series G preferred shares at $7.00 per
share expires on the earlier of March 27, 2001, the closing of an initial public
offering or a sale of all or substantially all of our assets. Nortel Networks
has notified us of its intent, which may be withdrawn, to exercise this warrant
at the time of this offering. We therefore assumed the exercise and subsequent
conversion into common shares as indicated throughout this filing.
The Series G preferred shares contain a $7.00 per share liquidation
preference and converts to common shares on a one-to-one basis. Concurrently
with the sale of the Series G preferred shares, Nortel Networks entered into a
registration rights agreement with us providing the registration rights
described in "Description of Share Capital--Registration Rights" and a voting
agreement providing for the election of our board of directors. Additional
information regarding the voting agreement is provided below.
Assuming the exercise of all warrants held by Nortel Networks, they
currently own approximately 24.0% of our common shares and will own 20.1% of our
common shares following the offering. Pascal R. Debon, President of Wireless
Solutions for Nortel Networks, is a member of our board of directors. Sales to
Nortel Networks represented 51% and 18% of our net revenues for fiscal years
1999 and the three months ending September 30, 1999, respectively.
PATENT LICENSE AGREEMENT
The patent license agreement provides us with a license to certain patents
held by Nortel Networks. The patent licenses continue in one year periods and
are subject to renewal at the end of each year with the consent of Nortel
Networks and us.
Nortel Networks may terminate the patent technology license agreement if it
is assigned by us to a third party. However, Nortel Networks may not terminate
the agreement if the third party is not a competitor of Nortel Networks, we
transfer all or substantially all of our assets to the third party, the
financial condition of the third party is not substantially worse than ours at
March of 1998 and the third party agrees to assume all of our obligations under
the patent technology license agreement. If the patent technology license
agreement is terminated due to assignment to a third party prior to the fourth
anniversary of its March 27, 1998 effective date, Nortel Networks shall refund,
at its option, to us the amounts set forth below either in cash or our shares.
However, Nortel Networks shall pay the refund in cash if the fair market value
of one share of our Series G preferred shares is less than six dollars and six
cents per share.
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<TABLE>
<S> <C> <C> <C>
Date of Termination of Percent Cash
Patent License Agreement Refund Shares Payment
Prior to 1(st) anniversary 80% 132,063 $800,000
After 1(st) and prior to 2(nd)
anniversary 60% 99,047 $600,000
After 2(nd) and prior to 3(rd)
anniversary 40% 66,032 $400,000
After 3(rd) and prior to 4(th)
anniversary 20% 33,016 $200,000
</TABLE>
TECHNICAL INFORMATION AGREEMENT
The technical information agreement provides us access to Nortel Networks'
technical assistance and testing services and other support and technical
information relating to the functionality, performance, testing, development and
interfaces with Nortel Networks' products. The information agreement terminates
upon termination of the purchase and distribution agreement signed concurrently
with the technical information agreement.
Nortel Networks may terminate portions of the technical information
agreement relating to technical information, technical assistance and technology
development if it is assigned by us to a third party. However, Nortel Networks
may not terminate any portion of the agreement if the third party is not a
competitor of Nortel Networks, we transfer all or substantially all of our
assets to the third party, the financial condition of the third party is not
substantially worse than ours at March of 1998 and the third party agrees to
assume all of our obligations under the technical information agreement.
If a portion of the technical information agreement is terminated due to
assignment to a third party prior to the fourth anniversary of its March 27,
1998 effective date, Nortel Networks shall refund, at its option, to us the
amounts set forth below payable in either cash or our shares. However, Nortel
Networks shall pay the refund in cash if the fair market value of one share of
our Series G preferred shares is less than six dollars and six cents per share.
<TABLE>
<S> <C> <C> <C>
Date of Termination of Percent Cash
Technical Information Agreement Refund Shares Payment
Prior to 1(st) anniversary 65% 375,556 $2,275,000
After 1(st) and prior to 2(nd)
anniversary 45% 260,000 $1,575,000
After 2(nd) and prior to 3(rd)
anniversary 30% 173,333 $1,050,000
After 3(rd) and prior to 4(th)
anniversary 15% 86,667 $ 525,000
</TABLE>
PURCHASE AND DISTRIBUTION AGREEMENT
Concurrently with the sale of Series G preferred shares, Nortel Networks
entered into a purchase and distribution agreement with us in which Nortel
Networks agreed to purchase goods and services according to certain
specifications and we agree to supply the goods and services.
This agreement establishes minimum amounts of goods to be purchased by
Nortel Networks for each quarter starting in June 1998 and ending in December
2000. The agreement requires that we provide certain product features by various
milestone dates. The minimum amounts of goods to be purchased can be
periodically adjusted to reflect the prevailing conditions of markets for the
goods. If the established minimum amount of goods for each quarter above is not
purchased, Nortel Networks
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shall pay us a percentage of the shortfall of goods not purchased for that
quarter. We shall credit Nortel Networks in the subsequent quarter the amount
paid for Nortel Networks' shortfall if Nortel Networks makes up the shortfall
with an excess in orders in the following quarter.
This agreement further provides that until December 31, 1999 we shall not
enter into a purchase and distribution agreement with Nokia or Ericsson for
products developed using information contained in or as a result of the
technical information or purchase and distribution agreements with Nortel
Networks. After December 31, 1999, the above restriction shall be terminated
only if the annual purchase by Nortel Networks for the calendar years 2000, 2001
and 2002 is less than eighty (80%) percent of the established minimum amounts.
This agreement between us and Nortel Networks may be immediately terminated,
in whole or in part, by either party if the other party fails to remedy a breach
of an order within 60 days of written request, declares or seeks bankruptcy
protection or ceases to carry on business.
AMENDMENT OF BYE-LAWS
In connection with the sale of Series G preferred shares, we amended our
bye-laws to require Nortel Networks' consent before an increase to the
authorized number of Series G preferred shares.
Our bye-laws were further amended to provide for the following until the
closing of an initial public offering:
- Prohibit us from engaging, directly or indirectly, in any business other
than the microcellular business except with the prior consent of Nortel
Networks or, if the limited exclusivity provisions contained in the
purchase and distribution agreement have terminated, with the prior
consent of a majority of directors who are neither officers nor employees
- Prohibit us from acquiring stock or making an investment in any person
engaged primarily in the compact wireless communications systems business
involving an aggregate of $5,000,000 except with the prior consent of
Nortel Networks or, if the limited exclusivity provisions contained in the
purchase and distribution agreement have terminated, with the prior
consent of a majority of directors who are neither officers nor employees
- Prohibit us from acquiring stock or making an investment in any person NOT
engaged primarily in the compact wireless communications systems business
involving an aggregate of $1,000,000 except with the prior consent of
Nortel Networks or, if the limited exclusivity provisions contained in the
purchase and distribution agreement have terminated, with the prior
consent of directors who are neither officers nor employees
- Prohibit us from selling technology or assets described in the patent
license agreement and the technology license agreement outside the
ordinary course of business except in compliance with the provisions
contained in those agreements or with the prior consent of Nortel Networks
- Prohibit us from entering into any transaction with any person that is the
beneficial owner or is affiliated with a beneficial owner of 5% or more of
the outstanding voting shares except with the prior written consent of
Nortel Networks
- Require a majority of our board members to consent to its budget for each
fiscal year, and any material expenditures made beyond the limits set by
such budget
- Prohibit us from incurring any debt in an amount exceeding $1,000,000
except with the prior approval of two-thirds of its board members
- Require our bye-laws to provide for a board consisting of nine members, at
least seven of whom will be neither officers nor employees. Further, a
majority of the directors holding office will be necessary for a quorum,
provided that if the number of directors holding office is less than five
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and the director nominated by Nortel Networks remains in office, then
Nortel Networks' director must be present to constitute a quorum
- Require our compensation committee to approve any employment agreement
with any officer or other employee under which the total compensation
package may be expected to exceed $250,000
- Require transactions taken by any of our majority-owned subsidiaries to be
subject to the same provisions described above.
LOAN AGREEMENT
In December 1998 we entered into a loan agreement with Nortel Networks in
which we borrowed $1,400,000 at 12% annual interest. The loan's maturity date
was the earlier of:
- February 21, 1999
- the date on which we closed a public offering or obtained net cash
proceeds in the sale of assets or a financing of $6,000,000
- the date of the signing and delivery of an agreement providing for our
acquisition by another company; or
- a change in control of our management
We were able to pay the accrued interest on the note but we were not able to
repay the principal amount borrowed at the maturity date of February 21, 1999
causing a default under the terms of the loan agreement. To remedy the default,
on April 22, 1999, we issued to Nortel Networks a warrant to acquire 24,000
common shares at $1.15 per share. The warrant expires on the earlier of
April 22, 2002 or the closing of an initial public offering.
The principal balance of $1,400,000 borrowed in the loan agreement was
applied as payment for Nortel Networks' participation in our March 1999,
convertible loan and warrant financing. As a result, Nortel Networks' $1,400,000
became a loan to us under the convertible loan and warrant financing. Additional
information regarding our convertible loan and warrant financing is provided
below.
CONVERTIBLE NOTE AND WARRANT FINANCING
Between March 1999 and June 1999, we entered into convertible note and
warrant agreements with 106 investors, all of which were existing shareholders,
in which we borrowed an aggregate of $12,691,830 at 8% annual interest. In
connection with the convertible note financing, we granted the investors
warrants to purchase an aggregate of 6,345,931 common shares at a purchase price
of $0.70 per share. These warrants expire at various times between March 2004
and June 2004. On September 10, 1999, the notes along with accrued interest,
converted according to their terms into 1,872,335 Series H1 preferred shares. In
addition, on September 10, 1999, we granted these investors warrants to purchase
up to an additional 253,874 common shares at an exercise price of $1.00 per
share. These warrants expire on September 10, 2002 or upon the consummation of
an initial public offering.
As an additional incentive to participate in the convertible note financing,
shareholders of series A, B, C, D, E, F and G preferred shares participating in
the convertible note financing at a minimum level based on their respective
ownership percentage were entitled to exchange their original preferred shares
for A-1, B-1, C-1, D-1, E-1, F-1 and G-1 preferred shares, respectively, whose
terms were identical to the original preferred shares, except that the new
preferred shares would be preferential in liquidation to all original preferred
shares.
The convertible note and warrant agreement provided for the automatic
conversion of the outstanding principal balance and accrued interest upon the
closing of our next equity financing which
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raised at least $9,000,000. As a result of the financing that closed on
September 10, 1999, the notes and aggregate accrued interest of $414,946
converted, according to the terms of the agreement, into 1,872,335 Series H1
preferred shares. Each investor was issued the number of Series H1 preferred
shares calculated by dividing the sum of each investor's note and accrued
interest by $7.00. The liquidation preference for all Series H1 preferred shares
issued in the equity financing and the subsequent conversion of notes was $7.00
per share. Additional information regarding the Series H1 preferred share
financing is provided below.
The following table shows officers, directors, shareholders and affiliated
investors who participated in our convertible note and warrant financing.
<TABLE>
<CAPTION>
ANNUAL CONVERSION BENEFICIAL
OFFICERS, DIRECTORS DATE OF NOTE INTEREST INITIAL SECOND TO H1 OWNERSHIP AS
AND SHAREHOLDERS INVESTOR NOTE AMOUNT RATE WARRANT(1) WARRANT(2) SHARES(3) OF 11/5/99
- ------------------- ------------------- -------- ---------- -------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pascal Debon.......... Nortel 3/3/99 $1,400,000 8%(4) 700,000 28,000 208,311 24.0%
Networks 3/3/99 1,147,347 8% 573,674 22,947 170,717
5/26/99 2,452,653 8% 1,226,327 49,054 358,476
---------- --------- -------
5,000,000 2,500,001 100,001 737,504
William Harding....... Morgan Stanley Dean 3/3/99 652,782 8% 326,391 13,056 97,128 6.8%
Witter Venture
Partners
Kevin Fong............ Mayfield Funds 3/3/99 746,037 8% 373,019 14,922 111,004 8.1%
Lork Sang Chow........ EXCELlink(5) 3/3/99 744,817 8% 354,814 14,897 110,824 11.2%
James Loh............. Mainwell Holdings 3/19/99 436,020 8% 218,010 8,721 64,655 4.6%
Moses Tsang........... MKT Holdings LLC(6) 4/1/99 503,412 8% 196,706 10,070 74,815 5.5%
Andrew Wang........... Sasson 6/8/99 0 8% 12,874 0 7.6%
International
Holdings LLC(7)
Priscilla M. Lu....... Priscilla M. Lu 4/7/99 100,000 8% 50,000 2,000 14,771 11.5%
Denis A. Cote......... Denis A. Cote 3/31/99 35,000 8% 17,500 700 5,177 *
Michele D. Hogan...... Michele D. Hogan 3/29/99 30,000 8% 15,000 600 4,439 *
Thomas W. Hubbs....... Voleas Ltd. 3/22/99 9,000 8% 4,500 180 1,333 *
Cynthia Hubbs Trust 3/23/99 5,000 8% 2,500 100 740 *
Bryna Hubbs Trust 3/23/99 5,000 8% 2,500 100 740 *
Edward W. Futcher..... Edward W. Futcher 3/21/99 10,000 8% 5,000 200 1,482 *
</TABLE>
- ------------------------
(1) Represents the initial warrants granted to the note and warrant investors,
who received one-half of a warrant for each dollar of principal amount
invested by each such investor. The warrants are exerciseable at a price of
$0.70 per share and expire between March, 2004 and June, 2004.
(2) Represents additional warrants granted to the note and warrant investors on
September 10, 1999. Each investor received .02 additional warrants for each
dollar of principal amount invested by each such investor. The warrants are
exerciseable at a price of $1.00 per share and expire upon the earlier of
September 10, 1999 or an initial public offering.
(3) Represents the number of Series H1 shares issuable to the note and warrant
investors upon conversion of the principal amount and accrued interest.
(4) Nortel Networks' note in the amount of $1,400,000 represents the conversion
of a previous note issued to Nortel Networks for the same principal amount
originally at 12% annual interest.
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(5) Represents current holdings in the convertible loan and warrant financing
following the assignment of a portion of EXCELlink's original investment of
$1,148,528 in principal amount, 574,264 initial warrant and 22,971 second
warrant to the following entities:
Transfer to MKT Holdings LLC of $403,711 of principal amount, 146,855
initial warrant and 8,075 second warrant
Transfer to Saintsville Limited of 55,000 initial warrant
Transfer to Cheerio Profits Limited (BVI) of 17,595 initial warrant
(6) Represents current holdings in the convertible loan and warrant financing
following receipt of assignment from the following entities:
Transfer from EXCELlink of $403,711 of principal amount, 146,855 initial
warrant and 8,075 second warrant
Transfer from Tsang and Associates (Cayman Islands) L.L.C. of $99,701 of
principal amount, 49,851 initial warrant and 1,995 second warrant
(7) Represents current holdings in the convertible loan and warrant financing
following the assignment of a portion of Sasson International Holdings
LLC's original investment of $1,251,492 in principal amount, 625,746
initial warrant and 25,030 second warrant to the following entities:
Transfer to Mercantile Teleco Venture of $1,251,492 of principal amount,
312,873 initial warrant and 25,030 second warrant
Transfer to Saintsville Limited of 195,000 initial warrant
Transfer to Cool Breeze Holdings Limited of 105,000 initial warrant
SERIES H PREFERRED SHARE FINANCING
In July 1999 we sold 360,000 Series H preferred shares to ADC
Telecommunications, Inc. at $7.00 per share for a total of $2,520,000. The
purchase price was paid by the cancellation and satisfaction of all outstanding
invoices and indebtedness by us for services performed by ADC Telecommunications
in the aggregate amount of $2,520,000.
SERIES H1 PREFERRED SHARE FINANCING
INVESTMENT BY INTASYS CORPORATION, DAMAC INVESTORS, INC. AND MEDIATEL CAPITAL
Between July 1 and September 10, 1999 we sold Series H1 preferred shares and
issued warrants as follows:
<TABLE>
<S> <C> <C> <C> <C>
Warrants to
purchase common
shares
Shares H1 Preferred at $1.00 per share
Closing Date Investor Shares (1) (2) Total Consideration
7/1/99 DAMAC Investors, Inc. 285,715 40,000 $2,000,005
7/26/99 Intasys Corporation 715,000 100,000 5,005,000
9/10/99 Mediatel Capital 715,000 100,000 5,005,000
</TABLE>
(1) Liquidation Preference $7.00 per share;
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(2) Warrants valued by Black-Scholes using $1.00 exercise price, $6.26 fair
market value, 70% volatility and 6% risk-free rate of return yields warrant
value of $5.47 per share.
The warrants expire on the earlier of three years from the issuance date or
upon the effectiveness of an initial public offering.
Concurrently with the financing, we entered into a memorandum of
understanding with Intasys Corporation providing for our distribution and
manufacturing of Intasys Corporation's products and for the marketing of our
products in Canada. In conjunction with the memorandum of understanding we
issued to Intasys Corporation another warrant to purchase 615,000 common shares
at an exercise price of $1.00 per share and we received a three-year warrant to
purchase 225,225 Intasys Corporation's common shares at an exercise price of
$3.31 per share. This second warrant issued to Intasys Corporation also expires
on the earlier of three years from the issuance date or upon the effectiveness
of an initial public offering.
CONVERSION OF PRINCIPAL UNDER CONVERTIBLE NOTE AND WARRANT FINANCING
The sale of Series H1 preferred shares to Intasys Corporation and MediaTel
Capital met the minimum financing requirements and triggered the automatic
conversion provided in the convertible note and warrant agreement. In
September 1999 the notes, along with accrued interest, converted into 1,872,335
Series H1 preferred shares.
TERMS OF SERIES H1 PREFERRED SHARES
The Series H1 preferred shares contain a $7.00 per share liquidation
preference and converts to common shares on a one-to-one basis. Concurrently
with the sale of the Series H1 preferred shares, Intasys Corporation, MediaTel
Capital and the investors in the convertible note and warrant financing entered
into a registration rights agreement with us providing the registration rights
described in "Description of Share Capital--Registration Rights".
Intasys Corporation and MediaTel Capital also entered into a voting
agreement with us providing for the election of our board of directors.
Additional information regarding the voting agreement is provided below.
SERIES I1 PREFERRED SHARE FINANCING
In November 1999 we sold 1,526,663 Series I1 preferred shares to Alcatel at
$8.00 per share for a total of $12,213,304. We incurred financing costs of
$200,000 in connection with this financing.
PURCHASE AND DISTRIBUTION AGREEMENT
Concurrently with the sale of Series I1 preferred shares, Alcatel entered
into an agreement with us in which Alcatel agreed to purchase goods and services
according to certain specifications and we agree to supply the goods and
services.
This agreement establishes minimum amounts of goods and services to be
purchased by Alcatel in each successive six month period, beginning with the six
month period starting January 1, 2000. If the established minimum amount of
goods for each six month period is not purchased, Alcatel shall pay us a
percentage of the shortfall of goods not purchased for that six months. If
Alcatel exceeds its commitment for a six month period, we shall credit Alcatel a
percentage of the exceeded amount. The agreement terminates on December 31,
2001, but is automatically renewable for successive twelve month periods.
If Ericsson, Lucent Technologies, Siemens, Cisco or Nokia purchases more
than 15% of our shares, the terms of this agreement with Alcatel will be
modified. If Ericsson, Lucent Technologies, Siemens,
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Cisco or Nokia purchases more than 50% of our shares, we change our business
model or fail to meet the terms of this agreement, the terms of this agreement
with Alcatel will be modified.
This agreement between us and Alcatel may be immediately terminated, in
whole or in part, by either party if the other party fails to remedy a breach of
the agreement within 90 days of a written request, declares or seeks bankruptcy
protection or ceases to carry on business.
TERMS OF SERIES I1 PREFERRED SHARES
The Series I1 preferred shares contain a $8.00 per share liquidation
preference and convert to common shares on a one-to-one basis. Concurrently with
the sale of the Series I1 preferred shares, Alcatel USA entered into a
registration rights agreement providing the registration rights with us
described in "Description of Share Capital--Registration Rights".
Alcatel USA also entered into a voting agreement with us providing for the
election of our board of directors. Additional information regarding the voting
agreement is provided below.
LOAN TO DR. LU
We loaned Dr. Lu $132,000 in August 1999 so that she could exercise her
expiring option holdings. The options were exercised for 400,000 of our common
shares at an exercise price of $.33 per share. In exchange for the loan, Dr. Lu
entered into a promissory note with us in which she agreed to repay the loan on
or before August 26, 2004. The note accrues interest at 7.05% and may be prepaid
without penalty.
STOCKHOLDER VOTING AGREEMENT
All eight of our directors were elected pursuant to a voting agreement
between us and the shareholders listed at the end of this sub-section. The most
recent voting agreement, which supersedes the prior agreements, provides that
the parties to the agreement vote all of the shares they own beneficially to
elect as directors
- Two persons designated by the holders of common shares
- One person designated by EXCELlink Corporation
- One person designated by Mainwell Corporation
- One person designated by Sasson International Holdings, Inc.
- One person designated by Mayfield VII and Mayfield Associates Fund II
- One person designated by Morgan Stanley venture funds
- One person designated by Nortel Networks
The voting agreement further provides for restrictions in the sale of shares
consisting of more than 5% of our outstanding shares to any of Nokia, Ericsson,
Motorola, Lucent, Siemens or Alcatel or any of their affiliates.
The voting agreement terminates on the effective date of our initial public
offering.
OPTION ISSUANCES
Since the end of fiscal year 1999, we have issued options to several of our
executive officers. Our non-employee directors will also be eligible for option
grants under our 1999 option plan. Please see "Management" for information
regarding these matters.
FUTURE TRANSACTIONS
We believe that the transactions described in this section were made on
terms no less favorable than could have been obtained from third parties. We
plan to adopt a policy that requires all future transactions between us and
officers, directors and affiliates to be on terms no less favorable than could
be obtained from unaffiliated third parties and such future transactions must be
approved by a certain number or percentage of disinterested directors. Under our
bye-laws, our directors may participate in transactions involving us or in which
we are interested.
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PRINCIPAL SHAREHOLDERS
The following table sets forth information known to us with respect to the
beneficial ownership of our common shares as of November 5, 1999 and as adjusted
to reflect the sale of common shares offered in this prospectus:
- each shareholder known by us to own beneficially more than 5% of our
common shares, as explained below;
- each of our executive officers;
- each of our directors; and
- all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the SEC.
In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, the common shares subject to options or
warrants held by that person that are currently exercisable or will become
exercisable within 60 days after November 5, 1999, are deemed outstanding, while
the shares are not deemed outstanding for purposes of computing percentage
ownership of any other person.
Unless otherwise indicated below, the address for each shareholder on this
table is c/o interWAVE Communications International, Ltd., 656 Bair Island Road,
Suite 108, Redwood City, CA 94063. Unless otherwise indicated below, the persons
and entities named in the table have sole voting or investment power with
respect to all shares beneficially owned, subject to community property laws
where applicable.
The percentage of shares beneficially owned are based on the aggregate of
- 33,126,003 common shares outstanding as of November 5, 1999, assuming
conversion of all outstanding preferred shares into common shares, and
- 7,500,000 common shares issued in this offering. Assumes no exercise of
underwriters' over-allotment option. Percentage ownership figures after
the offering do not include shares that may be purchased by each person in
the offering.
<TABLE>
<CAPTION>
SHARES PERCENT PERCENT
BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER OWNED OFFERING OFFERING
- ---------------- ------------ -------- --------
<S> <C> <C> <C>
Nortel Networks Corporation(1) ............................. 9,075,792 24.0% 20.1%
8200 Dixie Road, Suite 100
Brampton, Ontario, L6T 5P6
Canada
Entities associated with EXCELlink(2) ...................... 3,744,235 11.2 9.1
Lork Sang Chow
c/o King Fook Finance Co., Ltd.
30-32 Des Voeux Road
Hong Kong
Entities associated with Mayfield Funds(3) ................. 2,718,911 8.1 6.6
c/o Kevin Fong
Mayfield Funds
2800 Sand Hill Road
Menlo Park, CA 94025
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SHARES PERCENT PERCENT
BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER OWNED OFFERING OFFERING
- ---------------- ------------ -------- --------
<S> <C> <C> <C>
Sasson International Holdings, Inc.(4) ..................... 2,502,274 7.6% 6.2%
c/o Dr. Andrew Wang
Sasson International Holdings, Inc.
710 Lakeway Drive, Suite 140
Sunnyvale, CA 94086
Entities associated with Morgan Stanley Dean Witter
Venture Partners(5) ...................................... 2,291,545 6.8 5.6
c/o William J. Harding
Morgan Stanley Dean Witter Venture Partners
3000 Sand Hill Road
Bldg 4, Suite 250
Menlo Park, CA 94025
Mainwell Corporation(6) .................................... 1,530,397 4.6 3.7
c/o James Loh
UBS Securities
80 Raffles Place, UOB Plaza I
Singapore 0104
MKT Holdings LLC and related entities(7) ................... 1,185,512 3.5 2.9
c/o Moses Tsang
Goldman Sachs & Co.
37th Floor Asia Pacific Finance Tower
Citibank Plaza, 3 Garden Road
Hong Kong
Priscilla M. Lu(8).......................................... 3,815,191 11.5 9.4
Ian V. Sugarbroad(9)........................................ 20,000 * *
Thomas W. Hubbs(10)......................................... 290,610 * *
Roger B. Cheung(11)......................................... 40,000 * *
Denis A. Cote(12)........................................... 120,354 * *
Edward W. Futcher(13)....................................... 73,661 * *
H. David Jones(14).......................................... 38,124 * *
Michele D. Hogan(15)........................................ 184,622 * *
Pascal R. Debon(16)......................................... 9,075,792 24.0 20.1
Kevin A. Fong(17)........................................... 2,718,911 8.1 6.6
William J. Harding(18)...................................... 2,291,545 6.8 5.6
James S. Loh(19)............................................ 1,530,397 4.6 3.7
Moses K. Tsang(20).......................................... 1,185,512 3.5 2.9
Andrew C. Wang(21).......................................... 2,502,274 7.6 6.2
Lork Sang Chow(22).......................................... 3,744,235 11.2 9.1
Frank Seto(23).............................................. 0 * *
Roderick Thorne(24)......................................... 58,175 * *
</TABLE>
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<TABLE>
<CAPTION>
SHARES PERCENT PERCENT
BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER OWNED OFFERING OFFERING
- ---------------- ------------ -------- --------
<S> <C> <C> <C>
All directors and executive officers as a group 27,689,403 79.8% 65.6%
(17 persons)..............................................
</TABLE>
- ------------------------
* Less than 1% of the outstanding common shares.
(1) Consists of 4,451,790 shares held by and 4,624,002 shares issuable pursuant
to warrants held by Nortel Networks. Mr. Debon, one of our directors, is an
employee of Nortel Networks.
(2) Consists of 3,374,524 shares held by and 369,711 shares issuable pursuant
to warrants held by EXCELlink. Mr. Chow, a member of our board of
directors, is affiliated with EXCELlink.
(3) Consists of 117,279 shares held by and 21,954 shares issuable pursuant to
warrants held by Mayfield Associates Fund II; and 2,213,691 shares held by
and 365,987 shares issuable pursuant to warrants held by Mayfield
Associates Fund VII. Mr. Fong, a member of our board of directors, is
affiliated with Mayfield Funds.
(4) Consists of 2,489,400 shares held by and 12,874 shares issuable pursuant to
warrants held by Sasson International Holdings, Inc. Mr. Wang, a member of
our board of directors, is a principal of Sasson International Holdings,
Inc.
(5) Consists of 322,363 shares held by and 56,055 shares issuable pursuant to
warrants held by Morgan Stanley Venture Capital Fund II, CV; 1,293,916
shares held by and 224,997 shares issuable pursuant to warrants held by
Morgan Stanley Venture Capital Fund II, LP; 335,819 shares held by and
58,395 shares issuable pursuant to warrants held by Morgan Stanley Venture
Investors, LP. Mr. Harding, a member of our board of directors, is
affiliated with Morgan Stanley Dean Witter Venture Partners.
(6) Consists of 1,303,666 shares held by and 226,731 shares issuable pursuant
to warrants held by Mainwell Corporation. Mr. Loh, a member of our board of
directors, is affiliated with Mainwell Holdings.
(7) Consists of 527,835 shares held by and 177,766 shares issuable pursuant to
warrants held by Tsang & Associates; and 273,135 shares held by and 206,776
shares issuable pursuant to a warrant held by MKT Holdings LLC. Mr. Tsang,
a member of our board of directors, is affiliated with MKT Holdings.
(8) Consists of 1,673,191 shares held by and 52,000 shares issuable pursuant to
warrants held by Dr. Lu; 2,000,000 shares held by Best Ventures; 30,000
shares held by Douglas Lu-Hill, Irrevocable Trust; 30,000 shares held by
Felicity Lu-Hill, Irrevocable Trust; and 30,000 shares held by the Olivia
Lu-Hill Irrevocable Trust. All of the options held by Dr. Lu have been
exercised.
(9) Consists of 20,000 shares issuable pursuant to stock options.
(10) Consists of 113,750 shares held by Mr. Hubbs; 26,333 shares held by and
4,680 shares issuable pursuant to warrants held by Voleas Ltd.; 740 shares
held by and 2,600 shares issuable pursuant to a warrant held by Thomas
Hubbs C/F Cynthia Megan Hubbs UTMA/CA; 740 shares held by and 2,600 shares
issuable pursuant to a warrant held by Thomas Hubbs C/F Bryna N. Hubbs
UTMA/CA; and 139,167 shares which may be acquired pursuant to the exercise
of stock options.
(11) Consists solely of 40,000 shares issuable pursuant to the exercise of
stock options.
(12) Consists of 69,343 shares held by and 18,200 shares issuable pursuant to
warrants held by Mr. Cote; and 32,811 shares which may be acquired
pursuant to the exercise of stock options.
(13) Consists of 1,482 shares held by and 5,200 shares issuable pursuant to
warrants held by Mr. Futcher; and 66,979 shares issuable pursuant to stock
options.
(14) Consists of 36,041 shares held by Mr. Jones; and 2,083 which may be
acquired pursuant to stock options.
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<PAGE>
(15) Consists of 160,188 shares held by and 15,600 shares issuable pursuant to
warrants held by Ms. Hogan; and 8,834 shares which may be acquired
pursuant to stock options.
(16) Consists of 4,451,790 shares held by and 4,624,002 shares issuable
pursuant to warrants held by Nortel Networks. Mr. Debon, one of our
directors, is an employee of Nortel Networks.
(17) Consists of 117,279 shares held by and 21,954 shares issuable pursuant to
warrants held by Mayfield Associates Fund II; 2,213,691 shares held by and
365,987 shares issuable pursuant to warrants held by Mayfield Associates
Fund VII. Mr. Fong, a member of our board of directors, is affiliated with
Mayfield Funds.
(18) Consists of 322,363 shares held by and 56,055 shares issuable pursuant to
warrants held by Morgan Stanley Venture Capital Fund II, CV; 1,293,916
shares held by and 224,997 shares issuable pursuant to warrants held by
Morgan Stanley Venture Capital Fund II, LP; 335,819 shares held by and
58,395 shares issuable pursuant to warrants held by Morgan Stanley Venture
Investors, LP. Mr. Harding, a member of our board of directors, is
affiliated with Morgan Stanley Dean Witter Venture Partners.
(19) Consists of 1,303,666 shares held by and 226,731 shares issuable pursuant
to warrants held by Mainwell Corporation. Mr. Loh, a member of our board
of directors, is affiliated with Mainwell Corporation.
(20) Consists of 527,835 shares held by and 177,766 shares issuable pursuant to
warrants held by Tsang & Associates; and 273,135 shares held by and
206,776 shares issuable pursuant to a warrant held by MKT Holdings LLC.
Mr. Tsang, a member of our board of directors, is affiliated with MKT
Holdings.
(21) Consists of 2,489,400 shares held by and 12,874 shares issuable pursuant
to warrants held by Sasson International Holdings, Inc. Mr. Wang is a
principal of Sasson International Holdings, Inc.
(22) Consists of 3,374,524 shares held by and 369,711 shares issuable pursuant
to warrants held by EXCELlink. Mr. Chow, a member of our board of
directors, is affiliated with EXCELlink.
(23) No shares are held by Mr. Seto; and no shares may be acquired pursuant to
stock options.
(24) Consists of 48,820 shares held by Mr. Thorne; and 9,355 shares which may
be acquired pursuant to stock options.
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DESCRIPTION OF SHARE CAPITAL
GENERAL
After this offering, we will be authorized to issue 100,000,000 common
shares, $0.001 par value, and 10,000,000 shares of undesignated preferred
shares, $0.001 par value. Immediately after this offering, we estimate there
will be approximately 40,626,003 common shares outstanding, 7,478,805 common
shares will be issuable upon exercise of outstanding warrants, 5,476,542 common
shares issuable on exercise of outstanding options and no preferred shares will
be issued and outstanding as of November 5, 1999. The weighted average exercise
price of the options is $1.40 and the weighted average exercise price of the
warrants is $0.75.
Our memorandum of association and bye-laws contain provisions that are
intended to enhance the likelihood of continuity and stability in the
composition of the board of directors and which may have the effect of delaying,
deferring, or preventing a future takeover of us unless such takeover or change
in control is approved by the board of directors.
COMMON SHARES
Holders of common shares are entitled to one vote per share on all matters
to be voted upon by the shareholders.
Holders of the common shares are entitled to receive such dividends as may
be declared from time to time by the board of directors out of funds legally
available therefor, subject to the terms of any existing or future agreements
with holders of our preferred shares. We have never declared or paid cash
dividends on our capital shares, expect to retain future earnings, if any, for
use in the operation and expansion of our business, and do not anticipate paying
any cash dividends in the foreseeable future. In the event of our liquidation,
dissolution or winding up, the holders of common shares are entitled to share
ratable in all assets legally available for distribution after payment of all
debts and other liabilities and subject to the prior rights of any holders of
preferred shares then outstanding. Holders of common shares have no preemptive
or other subscription or conversion rights. There are no redemption or sinking
fund provisions applicable to the common shares.
PREFERRED SHARES
Effective upon the closing of this offering, we will be authorized to issue
10,000,000 shares of undesignated preferred shares, none of which will be
outstanding. The board of directors has the authority to issue the preferred
shares in one or more series and to fix the price, rights, preferences,
privileges and restrictions thereof, including dividend rights, dividend rates,
conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting a series or the
designation of such series, without any further vote or action by our
shareholders. The issuance of preferred shares, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of delaying, deferring or preventing a change in
control of us without further action by the shareholders and may adversely
affect the market price of, and the voting and other rights of, the holders of
common shares. The issuance of preferred shares with voting and conversion
rights may adversely affect the voting power of the holders of common shares,
including the loss of voting control to others. We have no current plans to
issue any preferred shares. The conversion rate of the existing preferred shares
to common shares is 1:1. All outstanding shares will convert to common shares
upon the closing of this offering.
REGISTRATION RIGHTS
Certain shareholders holding an aggregate of 32,833,201 shares are entitled
to rights with respect to registration of these shares under the securities act.
The rights are provided under the terms of an
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agreement between us and the holders of registrable securities. Beginning six
months following the completion of this offering, holders of then outstanding
registrable securities may require on up to two occasions and Nortel Networks
may require on one occasion that we register their shares for public resale. We
are obligated to register these shares only if the outstanding registrable
securities have an anticipated public offering price of at least $5,000,000.
Also, holders of registrable securities who hold more than one percent of our
outstanding registerable securities may require, on one separate occasion in any
12 month period and four occasions in the aggregate, that shares for public
resale on Form F-3 or similar short-form registration if the value of the
securities to be registered is at least $1,000,000. Furthermore, in the event we
determine to register any of our securities under the Securities Act of 1933,
either for our own account or for the account of other security holders
exercising their registration rights, the holders of registrable securities are
entitled to include their common shares in the registration. The registration
rights are subject to conditions and limitations, among them our right to limit
the number of shares included in the registration which may reduce the number of
shares proposed to be registered in view of market conditions. These
registration rights are not triggered by this offering. All expenses in
connection with any registration, other than underwriting discounts and
commissions, will be borne by us. All registration rights will terminate five
years following the consummation of this offering.
ANTITAKEOVER EFFECTS OF SOME PROVISIONS OF MEMORANDUM OF ASSOCIATION AND
BYE-LAWS
The following provisions, summarized below, are generally expected to
discourage coercive takeover practices and inadequate takeover bids. These
provisions are also designed to encourage persons seeking to acquire control of
us to first negotiate with our board. We believe that the benefits of increased
protection resulting from our potential ability to negotiate with the proponent
of an unfriendly or unsolicited proposal to acquire or restructure us outweigh
the disadvantage of discouraging these proposals because we believe that the
negotiation of these proposals could result in an improvement of their terms.
ELECTION AND REMOVAL OF DIRECTORS
Our board of directors is divided into three classes. The directors in each
class will serve for a three-year term, one class being elected each year by our
shareholders. This system of electing and removing directors may tend to
discourage a third party from making a tender offer or otherwise attempting to
obtain control of us because it generally makes it more difficult for
shareholders to replace a majority of the directors.
SHAREHOLDER MEETINGS
Under our bye-laws, only the board of directors, the chairman of the board,
the president and any shareholder or group of shareholders holding greater than
10% of the voting shares may call special meetings of shareholders. Under
Bermuda law, shareholders may act by written consent only if the written consent
is unanimous.
REQUIREMENTS FOR ADVANCE NOTIFICATION OF SHAREHOLDER NOMINATIONS AND PROPOSALS
Our bye-laws establish advance notice procedures with respect to shareholder
proposals and the nomination of candidates for election as directors, other than
nominations made by or at the direction of the board of directors or a committee
of the board. A minimum of 120 calendar days written notice is required. The
notice shall specify the place, day and time of the meeting, and the general
nature of the business to be considered. No business not referred to in the
notice shall be conducted at such meeting.
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UNDESIGNATED PREFERRED SHARES
The authorization of undesignated preferred shares makes it possible for the
board of directors to issue preferred shares with voting or other rights or
preferences that could impede the success of any attempt to change control of
us. These and other provisions may have the effect of deferring hostile
takeovers or delaying changes in control of us or our management.
AMENDMENT OF BYE-LAWS PROVISIONS
The amendment of the above provisions relating to the election and removal
of directors, shareholder meetings and elimination of shareholder action by
written consent requires approval by holders of at least 66% of the outstanding
common shares.
NASDAQ NATIONAL MARKET LISTING
We have been approved, subject to notice of issuance, for listing our shares
on the Nasdaq Stock Market's National Market under the symbol "IWAV."
TRANSFER AGENT
The transfer agent and registrar for the common shares is Norwest Bank
Minnesota, N.A. Norwest's telephone number for shareholder inquiries is
(800) 468-9716.
CERTAIN BERMUDA LAW CONSIDERATIONS
The following discussion is based on the advice of Conyers Dill & Pearman,
our Bermuda counsel. We have been designated as a non-resident for exchange
control purposes by the Bermuda Monetary Authority, Foreign Exchange Control,
whose permission for the issue and transfer of common shares has been obtained
subject to the common shares being listed on the Nasdaq National Market. This
Prospectus has been filed with the Registrar of Companies in Bermuda in
accordance with Bermuda law.
The transfer of common shares between persons regarded as non-resident in
Bermuda for exchange control purposes and the issue of shares after the
completion of the offering to such persons may be effected without specific
consent under the Exchange Control Act, 1972 and regulations thereunder subject
to the common shares being listed on the Nasdaq National Market. Issues and
transfers of shares to any person regarded as resident in Bermuda for exchange
control purposes require specific prior approval under the Exchange Control Act,
1972.
There are no limitations on the rights of persons regarded as non-residents
of Bermuda for foreign exchange control purposes owning common shares to hold or
vote their common shares. Because we have been designated as a non-resident for
Bermuda exchange control purposes, there are no restrictions on our ability to
transfer funds in and out of Bermuda or to pay dividends to United States
residents or other non-residents of Bermuda who are holders of common shares,
other than in respect of local Bermuda currency. In addition, because we have
been designated as a non-resident for Bermuda exchange control purposes, we do
not intend to maintain Bermuda dollar deposits and, accordingly, will not pay
dividends on the common shares in Bermuda currency.
In accordance with Bermuda law, share certificates are issued only in the
names of corporations or individuals. In the case of an applicant acting in a
special capacity (for example, as an executor or trustee), certificates may, at
the request of the applicant, record the capacity in which the applicant is
acting. Notwithstanding the recording of any such special capacity, we are not
bound to investigate or incur any responsibility in respect of the proper
administration of any such estate or trust. We will take no notice of any trust
applicable to any of its common shares whether or not we had notice of the
trust.
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There is no minimum subscription which must be raised by this offering to
provide the sums required to be provided for under Section 28 of the Companies
Act 1981 of Bermuda.
TAXATION
We believe that a significant portion of our income will be earned in
Bermuda, which currently has no corporate income tax, or other countries with
favorable tax regimes such as Hong Kong and the Netherlands in which we or our
affiliates conduct activities or in which our customers are located. However,
this belief is based upon the anticipated nature and conduct of our business,
which may change, and upon our understanding of our position under the tax laws
of the various countries in which we have assets or conduct activities, which
position is subject to review and possible challenge by taxing authorities and
to possible changes in law which may have retroactive effect. The extent to
which certain taxing jurisdictions, including the United States, may require us
to pay tax or to make payments in lieu of tax cannot be determined in advance.
In addition, our operations and the payments due to us may be affected by
changes in taxation, including retroactive tax claims or assessments of
withholding on amounts payable to us or other taxes assessed at the source, in
excess of the taxation anticipated by us based on business contacts and
practices of ours and the current tax regimes. There can be no assurance that
these factors will not have a material adverse effect on us.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
We and our non-United States subsidiaries will be subject to United States
federal income tax at regular corporate rates, as well as branch profits tax, on
our income that is effectively connected with the conduct of a trade or business
within the United States, and will be required to file federal income tax
returns reflecting that income. We intend to conduct our operations so as to
reduce the amount of our effectively connected income. However, no assurance can
be given that the Internal Revenue Service will agree with the positions taken
by us in this regard. Moreover, our United States subsidiary will be subject to
United States federal income tax on its worldwide income regardless of its
source, subject to reduction by allowable foreign tax credits, and distributions
by the United States subsidiary to us will be subject to United States
withholding.
BERMUDA TAX CONSIDERATIONS
Under current Bermuda law, we are not subject to tax on income or capital
gains. Furthermore, we obtained from the Minister of Finance of Bermuda under
the Exempted Undertakings Tax Protection Act 1966, an undertaking that, in the
event that Bermuda enacts any legislation imposing tax computed on profits,
income, any capital asset, gain or appreciation, or any tax in the nature of
estate duty or inheritance tax, then the imposition of the tax will not be
applicable to us or to any of our operations, or to our capital, or to our
capital shares, until March 28, 2016. This undertaking does not, however,
prevent the imposition of property taxes on any of our real property or
leasehold interests in Bermuda.
We are required to pay to the Bermuda government an annual registration fee
based upon our assessable capital subject to a maximum fee of BD$26,500.
TAXATION OF SHAREHOLDERS
BERMUDA TAX CONSIDERATIONS
Under current Bermuda law, no income, withholding or other taxes or stamp or
other duties are imposed upon the issue, transfer or sale of capital shares or
on any payments thereunder. See "Taxation--Bermuda Tax Considerations" for a
description of the undertaking on taxes obtained by us from the Minister of
Finance of Bermuda.
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<PAGE>
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
considerations that apply to the acquisition, ownership and disposition of our
common shares by United States shareholders as of the date hereof.
Although the following summary does not purport to describe all of the tax
considerations that may be relevant to a prospective purchaser of our common
shares, this summary describes the material United States federal income tax
consequences to a United States shareholder. No assurance can be given that the
conclusions set out below would be sustained by a court if challenged by the
Internal Revenue Service. This summary deals only with common shares that are
held as capital assets by United States shareholders, and does not address tax
considerations applicable to United States shareholders that may be subject to
special tax rules, such as dealers or traders in securities, financial
institutions, insurance companies, tax-exempt entities, United States
shareholders that hold common shares as a part of a straddle, conversion
transaction, constructive sale or other arrangement involving more than one
position, United States shareholders that owned or are deemed to own 10% or more
of the total combined voting power of all classes of our voting shares, United
States shareholders that have a principal place of business or "tax home"
outside the United States or United States shareholders whose functional
currency is not the United States dollar. Further this summary does not address
the alternative minimum tax consequences of an investment in our common shares.
The discussion below is based upon the provisions of the Internal Revenue
Code and regulations, rulings and judicial decisions thereunder as of the date
hereof; any such authority may be repealed, revoked or modified, perhaps with
retroactive effect, so as to result in federal income tax consequences different
from those discussed below.
The discussion set out below is intended only as a summary of certain United
States federal income tax consequences of an investment in common shares.
Prospective investors are urged to consult their own tax advisors as to the tax
consequences of an investment in the common shares, including the application to
their particular situation of the tax considerations discussed below, as well as
the application of state, local or foreign tax laws. The statements of United
States federal income tax law set out below are based on the laws in force and
interpretations thereof as of the date of this prospectus, and are subject to
any changes occurring after that date.
A United States shareholder of common shares means a holder that is:
- a citizen or resident of the United States;
- a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof;
or
- an estate or trust the income of which is subject to United States federal
income taxation regardless of its source.
TAXATION OF DIVIDENDS. Distributions received from us by United States
shareholders will constitute dividends for U.S. federal income tax purposes and
will be taxable in the United States as ordinary income to the extent of our
current or accumulated earnings and profits. Amounts paid as dividends that
exceed our current or accumulated earnings and profits will be treated first as
a non-taxable return of capital that reduces the United States shareholder's tax
basis in the common shares, and any amount in excess of the shareholder's U.S.
tax basis will be treated as either long-term or short-term capital gain,
depending on the shareholder's holding period for the common shares. Dividends
paid by us are not eligible for the dividends received deduction otherwise
allowed to United States shareholders on dividends from U.S. corporations.
TAXATION OF CAPITAL GAINS. A United States shareholder will recognize gain
or loss for U.S. federal income tax purposes upon the sale, exchange or other
disposition of common shares in an amount
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<PAGE>
equal to the difference between the amount realized from the sale, exchange or
other disposition and the shareholder's tax basis in the common shares. In most
cases, the gain or loss will be capital gain or loss, and will be long-term
capital gain or loss if such shareholder's holding period for the common shares
is more than one year. The deductibility of capital losses is restricted and may
only be used to reduce capital gains, except that individual taxpayers may
deduct annually $3,000 of capital loss in excess of their capital gains.
U.S. INFORMATION REPORTING AND BACKUP WITHHOLDING. Distributions made by us
with respect to our common shares and gross proceeds received from the
disposition of the common shares may be subject to certain information reporting
requirements to the Internal Revenue Service and to a 31% backup withholding
tax. However, backup withholding generally will not apply to payments made to a
United States shareholder who furnishes a correct taxpayer identification number
and provides certain other required information. If backup withholding applies,
the amount withheld is not an additional tax, but is credited against the
shareholder's United States federal income tax liability.
PASSIVE FOREIGN INVESTMENT COMPANIES. We will be classified as a passive
foreign investment company for United States federal income tax purposes if we
satisfy either of the following two tests:
- 75% or more of our gross income is passive income; or
- on average for the taxable year, 50% or more of our assets by value or by
adjusted basis produce or are held for the production of passive income.
We do not believe that we satisfy or, after the completion of this offering,
will satisfy either of the tests for passive foreign investment company status.
Because the determination of whether the common shares constitutes shares of a
passive foreign investment company will be based upon the composition of our
income and assets from time to time, there can be no assurance that we will not
be considered a passive foreign investment company for any future fiscal year.
If we are a passive foreign investment company for any taxable year, U.S.
holders would be required to either:
- pay an interest charge together with tax calculated at maximum ordinary
income rates on certain "excess distributions"; or
- if a qualified electing fund election is made, to include in their taxable
income certain undistributed amounts of our income.
Each U.S. holder should consult its own tax advisor regarding the
advisability of making the qualified electing fund election.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
We cannot provide any assurance that after this offering has been completed
a significant public market for our common shares will develop or be sustained.
The sale of substantial numbers of our common shares in the public market, or
the possibility of a sale, could adversely affect prevailing market prices for
our common shares. Furthermore, only a limited number of our common shares
currently held by our shareholders will be available for sale shortly after this
offering because of contractual and legal restrictions on resale described
below. Future sales of substantial amounts of our shares in the public market
after these restrictions lapse could adversely affect the prevailing market
price and our ability to raise equity capital in the future.
Upon completion of this offering and assuming no exercise after that date of
the underwriters' over-allotment option or of any outstanding options or
warrants, we expect to have 40,626,003 common shares outstanding based on shares
outstanding as of November 5, 1999.
Of the common shares, 7,500,000 of the shares that we expect to sell in the
offering, and any common shares sold upon exercise of the underwriters'
over-allotment option, will be freely tradable without restriction under the
securities act. However, there will be trading restrictions imposed on
"affiliates" and "control persons" as defined under Rule 144. The remaining
common shares held by existing shareholders are restricted securities as that
term is defined in Rule 144 of the securities act. Restricted securities may be
sold in the public market only if registered or if they qualify for an exemption
from registration under Rule 144 promulgated under the securities act, which
rules are summarized below. As a result of the contractual restrictions
described below and the provisions of Rule 144, the restricted securities will
be eligible for sale in the public market immediately following the offering
subject to the expiration of 180-day lock-up agreements with representatives of
the underwriters and to volume limitations and other conditions under Rule 144.
Following this offering, the holders of an aggregate of 26,487,270 of the
outstanding common shares and 7,478,805 common shares issuable upon the exercise
of warrants have the right to require us to register their shares for sale upon
meeting requirements to which the parties have previously agreed. See
"Description of Share Capital--Registration Rights" for additional information
regarding registration rights.
The following table indicates approximately when the 40,604,808 of our
common shares, held by existing shareholders, that are not being sold in the
offering but which will be outstanding at the time the offering is complete will
be eligible for sale into the public market:
<TABLE>
<CAPTION>
ELIGIBILITY OF RESTRICTED SHARES FOR SALE IN PUBLIC MARKET
- ----------------------------------------------------------
<S> <C>
At effective date........................................... 0
90 days after effective date................................ 0
180 days after effective date............................... 26,359,343
After 180 days post-effective date.......................... 14,245,465
</TABLE>
The shares eligible for sale includes shares outstanding as of November 5,
1999 and assumes conversion of all outstanding preferred shares into common
shares and the exercise of the 9,478,805 warrants outstanding as of November 5,
1999.
LOCK-UP AGREEMENTS
Our officers and directors and substantially all our existing shareholders
have signed lock-up agreements under which they agreed not to dispose of or
hedge any common shares or securities convertible into or exchangeable for
common shares for a period of 180 days from the date of this prospectus.
Dispositions can be made sooner with the prior written consent of Salomon Smith
Barney Inc.
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OPTIONS AND WARRANTS
As of November 5, 1999, a further 2,215,954 and 300,000 of the common shares
will be reserved for future issuance pursuant to our 1999 option plan and 1999
employee share purchase plan, respectively. An aggregate of 1,824,108 common
shares issuable upon the exercise of the outstanding options will be vested
180 days following the date of this prospectus. At the date of the offering, a
total of 1,370,509 shares issuable on the exercise of options held by employees
shall be vested and exercisable and not subject to the lock-up agreements. We
intend to file, shortly after to effectiveness of this offering, a registration
statement on Form F-3 or F-8 under the securities act covering all common shares
reserved for issuance under the share plans and subject to outstanding options
under our 1994 stock plan. Substantially all of the common shares issuable upon
exercise of outstanding options are subject to 180-day lock-up agreements with
the representatives of the underwriters.
At the date of the offering, none of the shares issuable on exercise of
outstanding warrants will be eligible for sale. After 180 days following the
date of the prospectus upon the expiration of the lock-up agreements, 9,478,805
of the common shares issuable on exercise of the outstanding warrants will first
become available for sale in the public markets. The warrants expire prior to
March 3, 2004.
RULE 144
In general, under Rule 144, as in effect on the date of this prospectus, any
person who has beneficially owned restricted securities for at least one year
will be entitled to sell in any three-month period a number of shares that does
not exceed the greater of:
- 1% of the then outstanding common shares which are approximately 406,260
shares immediately after the offering; or
- the average weekly trading volume of our common shares on the Nasdaq
National Market during the four calendar weeks immediately preceding the
date on which notice of the sale is filed with the SEC. Sales of
restricted securities pursuant to Rule 144 are subject to certain
requirements relating to manner of sale, notice and availability of
current public information about us. Our affiliates must also comply with
the restrictions and requirements of Rule 144, other than the one-year
holding period requirement, in order to sell common shares which are not
restricted securities.
RULE 144(K)
Under Rule 144(k), a person who is not deemed to have been one of our
"affiliates" at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
generally including the holding period of any prior owner other than an
"affiliate," is entitled to sell those shares without complying with the manner
of sale, notice filing, volume limitation or notice provisions of Rule 144.
Therefore, unless otherwise restricted, "144(k) shares" may be sold immediately
upon the completion of this offering.
RULE 701
Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 may be relied upon with respect to
the resale of securities originally purchased from us by employees, directors,
officers, consultants or advisers between May 20, 1988, the effective date of
Rule 701, and the date the issuer becomes subject to the reporting requirements
of the securities exchange act, pursuant to written compensatory benefit plans
or written contracts relating to the compensation of such persons. In addition,
the SEC has indicated that Rule 701 will apply to typical stock options granted
by an issuer before it becomes subject to the reporting requirements of the
exchange act, along with the shares acquired upon exercise of such options
beginning May 20, 1988. Securities issued in reliance on Rule 701 are restricted
securities and, subject to the contractual restrictions described above,
beginning 90 days after the date of this prospectus, such securities may be
sold:
- by persons other than our affiliates, subject only to the manner of sale
provisions of Rule 144; and
- by our affiliates under Rule 144 without compliance with its one-year
minimum holding period requirements.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each of the underwriters named below has severally agreed
to purchase, and we have agreed to sell to the underwriters, the respective
number of common shares set forth opposite the name of each underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
NAME COMMON SHARES
- ---- -------------
<S> <C>
Salomon Smith Barney Inc....................................
Banc of America Securities LLC..............................
SG Cowen Securities Corporation.............................
---------
Total..................................................... 7,500,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the common shares included in this offering are subject
to the approval of legal matters by counsel and to other conditions. The
underwriters are obligated to purchase all of the common shares offered hereby
other than those covered by the over-allotment option described below if they
purchase any of the common shares.
The underwriters, for whom Salomon Smith Barney Inc., Banc of America
Securities LLC and SG Cowen Securities Corporation are acting as
representatives, initially propose to offer some of the common shares directly
to the public at the public offering price set forth on the cover page of this
prospectus and some of the common shares to various securities dealers at the
public offering price less a concession not exceeding $ per common share.
The underwriters may allow, and these dealers may reallow, a concession not
exceeding $ per common share to certain brokers and dealers. After the
initial offering of the common shares to the public, the public offering price
and other selling terms may from time to time be varied by the representatives.
The representatives have advised us that the underwriters do not intend to
confirm any sales to any accounts over which they exercise discretionary
authority.
We have granted the underwriters an option, exercisable for 30 days after
the date of this prospectus, to purchase up to an aggregate of 1,125,000
additional common shares at the public offering price less the underwriting
discount. The underwriters may exercise this option solely to cover
over-allotments, if any, in connection with this offering. To the extent that
the underwriters exercise this option, each of them will be obligated, subject
to certain conditions, to purchase a number of additional shares approximately
proportionate to the underwriters' initial commitment.
interWAVE, each of our officers and directors and our other shareholders
have agreed with the representatives that, for a period of 180 days after the
date of this prospectus, they will not, without the prior written consent of
Salomon Smith Barney Inc., dispose of or hedge any common shares or any of our
securities convertible into or exchangeable for common shares other than, in the
case of interWAVE, shares pursuant to any employee stock option plan, stock
ownership plan or dividend reinvestment plan of interWAVE in effect at the time
the underwriting agreement is signed and common stock issuable upon the
conversion of securities or the exercise of warrants outstanding at the time the
underwriting agreement is signed, and in the case of the officers, directors and
shareholders, shares of common stock disposed of as bona fide gifts approved by
Salomon Smith Barney Inc. Salomon Smith Barney Inc. in its sole discretion may
release any of the securities subject to the lock-up agreements at any time
without notice. The release of any lock-up is considered on a case by case
basis. Factors in deciding whether to release shares may include the length of
time before the lock-up expires, the trading price of the common stock and
whether the person seeking the release is an officer,
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<PAGE>
director or affiliate of interWAVE. Salomon Smith Barney Inc. has no current
intention to release shares subject to the lock-up agreements.
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 375,000 common shares for directors, officers,
employees and customers and vendors of ours. We cannot assure you that any of
the reserved shares will be so purchased. The number of shares available for
sale to the general public in the offering will be reduced by the number of
reserved shares sold. Any reserved shares not so purchased will be offered to
the general public on the same basis as the other shares offered hereby.
Prior to this offering, there has been no public market for the common
shares. Consequently, the initial public offering price for the common shares
was determined by negotiations between us and the representatives. Among the
factors considered in determining the initial public offering price were our
record of operations, our current financial condition, our future prospects, our
markets, the economic conditions in and future prospects for the industry in
which we compete, our management, and currently prevailing general conditions in
the equity securities markets, including current market valuations of publicly
traded companies considered comparable to us. We cannot assure you, however,
that the prices at which the shares will sell in the public market after this
offering will not be lower than the price at which they are sold by the
underwriters or that an active trading market in the common shares will develop
and continue after the offering.
We have been approved, subject to notice of issuance, for listing our shares
on the Nasdaq Stock Market's National Market under the symbol "IWAV."
The following table shows the underwriting discounts and commissions to be
paid to the underwriters by us in connection with this offering. These amounts
are shown assuming both no exercise and full exercise of the underwriters'
option to purchase additional common shares.
<TABLE>
<CAPTION>
PAID BY INTERWAVE
---------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share............................................ $ $
Total................................................ $ $
</TABLE>
The expenses of the offering, exclusive of the underwriting discounts and
commissions, are estimated to be $1,200,000 and are payable entirely by us.
The expenses consist of the following:
- an SEC registration fee of $22,770;
- an NASD filing fee of $9,125;
- a Nasdaq application fee of $90,000;
- estimated blue sky qualification fees and expenses of $10,000;
- estimated printing and engraving expenses of $250,000;
- estimated legal fees and expenses of $350,000;
- estimated accounting fees and expenses of $250,000;
- estimated transfer agent and registrar fees of $25,000; and
- estimated miscellaneous fees and expenses of $193,105.
In connection with the offering, Salomon Smith Barney Inc. on behalf of the
underwriters, may over-allot, or engage in syndicate covering transactions,
stabilizing transactions and penalty bids. Over-allotment involves syndicate
sales of common shares in excess of the number of shares to be
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<PAGE>
purchased by the underwriters in the offering, which creates a syndicate short
position. Syndicate covering transactions involve purchases of the common shares
in the open market after the distribution has been completed in order to cover
syndicate short positions. Stabilizing transactions consist of certain bids or
purchases of common shares made for the purpose of preventing or retarding a
decline in the market price of the common shares while the offering is in
progress. Penalty bids permit the underwriters to reclaim a selling concession
from a syndicate member when Salomon Smith Barney Inc., in covering syndicate
short positions or making stabilizing purchases, repurchases shares originally
sold by that syndicate member. These activities may cause the price of the
common shares to be higher than the price that otherwise would exist in the open
market in the absence of such transactions. These transactions may be effected
on the Nasdaq National Market or in the over-the-counter market, or otherwise
and, if commenced, may be discontinued at any time.
We estimate that our portion of the total expenses of this offering will be
$1,200,000.
The prospectus may be used by underwriters and dealers in connection with
offers and sales of the common shares, including common shares initially sold
outside the United States, to persons located in the United States.
We have agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the securities act, or to contribute to
payments the underwriters may be required to make with respect to any of those
liabilities.
Initial sales of the common shares offered in the United States will be
settled in U.S. dollars. Subsequent trading of common shares effected on the
Nasdaq National Market will be settled in U.S. dollars in accordance with the
normal settlement practices of the Nasdaq.
LEGAL MATTERS
The validity of the common shares offered hereby and other matters of
Bermuda law relating to the offering are being passed upon for us by Conyers
Dill & Pearman, Bermuda. Certain legal matters relating to the offering are
being passed upon for us by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California, with respect to U.S. law. Certain legal
matters relating to the offering are being passed upon for the underwriters by
Brobeck, Phleger & Harrison LLP, San Francisco, California.
EXPERTS
The consolidated financial statements of interWAVE Communications
International, Ltd. and subsidiaries as of June 30, 1999 and 1998, and for each
of the years in the three-year period ended June 30, 1999, have been included in
this prospectus and registration statement in reliance upon the report of
KPMG LLP, independent auditors, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549,
a registration statement on Form F-1 under the U.S. securities act with respect
to the common shares offered by this prospectus. This prospectus, which forms a
part of the registration, does not contain all the information included in the
registration statement. Certain information is omitted and you should refer to
the registration statement and its exhibits.
Any statement in this prospectus about any of our contracts or other
documents is only a summary of the material provisions of the contract or
document. If the contract or document is filed as an exhibit to the registration
statement, the contract or document is deemed to modify the description
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<PAGE>
contained in this prospectus. You must review the exhibits themselves for a
complete description of the contract or document.
You may review a copy of the registration statement, including exhibits and
schedules filed with it, at the SEC's public reference facilities in Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C., 20549, and at the
regional offices of the SEC located at 7 World Trade Center, 13(th) Floor, New
York, New York 10048 and at the Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. You may also obtain copies of such
materials from the Public Reference Section of the SEC, Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C., 20549, at prescribed rates. You
may call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. The SEC maintains a web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants such as interWAVE that file electronically with the SEC. We have
applied for quotation of the common shares on the Nasdaq national market, and
reports and other information about us may also be inspected at the offices of
the National Association of Securities Dealers, Inc., 9513 Key West Avenue,
Rockville, Maryland 20850.
You may read and copy any reports, statements or other information that we
file with the SEC at the addresses indicated above, and you may also access them
electronically at the web site set forth above. These SEC filings are also
available to the public from commercial document retrieval services.
Prior to this offering, we have not been required to file reports under the
exchange act. Following consummation of the offering, we will be required to
file reports and other information with the SEC under the exchange act. You are
invited to read and copy any reports, statements or other information that we
file with the SEC.
We intend to provide to our shareholders proxy statements and annual reports
prepared in accordance with applicable law. Our annual reports will contain
audited consolidated financial statements following the end of each fiscal year,
and we will make available quarterly reports containing unaudited summary
consolidated financial information for each of the first three fiscal quarters
of each fiscal year. As a foreign private issuer under the exchange act, we will
be exempt from provisions of that act which require us to provide proxy
statements in prescribed form to shareholders and which relate to short swing
profit reporting and liability.
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INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of KPMG LLP, Independent Auditors.................... F-2
Consolidated Balance Sheet as of June 30, 1998 and 1999..... F-3
Consolidated Statement of Operations for the years ended
June 30, 1997, 1998 and 1999.............................. F-4
Consolidated Statements of Stockholders' Equity and
Comprehensive loss for the years ended June 30, 1997, 1998
and 1999.................................................. F-5
Consolidated Statement of Cash Flows for the years ended
June 30, 1997, 1998 and 1999.............................. F-7
Notes to Consolidated Financial Statements.................. F-9
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
interWAVE Communications International, Ltd.:
We have audited the accompanying consolidated balance sheets of interWAVE
Communications International, Ltd. and subsidiaries as of June 30, 1999 and
1998, and the related consolidated statements of operations, stockholders'
equity and comprehensive loss, and cash flows for each of the years in the three
year period ended June 30, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of interWAVE
Communications International, Ltd. and subsidiaries as of June 30, 1999 and
1998, and the results of their operations and their cash flows for each of the
years in the three year period ended June 30, 1999 in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
San Francisco, California
September 10, 1999
F-2
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30,
JUNE 30, 1999
-------------------- --------------
1998 1999 SEPTEMBER 30, 1999
-------- --------- ------------------ PRO FORMA
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 7,340 $ 3,919 $ 12,988 $ 39,047
Short-term investments................................. 75 -- -- --
Trade receivables, net of allowance of $125, $333 and
$173 at June 30, 1998 and 1999, and September 30,
1999, respectively................................... 5,776 6,999 6,540 6,540
Inventories............................................ 3,949 6,339 5,346 5,346
Prepaid expenses and other current assets.............. 893 844 1,192 1,192
-------- --------- --------- --------
Total current assets................................. 18,033 18,101 26,066 52,125
Property and equipment, net.............................. 6,622 5,334 5,524 5,524
Intangibles, net......................................... 3,023 2,855 2,722 2,722
Other assets............................................. 1,935 278 768 768
-------- --------- --------- --------
Total assets......................................... $ 29,613 $ 26,568 $ 35,080 $ 61,139
======== ========= ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................... $ 4,526 $ 2,757 $ 3,538 $ 3,538
Accrued expenses and other current liabilities......... 1,515 2,354 2,237 2,237
Convertible notes...................................... -- 8,754 -- --
Current portion of notes payable....................... 540 590 680 680
Deferred revenue....................................... 511 323 157 157
Income taxes payable................................... 171 215 215 215
Customer deposits...................................... -- 1,500 1,500 1,500
-------- --------- --------- --------
Total current liabilities............................ 7,263 16,493 8,327 8,327
Deferred revenue, long-term.............................. 2,087 -- -- --
Notes payable, net of current portion.................... 1,074 486 261 261
Other long-term liabilities.............................. 736 789 924 924
-------- --------- --------- --------
Total liabilities.................................... 11,160 17,768 9,512 9,512
Commitments and contingencies
Shareholders' equity:
Convertible preferred shares, $0.83 par value;
28,250,000 shares authorized at June 30, 1998 and
56,500,000 shares authorized at June 30, 1999 and
September 30, 1999, respectively; 19,531,453,
20,177,168 and 23,479,503 shares issued and
outstanding at June 30, 1998 and 1999 and
September 30, 1999, respectively; aggregate
liquidation preference of $90,488, $95,008 and
$118,124 at June 30, 1998 and 1999 and
September 30, 1999, respectively..................... 16,211 16,747 19,488 --
Common shares, $0.001 par value; 100,000,000 shares
authorized; 4,793,747, 5,071,921 and
6,074,019 shares issued and outstanding at June 30,
1998 and 1999 and September 30, 1999, respectively... 5 5 6 33
Additional paid-in capital............................. 95,400 109,712 140,075 185,595
Deferred stock compensation............................ (4,830) (3,717) (10,166) (10,166)
Services receivable from shareholder................... (3,143) (2,071) (4,784) (4,784)
Subscriptions and amounts receivable from
shareholders......................................... -- (2,284) (416) (416)
Accumulated other comprehensive income................. 62 128 51 51
Accumulated deficit.................................... (85,252) (109,720) (118,686) (118,686)
-------- --------- --------- --------
Total shareholders' equity........................... 18,453 8,800 25,568 51,627
-------- --------- --------- --------
Total liabilities and shareholders' equity........... $ 29,613 $ 26,568 $ 35,080 $ 61,139
======== ========= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE
MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30,
------------------------------ -------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues............................... $ 1,841 $ 12,995 $ 17,293 4,487 5,377
Cost of revenues........................... 3,617 12,251 12,531 2,477 3,973
-------- -------- -------- -------- --------
Gross profit (loss).................... (1,776) 744 4,762 2,010 1,404
-------- -------- -------- -------- --------
Operating expenses:
Research and development................. 14,169 15,300 14,174 3,872 3,562
Selling, general and administrative...... 6,923 7,742 7,440 1,759 2,088
Amortization of deferred stock
compensation........................... 6,377 7,604 5,254 1,523 2,820
-------- -------- -------- -------- --------
Total costs and expenses............... 27,469 30,646 26,868 7,154 8,470
-------- -------- -------- -------- --------
Operating loss......................... (29,245) (29,902) (22,106) (5,144) (7,066)
Interest expense........................... (479) (1,115) (2,403) (49) (1,959)
Other income (loss), net................... 653 415 154 102 59
-------- -------- -------- -------- --------
Net loss before income taxes........... (29,071) (30,602) (24,355) (5,091) (8,966)
Income tax expense......................... 111 220 113 -- --
-------- -------- -------- -------- --------
Net loss............................... (29,182) (30,822) (24,468) (5,091) (8,966)
======== ======== ======== ======== ========
Basic and diluted net loss per share....... $ (7.12) $ (6.68) $ (4.96) (1.05) (1.64)
Weighted average common shares
outstanding.............................. 4,099 4,614 4,934 4,840 5,480
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE LOSS
(IN THOUSANDS, EXCEPT SHARE DATA)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999 AND (UNAUDITED) THREE MONTH
ENDED SEPTEMBER 30, 1999.
<TABLE>
<CAPTION>
CONVERTIBLE SERVICES
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE
--------------------- --------------------- PAID-IN FROM
SHARES AMOUNT SHARES AMOUNT CAPITAL SHAREHOLDER
---------- -------- ---------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances as of June 30, 1996.................. 14,027,000 $11,642 3,940,977 $ 4 $ 43,602 $ --
Issuance of Series E, less issuance costs of
$75......................................... 290,167 241 -- -- 2,584 --
Issuance of Series F, less issuance costs of
$75......................................... 1,500,000 1,245 -- -- 15,979 --
Exercise of stock options..................... -- -- 334,963 -- 85 --
Deferred stock compensation related to stock
option grants............................... -- -- -- -- 8,617 --
Amortization of deferred stock compensation... -- -- -- -- -- --
Stock-based compensation to nonemployees...... -- -- -- -- 44 --
Comprehensive loss:
Net loss.................................... -- -- -- -- -- --
Foreign currency translation adjustment..... -- -- -- -- -- --
Total comprehensive loss......................
---------- ------- ---------- ---- -------- -------
Balances as of June 30, 1997.................. 15,817,167 13,128 4,275,940 4 70,911 --
Issuance of Series G and warrants less
issuance costs of $1,756.................... 3,714,286 3,083 -- -- 19,661 (3,500)
Issuance of common stock...................... -- -- 70,000 -- 428 --
Exercise of stock options..................... -- -- 447,807 1 160 --
Performance of services....................... -- -- -- -- -- 357
Deferred stock compensation related to stock
option grants............................... -- -- -- -- 4,240 --
Amortization of deferred stock compensation... -- -- -- -- -- --
Comprehensive loss:
Net loss.................................... -- -- -- -- -- --
Foreign currency translation adjustment..... -- -- -- -- -- --
Total comprehensive loss......................
---------- ------- ---------- ---- -------- -------
Balances as of June 30, 1998.................. 19,531,453 16,211 4,793,747 5 95,400 (3,143)
Issuance of Series H, less issuance costs of
$7.......................................... 360,000 299 -- -- 2,214 --
Issuance of Series H1......................... 285,715 237 -- -- 1,763 --
Exercise of stock options..................... -- -- 278,174 -- 153 --
Performance of services....................... -- -- -- -- -- 1,072
Issuance of warrants in connection with bridge
loan........................................ -- -- -- -- 5,878 --
Deferred stock compensation related to stock
option grants............................... -- -- -- -- 4,141 --
Amortization of deferred stock compensation... -- -- -- -- -- --
Stock-based compensation to non-employees..... -- -- -- -- 163 --
Comprehensive loss:
Net loss.................................... -- -- -- -- -- --
Foreign currency translation adjustment..... -- -- -- -- -- --
Total comprehensive loss......................
---------- ------- ---------- ---- -------- -------
Balances as of June 30, 1999.................. 20,177,168 $16,747 5,071,921 $ 5 109,712 (2,071)
========== ======= ========== ==== ======== =======
<CAPTION>
SUBSCRIPTIONS
AND AMOUNTS ACCUMULATED
RECEIVABLE DEFERRED OTHER TOTAL
FROM STOCK COMPREHENSIVE ACCUMULATED SHAREHOLDERS'
SHAREHOLDER COMPENSATION INCOME DEFICIT EQUITY
------------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balances as of June 30, 1996.................. $ -- (5,954) -- (25,248) 24,046
Issuance of Series E, less issuance costs of
$75......................................... -- -- -- -- 2,825
Issuance of Series F, less issuance costs of
$75......................................... -- -- -- -- 17,224
Exercise of stock options..................... -- -- -- -- 85
Deferred stock compensation related to stock
option grants............................... -- (8,617) -- -- --
Amortization of deferred stock compensation... -- 6,377 -- -- 6,377
Stock-based compensation to nonemployees...... -- -- -- -- 44
Comprehensive loss:
Net loss.................................... -- -- -- (29,182) (29,182)
Foreign currency translation adjustment..... -- -- 28 -- 28
Total comprehensive loss...................... --
------- ------- ---- --------- --------
Balances as of June 30, 1997.................. -- (8,194) 28 (54,430) 21,447
Issuance of Series G and warrants less
issuance costs of $1,756.................... -- -- -- -- 19,244
Issuance of common stock...................... -- -- -- -- 428
Exercise of stock options..................... -- -- -- -- 161
Performance of services....................... -- -- -- -- 357
Deferred stock compensation related to stock
option grants............................... -- (4,240) -- -- --
Amortization of deferred stock compensation... -- 7,604 -- -- 7,604
Comprehensive loss:
Net loss.................................... -- -- -- (30,822) (30,822)
Foreign currency translation adjustment..... -- -- 34 -- 34
Total comprehensive loss......................
------- ------- ---- --------- --------
Balances as of June 30, 1998.................. -- (4,830) 62 (85,252) 18,453
Issuance of Series H, less issuance costs of
$7.......................................... -- -- -- 2,513
Issuance of Series H1......................... (2,000) -- -- -- --
Exercise of stock options..................... -- -- -- -- 153
Performance of services....................... -- -- -- -- 1,072
Issuance of warrants in connection with bridge
loan........................................ (284) -- -- -- 5,594
Deferred stock compensation related to stock
option grants............................... -- (4,141) -- -- --
Amortization of deferred stock compensation... -- 5,254 -- -- 5,254
Stock-based compensation to non-employees..... -- -- -- -- 163
Comprehensive loss:
Net loss.................................... -- -- -- (24,468) (24,468)
Foreign currency translation adjustment..... -- -- 66 -- 66
Total comprehensive loss......................
------- ------- ---- --------- --------
Balances as of June 30, 1999.................. (2,284) (3,717) 128 (109,720) 8,800
======= ======= ==== ========= ========
<CAPTION>
COMPREHENSIVE
LOSS
--------------
<S> <C>
Balances as of June 30, 1996..................
Issuance of Series E, less issuance costs of
$75.........................................
Issuance of Series F, less issuance costs of
$75.........................................
Exercise of stock options.....................
Deferred stock compensation related to stock
option grants...............................
Amortization of deferred stock compensation...
Stock-based compensation to nonemployees......
Comprehensive loss:
Net loss.................................... (29,182)
Foreign currency translation adjustment..... 28
--------
Total comprehensive loss...................... (29,154)
========
Balances as of June 30, 1997..................
Issuance of Series G and warrants less
issuance costs of $1,756....................
Issuance of common stock......................
Exercise of stock options.....................
Performance of services.......................
Deferred stock compensation related to stock
option grants...............................
Amortization of deferred stock compensation...
Comprehensive loss:
Net loss.................................... (30,822)
Foreign currency translation adjustment..... 34
--------
Total comprehensive loss...................... (30,788)
========
Balances as of June 30, 1998..................
Issuance of Series H, less issuance costs of
$7..........................................
Issuance of Series H1.........................
Exercise of stock options.....................
Performance of services.......................
Issuance of warrants in connection with bridge
loan........................................
Deferred stock compensation related to stock
option grants...............................
Amortization of deferred stock compensation...
Stock-based compensation to non-employees.....
Comprehensive loss:
Net loss.................................... (24,468)
Foreign currency translation adjustment..... 66
--------
Total comprehensive loss...................... (24,402)
========
Balances as of June 30, 1999..................
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE LOSS
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999 AND (UNAUDITED) THREE MONTH
ENDED SEPTEMBER 30, 1999.
<TABLE>
<CAPTION>
CONVERTIBLE SERVICES
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE
--------------------- --------------------- PAID-IN FROM
SHARES AMOUNT SHARES AMOUNT CAPITAL SHAREHOLDER
---------- -------- ---------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances as of June 30, 1999.................. 20,177,168 $16,747 5,071,921 $ 5 $109,712 $(2,071)
Unaudited activity:
Conversion of the bridge financing to
Series H1 preferred stock and warrants...... 1,872,335 1,555 -- -- 9,291 --
Issuance of Series H1, less issuance cost of
$766........................................ 1,430,000 1,186 -- -- 8,058 --
Exercise of stock options and issuance of
shares for services......................... -- -- 1,002,098 1 382 --
Cash received from issuance of preferred
stock....................................... -- -- -- -- -- --
Deferred stock compensation related to stock
option grants............................... -- -- -- -- 9,269 --
Amortization of deferred stock compensation... -- -- -- -- -- --
Exchange of Warrants in connection with joint
sales agreement............................. -- -- -- -- 3,363 (2,888)
Performance of services....................... -- -- -- -- -- 175
Comprehensive loss
Net loss.................................... -- -- -- -- -- --
Foreign currency translation adjustment..... -- -- -- -- -- --
Total comprehensive loss...................... -- -- -- -- -- --
------------------------------------------------------------------------
Balances as of September 30, 1999
(unaudited)................................. 23,479,503 $19,488 6,074,019 $ 6 $140,075 $(4,784)
<CAPTION>
SUBSCRIPTIONS
AND AMOUNTS ACCUMULATED
RECEIVABLE DEFERRED OTHER TOTAL
FROM STOCK COMPREHENSIVE ACCUMULATED SHAREHOLDERS'
SHAREHOLDER COMPENSATION INCOME DEFICIT EQUITY
------------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balances as of June 30, 1999.................. $(2,284) $ (3,717) $128 $(109,720) $ 8,800
Unaudited activity:
Conversion of the bridge financing to
Series H1 preferred stock and warrants...... -- -- -- -- 10,846
Issuance of Series H1, less issuance cost of
$766........................................ -- -- -- -- 9,244
Exercise of stock options and issuance of
shares for services......................... (132) -- -- -- 251
Cash received from issuance of preferred
stock....................................... 2,000 -- -- -- 2,000
Deferred stock compensation related to stock
option grants............................... -- (9,269) -- -- --
Amortization of deferred stock compensation... -- 2,820 -- -- 2,820
Exchange of Warrants in connection with joint
sales agreement............................. -- -- -- -- 475
Performance of services....................... -- -- -- -- 175
Comprehensive loss
Net loss.................................... -- -- -- (8,966) (8,966)
Foreign currency translation adjustment..... -- -- (77) -- (77)
Total comprehensive loss...................... -- -- -- -- --
----------------------------------------------------------------------------
Balances as of September 30, 1999
(unaudited)................................. $ (416) $(10,166) $ 51 $(118,686) $25,568
<CAPTION>
COMPREHENSIVE
LOSS
--------------
<S> <C>
Balances as of June 30, 1999..................
Unaudited activity:
Conversion of the bridge financing to
Series H1 preferred stock and warrants...... --
Issuance of Series H1, less issuance cost of
$766........................................ --
Exercise of stock options and issuance of
shares for services......................... --
Cash received from issuance of preferred
stock....................................... --
Deferred stock compensation related to stock
option grants............................... --
Amortization of deferred stock compensation... --
Exchange of Warrants in connection with joint
sales agreement............................. --
Performance of services....................... --
Comprehensive loss
Net loss.................................... (8,966)
Foreign currency translation adjustment..... (77)
--------
Total comprehensive loss...................... $ (9,043)
========
Balances as of September 30, 1999
(unaudited)................................. --
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEARS ENDED JUNE 30, SEPTEMBER 30,
------------------------------ -------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.......................................... $(29,182) $(30,822) $(24,468) $ (5,091) $ (8,966)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization................... 2,505 3,373 3,497 1,017 924
Amortization of deferred stock compensation..... 6,377 7,604 5,254 1,523 2,820
Loss on disposition of property................. 3 79 -- --
Amortization of discount on debt................ -- -- 1,952 -- 1,744
Interest accrued on convertible note payable.... 32 -- 238 -- 170
Value of consulting services received in
exchange for shares........................... 44 -- 2,679 1,596 --
Value of engineering services received in
exchange for shares........................... -- 357 1,072 299 175
Changes in operating assets and liabilities:
Trade receivables............................. (750) (4,193) (1,222) (258) 459
Inventories................................... (2,725) (342) (2,391) (1,470) 993
Prepaid expenses and other current assets..... (118) (371) 1,706 (428) (49)
Accounts payable.............................. (697) 2,363 (1,769) (1,019) 781
Accrued expenses and other current
liabilities................................. 814 854 937 221 1,383
Deferred revenue.............................. 1,736 88 (776) (1,570) (1,666)
-------- -------- -------- -------- --------
Net cash used in operating activities....... (21,961) (21,010) (13,291) (5,180) (1,232)
-------- -------- -------- -------- --------
Cash flows from investing activities:
Sale of short-term investments.................... (4,902) 4,827 75 75
Purchases of property and equipment............... (4,552) (2,540) (1,728) (304) (934)
Investment in licensed technologies............... (36) (937) (314) (128) (47)
Other assets...................................... (509) (1,045) -- 63 --
-------- -------- -------- -------- --------
Net cash (used in) provided by investing
activities................................ (9,999) 305 (1,967) (294) (981)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Proceeds from issuances of common shares.......... -- 428 -- -- --
Proceeds from issuances of convertible preferred
shares and warrants............................. 20,049 18,245 -- -- 11,244
Proceeds from issuance of convertible notes and
warrants........................................ -- -- 12,164 -- --
Principal payments on notes payable............... (109) (6,073) (546) (142) (135)
Proceeds from exercise of options................. 85 161 153 8 115
Other long-term liabilities....................... 1,029 388 -- 1,495 135
-------- -------- -------- -------- --------
Net cash provided by financing activities... 21,054 13,149 11,771 1,361 11,359
Effect of exchange rate changes on cash and short
term investments................................ -- 34 66 (67) (77)
-------- -------- -------- -------- --------
Net increase (decrease) in cash and cash
equivalents....................................... (10,906) (7,522) (3,421) (4,180) 9,069
Cash and cash equivalents at beginning of year...... 25,768 14,862 7,340 7,340 3,919
-------- -------- -------- -------- --------
Cash and cash equivalents at end of year............ $ 14,862 $ 7,340 $ 3,919 3,160 $ 12,988
======== ======== ======== ======== ========
</TABLE>
F-7
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEARS ENDED JUNE 30, SEPTEMBER 30,
------------------------------ -------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during year for interest................ $ 438 $ 788 $ 213 $ 49 $ 35
======== ======== ======== ======== ========
Noncash investing and financing activities:
Licensed technology obtained in exchange for
preferred stock............................... $ -- $ 1,000 $ -- $ -- $ --
Provision of engineering services in exchange
for preferred stock........................... $ -- $ 3,500 $ -- $ -- $ --
Conversion of convertible notes to preferred
stock......................................... $ -- $ -- $ -- $ -- $ 8,754
Exchange of warrants in connection with joint
sales agreement............................... $ -- $ -- $ -- $ -- $ 3,364
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
(1) THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) DESCRIPTION OF BUSINESS
InterWAVE Communications International, Ltd. (the Company) develops,
manufactures and markets compact mobile wireless network solutions for GSM
wireless communications on a global basis. The Company's products are primarily
marketed to communication equipment providers, wireless service providers and
systems integrators.
The Company has a fiscal year that ends on the Friday nearest June 30.
Fiscal 1997 and 1998 were 52 week years. Fiscal 1999 was a 53 week year. For
presentation purposes the accompanying consolidated financial statements and
notes refer to the calendar month-end.
Effective November 1, 1997, the Company sold the assets and liabilities of
its offices in the United Kingdom and China to ADC Telecommunications, Inc. for
$1,016,806 which was substantially equal to the net book value on the date of
sale. All employees of the offices were transitioned to ADC to assist them with
the marketing, sale and service of interWAVE products through their channels. As
part of the sale, the Company modified its purchase/resale agreement with ADC
telecommunications.
(B) BASIS OF ACCOUNTING AND CONSOLIDATION
The consolidated financial statements of the Company are presented in
conformity with generally accepted accounting principles as adopted in the
United States. The consolidated financial information as of September 30, 1999
and for the three-months ended September 30, 1998 and 1999 is unaudited, but
includes all adjustments (consisting only of normal recurring adjustments) that
the Company considers necessary for the fair presentation of the financial
position at such dates and the operations and cash flows for the periods then
ended. Operating results for the three-months ended September 30, 1999 are not
necessarily indicative of results that may be expected for the entire year.
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries: interWAVE Communications, Inc. (Delaware,
USA); interWAVE Communications B.V. (Netherlands); interWAVE Communications
Solutions Ltd. (United Kingdom); and interWAVE Communications, S.A. (France).
The Company also operates a branch office in Hong Kong. All intercompany
balances and transactions have been eliminated in consolidation.
(C) INITIAL PUBLIC OFFERING AND UNAUDITED PRO FORMA BALANCE SHEET
In September 1999, the Board of Directors of the Company authorized the
filing of a registration statement with the Securities and Exchange Commission
(SEC) that would permit the Company to sell 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 the then outstanding
shares of the Company's Series A-1, Series B-1, Series C-1, Series D,
Series D-1, Series E, Series E-1, Series F-1, Series G-1, Series H and
Series H-1 convertible preferred stock will automatically convert into shares of
common stock on a one-for-one basis upon the closing of the proposed IPO. In
addition, outstanding warrants to purchase 2,000,000 preferred shares and
1,132,874 common shares, will expire upon the closing of the offering, if not
exercised earlier. The Company has received a firm committment from the
preferred warrant holder that they intend to exercise their warrants. The
Company has received indications from the common stock warrant holders that they
intend to exercise their warrants. The conversion of all convertible preferred
shares and warrants for preferred shares has
F-9
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
(1) THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
been reflected in the accompanying unaudited pro forma balance sheet as if it
had occurred on September 30, 1999. However, the Company has not reflected the
exercise of the common stock warrants since the warrant holders have not yet
made a firm commitment. Series G1 preferred shares shall not automatically
convert into common shares unless the $25,000,000 aggregate offering price is
met and the price is $7.00 per share or greater.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
------------------ PRO FORMA ------------------
AS REPORTED ADJUSTMENT PRO FORMA
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Shareholders' equity:
Convertible preferred shares..................... $ 19,488 (19,488) --
Common shares.................................... 6 28 33
Additional paid-in capital....................... 140,075 45,519 185,595
Deferred stock compensation...................... (10,166) -- (10,166)
Services receivable from shareholder............. (4,784) -- (4,784)
Subscriptions and amounts receivable from
shareholders................................... (416) -- (416)
Accumulated other comprehensive.................. 51 -- 51
Accumulated deficit.............................. (118,686) -- (118,686)
--------- -------- --------
Total shareholder equity......................... 25,568 26,059 51,627
</TABLE>
- ------------------------
(1) Assumes the conversion of all preferred shares outstanding as of
September 30, 1999.
(2) Assumes the conversion of the shares of Convertible preferred shares as of
September 30, 1999, into common shares; and the exercise of warrants for
2,000,000 preferred shares at $7 per share, which warrants will otherwise
expire on the effectiveness of the IPO.
(3) Assumes the issuance of 1,526,663 shares of Series I-1 preferred shares sold
in November, 1999.
(4) Includes the exercise of stock options to purchase 45,818 common shares at
an average exercise price of $.94 that has occurred since September 30,
1999.
(D) CURRENCY TRANSLATION
For operations outside of the United States with the local currency as the
functional currency, assets and liabilities are translated at year-end exchange
rates, and statements of operations are translated at the average exchange rates
during the year. Adjustments arising from translation of non-U.S. currency
denominated assets and liabilities for these operations are included as a
component of other comprehensive income in shareholders' equity.
For non-U.S. operations with the U.S. dollar as the functional currency,
non-U.S. currency denominated assets and liabilities are remeasured into U.S.
dollars using historical rates and any measurement gains and losses are included
in the consolidated results of operations and, to date, have not been
significant.
F-10
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
(1) THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(E) CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. Investments with an
original maturity of more than three months but less than one year are
classified as short-term investments.
Cash equivalents and short-term investments are classified as
"available-for-sale" under the provisions of Statement of Financial Accounting
Standards (SFAS) No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES.
The amortized cost of available-for-sale securities are adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization is included in net investment income. As required by SFAS No. 115,
available-for-sale securities are recorded at fair value. Unrealized gains and
losses are reported as a separate component of accumulated other comprehensive
income in stockholders' equity. Realized gains and losses and declines in value
judged to be other than temporary on available-for-sale securities are included
in net investment income. The cost of securities sold is based on the specific
identification method. Interest on securities classified as available-for-sale
are included in other income.
(F) CONCENTRATION OF RISK
Financial instruments, which potentially subject the Company to a
concentration of credit risk, principally consist of accounts receivable. The
Company performs ongoing credit evaluations of its customers and generally does
not require collateral on accounts receivable, as a majority of the Company's
customers are large, well established companies.
The following table summarizes information relating to the Company's
significant customers with balances greater than 10% of accounts receivable as
of:
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
------------------- -------------------
1998 1999 1998 1999
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
ACCOUNTS RECEIVABLE
Nortel Networks.............................. 41% 52% 63% 21%
Hutchison Telecommunications (Hong Kong)..... 24% 7% 10% 0%
ADC Telecommunications/Microcellular Systems,
Ltd.(1).................................... 35% 0% 18% 15%
HangZhou Topper Electric Corporation......... 0% 6% 0% 27%
Alcatel...................................... 0% 9% 8% 11%
</TABLE>
- ------------------------
(1) Microcellular Systems, Ltd. was created by a spin-off from ADC
Telecommunications in May 1999.
F-11
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
(1) THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following table summarizes information relating to the Company's
significant customers with revenues comprising greater than 10% of revenue:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30, SEPTEMBER 30,
------------------------------ -------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Nortel Networks........................... 0% 18% 51% 53% 18%
Hutchison Telecommunications (Hong
Kong)................................... 68% 21% 8% 4% 5%
ADC Telecommunications/Microcellular
Systems, Ltd.(1)........................ 15% 47% 20% 31% 21%
Total Access Communications............... 0% 13% 3% 0% 9%
Electronia................................ 16% 0% 0% 0% 0%
HangZhou Topper Electric Corporation...... 0% 0% 2% 0% 38%
Alcatel................................... 0% 0% 7% 11% 2%
</TABLE>
- ------------------------
(1) Microcellular Systems, Ltd. was created by a spin-off from ADC
Telecommunications in May 1999.
(G) INVENTORIES
Inventories are stated at the lower of average cost or market.
(H) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated depreciation,
calculated using the straight-line depreciation method over the estimated useful
lives of the related assets, generally two to five years. Leasehold improvements
are depreciated over the life of the underlying lease or the estimated useful
life, whichever is shorter.
(I) REVENUE RECOGNITION
Revenue is recognized when all of the following have occurred: the product
has been shipped, title and risk of loss have passed to the customer (generally
at time of shipment for US shipments and at time of arrival at an international
port for non-US shipments), we have the right to invoice the customer,
collection of the receivable is probable, and we have fulfilled all pre-sale
contractual obligations to the customer. Revenue for installation services is
recognized as the service is performed to the extent of direct installation
costs incurred and the excess is deferred and recognized over the estimated life
of the equipment. Revenue from extended warranty coverage and customer support
is recognized ratably over the period of the service contract. Trial sales made
directly to wireless service providers are not recognized as revenue until the
trial is successfully completed. Trials conducted by communications service
providers and systems integrators are normally shipped from their inventory and
do not result in any incremental revenue to us. Although the Company's products
contain a software component, the software is not sold separately and the
Company is not contractually obligated to provide software upgrades to its
customers.
F-12
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
(1) THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company provides for estimated warranty costs at the time of sale. Sales
agreements include a 12 to 16 month warranty on all hardware and software.
(J) RESEARCH AND DEVELOPMENT COSTS
SFAS No. 86 provides for the capitalization of certain software development
costs once technological feasibility is established subject to an evaluation of
realizability. Capitalized costs are then amortized on a straight-line basis
over the estimated product life or based on the ratio of current revenues to
projected product revenues, whichever is greater. To date, the Company's
products have been available for general release concurrent with the
establishment of technological feasibility; and, accordingly, no development
costs have been capitalized.
(K) INTANGIBLES
The Company capitalizes costs of acquiring licenses from third parties for
technologies that have reached technological feasibility and can be incorporated
into the Company's products. The Company also capitalizes certain external costs
associated with patents and trademarks. Except for the license and technical
information agreement discussed in Note 9(a), the Company amortizes these assets
straight line over four years or based on the ratio of current revenues to
projected revenues whichever is greater. Technology licenses generally contain
provisions for royalty payments to licensors based on the number of units sold.
(L) IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates its long-lived assets, including certain identifiable
intangibles, for impairment whenever events or changes in circumstances indicate
that the carrying amount of such assets might not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount
of an asset to future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the asset exceeds the
fair value of the asset. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.
(M) INCOME TAXES
The Company uses the asset and liability method of accounting for income
taxes. Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates in effect for the year in which those temporary differences
are expected to be recovered or settled. Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts expected to be
realized.
(N) LOSS PER SHARE
Basic loss per share is computed using the weighted average number of common
shares outstanding during the period. Diluted loss per share is computed using
the weighted average number of common and dilutive potential common shares
outstanding during the period, using the
F-13
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
(1) THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
as-if-converted method for convertible preferred shares and the treasury stock
method for options and warrants. The effect of including convertible preferred
shares, options and warrants would have been antidilutive during all periods
presented. As a result, such effect has been excluded from the computation of
diluted net loss per share during those antidilutive periods. The total number
of shares excluded from diluted net loss per share relating to these securities
was approximately 20,177,168, 1,939,000, and 3,518,201 shares, respectively, for
the fiscal year ended 1999. Pursuant to SEC Staff Accounting Bulletin No. 98,
common shares and convertible preferred shares issued for nominal consideration
and options and warrants granted for nominal consideration prior to the
anticipated effective date of the initial public offering are included in the
calculation of basic and diluted net loss per share, as if they were outstanding
for all periods presented. To date, the Company has not had any issuances of
stock, options or warrants for nominal consideration.
(O) STOCK-BASED COMPENSATION AND WARRANTS FOR GOODS AND SERVICES
The Company accounts for stock-based awards to employees using the intrinsic
value method. Expense associated with stock-based compensation is being
amortized on an accelerated basis over the vesting period of the individual
award consistent with the method described in Financial Accounting Standards
Board ("FASB") Interpretation No. 28.
Warrants issued for goods or services are valued at the fair value of the
equity instrument or the goods or services received, whichever is more readily
determinable. Promises of future services are recorded as contra-equity until
such time as the services are received.
(P) USE OF ESTIMATES
The preparation of consolidated 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 consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(Q) COMPREHENSIVE INCOME
"Other comprehensive income" refers to revenues, expenses, gains and losses
that are not included in net income, but rather are recorded directly in
stockholders' equity. The only component of other comprehensive income for the
years ended June 30, 1997, 1998 and 1999 was cumulative translation adjustments.
(R) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash, cash equivalents, accounts receivable, accounts
payable and accrued expenses, other current liabilities and convertible notes
approximate fair value due to the short maturity of those instruments. The
carrying value of the notes payable approximate fair value due to the variable
interest rates on these notes.
F-14
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
(2) CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash equivalents and short-term investments have been classified as
available-for-sale securities and consisted of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
Cash Equivalents ------------------- -------------
1998 1999 1999
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Cash................................................. $1,637 708 2,312
Money market funds................................... 2,703 2,216 5,224
Commercial paper..................................... 3,000 995 5,452
------ ----- ------
$7,340 3,919 12,988
====== ===== ======
</TABLE>
Short term investments consisted of repurchase agreements as of June 30,
1998. For all investments in commercial paper and repurchase agreements, cost
approximates fair market value.
(3) INVENTORIES
Inventories consist of (in thousands):
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
------------------- -------------
1998 1999 1999
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Work in Process.................................. $2,637 5,290 3,615
Finished goods................................... 204 373 400
Consignment inventory............................ 1,108 676 1,331
------ ----- -----
$3,949 6,339 5,346
====== ===== =====
</TABLE>
(4) PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
------------------- -------------
1998 1999 1999
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Machinery and equipment....................... $ 9,119 10,554 11,363
Computer equipment............................ 3,093 3,323 3,407
Furniture and fixtures........................ 254 260 277
Leasehold improvements........................ 140 197 221
------- ------- ------
12,606 14,334 15,268
Less accumulated depreciation and
amortization................................ (5,984) (9,000) (9,744)
------- ------- ------
$ 6,622 5,334 5,524
======= ======= ======
</TABLE>
F-15
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
(5) INTANGIBLES
A summary of intangibles is as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
------------------- -------------
1998 1999 1999
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Licensed technology.............................. $1,268 1,243 1,243
Patents & trademarks............................. 2,073 2,387 2,483
------ ----- ------
3,341 3,630 3,726
Less accumulated amortization.................... (318) (775) (1,004)
------ ----- ------
$3,023 2,855 2,722
====== ===== ======
</TABLE>
(6) INCOME TAXES
Income tax expense (benefit) for the fiscal years ended June 30, 1997, 1998
and 1999 consisted of the following (in thousands):
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
-------- -------- --------
<S> <C> <C> <C>
1997:
U.S. Federal....................................... $ 37 -- 37
Other.............................................. 63 11 74
---- --- ---
Total............................................ $100 11 111
==== === ===
1998:
U.S. Federal....................................... $ -- -- --
Other.............................................. 186 34 220
---- --- ---
Total............................................ $186 34 220
==== === ===
1999:
U.S. Federal....................................... $ -- -- --
Other.............................................. 114 (1) 113
---- --- ---
Total............................................ $114 (1) 113
==== === ===
</TABLE>
F-16
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
(6) INCOME TAXES (CONTINUED)
The reconciliation between the amount computed by applying the U.S. Federal
statutory tax rate of 34% to income taxes and the actual provision for income
taxes follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Income tax expense at statutory rate............... $(9,884) (10,405) (8,281)
Non-U.S. income taxed at rate other than the U.S.
federal rate..................................... (15) (108) (218)
Losses, in a zero tax jurisdiction................. 8,538 6,771 4,035
Net losses and temporary differences for which no
current benefit is recognized.................... 1,456 3,782 4,306
Other.............................................. 16 180 271
------- ------- ------
$ 111 220 113
======= ======= ======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
JUNE 30,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Deferred tax assets:
Technology asset....................................... $ 1,082 916 781
Inventory.............................................. 792 1,611 809
Allowance for doubtful accounts........................ -- -- 305
Accruals and reserves.................................. 185 428 526
Net operating loss carryforwards....................... 1,128 5,168 9,559
Research and other tax credit carryforwards............ 1,658 2,509 3,481
------- ------- --------
Total gross deferred tax assets...................... 4,845 10,632 15,461
Less valuation allowance............................... (4,513) (10,550) (15,438)
------- ------- --------
Total deferred tax assets............................ 332 82 23
Deferred tax liabilities - Fixed assets.................. (343) (125) (65)
------- ------- --------
Net deferred tax liabilities....................... $ (11) (43) (42)
======= ======= ========
</TABLE>
The net change in the total valuation allowance from the year ended
June 30, 1998, and 1999 was an increase of approximately $6,037,000 and
$4,888,000, respectively. Management believes that sufficient uncertainty exists
regarding the future realization on deferred tax assets, and, accordingly, a
valuation allowance is required.
F-17
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
(6) INCOME TAXES (CONTINUED)
The company has net operating loss carryforwards for federal and California
income tax return purposes of approximately $23,796,000 and $12,738,000,
respectively. The net operating losses expire in the following years in the
following amounts:
<TABLE>
<CAPTION>
U.S. FEDERAL CALIFORNIA
------------ ----------
<S> <C> <C>
Expires in year:
2001 $ -- 24,000
2002 -- 599,000
2003 -- 5,716,000
2004 -- 6,399,000
2010 13,000 --
2011 41,000 --
2012 611,000 --
2013 10,905,000 --
2019 12,226,000 --
----------- ----------
$23,796,000 12,738,000
=========== ==========
</TABLE>
The company also has foreign net operating losses in France of $323,000;
which expires in 2002.
The Company also has research credit carryforwards for U.S. federal and
California income tax return purposes of approximately $1,856,000 and
$1,110,000, respectively. The federal research credit carryforwards will expire
beginning in 2010 through 2019; California research credits carry forward
indefinitely until utilized. The Company also has U.S. federal minimum tax
credits of approximately $36,000, which carryforwards indefinitely until
utilized. The Company also has California manufacturer's investment credit
carryforwards of approximately $479,000, which expire in 2006 through 2009.
(7) EQUIPMENT LINE OF CREDIT
During 1997, the Company obtained a secured equipment line of credit of
$2,500,000. Borrowings bear interest at 6% above the average term Treasury Note
two weeks preceding a drawdown. The Company had $1,589,000 outstanding under the
secured equipment line of credit as of June 30, 1998, of which approximately
$1,074,000 is included in long-term liabilities and $515,374 is included in
current portion of notes payable. As of June 30, 1999, the Company had
$1,073,000 outstanding under the secured equipment line of credit, of which
approximately $486,000 is included in long-term liabilities and $587,000 is
included in current portion of notes payable. The Company does not have the
ability to borrow additional amounts under this facility. Borrowings under the
line of credit are payable monthly with the final payments due in July 2001.
(8) CONVERTIBLE NOTES
In 1999, as part of a bridge financing the Company issued $12,691,830 of
convertible notes payable to a group of its preferred and common shareholders in
exchange for $12,163,965 in cash and a note receivable of $527,865. The
principal amount, together with interest accrued at 8% per annum, will become
due and payable on December 3, 1999 or automatically convert into a new series
of preferred
F-18
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
(8) CONVERTIBLE NOTES (CONTINUED)
stock upon the closing of a minimum of $10 million of a new series of preferred
stock to new investors. As a result of the issuance of Series H-1 preferred
shares on September 9, 1999, the notes converted to Series H-1 preferred stock
at a price of $7 per share. As an incentive to participate in the convertible
note financing, current holders of Series A, B, C, D, E, F and G preferred stock
("original preferred stock") who participated at a minimum level based on their
respective ownership percentage were entitled to exchange their original
preferred stock for A-1, B-1, C-1, D-1, E-1, F-1 and G-1 preferred stock,
respectively ("new preferred stock"), whose terms were identical to the original
preferred stock, except that the new preferred stock would be preferential in
liquidation to all original preferred stock. As of June 30, 1999, the
convertible notes, including accrued interest of $231,211, amount to
$12,923,041.
In conjunction with the bridge loan financing, the participants in the
convertible notes were granted a warrant to purchase one share of common stock
for each $2 invested in the convertible notes. As a result, the Company issued
warrants to purchase 6,345,931 shares of common stock at a price of $0.70 per
share, which are exercisable any time for a period of 5 years from date of
issuance. The proceeds from the bridge financing were allocated between the
convertible notes and the warrants based upon their relative fair values. The
amount of $5,592,552 (net of proportionate value of note receivable of $284,466)
ascribed to the warrants was estimated using the Black-Scholes option valuation
model with the following assumptions: no expected dividend yield; risk free
interest rate of 6%; expected volatility 70%; and contractual term of 5 years.
The value of the warrants had been recorded as a discount on the convertible
notes payable and additional paid-in-capital and will be amortized over the term
of the debt.
The note receivable of $527,865 has been recorded as a reduction of the
convertible notes of $243,399 and a reduction of the warrants of $284,466
determined on a basis proportionate to the fair value of the bridge loan and
warrants.
As of June 30, 1999 no warrants have been exercised. Interest expense of
$1,951,567 has been recorded in connection with the amortization of the discount
in fiscal 1999.
A summary of the convertible notes is as follows (in thousands):
<TABLE>
<S> <C>
Convertible notes, plus accrued interest.................... $12,923
Less unamortized discount on term loan in connection with
the issuance of warrants.................................. (3,926)
Less: proportionate value of note receivable................ (243)
-------
Convertible notes........................................... $ 8,754
=======
</TABLE>
F-19
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
(9) PREFERRED AND COMMON SHARES
(A) CONVERTIBLE PREFERRED SHARES
A summary of outstanding convertible preferred stock is as follows (in
thousands, except share data):
<TABLE>
<CAPTION>
JUNE 30 SEPTEMBER 30
----------------------------------------------------- -------------------------
1998 1999 1999 (UNAUDITED)
------------------------- ------------------------- -------------------------
SHARES LIQUIDATION SHARES LIQUIDATION SHARES LIQUIDATION
SERIES OUTSTANDING PREFERENCE OUTSTANDING PREFERENCE OUTSTANDING PREFERENCE
- ------ ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
A......................... 3,400,000 $ 2,822 -- $ -- -- $ --
A-1....................... -- -- 3,400,000 2,822 3,400,000 2,822
B......................... 2,670,000 3,204 -- -- -- --
B-1....................... -- -- 2,670,000 3,204 2,670,000 3,204
C......................... 1,000,000 1,500 -- -- -- --
C-1....................... -- -- 1,000,000 1,500 1,000,000 1,500
D......................... 4,680,000 14,040 41,000 123 41,000 123
D-1....................... -- -- 4,639,000 13,917 4,639,000 13,917
E......................... 2,567,167 25,672 109,200 1,072 109,200 1,072
E-1....................... -- -- 2,457,967 24,600 2,457,967 24,600
F......................... 1,500,000 17,250 -- -- -- --
F-1....................... -- -- 1,500,000 17,250 1,500,000 17,250
G......................... 3,714,286 26,000 -- -- -- --
G-1....................... -- -- 3,714,286 26,000 3,714,286 26,000
H......................... -- -- 360,000 2,520 360,000 2,520
H-1....................... -- -- 285,715 2,000 3,588,050 25,116
---------- ------- ---------- ------- ---------- --------
19,531,453 $90,488 20,177,168 $95,008 23,479,503 $118,124
========== ======= ========== ======= ========== ========
</TABLE>
The liquidation preferences of the holders of authorized preferred shares
are as follows:
<TABLE>
<CAPTION>
SERIES
------------------------------------------------------------------------------------------------
A1 B1 C1 D D1 E E1 F1 G1
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Liquidation preference
per share(a)................. $0.83 $1.20 $1.50 $3.00 $3.00 $10.00 $10.00 $11.50 $7.00
<CAPTION>
SERIES
-------------------
H H1
-------- --------
<S> <C> <C>
Liquidation preference
per share(a)................. $7.00 $7.00
</TABLE>
- ------------------------
(a) Plus accrued and unpaid dividends. If the assets and funds
distributed among the holders of preferred stock are insufficient to
permit payment of these amounts, then such assets and funds shall be
distributed to the holders of preferred shares in proportion to the
respective preferential amounts fixed for each series. Any remaining
assets shall be distributed among the holders of common shares on a
pro rata basis. A consolidation or merger of the Company involving
transfer of more than 50% of the voting power shall be deemed a
liquidation except in specific circumstances.
Each holder of preferred shares is entitled to receive, when and if declared
by the Board of Directors, noncumulative dividends at a rate of $0.05 per share.
As of June 30, 1999, no dividends have been declared.
F-20
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
(9) PREFERRED AND COMMON SHARES (CONTINUED)
Each holder of preferred shares is entitled to one vote per share.
Each preferred share is convertible into common shares, at the option of the
holder, at any time, on a one-for-one basis subject to adjustment for
antidilution events as defined, and will automatically convert into common
shares in the event of the consummation of an underwritten initial public
offering of not less than $25,000,000. Series G1 preferred shares shall not
automatically convert into common shares unless the $25,000,000 aggregate
offering price is met and the price is $7.00 per share or greater.
On March 27, 1998 and April 29, 1998, the Company issued an aggregate of
3,714,286 shares of Series G preferred stock and a warrant to purchase 2,000,000
Series G preferred shares at $7.00 per share to Nortel Networks for an aggregate
purchase price of $22,744,000 (net of financing costs of $1,756,000), which
consideration consisted of a $20,000,000 cash payment and licensed technology
valued at $1,000,000, and a technical information agreement valued at
$3,500,000. The amount of $4,629,000 ascribed to the warrants was estimated
using the Black-Scholes option valuation model with the following assumptions:
no expected dividend yield; risk free interest rate of 5.5%; expected volatility
of 70%; and contractual term of 3 years. The warrants expire on March 27, 2001
or upon the effectiveness of an initial public offering, whichever is first,
unless previously exercised.
The licensed technology is being amortized over a five year term. If the
license is terminated in less than five years, the Company will receive a
prorata refund equal to 20% of the amount paid for the license for each
remaining year. The refund may be paid in cash or Series G preferred shares, at
the option of the payor, at their original value. The license technology
agreement is for one year and automatically renews for the duration of the
underlying patents. The technical information agreement provides for the Company
to have access to Nortel Network's technical assistance and testing services and
other documentation and support. The agreement further provides for a refund as
a percentage of the original value as per the following schedule:
<TABLE>
<S> <C>
March 16, 1999.............................................. 65%
March 16, 2000.............................................. 45%
March 16, 2001.............................................. 30%
March 16, 2002.............................................. 15%
March 16, 2003.............................................. 0%
</TABLE>
The Company has recorded this agreement as a contra equity and is amortizing
the value on a basis consistent with their ability to receive a refund.
On September 10, 1999, the Company completed an offering of 1,715,715 shares
of Series H-1 preferred shares and issued warrants to purchase an aggregate of
240,000 shares of common stock at $1 per share to a group of investors in
exchange of $12,010,000 (before financing costs of $766,000). The Series H-1
contains a $7 per share liquidation preference and converts to common shares on
a one-to-one basis. The warrants expire three years from the issuance date, or
upon the effectiveness of an initial public offering, whichever comes first,
unless previously exercised. The sale of Series H-1 preferred shares met the
minimum $10 million new financing described in footnote 8, and resulted in the
automatic conversion of the convertible notes and interest accrued thereon into
1,872,335 shares of Series H-1 and the issuance of warrants to purchase 253,874
shares of common stock for $1 per share
F-21
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
(9) PREFERRED AND COMMON SHARES (CONTINUED)
to the noteholders. The warrants expire three years from the issuance date, or
upon the effectiveness of an initial public offering, whichever comes first,
unless previously exercised.
In September 1999, the Company entered into a memorandum of understanding
expiring in August 2000 with an investor to distribute and manufacture the
investor's products and for the investor to market the company's products in
Canada. The Company expects to enter into a four-year distribution agreement. In
conjunction with the memorandum of understanding the Company issued a warrant to
purchase 615,000 common shares at an exercise price of $1 per share and received
a warrant to purchase 225,225 shares of the investor's publicly traded common
shares at $3.3125 per share expiring in August 2002. The warrant to purchase the
Company's common shares expires on the earlier of September 1, 2002, or the
effectiveness of an initial public offering.
The amount of $475,650 ascribed to the warrants received by the Company was
estimated using the Black-Scholes option valuation model with the following
assumptions: no expected dividend yield; risk free interest rate of 6%; expected
volatility of 81%; and contractual term of 3 years. The warrant received was
recorded in other assets as of September 30, 1999.
The amount of $3,363,435 ascribed to the warrants issued to the investor was
estimated using the Black-Scholes option valuation model with the following
assumptions: no expected dividend yield; risk free interest rate of 6%; expected
volatility of 70%; and contractual term of 3 years. The warrant has been
recorded as other paid in capital. The amount of $2,887,785 ascribed to the
services to be received from the investor was determined as the difference in
value between the warrants exchanged. This amount has been recorded as contra
equity and will be amortized to expense over the four year term of the
distribution agreement.
(B) SHARE OPTION PLAN
In fiscal 1995, the Board of Directors adopted the 1994 Share Plan (the
Plan) providing for the issuance of common share options to employees and
consultants of the Company. The share options are a combination of both
incentive and non-statutory share options.
Incentive share options may be granted at not less than 100% of the fair
market value per share, and non-statutory share options may be granted at not
less than 85% of the fair market value per share at the date of grant as
determined by the Board of Directors or committee thereof, except for options
granted to a person owning greater than 10% of the total combined voting power
of all classes of shares of the Company, for which the exercise price must not
be less than 110% of the fair market value. Share option plan shares generally
vest 25% after one year, with the remainder vesting monthly over the following
three years. Additional options granted to existing employees after July 28,
1998 are in general vesting monthly over four years.
The Company uses the intrinsic value method to account for the 1994 plans.
Accordingly compensation cost has been recognized for its stock options in the
accompanying financial statements if, on the date of grant, the current market
value of the underlying common stock exceeded the exercise price of the stock
options at the date of grant.
During fiscal 1997, 1998 and 1999, the Company granted options with a
weighted-average exercise price of $1.07, $1.15 and $0.90 respectively, compared
to the weighted-average fair value of approximately $8.80, $6.37 and $3.03 for
the same respective periods.
Options generally have 10 year terms. However, options granted to an
optionee who, at the time the option is granted, owns stock representing more
than 10% of the voting power of all classes of stock of the Company, generally
have 5 year terms.
F-22
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
(9) PREFERRED AND COMMON SHARES (CONTINUED)
The Company has reserved 10,730,000 common shares for issuance under the
Plan. A summary of the Company's share option plan activity is as follows:
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
---------------------------------------------------------------------- (UNAUDITED)
1997 1998 1999 1999
--------------------- --------------------- ---------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
--------- --------- --------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of
year................. 2,857,524 $0.27 3,007,986 $0.52 3,265,867 $0.74 4,304,811 $0.77
Granted................ 1,177,200 1.07 1,044,500 1.15 2,417,100 0.90 1,973,750 1.45
Exercised.............. (334,963) 0.25 (447,807) 0.23 (278,174) 0.55 (993,098) 0.37
Canceled............... (691,775) 0.51 (338,812) 0.72 (1,099,982) 1.09 (154,954) 1.01
--------- ----- --------- ----- ---------- ----- --------- -----
Outstanding at
year-end............. 3,007,986 0.52 3,265,867 0.74 4,304,811 0.77 5,130,509 1.10
========= ===== ========= ===== ========== ===== ========= =====
Options exercisable at
year-end............. 1,109,432 $0.30 1,362,648 $0.46 2,026,902 $0.61 1,325,013 $0.85
========= ===== ========= ===== ========== ===== ========= =====
</TABLE>
The following table summarizes information about share options outstanding
and exercisable under the Plan as of June 30, 1999:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
RANGE OF REMAINING
EXERCISE NUMBER CONTRACTUAL LIFE WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE
PRICES OUTSTANDING (YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- -------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$0.08 160,188 5.13 $0.08 160,188 $0.08
0.12 158,522 5.64 0.12 158,053 0.12
0.30 816,139 6.21 0.30 774,743 0.30
0.70 1,258,163 9.74 0.70 159,442 0.70
1.00 342,003 7.26 1.00 225,462 1.00
1.15 1,569,795 8.75 1.15 549,014 1.15
--------- ---- ----- --------- -----
4,304,810 8.19 $0.77 2,026,902 $0.61
========= ==== ===== ========= =====
</TABLE>
Under SFAS No. 123, Accounting for Stock-Based Compensation, the Company is
required to disclose the pro forma effects on net loss and net loss per share as
if the Company had elected to use the fair value approach to account for all of
its employee stock-based compensation plans. Had compensation cost for the
Company's plans been determined consistently with the fair value approach
described in SFAS No. 123, the Company's pro forma net loss and pro forma net
loss per share for the
F-23
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
(9) PREFERRED AND COMMON SHARES (CONTINUED)
years ended June 30, 1997, 1998 and 1999, would have been changed as indicated
below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
JUNE 30,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net loss:
As reported.................................... $(29,182) (30,822) (24,468)
Pro forma...................................... $(33,132) (35,485) (26,417)
Net loss per share
As reported.................................... $ (7.12) (6.68) (4.96)
Pro forma...................................... $ (8.08) (7.69) (5.35)
</TABLE>
The fair value of options granted was estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1997, 1998 and 1999:
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Weighted average risk-free rate...................... 5.56% 5.56% 5.29%
Expected life (years)................................ 5 5 5
Volatility........................................... 70% 70% 70%
Dividend yield....................................... 0 0 0
</TABLE>
(10) TRANSACTIONS WITH RELATED PARTIES AND MAJOR CUSTOMERS
For the years ended June 30, 1997, 1998, and 1999, the Company engaged in
business transactions with investors and major customers resulting in the
following revenue, deferred revenue, and trade receivables: (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Nortel Networks................................... $ -- 2,392 8,797
Hutchison Telecommunications (Hong Kong).......... 1,251 2,754 1,409
ADC Telecommunications............................ 279 6,099 3,449
Total Access Communications....................... 8 1,750 505
------ ------ ------
$1,538 12,995 14,160
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Deferred Revenue:
Nortel Networks........................................... $1,531 1,508
Hutchison Telecommunications (Hong Kong).................. 374 144
Total Access Communications............................... 693 56
------ -----
$2,598 1,708
====== =====
</TABLE>
F-24
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
(10) TRANSACTIONS WITH RELATED PARTIES AND MAJOR CUSTOMERS (CONTINUED)
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Trade Receivables:
Nortel Networks........................................... 2,382 3,669
Hutchinson Telecommunications (Hong Kong)................. 1,352 509
ADC Telecommunications.................................... 2,042 --
----- -----
5,776 4,178
===== =====
</TABLE>
(11) COMMITMENTS
(A) OPERATING LEASE COMMITMENTS
The Company leases its facilities under noncancelable operating leases.
These leases expire at various dates ranging from December 1998 to March 2005.
Future minimum lease payments as of June 30, 1999, are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30
- -------------------
<S> <C>
2000.................................................... $1,068
2001.................................................... 1,106
2002.................................................... 1,128
2003.................................................... 489
2004.................................................... 94
Thereafter.............................................. 83
------
Total minimum lease payments.................... $3,968
======
</TABLE>
Rent expense was approximately $775,000, $822,000, and $960,951 for the
years ended June 30, 1997, 1998, and 1999, respectively.
(B) CONTRACT MANUFACTURERS
The Company generally commits to purchase products from its contract
manufacturers to be delivered within the most recent 60 days covered by
forecasts with cancellation fees. As of September 10, 1999, the Company had
committed to make purchases totaling $2.7 million from these manufacturers in
the next 60 days. In addition, in specific instances, the Company may agree to
assume liability for limited quantities of specialized components with lead
times beyond this 60-day period.
(12) LITIGATION
On June 28, 1999, the Company filed a complaint against JetCell Corporation
in United States District Court alleging misappropriation of trade secrets and
patent infringement. The complaint seeks injunctive relief and damages. On
July 19, 1999, JetCell filed an answer to the complaint and a series of
counterclaims against the Company. The answer denied the allegations made in the
complaint and the counterclaims included allegations against the Company of
unfair trade practices, unfair
F-25
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
(12) LITIGATION (CONTINUED)
competition, defamation, and patent misuse. The answer and counterclaims seek
injunctive relief, damages, invalidation of the Company's patents and a
dismissal of the complaint. The Company is unable to predict the outcome of the
lawsuit and does not expect it to be resolved in the near future. However, if
the Company is unable to settle these proceedings in a satisfactory manner, the
legal proceedings may be time consuming and expensive and the outcome could be
adverse to the Company. If the outcome is adverse to the Company, they would
experience more competition in the Company's markets and may be required to
license technology required for the Company's products, either of which could
harm the Company's business and financial results.
(13) EMPLOYEE BENEFIT PLANS
The Company maintains a 401(k) defined contribution benefit plan that covers
all U.S. employees who have attained the age of at least 20.5 years. This plan
allows employees to defer up to 20% of their pretax salary in certain
investments at the discretion of the employee. The Company has the option to
make discretionary employer matching contributions. The Company did not make any
matching contributions to the plan during the years ended June 30, 1997, 1998
and 1999.
(14) GEOGRAPHIC SEGMENT INFORMATION
In fiscal 1999, the Company adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 establishes standards for
the manner in which public companies report information about operating segments
in annual and interim financial statements. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. The method for determining what information to report is based on the
way management organizes the operating segments within the Company for making
operating decisions and assessing financial performance. The Company's chief
operating decision-maker is considered to be the chief executive officer (CEO).
The financial information that the CEO reviews is identical to the information
presented in the accompanying statements of operations. Therefore, the Company
has determined that it operates in a single operating segment: manufacturing and
sale of compact mobile wireless network solutions.
The following table presents information about the Company by geographic
area: (in thousands)
<TABLE>
<CAPTION>
1997
---------------------------------------------
UNITED
STATES ASIA EUROPE CONSOLIDATED
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Total net revenues.................................. $ 1,229 1,639 344 3,212
Less: intercompany sales............................ $ (919) (452) -- (1,371)
Reported net revenues............................... $ 310 1,187 344 1,841
Net loss............................................ $(24,248) (2,215) (2,719) (29,182)
Property & equipment, net........................... $ 6,265 637 512 7,414
Percentage of reported net revenue.................. 16.84% 64.48% 18.68% 100.00%
</TABLE>
F-26
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
(14) GEOGRAPHIC SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
1998
---------------------------------------------
UNITED
STATES ASIA EUROPE CONSOLIDATED
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Total net revenues.................................. $ 9,342 6,460 4,191 19,993
Less: intercompany sales............................ $ (2,765) (1,567) (2,666) (6,998)
Reported net revenues............................... 6,577 4,893 1,525 12,995
Net loss............................................ (24,501) (4,484) (1,837) (30,822)
Property & equipment, net........................... 6,039 450 133 6,622
Percentage of reported net revenue.................. 50.61% 37.65% 11.74% 100.00%
<CAPTION>
1999
---------------------------------------------
UNITED
STATES ASIA EUROPE CONSOLIDATED
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Total net revenues.................................. $ 13,697 4,930 2,847 21,474
Less: intercompany sales............................ (1,620) (2,561) -- (4,181)
Reported net revenues............................... 12,077 2,369 2,847 17,293
Net loss............................................ (19,593) (3,927) (948) (24,468)
Property and equipment, net......................... 4,709 502 123 5,334
Percentage of reported net revenue.................. 69.84% 13.70% 16.46% 100.00%
</TABLE>
(15) SUBSEQUENT EVENT (UNAUDITED)
In November 1999, the Company completed an offering of 1,526,663 Series I-1
preferred shares to Alcatel in exchange for $12,013,304 (net of financing costs
of $200,000). The Series I-1 contains an $8 per share liquidation preference and
converts to common shares on a one-to-one basis. In connection with the sale of
Series I-1 preferred shares, the Company and Alcatel entered into a purchase and
distribution agreement whereby Alcatel will market the Company's wireless office
network products through their enterprise solutions division.
In November 1999 the Company received a commitment from a financial
institution for a revolving line of credit in the amount of $5,000,000 for a one
year term subject to advances against eligible accounts receivable.
The Company has recently signed a lease for approximately 56,000 square feet
in Menlo Park, California for our principal administrative and engineering
facilities. The five-year lease commences December 15, 1999. The Company expects
to sublet the premises in Redwood City following our
F-27
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JUNE 30, 1997, 1998 AND 1999
(15) SUBSEQUENT EVENT (UNAUDITED) (CONTINUED)
relocation in early 2000 until the expiration of our Redwood City lease in 2002.
Future minimum lease payments for the new lease are as follows for the fiscal
years ending June 30:
<TABLE>
<S> <C>
2000........................................................ $ 878,582
2001........................................................ 2,062,117
2002........................................................ 2,144,604
2003........................................................ 2,330,393
2004 and thereafter......................................... 3,703,768
-----------
$11,019,464
</TABLE>
F-28
<PAGE>
- ---------------------------------------------------------
- ---------------------------------------------------------
7,500,000 SHARES
INTERWAVE COMMUNICATIONS
INTERNATIONAL, LTD.
COMMON SHARES
[LOGO]
------
P R O S P E C T U S
, 2000
---------
SALOMON SMITH BARNEY
BANC OF AMERICA SECURITIES LLC
SG COWEN
- ---------------------------------------------------------
- ---------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by us in connection with the sale of the
common shares being registered. All of the amounts shown are estimates except
for the SEC registration fee, the NASD filing fee and the Nasdaq National Market
listing fee.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 22,770
NASD Filing Fee............................................. 9,125
Nasdaq National Market Listing Fee.......................... 90,000
Blue Sky Qualification Fees and Expenses.................... 10,000
Printing and Engraving Expenses............................. 250,000
Legal Fees and Expenses..................................... 350,000
Accounting Fees and Expenses................................ 250,000
Transfer Agent and Registrar Fees........................... 25,000
Miscellaneous............................................... 193,105
----------
Total................................................... $1,200,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Bye-laws provide as follows:
The Directors, Secretary and other Officers for the time being of the
Company and the liquidator or trustees (if any) for the time being acting in
relation to any of the affairs of the Company and every one of them, and their
heirs, executors and administrators, shall be indemnified and secured harmless
out of the assets of the Company from and against all actions, costs, charges,
losses, damages and expenses which they or any of them, their heirs, executors
or administrators, shall or may incur or sustain by or by reason of any act
done, concurred in or omitted in or about the execution of their duty, or
supposed duty, or in their respective offices or trusts, and none of them shall
be answerable for the acts, receipts, neglects or defaults of the others of them
or for joining in any receipts for the sake of conformity, or for any bankers or
other persons with whom any moneys or effects belonging to the Company shall or
may be lodged or deposited for safe custody, or for insufficiency or deficiency
of any security upon which any moneys of or belonging to the Company shall be
placed out on or invested, or for any other loss, misfortune or damage which may
happen in the execution of their respective offices or trusts, or in relation
thereto, PROVIDED THAT this Indemnity shall not extend to any matter in respect
of any fraud or dishonesty which may attach to any of said persons.
The Company carries liability insurance which provides for coverage for
officers and directors of the Company and its subsidiaries, subject to certain
deductibles.
In December 1999, the Registrant will enter into indemnification agreements
with its directors and officers providing for limitations on a director's and
officer's liability for judgments, settlements, penalties, fines, and expenses
of defense (including attorneys' fees, bonds and costs of investigation) arising
out of or in any way related to acts of omissions as a director or an officer,
or in any other capacity in which services are rendered to the Registrant. The
Registrant believes its indemnification agreements will assist it in attracting
and retaining qualified individuals to serve as directors and officers. The
agreements provide that a director or officer is not entitled to indemnification
under such agreements among other cases (i) if the director or officer is not
relieved of liability under applicable law, (ii) for violations of certain
securities laws, or (iii) for certain claims initiated by the officer or
director. In addition, indemnification may not be available to directors or
officers under Bermuda law
II-1
<PAGE>
if any act or omission by a director or officer amounted to a failure to act
honestly and in good faith with a view to the best interests of the Company. Due
to the lack of applicable case law, it is not clear whether indemnification is
available in the case of a breach of securities laws of the United States.
Insofar as indemnification for liabilities arising under the U.S. Securities
Act may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the United States Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following is a summary of transactions by the Company during the last
three years preceding the date hereof involving sales of the Company's
securities that were not registered under the Securities Act:
- In March 1997, the Registrant sold a total of 1,500,000 Series F preferred
shares at a price of $11.50 per share to UCOM Company International
Limited for an aggregate purchase price of $17,250,000 net of financing
costs of $0. Each Series F preferred share is convertible into one common
share at the option of the holder, and will automatically convert into
common shares at the consummation of Registrant's initial public offering.
These shares were exempt from registration under Rule 506 of the
Securities Act since the sale was to a corporation, which is defined as an
accredited investor under Rule 501(a)(3) of the Securities Act.
- Beginning in March 1998, the Registrant sold a total of 3,714,286
Series G preferred shares and a warrant to purchase 2,000,000 Series G
preferred shares at a price of $7.00 per share to Nortel Networks
Corporation for an aggregate purchase price of $22,744,000 net of
financing costs of $1,756,000 paid substantially to Goldman
Sachs & Co., Inc. The consideration consisted of a $20,000,000 cash
payment and the execution of a license agreement and a technical
information agreement. The warrant expires on the earlier of March 27,
2001, the consummation of an initial public offering or a sale of
substantially all of the assets of the Registrant. Each Series G preferred
share is convertible into one common share. In April 1999, the Registrant
granted Nortel Networks Corporation a warrant to purchase 24,000 common
shares at a purchase price of $1.15 per share. This warrant expires on
April 22, 2002, upon consummation of an initial public offering or a sale
of substantially all of the assets of the Registrant. These shares were
exempt from registration under Rule 506 of the Securities Act since the
sale was to a corporation, which is defined as an accredited investor
under Rule 501(a)(3) of the Securities Act.
- In March 1999, the Registrant entered into a convertible note and warrant
agreement with 106 investors, all of which were existing shareholders of
the Registrant. Pursuant to these note financings, the Registrant borrowed
at 8% annual interest an aggregate amount of $12,691,830 and issued
warrants to purchase 6,345,931 common shares at a purchase price of $0.70
per share. These warrants expire on March 3, 2004. On September 10, 1999,
these notes along with accrued interest converted according to their terms
into 1,872,335 Series H1 preferred shares, and the Registrant granted the
investors additional warrants to purchase 253,874 common shares at a
purchase price of $1.00 per share. These warrants expire on the earlier of
September 10, 2002, the consummation of an initial public offering or a
sale of substantially all of the assets of the Registrant. Each Series H1
preferred share is convertible into one common share. The note financings
were exempt from registration under Rule 506 of the Securities Act since
the sale was to 106 accredited investors, as defined and Rule 501 of the
Securities Act.
- Beginning in July 1999, the Registrant sold a total of 1,715,715
Series H1 preferred shares and warrants to purchase 240,000 common shares
at a price of $7.00 per share to three investors. The warrants expire on
the earlier of three years from the issuance date or upon the
II-2
<PAGE>
consummation of an initial public offering. Each Series H1 preferred share
is convertible into one common share. The shares were exempt from
registration under Rule 506 of the Securities Act since the sales were to
three corporations, which are defined as accredited investors under
Rule 501(a)(3) of the Securities Act.
- In November 1999, the Registrant sold a total of 1,526,663 Series I1
preferred shares at a price of $8.00 per share to Alcatel USA, Inc. for an
aggregate purchase price of $12,013,304 net of financing costs of
$200,000. Each Series I1 preferred share is convertible into one common
share. These shares were exempt from registration under Rule 506 of the
Securities Act since the sale was to a corporation, which is defined as an
accredited investor under Rule 501(a)(3) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<C> <S> <C>
1.1* Form of underwriting agreement
3.1 Bye-laws of the Registrant with amendments
3.2 Form of Amended and Restated Bye-laws of the Registrant to
be filed and effective upon completion of this offering
3.3 Memorandum of Association
4.1 Form of the Registrant's common share certificates
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, a professional
corporation
10.1 Form of indemnification agreement
10.2 1994 Stock Plan and form of stock option agreement and
restricted stock purchase agreement
10.3 1999 Option Plan and form of subscription agreement
10.4 1999 Share Purchase Plan and form of subscription agreement
10.5 Lease between Marina Investments, Inc. and interWAVE
Communications Inc., dated February 15, 1999
10.6+ OEM purchase agreement between Registrant and Nortel
Networks Corporation, dated March 27, 1998
10.7+ Purchase / resale agreement between Registrant and ADC
Telecommunications, Inc., dated February 27, 1997
10.8 Assignment agreement among ADC Telecommunications, Inc.,
Microcellular Systems, Ltd. and the Registrant, dated
May 13, 1999
10.9 Joint development agreement between Registrant and ADC
Telecommunications Inc., dated September 4, 1998
10.10 Offer of employment between Registrant and Ian V. Sugarbroad
10.11 Offer of employment between Registrant and Thomas W. Hubbs
10.13 Amended and Restated Rights Agreement by and among
Registrant and certain shareholders, dated in August 1999
10.14 Form of warrant by and between Registrant and Intasys
Corporation
10.15 Form of warrant by and between Registrant and MediaTel
Capital
10.16 Form of warrant by and between Registrant and Nortel
Networks Corporation
10.17* Patent license agreement by and between Registrant and
Nortel Networks Corporation
10.18 Technical information agreement by and between Registrant
and Nortel Networks Corporation
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S> <C>
10.19 Value-added services agreement between Registrant and
Pemstar, Inc.
10.20+ Distribution and OEM agreement by and between Registrant and
Alcatel, dated October 27, 1999
10.21 Lease between Tyco Electronics Corporation and interWAVE
Communications, Inc., dated November 24, 1999
21.1 List of Subsidiaries
23.1 Consent of KPMG LLP, independent public accountants
23.2* Consent of counsel (included in exhibit 5.1)
24.1* Power of attorney (See page II-5)
27.1* Financial data schedule
</TABLE>
- ------------------------
* To be filed by amendment
+ Confidential treatment has been requested for portions of this exhibit.
These portions have been filed separately with the SEC.
(B) FINANCIAL STATEMENT SCHEDULES
Schedules have been omitted because the information required to be set forth
therein is not applicable or is shown in the Consolidated Financial Statements
or the Notes thereto.
ITEM 17. UNDERTAKINGS
(a) The Registrant hereby undertakes to provide to the underwriter at
the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than 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 Securities Act and will be
governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as at the time it was declared effective; and
(ii) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
the time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the U.S. Securities Act of 1933, as amended
(the U.S. Securities Act), the Registrant certifies that it has reasonable
grounds to believe that it meets all of the requirements for filing on Form F-1
and has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Redwood City,
California, on the 17th day of December, 1999.
<TABLE>
<S> <C> <C>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
By /s/ PRISCILLA M. LU
-----------------------------------------
Priscilla M. Lu
CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
We, the undersigned officers and directors of InterWAVE Communications
International, Ltd., do hereby constitute and appoint Priscilla M. Lu and
Thomas W. Hubbs, and each of them, our true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, for him and his
name, place and stead, in any and all capacities, to sign any and all amendments
to this Registration Statement, and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that each of said attorneys-in-fact and agents, or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the U.S. Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Chief Executive Officer and
/s/ PRISCILLA M. LU Chairman of the Board
------------------------------------------- (Principal Executive December 17, 1999
Priscilla M. Lu Officer)
Executive Vice President,
/s/ THOMAS W. HUBBS Chief Financial Officer
------------------------------------------- (Principal Financial and December 17, 1999
Thomas W. Hubbs Accounting Officer)
/s/ PASCAL DEBON
------------------------------------------- Director December 17, 1999
Pascal Debon
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ KEVIN FONG
------------------------------------------- Director December 17, 1999
Kevin Fong
/s/ WILLIAM J. HARDING
------------------------------------------- Director December 17, 1999
William J. Harding
/s/ JAMES LOH
------------------------------------------- Director December 17, 1999
James Loh
/s/ MOSES TSANG
------------------------------------------- Director December 17, 1999
Moses Tsang
/s/ LORK SANG CHOW
------------------------------------------- Director December 17, 1999
Lork Sang Chow
/s/ ANDREW WANG
------------------------------------------- Director December 17, 1999
Andrew Wang
/s/ PRISCILLA M. LU
------------------------------------------- Authorized Representative December 17, 1999
Priscilla M. Lu
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS PAGE
- --------------------- --------
<C> <S> <C>
1.1* Form of underwriting agreement
3.1 Bye-laws of the Registrant with amendments
3.2 Form of Amended and Restated Bye-laws of the Registrant to
be filed and effective upon completion of this offering
3.3 Memorandum of Association
4.1 Form of the Registrant's common share certificates
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, a professional
corporation
10.1 Form of indemnification agreement
10.2 1994 Stock Plan and form of stock option agreement and
restricted stock purchase agreement
10.3 1999 Option Plan and form of subscription agreement
10.4 1999 Share Purchase Plan and form of subscription agreement
10.5 Lease between Marina Investments, Inc. and interWAVE
Communications Inc., dated February 15, 1999
10.6+ OEM purchase agreement between Registrant and Nortel
Networks Corporation, dated March 27, 1998
10.7+ Purchase / resale agreement between Registrant and ADC
Telecommunications, Inc., dated February 27, 1997
10.8 Assignment agreement among ADC Telecommunications, Inc.,
Microcellular Systems, Ltd. and the Registrant, dated
May 13, 1999
10.9 Joint development agreement between Registrant and ADC
Telecommunications Inc., dated September 4, 1998
10.10 Offer of employment between Registrant and Ian V. Sugarbroad
10.11 Offer of employment between Registrant and Thomas W. Hubbs
10.13 Amended and Restated Rights Agreement by and among
Registrant and certain shareholders, dated in August 1999
10.14 Form of warrant by and between Registrant and Intasys
Corporation
10.15 Form of warrant by and between Registrant and MediaTel
Capital
10.16 Form of warrant by and between Registrant and Nortel
Networks Corporation
10.17* Patent license agreement by and between Registrant and
Nortel Networks Corporation
10.18 Technical information agreement by and between Registrant
and Nortel Networks Corporation
10.19 Value-added services agreement between Registrant and
Pemstar, Inc.
10.20+ Distribution and OEM agreement by and between Registrant and
Alcatel, dated October 27, 1999
10.21 Lease between Tyco Electronics Corporation and interWAVE
Communications, Inc., dated November 24, 1999
21.1 List of Subsidiaries
23.1 Consent of KPMG LLP, independent public accountants
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS PAGE
- --------------------- --------
<C> <S> <C>
23.2* Consent of counsel (included in exhibit 5.1)
24.1* Power of attorney (See page II-5)
27.1* Financial data schedule
</TABLE>
- ------------------------
* To be filed by amendment
+ Confidential treatment has been requested for portions of this exhibit.
These portions have been filed separately with the SEC.
<PAGE>
BYE-LAWS
OF
INTERWAVE COMMUNICATIONS INTERNATIONAL LTD.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I -- GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . .1
1.1 DEFINITIONS AND INTERPRETATION. . . . . . . . . . . . . . . . .1
1.2 REGISTERED OFFICE; PRINCIPAL BUSINESS OFFICE. . . . . . . . . .2
1.3 THE SEAL. . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.4 DUPLICATE SEAL. . . . . . . . . . . . . . . . . . . . . . . . .3
1.5 SECURITIES SEAL . . . . . . . . . . . . . . . . . . . . . . . .3
ARTICLE II -- SHARES AND SHAREHOLDERS GENERALLY. . . . . . . . . . . . . .3
2.1 SHARE RIGHTS GENERALLY. . . . . . . . . . . . . . . . . . . . .3
2.2 SPECIAL RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . .4
2.3 SHARE ISSUANCES . . . . . . . . . . . . . . . . . . . . . . . .4
2.4 BROKERAGE FEES AND COMMISSIONS. . . . . . . . . . . . . . . . .4
2.5 SHARE CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . .4
2.6 LOST OR DESTROYED CERTIFICATES. . . . . . . . . . . . . . . . .4
2.7 ISSUANCE UNDER SEAL; SIGNATURES . . . . . . . . . . . . . . . .4
2.8 INCREASE OF CAPITAL . . . . . . . . . . . . . . . . . . . . . .5
2.9 ALTERATION OF CAPITAL . . . . . . . . . . . . . . . . . . . . .5
2.10 REDUCTION OF CAPITAL. . . . . . . . . . . . . . . . . . . . . .5
2.11 DIVIDENDS AND OTHER PAYMENTS. . . . . . . . . . . . . . . . . .5
2.12 RESERVES. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.13 REGISTER OF SHAREHOLDERS. . . . . . . . . . . . . . . . . . . .7
2.14 REGISTER OF DIRECTORS AND OFFICERS. . . . . . . . . . . . . . .7
2.15 TRANSFER OF SHARES. . . . . . . . . . . . . . . . . . . . . . .7
2.16 TRANSMISSION OF SHARES. . . . . . . . . . . . . . . . . . . . .8
2.17 RECORD DATES. . . . . . . . . . . . . . . . . . . . . . . . . .8
2.18 SERVICE OF NOTICES AND OTHER DOCUMENTS. . . . . . . . . . . . .9
2.19 RESTRICTIONS ON TRANSFER OF SHARES. . . . . . . . . . . . . . .9
ARTICLE III -- SHARE RIGHTS. . . . . . . . . . . . . . . . . . . . . . . 11
3.1 SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.3 LIQUIDATION PREFERENCE. . . . . . . . . . . . . . . . . . . . 13
3.4 CONVERSION INTO COMMON STOCK. . . . . . . . . . . . . . . . . 14
3.5 VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . 24
3.6 PROTECTIVE PROVISIONS . . . . . . . . . . . . . . . . . . . . 24
3.7 RESIDUAL RIGHTS . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE IV -- MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.1 GENERAL MEETINGS. . . . . . . . . . . . . . . . . . . . . . . 26
4.2 SPECIAL GENERAL MEETINGS. . . . . . . . . . . . . . . . . . . 26
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TABLE OF CONTENTS
(CONTINUED)
<CAPTION>
PAGE
----
<S> <C>
4.3 TELEPHONE MEETINGS. . . . . . . . . . . . . . . . . . . . . . 26
4.4 NOTICE OF GENERAL MEETINGS. . . . . . . . . . . . . . . . . . 27
4.5 PROCEEDINGS AT GENERAL MEETINGS . . . . . . . . . . . . . . . 27
4.6 CHAIRMAN. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.7 VOTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.8 CUMULATIVE VOTING . . . . . . . . . . . . . . . . . . . . . . 29
4.9 CORPORATE TRANSACTIONS. . . . . . . . . . . . . . . . . . . . 29
4.10 PROXIES AND CORPORATE REPRESENTATIVES . . . . . . . . . . . . 30
4.11 SHAREHOLDER ACTION BY UNANIMOUS WRITTEN CONSENT WITHOUT A
MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE V -- DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.1 POWERS AND DUTIES OF THE BOARD. . . . . . . . . . . . . . . . 31
5.2 DELEGATION OF THE BOARD'S POWERS. . . . . . . . . . . . . . . 32
5.3 APPOINTMENT AND REMOVAL OF DIRECTORS. . . . . . . . . . . . . 33
5.4 RESIGNATION AND DISQUALIFICATION OF DIRECTORS . . . . . . . . 33
5.5 ALTERNATE DIRECTORS . . . . . . . . . . . . . . . . . . . . . 34
5.6 DIRECTORS' FEES AND ADDITIONAL REMUNERATION AND EXPENSES. . . 34
5.7 PLACE OF MEETINGS; TELEPHONE MEETINGS . . . . . . . . . . . . 34
5.8 DIRECTOR'S INTEREST . . . . . . . . . . . . . . . . . . . . . 35
5.9 PROCEEDINGS OF THE BOARD. . . . . . . . . . . . . . . . . . . 35
5.10 NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.11 QUORUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.12 CHAIRMAN. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.13 BOARD ACTION BY UNANIMOUS WRITTEN CONSENT WITHOUT A MEETING . 36
5.14 REPRESENTATION OF SHARES OF OTHER CORPORATIONS. . . . . . . . 37
5.15 MINUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VI -- OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.1 OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.2 ELECTION OF OFFICERS. . . . . . . . . . . . . . . . . . . . . 37
6.3 SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.4 CHIEF FINANCIAL OFFICER . . . . . . . . . . . . . . . . . . . 38
6.5 SUBORDINATE OFFICERS. . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VII -- RECORDS, REPORTS AND NOTICES. . . . . . . . . . . . . . . 38
7.1 ACCOUNTING RECORDS AND FINANCIAL STATEMENTS . . . . . . . . . 38
7.2 AUDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.3 MAINTENANCE OF SHAREHOLDER REGISTER . . . . . . . . . . . . . 39
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<CAPTION>
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----
<S> <C>
7.4 MAINTENANCE AND INSPECTION OF BYE-LAWS. . . . . . . . . . . . 40
7.5 ANNUAL REPORT TO SHAREHOLDERS . . . . . . . . . . . . . . . . 40
ARTICLE VIII -- INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . 40
8.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY. . . 40
8.2 WAIVER OF CLAIM BY SHAREHOLDER. . . . . . . . . . . . . . . . 41
8.3 INDEMNIFICATION OF OTHERS . . . . . . . . . . . . . . . . . . 41
8.4 PAYMENT OF EXPENSES IN ADVANCE. . . . . . . . . . . . . . . . 41
8.5 INDEMNITY NOT EXCLUSIVE . . . . . . . . . . . . . . . . . . . 41
8.6 INSURANCE INDEMNIFICATION . . . . . . . . . . . . . . . . . . 42
8.7 CONFLICTS . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IX -- BYE-LAWS . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.1 AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.2 APPROVAL BY CLASS . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
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<PAGE>
BYE-LAWS OF
INTERWAVE COMMUNICATIONS INTERNATIONAL LTD.
ARTICLE I -- GENERAL INFORMATION
1.1 DEFINITIONS AND INTERPRETATION
In these Bye-Laws unless the context otherwise requires:
(a) "Bermuda" shall mean the Islands of Bermuda;
(b) "Board" shall mean the Board of Directors of the Company or the
Directors present at a meeting of Directors at which there is a quorum;
(c) "Company" shall mean the company incorporated in Bermuda under
the name of Interwave Communications International Ltd. on the 16th day of
June, 1994;
(d) "Conversion Price" shall mean any of the Series A Conversion
Price, the Series B Conversion Price, the Series C Conversion Price, the
Series D Conversion Price, the Series E Conversion Price, the Series F
Conversion Price and the Series G Conversion Price, as applicable, in each
case as in effect from time to time;
(e) The "Companies Act" shall mean the Bermuda Companies Act,
1981, as amended, from time to time;
(f) "Junior Shares" shall mean all Common Stock and any other
shares of the Company other than the Preferred Stock;
(g) "Memorandum" shall mean the Memorandum of Association of the
Company as filed pursuant to the Companies Acts.
(h) "Paid up" shall mean paid up or credited as paid up;
(i) "Qualified Public Offering" shall mean the closing of the first
firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act covering the offer and sale
of Common Stock at an aggregate offering price of not less than $25,000,000
and, in the case of the Series G Preferred Stock at a price to public in such
offering greater than or equal to $7.00 per share.
(j) "Register" shall mean the register of Shareholders of the
Company;
(k) "Seal" shall mean the common seal of the Company and includes
any duplicate thereof;
(l) "Secretary" includes a temporary or assistant Secretary and any
person appointed by the Board to perform any of the duties of the Secretary;
(m) "Securities Act" shall mean the Securities Act of 1933, as
amended, of the United States, 15 U.S.C. Section 77a et. seq.
<PAGE>
(n) "Subsidiary" shall mean any corporation at least 50% of whose
outstanding voting shares shall at the time be owned by the Company or by one
or more Subsidiaries of the Company;
(o) "Shareholder" shall mean a shareholder or member of the Company;
(p) "these Bye-Laws" shall mean these Bye-Laws in their present
form or as from time to time amended;
(q) for the purpose of these Bye-Laws a corporation shall be deemed
to be present in person if its representative duly authorized pursuant to the
Companies Acts is present;
(r) words meaning the singular number only include the plural
number and vice versa;
(s) words meaning the masculine gender only include the feminine
and neuter genders respectively;
(t) words referring to persons include companies or associations or
bodies of persons, whether incorporated or not incorporated;
(u) references to writing shall include typewriting, printing,
lithography, photography, facsimile or other telecopy and other modes of
representing or reproducing words in a legible and non-transitory form;
(v) any words or expressions defined in the Companies Acts in force
at the date when these Bye-Laws or any part thereof are adopted shall bear
the same meaning in these Bye-Laws or such part (as the case may be).
(w) all dollar amounts or fractions thereof stated herein shall
refer to U.S. dollars.
1.2 REGISTERED OFFICE; PRINCIPAL BUSINESS OFFICE
The Registered Office shall be at such place in Bermuda as the Board
shall from time to time appoint. The principal business office of the
Company may be at such place within or outside of Bermuda as the Board shall
determine.
1.3 THE SEAL
The Seal shall consist of a circular metal device with the name of the
Company around the outer margin thereof and the country and year of
incorporation across the center thereof. Should the Seal not have been
received at the registered office in such form at the date of adoption of
this Bye-Law then, pending such receipt, any document requiring to be sealed
with the Seal shall be sealed by affixing a red wafer seal to the document
with the name of the Company, and the country and year of incorporation type
written across the center thereof.
The Board shall provide for the custody of every Seal. A Seal shall
only be used by authority of the Board or of a committee authorized by the
Board in that behalf. Subject to these Bye-Laws, any instrument to which a
Seal is affixed shall be signed by a Director and by the Secretary or by a
second Director; provided that any Officer or Director may affix a Seal over
his signature only to authenticate copies of these Bye-Laws, incorporating
documents, the minutes of any meeting or any other documents requiring
authentication by such Officer or Director.
-2-
<PAGE>
1.4 DUPLICATE SEAL
(a) The Company may have for use in any territory, district, or
place elsewhere than in Bermuda an official seal (in these Bye-Laws referred
to as an "Duplicate Seal"), which shall be a facsimile of the Seal.
(b) A deed or other document to which the Duplicate Seal is duly
affixed shall bind the Company as if it had been sealed with the Seal.
(c) The Company having an Duplicate Seal for use in any such
territory, district or place may, by writing under its Seal, authorize any
person or persons appointed for the purpose as its agent or agents in that
territory, district or place to affix the Duplicate Seal to any deed or other
document to which the Company is party in that territory, district or place.
(d) As between the Company and the person dealing with such an
agent or agents, the authority of such agent or agents continues during the
period (if any) mentioned in the instrument conferring the authority, or if
no period is there mentioned, then until notice of the revocation or
determination of the authority of such agent or agents has been given to the
person dealing with him.
(e) The person affixing the Duplicate Seal shall certify in writing
on the deed or other instrument to which the Duplicate Seal is affixed the
date on which it is affixed.
(f) The powers referred to in this Bye-Law shall be vested in the
Directors and whenever in these Bye-Laws reference is made to the Seal the
reference shall, when and so far as may be applicable, be deemed to include
any Duplicate Seal and any Securities Seal (as defined in Bye-Law 1.5 below).
1.5 SECURITIES SEAL
(a) The Company may have, for use for sealing securities issued by
the Company and for sealing documents creating or evidencing securities so
issued, an official seal (in these Bye-Laws referred to as a "Securities
Seal") which is a facsimile of the Seal with the addition on its face of the
word "Securities".
(b) Each certificate to which the Securities Seal shall be affixed
need not bear any signature.
ARTICLE II -- SHARES AND SHAREHOLDERS GENERALLY
2.1 SHARE RIGHTS GENERALLY
Subject to any special rights conferred on the holders of any series
or class of shares, any share in the Company may be issued with or have
attached thereto such preferred, deferred, qualified or other special rights
or such restrictions, whether in regard to dividend, voting, return of
capital or otherwise, as the Company may in general meeting determine or, if
there has not been any such determination or so far as such determination
shall not make specific provision, as the Board may determine.
Subject to the provisions of Section 42A of the Act, any preferred
shares may, with the sanction of a resolution of the Shareholders, be issued
on terms:
(a) that they are to be repurchased on the happening of a specified
event or on a given date and/or,
-3-
<PAGE>
(b) that they are liable to be repurchased at the option of the
Company; and/or
(c) if authorized by the Memorandum of the Company, that they are
liable to be repurchased at the option of the holder.
The terms and manner of repurchase shall be provided for by way of
amendment of these Bye-Laws.
2.2 SPECIAL RIGHTS
The special rights conferred upon the holders of any series or class
of shares shall not, unless otherwise expressly provided in the rights
attaching to or the terms of issue of such shares, be deemed to be altered by
the creation or issue of further shares ranking pari passu therewith.
2.3 SHARE ISSUANCES
Subject to the provisions of these Bye-Laws, the unissued shares of
the Company (whether forming part of the original capital or any increased
capital) shall be at the disposal of the Board, which may offer, allot, grant
options over or otherwise dispose of them to such persons, at such times and
for such consideration and upon such terms and conditions as the Board may
determine.
2.4 BROKERAGE FEES AND COMMISSIONS
The Board may in connection with the issue of any shares exercise all
powers of paying commission and brokerage conferred or permitted by law.
2.5 SHARE CERTIFICATES
The preparation, issue and delivery of certificates shall be governed
by the Companies Acts. In the case of a share held jointly by several
persons, delivery of a certificate to one of several joint holders shall be
sufficient delivery to all.
2.6 LOST OR DESTROYED CERTIFICATES
If a share certificate is defaced, lost or destroyed it may be
replaced without fee, subject to any applicable terms as to evidence and
indemnity and subject to the charge to the Shareholder for the reimbursement
of the reasonable payment of costs and out of pocket expenses incurred by the
Company in investigating such evidence and preparing such indemnity. In case
of defacement, a replacement certificate will be issued conditioned on
delivery of the old certificate to the Company.
2.7 ISSUANCE UNDER SEAL; SIGNATURES
All certificates for share or loan capital or other securities of the
Company (other than letters of allotment, scrip certificates and other like
documents) shall, except to the extent that the terms and conditions relating
thereto otherwise provide, be issued under the Seal. The Board may by
resolution determine, either generally or in any particular case, that any
signatures on any such certificates need not be autographic but may be
affixed to such certificates by some mechanical means or may be printed
thereon or that such certificates need not be signed by any persons.
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<PAGE>
2.8 INCREASE OF CAPITAL
The Company may from time to time increase its capital by such sum to
be divided into shares of such par value as the Company in general meeting
shall prescribe.
Any new shares shall be subject to all the provisions of these
Bye-Laws with reference to forfeiture, transfer, transmission and otherwise.
The Company shall not give, whether directly or indirectly, whether by
means of loan, guarantee, provision of security or otherwise, any financial
assistance for the purpose of a purchase of subscription made or to be made
by any person of or for any shares in the Company, but nothing in this
Bye-Law shall prohibit transactions mentioned in Sections 39A, 39B and 39C of
the Act.
2.9 ALTERATION OF CAPITAL
The Company may from time to time in general meeting;
(a) divide its shares into several classes and attach thereto
respectively any preferential, deferred, qualified or special rights,
privileges or conditions;
(b) consolidate all or any of its share capital into shares of
larger par value than its existing shares;
(c) sub-divide its shares or any of them into shares of smaller par
value than is fixed by its memorandum;
(d) change the currency denomination of its share capital in
accordance with the provisions of Sections 45 and 46 of the Act;
(e) make provision for the issue and allotment of shares which do
not carry any voting rights; and
(f) cancel shares which, upon the passing of a resolution to that
effect, have not been taken or agreed to be taken by any person, and diminish
the amount of its share capital by the amount of the shares so canceled.
2.10 REDUCTION OF CAPITAL
Subject to the Companies Acts, its memorandum and any confirmation or
consent required by law or these Bye-Laws, the Company may from time to time
in general meeting authorize the reduction of its issued share capital or any
capital redemption reserve fund or any share premium or contributed surplus
account in any manner. In relation to any such reduction, the Company may in
general meeting determine the terms upon which such reduction is to be
effected.
2.11 DIVIDENDS AND OTHER PAYMENTS
(a) Subject to any special rights provided pursuant to these
Bye-Laws and the provisions of Section 54 of the Act, the Board may from time
to time declare cash dividends to be paid to the Shareholders according to
their rights and interests in the profits including such interim dividends as
appear to the Board to
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<PAGE>
be justified by the position of the Company. The Board may also pay any
fixed cash dividend which is payable on any shares of the Company half yearly
or on such other dates, whenever the position of the Company, in the opinion
of the Board, justifies such payment.
(b) No dividend or other moneys payable by the Company on or in
respect of any shares shall bear interest against the Company.
(c) Any dividend, interest or other sum payable in cash to the
holder of shares may be paid by cheque or warrant sent through the post
addressed to the holder at his address in the Register or, in the case of
joint holders, addressed to the holder whose name stands first in the
Register in respect of the shares at his registered address as appearing in
the register or addressed to such person at such address as the holder or
joint holders may in writing direct. Every such cheque or warrant shall,
unless the holder or joint holders otherwise direct, be made payable to the
order of the holder or, in the case of joint holders, to the order of the
holder whose name stands first in the Register in respect of such shares, and
shall be sent at his or their risk and payment of the cheque or warrant by
the bank on which it is drawn shall constitute a good discharge to the
Company. Any one of two or more joint holders may give effectual receipts
for any dividends or other moneys payable or property distributable with
respect to the shares held by such joint holders.
(d) With the sanction of the Company in general meeting, the Board
may (a) declare a distribution to any Shareholder out of contributed surplus
and (b) may direct payment or satisfaction of such distribution or any
dividend wholly or in part by the distribution of specific assets, and may
fix the value for distribution or dividend purposes of any such specific
assets and may determine that cash payments shall be made to any Shareholder
upon the footing of the values so fixed in order to secure equality of
distribution and may vest such specific assets in trustees as may seem
expedient to the Board.
(e) Neither the Company nor any of its subsidiaries shall make any
distribution to the Company's Shareholders on any shares of its stock of any
class or series which are junior to outstanding shares of any other class or
series with respect to distribution of assets on liquidation if, after giving
effect thereto, the excess of its assets (exclusive of goodwill, capitalized
research and development expenses and deferred charges) over its liabilities
(not including deferred taxes, deferred income and other deferred credits)
would be less than the liquidation preference of all shares having a
preference on liquidation over the class or series to which the distribution
is made; provided, however, that for the purpose of applying this section to
a distribution of cash or property in payment in whole or in part of an
obligation incurred by the Company in connection with the purchase of its
shares, there shall be deducted from liabilities any amount which had been
added thereto at the time the obligation was incurred, but not in excess of
the principal of the obligation which will remain unpaid after the
distribution. Notwithstanding the foregoing, neither the Company nor any of
its Subsidiaries shall make any distribution to the Company's Shareholders on
any shares of its stock of any class or series which are junior to
outstanding shares of any other class or series at any time that such senior
securities are outstanding.
(f) Neither the Company nor any of its subsidiaries shall make any
distribution to the Company's Shareholders on any shares of its stock of any
class or series which are junior to outstanding shares of any other class or
series with respect to payment of dividends unless the amount of the retained
earnings of the Company immediately prior thereto equals or exceeds the
amount of the proposed distribution plus the aggregate amount of the
cumulative dividends in arrears on all shares having a preference with
respect to payment of dividends over the class or series to which the
distribution is made; provided, however, that for the purpose of applying
this section to a distribution of cash or property in payment in whole or in
part of an obligation incurred by the Company in connection with the purchase
of its shares, there shall be added to
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retained earnings any amount that had been deducted therefrom at the time the
obligation was incurred, but not in excess of the principal of the obligation
which remains unpaid immediately prior to the distribution. Notwithstanding
the foregoing, neither the Company nor any of its Subsidiaries shall make any
distribution to the Company's Shareholders on any shares of its stock of any
class or series which are junior to outstanding shares of any other class or
series at any time that such senior securities are outstanding.
(g) Sections 2.11(e) and (f) shall not apply to a purchase or
redemption of shares of a deceased or disabled Shareholder from the proceeds
of life insurance or disability insurance in excess of the total amount of
all premiums paid by the Company for such insurance, in order to carry out
the provisions of an agreement between the Company and such Shareholder to
purchase or redeem such shares upon the death or disability of the
Shareholder. Sections 2.11(e) and (f) also shall not apply to distributions
made by the Company and approved by the Board of Directors in connection with
the repurchase of shares of Common Stock issued to or held by directors,
officers, employees and consultants of the Company upon termination of their
employment or services pursuant to agreements providing the Company such a
right of repurchase.
2.12 RESERVES
The Board may, before recommending or declaring any dividend, set
aside out of the profits of the Company such sums as it thinks proper as
reserves which shall, at the discretion of the Board, be applicable for any
purpose to which the profits of the Company may be properly applied and
pending such application may, also at such discretion, either be employed in
the business of the Company or be invested in such investments as the Board
may from time to time think fit. The Board may also without placing the same
to reserve carry forward any profits which it may think it prudent not to
distribute.
2.13 REGISTER OF SHAREHOLDERS
In accordance with this Section 2.13 and Section 6.4 below, the
Secretary shall establish and maintain the Register of Shareholders at the
Registered Office in the manner prescribed by the Companies Act. Unless the
Board otherwise determines, the Register of Shareholders shall be open to
inspection in the manner prescribed by the Companies Acts between 10:00 a.m.
and 12:00 noon on every working day.
2.14 REGISTER OF DIRECTORS AND OFFICERS
The Secretary shall establish and maintain a register of the Directors
and Officers of the Company as required by the Companies Acts.
The register of Directors and Officers shall be open to inspection in
the manner prescribed by the Companies Acts between 10:00 a.m. and 12:00 noon
on every working day.
2.15 TRANSFER OF SHARES
Subject to the Companies Acts and to such of the restrictions
contained in these Bye-Laws as may be applicable, and to such agreements as
may be binding upon such Shareholder from time to time, any Shareholder may
transfer all or any of his shares by an instrument of transfer in the usual
common form or in any other form which the Board may approve.
No fee shall be charged by the Company for registering any transfer,
probate, letters of administration, certificate of death or marriage, power
of attorney, restraining order or stop notice, order of court or other
instrument relating to or affecting the title to any share, or otherwise
making an entry in the
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Register relating to any share, if properly executed by the appropriate party
or by a court of competent jurisdiction.
2.16 TRANSMISSION OF SHARES
For the purpose of this Section 2.16, legal personal representative
shall mean the person to whom probate or letters of administration has or
have been granted in Bermuda or, failing any such person, such other person
as the Board may in its absolute discretion determine to be the person
recognized by the Company for the purpose of this Section 2.16.
In the case of the death of a Shareholder, the survivor or survivors,
where the deceased was a joint holder, and the legal personal representative,
where he was sole holder, shall be the only person recognized by the Company
as having any title to his shares. Nothing herein contained shall release
the estate of a deceased holder (whether the sole or joint) from any
liability in respect of any share held by him solely or jointly with other
persons.
Any person becoming entitled to a share as a consequence of the death
of a Shareholder or otherwise by operation of applicable law may, subject as
hereafter provided and upon such evidence being produced as may from time to
time be required by the Board as to his entitlement, either be registered
himself as the holder of the share or elect to have some person nominated by
him registered as the transferee thereof. If the person so becoming entitled
elects to be registered himself, he shall deliver or send to the Company a
notice in writing signed by him stating that he so elects. If he shall elect
to have his nominee registered, he shall signify his election by signing an
instrument of transfer of such share in favor of his nominee. All the
limitations, restrictions and provisions of these Bye-Laws relating to the
right to transfer and the registration of transfer of shares shall be
applicable to any such notice or instrument of transfer as aforesaid as if
the death of the Shareholder or other event giving rise to the transmission
had not occurred and the notice or instrument of transfer was an instrument
of transfer signed by such Shareholder.
A person becoming entitled to a share as a consequence of the death of
a Shareholder or otherwise by operation of applicable law shall (upon
delivering such evidence as may from time to time be required by the Board as
to his entitlement) be entitled to receive and may give a discharge for any
dividends or other moneys payable in respect to the share, but he shall not
be entitled in respect of the share to receive notices of or to attend or
vote at general meetings of the Company or, save as aforesaid, to exercise in
respect of the share any of the rights or privileges of a Shareholder until
he shall have become registered as the holder thereof. The Board may at any
time give notice requiring such person to elect either to be registered
himself or to transfer the share and if the notice is not complied with
within sixty days the Board may thereafter withhold payment of all dividends
and other moneys payable in respect of the shares until the requirements of
the notice have been complied with.
Subject to any directions of the Board from time to time in force, the
Secretary may exercise the powers and discretions of the Board under this
Section 2.16.
2.17 RECORD DATES
Notwithstanding any other provisions of these Bye-Laws the Company in
general meeting or the Board may fix any date as the record date for any
dividend, distribution, allotment or issue and for the purpose of identifying
the persons entitled to receive notices of general meetings and proxy
solicitation
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materials. Any such record date may be on or at any time before or after any
date on which such dividend, distribution, allotment or issue is declared,
paid or made or such notice is despatched.
2.18 SERVICE OF NOTICES AND OTHER DOCUMENTS
Any notice or other document (including a share certificate) may be
served on or delivered to any Shareholder by the Company either personally or
by sending it through the post (by airmail where applicable) in a pre-paid
letter addressed to such Shareholder at his address as appearing in the
Register or by delivering it to or leaving it at such registered address. In
the case of joint holders of a share, service or delivery of any notice or
other document on or to one of the joint holders shall for all purposes be
deemed as sufficient service on or delivery to all the joint holders. Any
notice or other document if sent by post shall be deemed to have been served
or delivered seven days after it was put in the post, and in proving such
service or delivery, it shall be sufficient to prove that the notice or
document was properly addressed, stamped and put in the post.
Any notice of a general meeting of the Company shall be deemed to be
duly given to a Shareholder if it is sent to him by cable, telex, telecopier
or other mode of representing or reproducing words in a legible and
non-transitory form at his address as appearing in the Register or any other
address given by him to the Company for this purpose. Any such notice shall
be deemed to have been served twenty-four hours after its despatch.
Any notice or other document delivered, sent or given to a Shareholder
in any manner permitted by these Bye-Laws shall, notwithstanding that such
Shareholder is then dead or bankrupt or that any other event has occurred,
and whether or not the Company has notice of the death or bankruptcy or other
event, be deemed to have been duly served or delivered in respect of any
share registered in the name of such Shareholder as sole or joint holder
unless his or her name shall, at the time of the service or delivery of the
notice or document, have been removed from the Register as the holder of the
share, and such service or delivery shall for all purposes be deemed as
sufficient service or delivery of such notice or document on all persons
interested (whether jointly with or as claiming through or under him) in the
share.
2.19 RESTRICTIONS ON TRANSFER OF SHARES
(a) A sale or transfer of shares of Common or Preferred Stock of
the Company by any holder thereof shall not require the prior approval or
consent of the Board of Directors of the Company.
(b) Before there can be a valid sale or transfer for consideration
of any of the shares of Common Stock of the Company by any holder thereof, he
shall first offer those shares to the Company and then to the other holders
of Common Stock in the following manner:
(i) The offering Shareholder shall deliver a notice in
writing by mail or otherwise to the secretary or an assistant secretary of
the Company stating the price, terms, and conditions of such proposed sale or
transfer, the number of shares to be sold or transferred, and his intention
so to sell or transfer the shares. Such notice shall also set forth the
identity of the proposed purchaser and shall be accompanied by the definitive
purchase and sale agreement that the offering Shareholder is proposing to
utilize in connection with such sale. Within ten (10) days thereafter, the
Company shall have the prior right to purchase all or any part of the shares
offered at the price and upon the terms and conditions stated in such notice.
Should the Company fail to purchase all of said shares, then, at the
expiration of said ten (10) day period or prior thereto upon the
determination of the Company to purchase less than all of such shares so
offered, the secretary or an assistant secretary of the Company shall, within
two (2) days thereafter, mail or deliver to each of the other
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Shareholders a notice setting forth the particulars concerning the shares not
purchased by the Company described in the notice received from the offering
Shareholder. The other Shareholders shall have the right to purchase all or
any part of the shares the Company failed to purchase. If the Company and
the other Shareholders fail to purchase all of the shares specified in the
secretary's or assistant secretary's notice, then the offering Shareholder
shall have no obligation to sell any of such shares to either the Company or
the other Shareholders. Each Shareholder shall deliver to the secretary or
assistant secretary by mail or otherwise a written offer or offers to
purchase all or any specified number of shares upon the terms described in
the secretary's or assistant secretary's notice within eighteen (18) days
after the secretary's or assistant secretary's notice was delivered to the
other Shareholders. If the total number of shares specified n such offers
received within such period by the secretary or assistant secretary exceeds
the number of shares referred to in the secretary's or assistant secretary's
notice, then each offering Shareholder shall be entitled to purchase such
portion of the shares referred to in the secretary's or assistant secretary's
notice as the number of shares of the Company which he holds bears to the
total number of shares held by all Shareholders desiring to purchase the
shares referred to in such notice.
(ii) If all of the shares referred to in the secretary's or
assistant secretary's notice are not disposed of under such apportionment,
then each Shareholder desiring to purchase shares in a number in excess of
his proportionate share, as provided above, shall be entitled to purchase
such proportion of those shares which remain thus undisposed of as the total
number of shares which he holds bears to the total number of shares held by
all of the Shareholders desiring to purchase shares in excess of those to
which they are entitled under such apportionment. Such apportionment shall
be made successively until all of the shares offered have been allocated to
purchasing Shareholders.
(iii) If the shares referred to in the offering Shareholder's
notice to the secretary or assistant secretary are not purchased by the
Company or by other Shareholders within a thirty (30) day period (which
period shall be extended if necessary to comply with legal requirements,
including United States Hart-Scott-Rodino legal requirements) from the date
of delivery of the notice by the offering Shareholder as a result of the
foregoing procedures, the offering Shareholder may sell or transfer to any
person or persons named in the secretary's or assistant secretary's notice
any or all shares of stock referred to in his notice to the secretary or
assistant secretary, but only within a period of one hundred twenty (120)
days from the date of his first notice; provided, however, that he shall not
sell or transfer such shares at a lower price or on terms more favorable to
the purchaser or transferee than those specified in his notice to the
secretary or assistant secretary. After said 120-day period, the foregoing
procedure for first offering shares to the Company and Shareholders shall
again apply.
(iv) Within the limitations herein provided, and subject to
the Companies Acts, the Company may purchase the shares of the Company from
any offering Shareholder; provided, however, that at no time shall the
Company be permitted to purchase all of its outstanding voting shares. Any
sale or transfer or purported sale or transfer of the shares of the Company
shall be null and void unless the terms, conditions, and provisions of this
Subsection 2.19(b) are strictly observed and followed.
(v) The Company shall place an appropriate legend on all
certificates for its shares of Common Stock referring to the provisions of
this Subsection 2.19(b) restricting the transfer of shares.
(vi) The provisions of this Subsection 2.19(b) shall (a) not
apply to any transfer of any of the shares of Common Stock of the Company in
accordance with Regulation S or Rule 144 or Rule 144A promulgated under the
United States Securities Act of 1933, as amended (the "Securities Act"), and
(b) terminate and be of no further force or effect upon the closing of a
Qualified Public Offering.
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ARTICLE III -- SHARE RIGHTS
3.1 SHARE CAPITAL
(a) The capital of the Company shall be divided into such shares
with the rights and restrictions contained in these Bye-Laws as follows:
(i) 12,000 Ordinary Shares of a par value of US$1.00, each
the holders of which shall, subject to the provisions of these Bye-laws:
(1) be entitled to one vote per Ordinary Share;
(2) not be entitled to any dividends in respect of
such Ordinary Share;
(3) in the event of a winding-up or dissolution of
the Company, whether voluntary or involuntary or for the purposes of a
reorganization or otherwise or upon any distribution of capital, be entitled,
pari passu with the holders of Common Shares (subject to the liquidation
preferences set forth in Bye-Law 3.3) to an amount equal to the capital paid
up on such Ordinary Shares but to no other or further amount;
(4) be subject to repurchase of such Ordinary Shares,
whether at the option of the Company or the holder on such terms as the
Directors may by resolution determine; and
(ii) 56,500,000 Preferred Shares of a par value of US$0.83,
subdivided into Series as the Directors may from time to time determine, the
holders of which shall, subject to the provisions of these Bye-laws:
(1) be entitled to one vote per Preferred Share;
(2) be entitled to such dividends as the Directors
may from time to time declare, subject to the provisions of Bye-Law 3.2;
(3) in the event of a winding-up or dissolution of
the Company, whether voluntary or involuntary or for the purposes of a
reorganization or otherwise or upon any distribution of capital, be entitled
to receive distributions in accordance with the liquidation preferences of
outstanding Preferred Shares set forth in Bye-Law 3.3;
(4) be entitled to convert such Preferred Shares into
Common Shares on such terms as the Directors may from time to time determine
prior to the issue of the relevant Series, subject to the provisions of
Bye-Law 3.4;
(5) not be entitled to request repurchase with
respect to such Preferred Shares; and
(iii) 100,000,000 of Common Shares of a par value of US$0.001,
the holders of which shall, subject to the provisions of these Bye-laws:
(1) be entitled to one vote per Common Share;
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(2) be entitled to such dividends as the Directors
may from time to time declare with respect to such Common Shares, subject to
the provisions of Bye-Law 3.2;
(3) in the event of a winding-up or dissolution of
the Company, whether voluntary or involuntary or for the purposes of a
reorganization or otherwise or upon any distribution of capital, be entitled,
pari passu with the holders of Ordinary Shares and subject to the liquidation
preference set forth in Bye-Law 3.3 to an amount equal to the par value per
Common Share and thereafter to all the surplus assets attributable to such
Common Shares; and
(4) not be entitled to request repurchase with
respect to Common Shares.
Subject to compliance with the covenants granted in Sections 3.2 to
3.6, inclusive, of these Bye-Laws to the Preferred Stock (collectively, the
"Covenants"), the shares of Preferred Stock authorized by these Bye-Laws may
be issued from time to time in one or more series. Subject to compliance with
the Covenants, for any wholly unissued series of Preferred Stock, the Board
is hereby authorized to fix and alter the dividend rights, dividend rates,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), redemption prices, liquidation preferences, number
of shares constituting any such series, designation thereof, and any other
rights, preferences or privileges attendant thereto, or any of them.
Subject to compliance with the Covenants, for any series of Preferred
Stock having issued and outstanding shares, the Board is hereby authorized to
increase or decrease the number of shares of such series when the number of
shares of such series was originally fixed by the Board, but such increase or
decrease shall be subject to the limitations and restrictions stated in the
resolution of the Board originally fixing the number of shares of such
series. If the number of shares of any series is so decreased, then the
shares constituting such decrease shall resume the status that they had prior
to the adoption of the resolution originally fixing the number of shares of
such series.
The Company shall from time to time in accordance with the Companies
Acts increase the authorized amount of its Common Stock if at any time the
number of shares of Common Stock remaining unissued and available for
issuance shall not be sufficient to permit conversion of the Series A, Series
A1, Series B, Series B1, Series C, Series C1, Series D, Series D1, Series E,
Series E1, Series F, Series F1, Series G, Series G1 Series H or Series H1
Preferred Stock.
The relative rights, preferences, privileges and restrictions granted
to or imposed on the respective series and classes of the shares of capital
stock or the holders thereof are as provided in Sections 3.2 to 3.6 below.
3.2 DIVIDENDS
The holders of the outstanding shares of Preferred Stock shall be
entitled to receive, out of any funds legally available therefor, dividends
payable in preference and priority to any payment of any dividend on Junior
Shares at the rate of Five Cents ($.05) per share, per annum or, if greater
(as determined on a per annum basis and an as-converted basis for Preferred
Stock), an amount equal to that paid on any other outstanding shares of the
Company, payable on each outstanding share of Preferred Stock, when and as
declared by the Board of Directors. The right to such dividends on shares of
Preferred Stock shall not be cumulative, and no right shall accrue to holders
of Preferred Stock by reason of the fact that dividends on said shares are
not declared or paid in any prior year. Notwithstanding the foregoing, the
Company may repurchase or redeem Junior Shares from employees of the Company
upon termination of employment,
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pursuant to the terms of the restrictive stock agreements entered into with
such employees, provided that, except with the prior approval of a majority
of the Directors who are neither officers nor employees of the Company
("Non-Management Directors"), the Company will not redeem or repurchase any
equity securities (including rights, options, warrants or convertible
securities) held by any officer, director or employee of, or any consultant
to, the Company and except with the prior approval of two-thirds of the
disinterested members of the Board (with respect to such transaction), the
Company will not redeem or repurchase any equity securities (including
rights, options, warrants or convertible securities) of the Company held by
any other persons or entities. Notwithstanding the foregoing, the Company
(i) may repurchase unvested stock at cost from terminated employees or
consultants and (ii) may, with the approval of the Compensation Committee,
exercise rights of first refusal applicable to transfers of vested stock held
by employees or consultants.
In the event the Company shall declare any other dividend, or a
distribution payable in securities of other persons, evidences of
indebtedness issued by the Company or other persons, assets (excluding cash
dividends) or options or rights to purchase any such securities or evidences
of indebtedness, then, in each such case the holders of the Preferred Stock
shall be entitled to a proportionate share of any such distribution as though
the holders of the Preferred Stock were the holders of the number of shares
of Common Stock of the Company into which their shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders
of Common Stock of the Company entitled to receive such distribution.
Dividends, if paid, or if declared and set apart for payment, must be
paid on or declared and set apart for payment on each share of Preferred
Stock contemporaneously, and if less than full dividends are paid on or
declared and set apart for payment, the same percentage of the applicable
dividend rate will be paid on or declared and set apart for payment on each
share of Preferred Stock.
3.3 LIQUIDATION PREFERENCE
(a) In the event of any liquidation, dissolution, or winding up of
the Company, either voluntary or involuntary, the holders of the Series A1
Preferred Stock, Series B1 Preferred Stock, Series C1 Preferred Stock, Series
D1 Preferred Stock, Series E1 Preferred Stock, Series F1 Preferred Stock,
Series G1 Preferred Stock, Series H1 Preferred Stock (the "Senior Preferred
Stock") shall be entitled to receive, on a pari passu basis and prior and in
preference to any distribution of any of the assets or surplus funds of the
Company to the holders of the of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred Stock , Series
H Preferred Stock and Common Stock by reason of their ownership of such
stock, the amount of $0.83, $1.20, $1.50, $3.00, $10.00, $11.50, $7.00 and
$7.00 per share for each share of Series A1 Preferred Stock, Series B1
Preferred Stock, Series C1 Preferred Stock, Series D1 Preferred Stock,
Series E1 Preferred Stock, Series F1 Preferred Stock , Series G1 Preferred
Stock and Series H1 Preferred Stock, respectively, then held by them,
adjusted for any combinations, consolidations, or stock distributions or
dividends with respect to such shares and, in addition, an amount equal to
all declared but unpaid dividends on the Senior Preferred Stock. If the
assets and funds thus distributed among the holders of the Senior Preferred
Stock shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amount, then the entire assets and funds of the
Company legally available for distribution shall be distributed among the
holders of the Senior Preferred Stock in proportion to the respective
preferential amounts fixed for each series upon such an event.
(b) After payment has been made to the holders of the Senior
Preferred Stock of the full amounts to which they are entitled, the holders
of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock, Series G Preferred Stock and Series H Preferred Stock (the
"Junior Preferred Stock") shall be entitled to receive, on a
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pari passu basis and prior and in preference to any distribution of any of
the assets or surplus funds of the Company to the holders of the Common Stock
by reason of their ownership of such stock, the amount of $0.83, $1.20,
$1.50, $3.00, $10.00, $11.50, $7.00 and $7.00 per share for each share of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock, Series G Preferred Stock and Series H Preferred Stock, respectively,
then held by them, adjusted for any combinations, consolidations, or stock
distributions or dividends with respect to such shares and, in addition, an
amount equal to all declared but unpaid dividends on the Junior Preferred
Stock. If the assets and funds thus distributed among the holders of the
Junior Preferred Stock shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amount, then the entire assets and
funds of the Company legally available for distribution shall be distributed
among the holders of the Junior Preferred Stock in proportion to the
respective preferential amounts fixed for each series upon such an event.
(c) After payment has been made to the holders of the Senior
Preferred Stock and the Junior Preferred Stock of the full amounts to which
they shall be entitled as aforesaid, the holders of the Common Stock shall be
entitled to receive all remaining assets of the Company on a pro rata basis
based on the number of shares held by each such holder.
(d) For purposes of this Section 3.3, a merger or consolidation of
the Company with or into any other corporation or corporations, or a sale of
all or substantially all of the assets of the Company, shall be treated as a
liquidation, dissolution or winding up, unless the Shareholders of the
Company hold at least 50% of the outstanding voting equity securities of the
surviving corporation; provided that nothing contained in this subsection (d)
shall limit the right of a holder of Preferred Stock to convert such shares
into Common Stock prior to the effective date of any such transaction.
(e) Each holder of an outstanding share of Preferred Stock shall be
deemed to have consented to distributions made by the Company in connection
with the repurchase of shares of Common Stock issued to or held by employees
or consultants upon termination of their employment or services pursuant to
agreements providing for the right of said repurchase between the Company and
such persons, provided that, except with the prior approval of a majority of
the Non-Management Directors, the Company will not redeem or repurchase any
equity securities (including rights, options, warrants or convertible
securities) held by any officer, director or employee of, or any consultant
to, the Company and except with the prior approval of two-thirds of the
disinterested members of the Board (with respect to such transaction), the
Company will not redeem or repurchase any equity securities (including
rights, options, warrants or convertible securities) of the Company held by
any other persons or entities. Notwithstanding the foregoing, the Company
(i) may repurchase unvested stock at cost from terminated employees or
consultants and (ii) may, with the approval of the Compensation Committee,
exercise rights of first refusal applicable to transfers of vested stock held
by employees or consultants.
3.4 CONVERSION INTO COMMON STOCK
The holders of the Preferred Stock shall have conversion rights as
follows (the "Conversion Rights"):
(a) 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 Company or any transfer agent
for the Preferred Stock, into such number of fully paid and nonassessable
shares of Common
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Stock, as is determined in the case of the Series A Preferred Stock by
dividing $0.83 by the Series A Conversion Price, determined as hereinafter
provided, in effect at the time of conversion. The price at which shares of
Common Stock shall be deliverable upon conversion of the Series A Preferred
Stock (the "Series A Conversion Price") shall initially be $0.83 per share of
Common Stock. The initial Series A Conversion Price shall be subject to
adjustment as hereinafter provided.
(ii) Each share of Series A1 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 Company or any transfer agent
for the Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock, as is determined in the case of the Series A1
Preferred Stock by dividing $0.83 by the Series A1 Conversion Price,
determined as hereinafter provided, in effect at the time of conversion. The
price at which shares of Common Stock shall be deliverable upon conversion of
the Series A1 Preferred Stock (the "Series A1 Conversion Price") shall
initially be $0.83 per share of Common Stock. The initial Series A1
Conversion Price shall be subject to adjustment as hereinafter provided.
(iii) 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 Company or any transfer agent
for the Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock, as is determined in the case of the Series B
Preferred Stock by dividing $1.20 by the Series B Conversion Price,
determined as hereinafter provided, in effect at the time of conversion. The
price at which shares of Common Stock shall be deliverable upon conversion of
the Series B Preferred Stock (the "Series B Conversion Price") shall
initially be $1.20 per share of Common Stock. The initial Series B
Conversion Price shall be subject to adjustment as hereinafter provided.
(iv) Each share of Series B1 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 Company or any transfer agent
for the Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock, as is determined in the case of the Series B1
Preferred Stock by dividing $1.20 by the Series B1 Conversion Price,
determined as hereinafter provided, in effect at the time of conversion. The
price at which shares of Common Stock shall be deliverable upon conversion of
the Series B1 Preferred Stock (the "Series B1 Conversion Price") shall
initially be $1.20 per share of Common Stock. The initial Series B1
Conversion Price shall be subject to adjustment as hereinafter provided.
(v) 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 Company or any transfer agent
for the Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock, as is determined in the case of the Series C
Preferred Stock by dividing $1.50 by the Series C Conversion Price,
determined as hereinafter provided, in effect at the time of conversion. The
price at which shares of Common Stock shall be deliverable upon conversion of
the Series C Preferred Stock (the "Series C Conversion Price") shall
initially be $1.50 per share of Common Stock. The initial Series C
Conversion Price shall be subject to adjustment as hereinafter provided.
(vi) Each share of Series C1 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 Company or any transfer agent
for the Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock, as is determined in the case of the Series C1
Preferred Stock by dividing $1.50 by the Series C1 Conversion Price,
determined as hereinafter provided, in effect at the time of conversion. The
price at which shares of Common Stock shall be deliverable upon conversion of
the Series C1 Preferred Stock (the
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"Series C1 Conversion Price") shall initially be $1.50 per share of Common
Stock. The initial Series C1 Conversion Price shall be subject to adjustment
as hereinafter provided.
(vii) 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 Company or any transfer agent
for the Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock, as is determined in the case of the Series D
Preferred Stock by dividing $3.00 by the Series D Conversion Price,
determined as hereinafter provided, in effect at the time of conversion. The
price at which shares of Common Stock shall be deliverable upon conversion of
the Series D Preferred Stock (the "Series D Conversion Price") shall
initially be $3.00 per share of Common Stock. The initial Series D
Conversion Price shall be subject to adjustment as hereinafter provided.
(viii) Each share of Series D1 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 Company or any transfer agent
for the Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock, as is determined in the case of the Series D1
Preferred Stock by dividing $3.00 by the Series D1 Conversion Price,
determined as hereinafter provided, in effect at the time of conversion. The
price at which shares of Common Stock shall be deliverable upon conversion of
the Series D Preferred Stock (the "Series D1 Conversion Price") shall
initially be $3.00 per share of Common Stock. The initial Series D1
Conversion Price shall be subject to adjustment as hereinafter provided.
(ix) Each share of Series E 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 Company or any transfer agent
for the Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock, as is determined in the case of the Series E
Preferred Stock by dividing $10.00 by the Series E Conversion Price,
determined as hereinafter provided, in effect at the time of conversion. The
price at which shares of Common Stock shall be deliverable upon conversion of
the Series E Preferred Stock (the "Series E Conversion Price") shall
initially be $10.00 per share of Common Stock. The initial Series E
Conversion Price shall be subject to adjustment as hereinafter provided.
(x) Each share of Series E1 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 Company or any transfer agent
for the Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock, as is determined in the case of the Series E1
Preferred Stock by dividing $10.00 by the Series E1 Conversion Price,
determined as hereinafter provided, in effect at the time of conversion. The
price at which shares of Common Stock shall be deliverable upon conversion of
the Series E Preferred Stock (the "Series E1 Conversion Price") shall
initially be $10.00 per share of Common Stock. The initial Series E1
Conversion Price shall be subject to adjustment as hereinafter provided.
(xi) Each share of Series F 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 Company or any transfer agent
for the Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock, as is determined in the case of the Series F
Preferred Stock by dividing $11.50 by the Series F Conversion Price,
determined as hereinafter provided, in effect at the time of conversion. The
price at which shares of Common Stock shall be deliverable upon conversion of
the Series F Preferred Stock (the "Series F Conversion Price") shall
initially be $11.50 per share of Common Stock. The initial Series F
Conversion Price shall be subject to adjustment as hereinafter provided.
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(xii) Each share of Series F1 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 Company or any transfer agent
for the Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock, as is determined in the case of the Series F1
Preferred Stock by dividing $11.50 by the Series F1 Conversion Price,
determined as hereinafter provided, in effect at the time of conversion. The
price at which shares of Common Stock shall be deliverable upon conversion of
the Series F1 Preferred Stock (the "Series F Conversion Price") shall
initially be $11.50 per share of Common Stock. The initial Series F1
Conversion Price shall be subject to adjustment as hereinafter provided.
(xiii) Each share of Series G 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 Company or any transfer agent
for the Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock, as is determined in the case of the Series G
Preferred Stock by dividing $7.00 by the Series G Conversion Price,
determined as hereinafter provided, in effect at the time of conversion. The
price at which shares of Common Stock shall be deliverable upon conversion of
the Series G Preferred Stock (the "Series G Conversion Price") shall
initially be $7.00 per share of Common Stock. The initial Series G
Conversion Price shall be subject to adjustment as hereinafter provided.
(xiv) Each share of Series G1 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 Company or any transfer agent
for the Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock, as is determined in the case of the Series G1
Preferred Stock by dividing $7.00 by the Series G1 Conversion Price,
determined as hereinafter provided, in effect at the time of conversion. The
price at which shares of Common Stock shall be deliverable upon conversion of
the Series G1 Preferred Stock (the "Series G1 Conversion Price") shall
initially be $7.00 per share of Common Stock. The initial Series G1
Conversion Price shall be subject to adjustment as hereinafter provided.
(xv) Each share of Series H 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 Company or any transfer agent
for the Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock, as is determined in the case of the Series H
Preferred Stock by dividing $7.00 by the Series H Conversion Price,
determined as hereinafter provided, in effect at the time of conversion. The
price at which shares of Common Stock shall be deliverable upon conversion of
the Series H Preferred Stock (the "Series H Conversion Price") shall
initially be $7.00 per share of Common Stock. The initial Series H
Conversion Price shall be subject to adjustment as hereinafter provided.
(xvi) Each share of Series H1 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 Company or any transfer agent
for the Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock, as is determined in the case of the Series G1
Preferred Stock by dividing $7.00 by the Series H1 Conversion Price,
determined as hereinafter provided, in effect at the time of conversion. The
price at which shares of Common Stock shall be deliverable upon conversion of
the Series H1 Preferred Stock (the "Series G1 Conversion Price") shall
initially be $7.00 per share of Common Stock. The initial Series H1
Conversion Price shall be subject to adjustment as hereinafter provided.
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(b) AUTOMATIC CONVERSION. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Price of such share upon the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act, covering the offer and sale of Common Stock at an
aggregate offering price of not less than $25,000,000; provided, however,
that the Series G Preferred Stock shall not be automatically converted into
Common Stock pursuant to this paragraph unless (i) the foregoing $25,000,000
threshold is met and (ii) the price to public in such offering is greater
than or equal to $4.00 per share.
(c) MECHANICS OF CONVERSION. No fractional shares of Common Stock
shall be issued upon conversion of Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Company shall pay cash equal to such fraction multiplied by the then
effective Conversion Price for such shares. Before any holder of Preferred
Stock shall be entitled to convert the same into full shares of Common Stock,
he shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Company or of any transfer agent for the Preferred
Stock, and shall give written notice to the Company at such office that he
elects to convert the same. The Company shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Preferred
Stock, a certificate or certificates for the number of shares of Common Stock
to which he shall be entitled as aforesaid and a check payable to the holder
in the amount of any cash amounts payable as the result of a conversion into
fractional shares of Common Stock. Except as set forth in Section 3.4(b)
above, 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
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. If the conversion is in connection with an
underwritten offer of securities registered pursuant to the Act, the
conversion may, at the option of any holder tendering Preferred Stock for
conversion, be conditioned upon the closing with the underwriter of the sale
of securities pursuant to such offering, in which event the person(s)
entitled to receive the Common Stock issuable upon such conversion of the
Preferred Stock shall not be deemed to have converted such Preferred Stock
until immediately prior to the closing of such sale of securities.
(d) ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES.
(i) Adjustments for Subdivisions, Combinations or
Consolidation of Common Stock. In the event the outstanding shares of Common
Stock shall be subdivided (by stock split or otherwise), into a greater
number of shares of Common Stock, the Conversion Price then in effect shall,
concurrently with the effectiveness of such subdivision, be proportionately
decreased. In the event the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, the Conversion Price then in effect shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
(ii) Adjustments for Other Distributions. In the event the
Company at any time or from time to time makes, or fixes a record date for
the determination of holders of Common Stock entitled to receive any
distribution payable in securities of the Company, then and in each such
event provision shall be made so that the holders of Preferred Stock shall
receive upon conversion thereof, in addition to the number of shares of
Common Stock receivable thereupon, the amount of securities of the Company
which they would have received had their Preferred Stock been converted into
Common Stock on the date of such event and had they thereafter, during the
period from the date of such event to and including the date of conversion,
retained such securities receivable by them as aforesaid during such period,
subject to all other adjustments called for during such period under this
Section 3.4 with respect to the rights of the holders of the Preferred Stock.
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(iii) Adjustments for Reorganization, Reclassification,
Exchange and Substitution. If the Common Stock issuable upon conversion of
the 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 3.3(b) hereof), reclassification or otherwise
(other than a subdivision or combination of shares provided for above), the
Conversion Price then in effect shall, concurrently with the effectiveness of
such reorganization or reclassification, be proportionately adjusted such
that the 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 Preferred Stock immediately before such event; and, in any such case,
appropriate adjustment (as determined by the Board) 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 Preferred Stock, to the end that
the provisions set forth herein (including provisions with respect to changes
in and other adjustments of the Conversion Price) 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
Preferred Stock.
(iv) Series G and Series G1 Fair Market Value Antidilution
Adjustment. In addition to the adjustment provided for in Section 3.4(d)(i),
(ii) and (iii), the Series G Conversion Price and Series G1 Conversion Price
shall be subject to adjustment from time to time as follows:
(a) If the Company shall issue (or, pursuant
to subdivision (iv)(a)(iii)(z) hereof, shall be deemed to have issued) any
Common Stock other than Excluded Stock (as hereinafter defined) for a
consideration per share less than the Fair Market Value (as hereinafter
defined) per share immediately prior to the issuance of such Common Stock
(excluding stock dividends, subdivisions, split-ups, combinations, dividends
or recapitalizations), the Series G Conversion Price and/or the Series G1
Conversion Price, as the case may be, in effect immediately after each such
issuance shall forthwith (except as provided in this subsection) be adjusted
to a price equal to the quotient obtained by dividing:
(i) an amount equal to the sum of
(1) the total number of shares
of Common Stock outstanding (including any shares of Common Stock issuable
upon conversion of outstanding of Preferred Stock, options, warrants, or
other securities convertible into Common Stock) immediately prior to such
issuance multiplied by the Conversion Price for the Series G Preferred Stock
and/or Series G1 Preferred Stock, as the case may be, in effect immediately
prior to such issuance, plus
(2) the aggregate consideration
received by the Company upon such issuance, by
(ii) the total number of shares of
Common Stock outstanding immediately prior to such issuance of Common Stock
(including any shares of Common Stock issuable upon conversion of outstanding
Preferred Stock, options, warrants, or other securities convertible into
Common Stock) plus the number of shares of Common Stock issued in the
transaction which resulted in the adjustment pursuant to this subsection.
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(iii) For the purposes of any adjustment
of the Conversion Price for Series G Preferred Stock and Series G1 Preferred
Stock pursuant to this subsection, the following provisions shall be
applicable:
(x) In the case of the issuance
of Common Stock for cash, the consideration received therefor shall be deemed
to be the amount received by the Company therefor, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company in connection therewith;
(y) In the case of the issuance
of Common Stock for a consideration other than cash, the amount of the
consideration other than cash received by the Company shall be deemed to be
the Fair Market Value (as hereinafter defined) of such consideration.
(z) In the case of the issuance
of (i) options to purchase or rights to subscribe for Common Stock, (ii)
securities, by their terms, convertible into or exchangeable for Common
Stock, or (iii) options to purchase or rights to subscribe for securities, by
their terms, convertible into or exchangeable for Common Stock:
(a) the aggregate maximum number
of shares of Common Stock deliverable upon exercise of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in subdivisions
(x) and (y) above), if any, received by the Company upon the issuance of such
options or rights plus the minimum purchase price provided in such options or
rights for the Common Stock covered thereby;
(b) the aggregate maximum number
of shares of Common Stock deliverable upon conversion of or in exchange for
any such convertible or exchangeable securities, or upon the exercise of
options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof, shall
be deemed to have been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal to the
consideration received by the Company for any such securities and related
options or rights (excluding any cash received on account of accrued interest
or accrued dividends), plus the additional minimum consideration, if any, to
be received by the Company upon the conversion or exchange of such securities
or the exercise of any related options or rights (the consideration in each
case to be determined in the manner provided in subdivisions (x) and (y)
above);
(c) on any change in the number
of shares of Common Stock deliverable upon exercise of any such options or
rights or conversion of or exchange for such convertible or exchangeable
securities, or on any change in the minimum purchase price of such options,
rights or securities, other than a change resulting from the antidilution
provisions of such options, rights or securities, the Conversion Price shall
forthwith be readjusted to such Conversion Price as would have obtained had
the adjustment made upon (x) the issuance of such options, rights or
securities not exercised, converted or exchanged prior to such change or (y)
the options or rights related to such securities not converted or exchanged
prior to such change, as the case may be, been made upon the basis of such
change; and
(d) on the expiration of any
such options or rights, the termination of any such rights to convert or
exchange or the expiration of any options or rights related to such
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convertible or exchangeable securities, the Conversion Price shall forthwith
be readjusted to such Conversion Price as would have obtained had the
adjustment made upon the issuance of such options, rights, convertible or
exchangeable securities or options or rights relate to such convertible or
exchangeable securities, as the case may be, been made upon the basis of the
issuance of only the number of shares of Common Stock actually issued upon
the exercise of such options or rights, upon the conversion or exchange of
such convertible or exchangeable securities or upon the exercise of the
options or rights related to such convertible or exchangeable securities, as
the case may be.
(b) "Excluded Stock" shall mean:
(i) all shares of Series A, Series A1,
Series B, Series B1, Series C, Series C1, Series D, Series D1, Series E,
Series E1, Series F, Series F1, Series G and Series G1 Preferred Stock and
the Common Stock into which the shares of such series of Preferred Stock are
convertible;
(ii) all shares of Common Stock or
securities convertible into Common Stock, or options or warrants exercisable
for or convertible into Common Stock or securities convertible into Common
Stock issued to employees and officers of, and consultants, customers,
vendors and equipment lessors to, the Company, pursuant to any arrangement
approved by the compensation committee of Board of Directors of the Company;
(iii) all shares of the Common Stock or
securities convertible into Common Stock, or options or warrants exercisable
for or convertible into Common Stock or securities convertible into Common
Stock issued to any director of the Company pursuant to any arrangement
approved by the a majority of the disinterested members of the Board of
Directors of the Company
(iv) all shares of the Common Stock or
securities convertible into Common Stock, or options or warrants exercisable
for or convertible into Common Stock or securities convertible into Common
Stock issued in connection with any joint venture transaction or strategic
development agreement between the Company and any third party, which
agreement has been approved by the Board of Directors of the Company
(v) the Series G Preferred Stock and/or
Series G-1 Preferred Stock issuable upon exercise of a Warrant Certificate
issued to Northern Telecom, Ltd. ("Nortel") and the Common Stock issuable
upon conversion of such Series G Preferred Stock and/or Series G-1 Preferred
Stock
(vi) the warrants issued in connection
with the Company's 1999 bridge loan financing having an exercise price of
$0.70 per share and the shares of Common Stock issuable upon exercise of such
warrants.
All outstanding shares of Excluded Stock (including shares issuable
upon conversion of the Preferred Stock) shall be deemed to be outstanding for
all purposes of the computations of this subsection.
(c) All calculations under this subsection
shall be made to the nearest cent or to the nearest one hundredth (1/100) of
a share, as the case may be.
(d) For the purpose of any computation
pursuant to this subsection, the "Fair Market Value" at any date of one share
or unit of a security, shall mean:
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(i) If such security is listed or
admitted to trading on any exchange or quoted on the Nasdaq National Market
or any similar organization, the Fair Market Value shall equal the average of
the daily closing prices per share for the twenty (20) consecutive trading
days immediately preceding the date of public announcement of the event
giving rise to adjustment under this subsection or, if no such public
announcement is made with respect to such event, the average of the daily
closing prices per share for the twenty (20) consecutive trading days
immediately preceding the day as of which the Fair Market Value is being
determined. The closing price for each day shall be the last sale price
regular way or, in case no such sale takes place on such day, the average of
the closing bid and ask prices regular way, in either case on the New York
Stock Exchange, or, if such security is not listed admitted to trading on the
New York Stock Exchange, on the principal national securities exchange on
which the shares are listed or admitted to trading, or if such security is
not so listed or admitted to trading, the average of the highest reported bid
and lowest reported ask prices as furnished by the National Association of
Securities Dealers, Inc. through the Nasdaq National Market or through a
similar organization.
(ii) If such security is not listed or
admitted to trading on any exchange or quoted through the Nasdaq National
Market or any similar organization, the Fair Market Value shall be determined
by the Board of Directors of the Company, in good faith and in the exercise
of reasonable business judgment, without taking into consideration any
premium for shares representing control of the Company, any discount for any
minority interest therein or any restrictions on transfer under federal and
applicable state securities laws or otherwise, which determination shall be
conclusive, and which determination of valuation shall be sent in writing by
the Board of Directors of the Company to the holders of the Series G and
Series G1 Preferred Stock. In the event that the holders of at least fifty
percent (50%) of the then-outstanding Series G and Series G1 Preferred Stock
disagree with such valuation, such holders may provide written notice of such
disagreement to the Company within thirty (30) days following such notice
from the Board of Directors of the Company. For a period of fifteen days
following the delivery of the last timely delivered notice of disagreement,
the Company and such holders shall in good faith seek to agree upon a
valuation. If, at the end of such 15-day period, the Company and such
holders have not agreed upon a valuation. If, at the end of such 15-day
period, the Company and such holders have not agreed upon a valuation, then,
to the fullest extent permitted by law, the Fair Market Value shall be
determined by independent appraisal by an independent appraiser hired and
paid by the Company and mutually acceptable to the Company and such holders.
(e) NO IMPAIRMENT. The Company will not, by amendment of its
Bye-Laws or its Memorandum or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Company but will at
all times in good faith assist in the carrying out of all the provisions of
this Section 3.4 and in the taking of all such actions as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Preferred Stock against impairment.
(f) MINIMAL ADJUSTMENTS. No adjustment in the Conversion Price for
any series of Preferred Stock need be made if such adjustment would result in
a change in the Conversion Price of less than $0.01. Any adjustment of less
than $0.01 which is not made shall be carried forward and shall be made at
the time of and together with any subsequent adjustment which, on a
cumulative basis, amounts to an adjustment of $0.01 or more in the Conversion
Price.
(g) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section
3.4, the Company at its expense shall promptly compute such
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adjustment or readjustment in accordance with the terms hereof and furnish to
each holder of 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 Company shall, upon the written request at any
time of any holder of Preferred Stock, furnish or cause to be furnished to
such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other property
which at the time would be received upon the conversion of Preferred Stock.
(h) 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 Preferred Stock such number of its shares of
Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Preferred Stock; and if at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of
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.
(i) NO INCONSISTENT AGREEMENTS. The Company will not enter into
any agreement with respect to its securities which is inconsistent with the
rights granted in Section 3.4 or otherwise conflicts with the provisions of
such section. The rights granted in Section 3.4 do not in any way conflict
with and are not inconsistent with any other agreements to which the Company
is a party or by which it is bound.
(j) NOTICES OF RECORD DATE. In the event that the Company shall
propose at any time:
(i) to declare any dividend or distribution upon its shares
of Common Stock, whether in cash, property, stock or other securities,
whether or not a regular cash dividend and whether or not out of earnings or
earned surplus;
(ii) to offer for subscription pro rata to the holders of any
class or series of its stock any additional shares of stock of any class or
series or other rights;
(iii) to effect any reclassification or recapitalization of
its shares of Common Stock outstanding involving a change in the shares of
Common Stock; or
(iv) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially all its property
or business, or to liquidate, dissolve or wind up;
then, in connection with each such event, the Company shall send to the
holders of the Preferred Stock:
(1) at least 20 days' prior written notice of the
date on which a record shall be taken for such dividend, distribution or
subscription rights (and specifying the date on which the holders of Common
Stock shall be entitled thereto) or for determining rights to vote in respect
of the matters referred to in (iii) and (iv) above; and
(2) in the case of the matters referred to in (iii)
and (iv) above, at least 20 days' prior written notice of the date when the
same shall take place (and specifying the date on which the holders of Common
Stock shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon the occurrence of such event).
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Each such written notice shall be delivered in the manner prescribed
by Section 2.18 of these Bye-Laws.
3.5 VOTING RIGHTS
The holders of Preferred Stock shall be entitled to notice of any
Shareholders' meeting and, except as otherwise required by law, to vote on
all matters submitted to the Shareholders for a vote, together with the
holders of Common Stock, with the holders of Preferred Stock having one vote
for each full share of Common Stock into which their respective shares of
Preferred Stock are convertible on the record date for the vote or, if no
such record date is established, at the date such vote is taken or any
written consent of Shareholders is solicited, and the holders of Common Stock
having one vote per share of Common Stock. Except as otherwise expressly
provided herein or as required by law, the holders of shares of Preferred
Stock and Common Stock shall vote together and not as separate classes.
3.6 PROTECTIVE PROVISIONS
(a) In addition to any other rights provided by law, so long as at
least 500,000 shares of Preferred Stock shall be outstanding, the Company
shall not, without first obtaining the affirmative vote or written consent of
the holders of not less than a majority of the outstanding shares of
Preferred Stock voting as a single class:
(i) amend or repeal any provision of, or add any provision
to, the Company's Bye-Laws or Memorandum if such action would adversely alter
or change the preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of the Preferred Stock, or increase or
decrease the authorized number of shares of Preferred Stock or Common Stock;
(ii) create, authorize or issue shares of any class of stock
or any other securities convertible into equity securities of the Company (i)
having any preference over the Preferred Stock with respect to voting,
dividends, upon liquidation or otherwise, or (ii) having rights superior to
any of the rights of the Preferred Stock under this Section 3.6;
(iii) reclassify any Junior Shares into shares having any
preference or priority as to dividends or assets superior to any such
preference or priority of the Preferred Stock;
(iv) sell, convey or otherwise dispose or encumber all or
substantially all of its property or assets or merge or consolidate with or
into any other corporation or corporations or effect any transaction or
series of related transactions in which more than 50% of the voting power of
the Company is disposed of;
(v) pay or declare any dividend on any shares of Preferred
Stock or Common Stock;
(vi) do any act or thing which would result in taxation of
the holders of shares of the Preferred Stock under Section 305 of the
Internal Revenue Code of 1986, as amended, of the United States, 26 U.S.C.
Section 1 et. seq. (or any comparable provision of the Code as hereafter from
time to time amended); or
(vii) create or authorize any Ordinary Shares beyond the
12,000 Ordinary Shares authorized in Section 3.1 or issue any of the 12,000
Ordinary Shares authorized in Section 3.1.
For purposes of this Section 3.6 (a), shares of different series of
the same class of shares shall not constitute different classes for the
purpose of voting by classes except where a particular series is adversely
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affected in a different manner than shares of the other series of the same
class, in which event the affirmative vote or consent of the holders of a
majority of the shares of adversely affected series shall be required with
respect to the matter being considered. Notwithstanding the foregoing, from
and after the initial issuance of Series G Preferred Stock, the Board may not
increase the authorized number of shares of Series G Preferred Stock without
the affirmative vote or written consent of the holders of not less than a
majority of the outstanding shares of Series G Preferred Stock voting as a
separate series.
(b) Until the closing of a Qualified Public Offering, the Company
shall not:
(i) engage, directly or indirectly, in any business other
than the microcellular business (the "Microcellular Business") except with
the prior consent of Nortel, or if Limited Exclusivity as defined in the OEM
Agreement dated March 1998 between Nortel and the Company (the "OEM
Agreement") has terminated, a majority of the Non-Managment Directors;
(ii) acquire stock or assets of, acquire by merger or
consolidation, or make an investment in, any person or entity engaged
primarily in the Microcellular Business, in any transaction or series of
related transactions of any form or type involving aggregate consideration
having value in excess of $5,000,000 or (ii) acquire stock or assets of,
acquire by merger or consolidation, or make an investment in, any person or
entity not engaged primarily in the Microcellular Business, in any
transaction or series of related transactions of any form or type involving
aggregate consideration having value in excess of $1,000,000 (or in excess of
$5,000,000 for all such transactions from and after March 31, 1998) except
with the prior consent of Nortel, or if the Exclusivity Period as defined in
the OEM Agreement has terminated, a majority of the Non-Management Directors.
For purposes of determining such aggregate total value, the value of non-cash
consideration shall be determined in accordance with the principles established
in the Section 3.4(d)(iv) and such consideration shall be deemed to include
the amount of indebtedness and other liabilities that are assumed by the
Company or any of its Affiliates and that are required to be accrued on a
consolidated balance sheet of the Company in accordance with generally
accepted accounting principles;
(iii) sell or agree to sell any GSM (as defined in the Series
G Preferred Stock and Warrant Agreement dated as of March 16, 1998 between
the Company and Nortel (the "Purchase Agreement")) Proprietary Assets (as
defined in the License Agreement dated March 1998 among the Company, Nortel
and Matra Cellular SCA (the "License Agreement")) outside of the ordinary
course of business, except with the prior written consent of Nortel and
except for sales or licenses of radio or BTS GSM Proprietary Assets or,
subject to the provisions in the License Agreement, in connection with a sale
of the Company in connection with which the Company has complied with the
provisions of Sections 6.13, 6.4 and 6.15 of the Purchase Agreement to the
extent applicable. Except with the prior approval of a majority of the
Non-Management Directors or, subject to the provisions in the License
Agreement, in connection with a sale of the Company in connection with which
the Company has complied with the provisions of Sections 6.13, 6.4 and 6.15
of the Purchase Agreement to the extent applicable, the Company will not sell
or agree to sell any assets outside of the ordinary course of business, or
license or sell, or agree to license or sell, any non-GSM Proprietary Assets
or any radio or BTS GSM Proprietary Assets;
(iv) enter into any transaction with any person (other than
the Company or any direct or indirect majority-owned Subsidiary of the
Company) that is (a) the Beneficial Owner of 5% or more of the outstanding
voting securities of the Company or (b) an affiliate or associate of any such
person or entity except with the prior approval of a majority of the
disinterested members of the Board (with respect to such transaction);
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(v) adopt a budget for any fiscal year or make material
expenditures beyond the limits set by such budget without the consent of a
majority of the members of the Board;
(vi) incur any debt (including obligations for borrowed
money, obligations evidenced by notes or other instruments, obligations in
connection with letters of credit or guarantees, obligations for the deferred
purchase price of property or services (including installment sales
contracts) and capitalized lease obligations) in an amount exceeding
$1,000,000 in total aggregate principal amount except with the prior approval
of two-thirds of the members of the Board;
(vii) enter into any employment agreement with any officer or
other employee of the Company under which the total consideration (base
salary plus guaranteed bonus, multiplied by the total number of years of such
agreement, including any extensions thereof that may be made at the election
of the employee) payable by the Company and its Subsidiaries exceeds or may
reasonably be expected to exceed $250,000 except with the prior approval of
the Compensation Committee. The compensation, both in the form of cash and
equity incentives, paid by the Company to its executive officers will be
subject to the approval of the Compensation Committee, and will be reviewed
by the Compensation Committee at least annually.
Transactions and other actions undertaken by any majority-owned
Subsidiary of the Company shall be subject to the restrictions set forth in
this Section 3.6 (b) if such transactions and other actions would, if
undertaken by the Company, be subject to such restrictions.
3.7 RESIDUAL RIGHTS
All rights accruing to the outstanding shares of the Company not
expressly provided for to the contrary herein shall be vested in the Common
Stock.
ARTICLE IV -- MEETINGS
4.1 GENERAL MEETINGS
The Board shall convene and the Company shall hold Annual General
Meetings in accordance with the requirements of the Companies Acts at such
times and places as the Board shall appoint.
4.2 SPECIAL GENERAL MEETINGS
A special general meeting of the Shareholders may be called at any
time by the Board, 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.
4.3 TELEPHONE MEETINGS
A meeting of the Shareholders or any class or series thereof may be
held by means of such telephone, electronic or other communication facilities
as permit all persons participating in the meeting to communicate with each
other simultaneously and instantaneously, and participating in such a meeting
shall constitute presence in person at such meeting.
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4.4 NOTICE OF GENERAL MEETINGS
An Annual General Meeting and a Special General Meeting shall be
called by not less than 10 days' notice in writing. The notice shall specify
the place, day and time of the meeting, and the general nature of the
business to be considered. No business not referred to in the notice of any
such meeting shall be conducted at such meeting. Notice of every general
meeting shall be given in any manner permitted by this Section 4.4 to all
Shareholders other than such as, under the provisions of these Bye-Laws or
the terms of issue of the shares they hold, are not entitled to receive such
notice from the Company. Notwithstanding that a meeting of the Company is
called by shorter notice than that specified in this Bye-Law, it shall be
deemed to have been duly called if it is so agreed, in the case of a meeting
called as an Annual General Meeting, by all the Shareholders entitled to
attend and vote thereat.
The accidental omission to give notice of a meeting or (in cases where
instruments of proxy are sent out with the notice) the accidental omission to
send such instrument of proxy to, or the non-receipt of notice of a meeting
or such instrument of proxy by, any person entitled to receive such notice
shall not invalidate the proceedings at that meeting.
4.5 PROCEEDINGS AT GENERAL MEETINGS
No business shall be transacted at any general meeting unless a quorum
is present when the meeting proceeds to business, but the absence of a quorum
shall not preclude the appointment, choice or election of a Chairman which
shall not be treated as part of the business of the meeting. 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. Notwithstanding the foregoing, no business may be
transacted at any general meeting of Shareholders unless at least two
Shareholders are present at the meeting in person. The Shareholders present
in person or by proxy 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 at such meeting by at least a
majority of the shares required to constitute a quorum.
If within five minutes (or such longer time as the Chairman of the
meeting may determine to wait) after the time appointed for the meeting, a
quorum is not present, the meeting, if convened on the requisition of
Shareholders, shall be dissolved. In any other case, it shall stand
adjourned to such other day and such other time and place as the Chairman of
the meeting may determine and at such adjourned meeting two Shareholders
present in person (whatever the number of shares held by them) shall be a
quorum.
Each Director shall be entitled to attend and speak at any general
meeting of the Company.
4.6 CHAIRMAN
The Chairman (if any) of the Board or, in his absence, the President
shall preside as Chairman at every general meeting. If there is no such
Chairman or President, or if at any meeting neither of the Chairman nor the
President is present within five minutes after the time appointed for holding
the meeting, or if neither of them is willing to act as Chairman, the
Directors present shall choose one of their number to act or if one Director
only is present he shall preside as Chairman if willing to act. If no
Director is present or, if each of the Directors present declines to take the
chair, the persons present and entitled to vote on a poll shall elect one of
their number to be Chairman.
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The Chairman may, with the consent of any meeting at which a quorum is
present (and shall if so directed by the meeting), adjourn the meeting from
time to time and from place to place but no business shall be transacted at
any adjourned meeting except business which might lawfully have been
transacted at the meeting from which the adjournment took place. When a
meeting is adjourned for thirty days or more, notice of the adjourned meeting
shall be given as in the case of an original meeting.
Save as expressly provided by these Bye-Laws, it shall not be
necessary to give any notice of an adjournment or of the business to be
transacted at an adjourned meeting.
4.7 VOTING
Save where a greater majority is required by the Companies Acts or
these Bye-Laws, any question proposed for consideration at any general
meeting shall be decided on by a simple majority of votes cast.
At any general meeting, a resolution put to the vote of the meeting
shall be decided on a show of hands unless (before or on the declaration of
the result of the show of hands or on the withdrawal of any other demand for
a poll) a poll is demanded by:
(a) the Chairman of the meeting or any Director; or
(b) at least three Shareholders present in person or represented by
proxy; or
(c) any Shareholder or Shareholders present in person or
represented by proxy and holding between them not less than five percent (5%)
of the total voting rights of all the Shareholders having the right to vote
at such meeting; or
(d) a Shareholder or Shareholders present in person or represented
by proxy holding shares conferring the right to vote at such meeting, being
shares on which an aggregate sum has been paid up equal to not less than five
percent (5%) of the total sum paid up on all such shares conferring such
right.
Unless a poll is so demanded and the demand is not withdrawn, a
declaration by the Chairman that a resolution has, on a show of hands, been
carried or carried unanimously or by a particular majority or not carried by
a particular majority or lost shall be final and conclusive, and an entry to
that effect in the Minute Book of the Company shall be conclusive evidence of
the fact without proof of the number of votes recorded for or against such
resolution.
If a poll is duly demanded, the result of the poll shall be deemed to
be the resolution of the meeting at which the poll is demanded.
Any poll demanded shall be taken forthwith.
The demand for a poll shall not prevent the continuance of a meeting
for the transaction of any business other than the question on which the poll
has been demanded and it may be withdrawn at any time before the close of the
meeting or the taking of the poll, whichever is earlier.
On a poll, votes may be cast either personally or by proxy.
A person entitled to more than one vote on a poll need not use all his
votes or cast all the votes he uses in the same way.
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In the case of an equality of votes at a general meeting, whether on a
show of hands or on a poll, the Chairman of such meeting shall not be
entitled to a second or casting vote.
In the case of joint holders of a share, the vote of the senior who
tenders a vote, whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders, and for this purpose
seniority shall be determined by the order in which the names stand in the
Register in respect of the joint holding.
A Shareholder who is a patient for any purpose of any statute or
applicable law relating to mental health or in respect of whom an order has
been made by any Court having jurisdiction for the protection or management
of the affairs of persons incapable of managing their own affairs may vote,
whether on a show of hands or on a poll, by his receiver, committee, curator
bonis or other person in the nature of a receiver, committee or curator bonis
or other person may vote on a poll by proxy, and may otherwise act and be
treated as such Shareholder for the purpose of general meetings.
No Shareholder shall, unless the Board otherwise determines, be
entitled to vote at any general meeting unless all calls or other sums
presently payable by him in respect of shares in the Company have been paid.
If (i) any objection shall be raised to the qualification of any voter
or (ii) any votes have been counted which ought not been counted or which
might have been rejected or (iii) any votes are not counted which ought to
have been counted, the objection or error shall not vitiate the decision of
the meeting or adjourned meeting on any resolution unless the same is raised
or pointed out at the meeting or, as the case may be, the adjourned meeting
at which the vote objected to is given or tendered or at which the error
occurs. Any objection or error shall be referred to the Chairman of the
meeting and shall only vitiate the decision of the meeting on any resolution
if the Chairman decides that the same may have affected the decision of the
meeting. The decision of the Chairman on such matters shall be final and
conclusive.
4.8 CUMULATIVE VOTING
At any 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 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. This Section 4.8 may only be amended by the affirmative vote of
seventy-five percent (75%) of the outstanding shares entitled to vote.
4.9 CORPORATE TRANSACTIONS
(a) AMALGAMATION OR MERGER: An amalgamation or merger of this
Company with or into another corporation, shall be approved by the
affirmative vote of a majority of the outstanding shares entitled to vote.
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(b) SALE OF ASSETS: A sale, lease, conveyance, exchange, transfer
or other disposal of all or substantially all of the Company's assets (with
the exception of transactions which are, in the judgment of the Board, in the
usual and regular course of the Company's business) shall be approved by the
affirmative vote of a majority of the outstanding shares entitled to vote.
(c) SHARE EXCHANGE: Any transaction in which the Company acquires
shares of another corporation in exchange in whole or in part for its equity
securities (or the equity securities of a corporation which is in control of
the Company), whereby, immediately after the acquisition, the Company has
control of the other corporation, shall be approved by the affirmative vote
of a majority of the outstanding shares entitled to vote.
(d) EXCEPTIONS: No approval of the outstanding shares will be
required under subsections (a) and (c) of this Section 4.9 if the Company, or
its Shareholders immediately before the reorganization, or both, shall own
(immediately after the reorganization) equity securities, other than any
warrant or right to subscribe to or purchase such equity securities, of the
surviving or acquiring corporation or a parent party possessing more than
five-sixths of the voting power of the surviving or acquiring corporation or
parent party. In making the determination of ownership by the Shareholders
of the Company, immediately after the reorganization, of equity securities
pursuant to the preceding sentence, equity securities which Shareholders
owned immediately before the reorganization as Shareholders of another party
to the transaction shall be disregarded. For the purpose of this section
only, the voting power of a corporation shall be calculated by assuming the
conversion of all equity securities convertible, immediately or at some
future time, into shares entitled to vote but not assuming the exercise of
any warrant or right to subscribe to or purchase such shares.
(e) VOTING REQUIREMENTS: The voting requirements in this Section
4.9 are in addition to any voting requirements set forth in the Companies
Acts or elsewhere in these Bye-Laws.
4.10 PROXIES AND CORPORATE REPRESENTATIVES
The instrument appointing a proxy shall be in writing under the hand
of the appointor or of his attorney authorized by him in writing or, if the
appointor is a corporation, either under its seal or under the hand of an
officer, attorney or other person authorized to sign the same.
Any Shareholder may appoint a standing proxy or (if a corporation)
representative by depositing at the Registered Office a proxy or (if a
corporation) an authorization and such proxy or authorization shall be valid
for all general meetings and adjournments thereof until notice of revocation
is received at the Registered Office. Where a standing proxy or
authorization exists, its operation shall be deemed to have been suspended at
any general meeting or adjournment thereof at which the Shareholder is
present or in respect to which the Shareholder has specially appointed a
proxy or representative. The Board may from time to time require such
evidence as it shall deem necessary as to the due execution and continuing
validity of any such standing proxy or authorization, which shall be deemed
to be suspended until such time as the Board determines that it has received
the requested evidence or other evidence satisfactory to it.
Subject to this Section 4.10, the instrument appointing a proxy
together with such other evidence as to its due execution as the Board may
from time to time require, shall be delivered at the Registered Office (or at
such place as may be specified in the notice convening the meeting or in any
notice of any adjournment or, in either case, in any document sent therewith)
prior to the holding of the meeting or adjourned meeting at which the person
named in the instrument proposed to vote or, in the case of a poll taken
subsequently to the date of
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a meeting or adjourned meeting, before the time appointed for the taking of
the poll and in default the instrument of proxy shall not be treated as valid.
Instruments of proxy shall be in any common form or in such other form
as the Board may approve and the Board may, if it thinks fit, send out with
the notice of any meeting forms of instruments of proxy for use at that
meeting. The instrument of proxy shall be deemed to confer authority to
demand or join in demanding a poll and to vote on any amendment of a
resolution put to the meeting for which it is given as the proxy thinks fit.
The instrument of proxy shall unless the contrary is stated therein be valid
as well for any adjournment of the meeting as for the meeting to which it
relates.
A vote given in accordance with the terms of an instrument of proxy
shall be valid notwithstanding the previous death or insanity of the
principal, or revocation of the instrument of proxy or of the authority under
which it was executed, provided that no intimation in writing of such death,
insanity or revocation shall have been received by the Company at the
Registered Office (or such other place as may be specified for the delivery
of instruments of proxy in the notice convening the meeting or other
documents sent therewith) one hour at least before the commencement of the
meeting or adjourned meeting, or the taking of the poll, at which the
instrument of proxy is used.
Subject to the Companies Acts, the Board may at its discretion waive
any of the provisions of these Bye-Laws related to proxies or authorizations
and, in particular, may accept such verbal or other assurances as it thinks
fit as to the right of any person to attend and vote on behalf of any
Shareholder at general meetings.
4.11 SHAREHOLDER ACTION BY UNANIMOUS WRITTEN CONSENT WITHOUT A MEETING
Subject to the Companies Act, any action required or permitted to be
taken by the Shareholders may be taken without a meeting, provided that all
Shareholders 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 Shareholders. Such written consent and any
counterparts thereof shall be filed with the minutes of the proceedings of
the Shareholders.
ARTICLE V -- DIRECTORS
5.1 POWERS AND DUTIES OF THE BOARD
Subject to the provisions of the Companies Acts and these Bye-Laws and
to any direction given by the Company in general meeting, the Board shall
manage the business of the Company and may pay all expenses incurred in
promoting and incorporating the Company and may exercise all the powers of
the Company. No alteration of these Bye-Laws and no such director shall
invalidate any prior act of the Board which would have been valid if that
alteration had not been made or that direction had not been given. The
powers given to the Board by these Bye-Laws and a meeting of the Board at
which a quorum is present shall be competent to exercise all the powers,
authorities and discretions for the time being vested in or exercisable by
the Board.
The Board may exercise all the powers to borrow money and to mortgage
or charge all or any part of the undertaking, property and assets (present
and future) and uncalled capital of the Company and to issue debentures and
other securities, whether outright or as collateral security for any debt,
liability or obligation of the Company or of any other persons.
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All cheques, promissory notes, drafts, bills of exchange and other
instruments, whether negotiable or transferable or not, and all receipts for
money paid to the Company shall be signed, drawn, accepted, endorsed or
otherwise executed, as the case may be, in such manner as the Board shall
from time to time by resolution determine.
The Board on behalf of the Company may provide benefits, whether by
the payment of gratuities or pensions or otherwise, for any person including
any Director or former Director who has held any executive office or
employment with the Company or with any body corporate which is or has been a
subsidiary or affiliate of the Company or a predecessor in the business of
the Company or of any such subsidiary or affiliate, and to any member of his
family or any person who is or was dependent on him, and may contribute to
any fund and pay premiums for the purchase or provision of any such gratuity,
pension or other benefit, or for the insurance of any such person.
The Board may, with the approval of the President, from time to time
appoint one or more of its body to be a managing director, joint managing
director or an assistant managing director or to hold any other employment or
executive office with the Company for such period and upon such terms as the
Board may determine and may revoke or terminate any such appointments. Any
such revocation or termination as aforesaid shall be without prejudice to any
claim for damages that such Director may have against the Company or the
Company may have against such Director for any breach of any contract of
service between him and the Company which may be involved in such revocation
or termination. Any person so appointed shall receive such remuneration (if
any) (whether by way of salary, commission, participation in profits or
otherwise) as the Board may determine, and either in addition to or in lieu
of his remuneration as a Director.
The Board may, from time to time without the approval of the
Shareholders of the Company, but subject to the requirements of the Companies
Acts, authorize, and cause the Company to repurchase any of its issued and
outstanding shares.
5.2 DELEGATION OF THE BOARD'S POWERS
The Board may, by power of attorney, appoint any company, firm or
person or any fluctuating body of persons, whether nominated directly or
indirectly by the Board, to be the attorney or attorneys of the Company for
such purposes and with such powers, authorities and discretions (not
exceeding those vested in or exercisable by the Board under these Bye-Laws)
and for such period and subject to such conditions as it may think fit, and
any such power of attorney may contain such provisions for the protection and
convenience of persons dealing with any such attorney and of such attorney as
the Board may think fit, and may also authorize any such attorney to
sub-delegate all or any of the powers, authorities and discretions vested in
him.
The Board may entrust to and confer upon any Director or officer any
of the powers exercisable by it upon such terms and conditions with such
restrictions as it thinks fit, and either collaterally with, or to the
exclusion of, its own powers, and may from time to time revoke or vary all or
any of such powers but no person dealing in good faith and without notice of
such revocation or variation shall be affected thereby.
The Board may delegate any of its powers, authorities and discretions
to committees, consisting of such person or persons (whether a member or
members of its body or not) as it thinks fit. Any committee so formed shall,
in the exercise of the powers, authorities and discretions so delegated,
conform to any regulations which may be imposed upon it by the Board.
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The holder(s) of a majority of the outstanding shares of Series G
Preferred shall approve the appointment of one member of any committee formed
by the board. The foregoing provisions are subject to the terms of that
certain Voting Agreement dated March 1998, to which certain Shareholders of
the Company are parties, regarding the voting of such Shareholders in the
election of directors.
5.3 APPOINTMENT AND REMOVAL OF DIRECTORS
Subject to the Companies Acts and these Bye-Laws, a director shall
hold office until the expiration of the term for which elected and until a
successor has been qualified and elected.
The Shareholders shall at the Annual General Meeting and may in any
general meeting determine the minimum and the maximum number of Directors and
may in general meeting determine that one or more vacancies in the Board
shall be deemed casual vacancies for the purposes of these Bye-Laws. Without
prejudice to the power of the Company in general meeting in pursuance of any
of the provisions of these Bye-Laws to appoint any person to be a Director,
the Board, so long as a quorum of Directors remains in office, shall have
power at any time and from time to time to appoint any Shareholder being an
individual to be a Director so as to fill a casual vacancy.
The Company may in a Special General Meeting called for that purpose
remove a Director provided notice of any such meeting shall be served upon
the Director concerned not less than 14 days before the meeting and he shall
be entitled to be heard at that meeting. No Director may be removed (unless
the entire Board is removed) when the votes cast against the removal would be
sufficient to elect the Director if voted cumulatively at an election at
which the same total number of votes were cast and the entire number of
Directors authorized at the time of the Director's most recent election were
then being elected. Any vacancy created by the removal of a Director at a
Special General Meeting may be filled at the Meeting by the election of
another Director in his place or, in the absence of any such election, by the
Board.
The foregoing provisions are subject to the terms of that certain
Voting Agreement dated March 1998, to which certain Shareholders of the
Company are parties, regarding the voting of such Shareholders in the
election of directors.
5.4 RESIGNATION AND DISQUALIFICATION OF DIRECTORS
The office of a Director shall be vacated upon the happening of any of
the following events:
(a) if he resigns his office by notice in writing delivered to the
Registered Office or tendered at a meeting of the Board;
(b) if he becomes of unsound mind or a patient for any purpose of
any statute or applicable law relating to mental health and the Board
resolves that his office is vacated;
(c) if he becomes bankrupt or compounds with his creditors;
(d) if he is prohibited by law from being a Director;
(e) if he ceases to be a Director by virtue of the Companies Acts
or is removed from office pursuant to these Bye-Laws.
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5.5 ALTERNATE DIRECTORS
The Company may in general meeting elect a person or persons qualified
to be Directors to act as Directors in the alternative to any of the
Directors of the Company or may authorize the Board to appoint such Alternate
Directors. Additionally, unless otherwise resolved by the Shareholders, a
Director may appoint an Alternate Director to act as a Director in his or her
stead by notifying the Secretary in writing of such appointment. Any
Alternate Director may be removed by the Company in general meeting, and if
appointed by the Board, may be removed by the Board and, subject thereto, the
office of Alternate Director shall continue until the next annual election of
Directors or, if earlier, the date on which the relevant Director ceases to
be a Director. An Alternate Director may also be a Director in his own right
and may act as alternate to more than one Director.
An Alternate Director shall be entitled to receive notices of all
meetings of Directors, to attend, be counted in the quorum and vote at any
such meeting at which any Director to whom he is alternate is not personally
present, and generally to perform all the functions of any Director to whom
he is an alternate in his absence.
Any person acting as an Alternate Director shall (except as regards
powers to appoint an alternate and remuneration) be subject in all respects
to the provisions of these Bye-Laws relating to Directors and shall alone be
responsible to the Company for his acts and defaults and shall not be deemed
to be the agent of or for any Director for whom he is alternate. An
Alternate Director may be paid expenses and shall be entitled to be
indemnified by the Company to the same extent as if he were a Director.
Every person acting as an Alternate Director shall have one vote for each
Director for whom he acts as alternate (in addition to his own vote if he is
also a Director). The signature of an Alternate Director to any resolution
in writing of the Board or a committee of the Board shall, unless the terms
of his appointment provides to the contrary, be as effective as the signature
of the Director or Directors to whom he is an alternate.
5.6 DIRECTORS' FEES AND ADDITIONAL REMUNERATION AND EXPENSES
The amount, if any, of Directors' fees shall from time to time be
determined by the Shareholders of the Company in a general meeting and in the
absence of a determination to the contrary in general meeting, such fees
shall be deemed to accrue from day to day. Each Director may be paid his
reasonable traveling, hotel and incidental expenses in attending and
returning from meetings of the Board or committee constituted pursuant to
these Bye-Laws or general meetings and shall be paid all expenses properly
and reasonably incurred by him in the discharge of his duties as a Director.
Any Director who, by request, goes or resides abroad for any purposes of the
Company or who performs services which in the opinion of the Board go beyond
the ordinary duties of a Director may be paid such extra remuneration
(whether by way of salary, commission, participation in profits or otherwise)
as the Board may determine, and such extra remuneration shall be in addition
to any remuneration provided for by or pursuant to any other Bye-Law.
5.7 PLACE OF MEETINGS; TELEPHONE MEETINGS
Regular meetings of the Board may be held at any place within or
outside of Bermuda 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 business office of the Company. Special meetings of
the Board may be held at any place within or outside Bermuda that has been
designated in the notice of the meeting or, if not stated in the notice, at
the registered office of the Company.
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Any meeting, regular or special, of the Board or a committee appointed
by the Board may be held by means of such telephone, electronic or other
communication facilities as permit all persons participating in the meeting
to communicate with each other simultaneously and instantaneously, and
participation in such a meeting shall constitute presence in person at such
meeting.
5.8 DIRECTOR'S INTEREST
(a) A Director may hold any other office or place of profit with
the Company (except that of auditor) in conjunction with his office of
Director for such period and upon such terms as the Board may determine, and
may be paid such extra remuneration therefor (whether by way or salary,
commission, participation in profits or otherwise) as the Board may
determine, and such extra remuneration shall be in addition to any
remuneration provided for by or pursuant to any other Bye-Law.
(b) A Director may act by himself or his firm in a professional
capacity for the Company (otherwise than as auditor) and he or his firm shall
be entitled to remuneration for professional services as if he were not a
Director.
(c) Subject to the provisions of the Companies Acts, a Director
may, notwithstanding his office be a party to, or otherwise interested in,
any transaction or arrangement with the Company or in which the Company is
otherwise interested; and be a Director or other officer of, or employed by,
or a party to any transaction or arrangement with, or otherwise interested
in, any body corporate promoted by the Company or in which the Company is
interested. The Board may also cause the voting power conferred by the
shares in any other company held or owned by the Company to be exercised in
such manner in all respects as it thinks fit, including the exercise thereof
in favor of any resolution appointing the Directors or any of them to be
directors or officers of such other company, or voting or providing for the
payment of remuneration to the directors or officers of such other company.
(d) So long as, where it is necessary, he declares the nature of
his interest at the first opportunity at a meeting of the Board or by writing
to the Directors as required by the Companies Acts, a Director shall not by
reason of his office be accountable to the Company for any benefits which he
derives from any office or employment to which these Bye-Laws allow him to be
appointed or from any transaction or arrangement in which these Bye-Laws
allow him to be interested, and no such transaction or arrangement shall be
liable to be avoided on the ground of any interest or benefit.
(e) Subject to the Companies Acts and any further disclosure
required thereby, a general notice to the Directors by a Director or officer
declaring that he is a director or officer or has an interest in a person and
is to be regarded as interested in any transaction or arrangement made with
that person, shall be a sufficient declaration of interest in relation to any
transaction or arrangement so made.
5.9 PROCEEDINGS OF THE BOARD
The Board may meet for the despatch of business, adjourn and otherwise
regulate its meetings as it thinks fit. Questions arising at any meeting
shall be determined by a majority of votes.
Regular meetings of the Board may be held without additional notice if
the times of such meeting are fixed by the Board. No business not
contemplated in the notice of any such meeting shall be conducted at such
meeting.
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Special meetings of the Board for any purpose or purposes may be
called, with reasonable notice given, at any time by the Chairman of the
Board, the President, any Vice President, the Secretary or any two directors.
No business not contemplated in the notice of any such meeting shall be
conducted at such meeting.
The meetings and proceedings of any committee consisting of two or
more members shall be governed by the provisions contained in these Bye-Laws
for regulating the meetings and proceedings of the Board so far as the same
are applicable and are not superseded by any regulations imposed by the Board.
5.10 NOTICE
Notice of a board meeting shall be deemed to be duly given to a
Director if it is given to him personally or by word of mouth or received by
post, cable, telex, telecopier or other mode of representing or reproducing
words in a legible and non-transitory form at his last known address or any
other address given by him to the Company for this purpose. A Director may
waive notice of an meeting either prospectively or retrospectively.
5.11 QUORUM
A quorum necessary for the transaction of the business of the Board
may be fixed by the Board and, unless so fixed at any other number, shall be
a majority of the Directors, provided that if a majority of Directors is less
than five (5) then a quorum shall include one individual designated by Nortel
and its assigns to the extent Nortel has rights pursuant to that certain
Voting Agreement dated March 1998. Any Director who ceases to be a Director
at a board meeting may continue to be present and to act as a Director and be
counted in the quorum until the termination of the Board meeting if no other
Director objects and if otherwise a quorum of Directors would not be present.
(a) A Director who to his knowledge is in any way, whether directly
or indirectly, interested in a contract or proposed contract, transaction or
arrangement with the Company and has complied with the provisions of the
Companies Acts and these Bye-Laws with regard to disclosure of his interest
shall be entitled to vote in respect of any contract, transaction or
arrangement in which he is so interested; provided, however, his vote shall
be not counted, and he shall not be taken into account in ascertaining
whether a quorum is present.
(b) So long as a quorum of Directors remains in office, the
continuing Directors may act notwithstanding any vacancy in the Board but, if
no quorum of Directors remains, the continuing Directors or a sole continuing
Director may act only for the purpose of calling a general meeting.
5.12 CHAIRMAN
The Board may elect a Chairman of the Board from amongst its members.
If no Chairman of the Board is elected or he is absent, the President shall
be Chairman. If at any meeting neither the Chairman of the Board nor the
President is present within five minutes after the time appointed for holding
the same, the Directors present may choose one of their number to be Chairman
of the meeting.
5.13 BOARD ACTION BY UNANIMOUS WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the Board or a
committee thereof may be taken without a meeting, provided that all members
of the Board or the committee, as the case may be, individually
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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
or the committee, as the case may be. Such written consent and any
counterparts thereof shall be filed with the minutes of the proceedings of
the Board.
5.14 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 the Company,
or any other person authorized by the Board or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of the
Company all rights incidental to any and all shares of any other corporation
or corporations standing in the name of the Company. 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.
5.15 MINUTES
The Directors shall cause minutes to be made and books kept for the
purpose of recording:
(a) all appointments of officers made by the Directors;
(b) the names of the Directors and other persons (if any) present
at each meeting of Directors and of any committee;
(c) of all proceedings at meetings of the Company, of the holders
of any class of shares in the Company, and of committees;
(d) of all proceedings of managers (if any).
ARTICLE VI -- OFFICERS
6.1 OFFICERS
The officers of the Company shall include a President or a Chairman
and a Vice-President or Vice-Chairman who shall be Directors and shall be
elected by the Board as soon as possible after the statutory meeting and each
annual general meeting. In addition, the Board may appoint any person
whether or not he is a Director to hold such other office (including any
additional Vice-Presidencies) as the Board may from time to time determine.
Any person elected or appointed pursuant to this Bye-Law shall hold office
for such period and upon such terms as the Board may determine and the Board
may revoke or terminate any such election or appointment. Any such
revocation or termination shall be without prejudice to any claim for damages
that such officer may have against the Company or the Company may have
against such officer for any breach of any contract of service between him
and the Company which may be involved in such revocation or termination.
Save as provided in the Companies Acts or these Bye-Laws, the powers and
duties of the officers of the Company shall be such (if any) as are
determined from time to time by the Board.
6.2 ELECTION OF OFFICERS
The officers of the Company, except such officers as may be appointed
in accordance with the provisions of these Bye-Laws, shall be chosen by the
Board, subject to the rights, if any, of an officer under any contract of
employment.
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6.3 SECRETARY
The secretary shall keep or cause to be kept, at the registered office
of the Company, a book of minutes of all meetings and actions of directors,
committees of the Board 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 registered
office of the Company or at the office of the Company's transfer agent or
registrar, as determined by resolution of the Board, 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 required to be given by law or by these
Bye-Laws, and shall keep the seal of the Company in safe custody and shall
have such other powers and perform such other duties as may be prescribed by
the Board or by these Bye-Laws.
6.4 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 Company, 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 Company with such depositaries
as may be designated by the Board, and shall disburse the funds of the
Company as may be ordered by the Board, 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 Company, and
shall have such other powers and perform such other duties as may be
prescribed by the Board or these Bye-Laws.
6.5 SUBORDINATE OFFICERS
The Board may with the approval of the President appoint, or the Board
may empower the President to appoint, such other officers as the business of
the Company may require, each of whom shall hold office for such period, have
such authority, and perform such duties as are provided in these Bye-Laws or
as the Board may from time to time determine.
ARTICLE VII -- RECORDS, REPORTS AND NOTICES
7.1 ACCOUNTING RECORDS AND FINANCIAL STATEMENTS
The Board shall cause to be kept accounting records sufficient to give
a true and fair view of the state of the Company's affairs and to show and
explain its transactions, in accordance with the Companies Acts and the
United States Foreign Corrupt Practices Act, whether or not the same may be
applicable.
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The records of account shall be kept at the Registered Office or at
such other place or places as the Board thinks fit, and shall at all times be
open to inspection by the Directors: provided that if the records of account
are kept at some place outside Bermuda, there shall be kept at an office of
the Company in Bermuda such records as will enable the directors to ascertain
with reasonable accuracy the financial position of the Company at the end of
each three month period. No Shareholder (other than an officer of the
Company) shall have the right to inspect any accounting record or book or
document of the Company except as conferred by law or authorized by the Board
or the Company in general meeting.
7.2 AUDIT
(a) APPOINTMENT OF AUDITOR. Subject to Section 88 of the Act, at
the annual general meeting or at a subsequent special general meeting in each
year, an independent representative of the Shareholders shall be appointed by
them as Auditor of the accounts of the Company. Such Auditor may be a
Shareholder but no Director, Officer or employee of the Company shall, during
his or her continuance in office, be eligible to act as an Auditor of the
Company. Such Auditor shall be a firm of independent public accountants of
national standing in the United States.
(b) REMUNERATION OF AUDITOR. The remuneration of the Auditor shall
be fixed by the Company in general meeting or in such manner as the
Shareholders may determine.
(c) VACATION OF OFFICE OF AUDITOR. If the office of Auditor
becomes vacant by the resignation or death of the Auditor, or by the Auditor
becoming incapable of acting by reason of illness or other disability at a
time when the Auditor's services are required, the Board shall, as soon as
practicable, convene a special general meeting to fill the vacancy thereby
created.
(d) ACCESS TO BOOKS OF THE COMPANY. The Auditor shall at all
reasonable times have access to all books kept by the Company and to all
accounts and vouchers relating thereto, and the Auditor may call on the
Directors or Officers of the Company for any information in their possession
relating to the books or affairs of the Company.
7.3 MAINTENANCE OF SHAREHOLDER REGISTER
The Company shall keep either at its Registered Office or at the
office of its transfer agent or registrar (if either be appointed) or at some
other place in Bermuda of which the Registrar of Companies has received
notice, as determined by resolution of the Board, a Register of its
Shareholders listing the names and addresses of all Shareholders and the
number and class of shares held by each Shareholder. In addition, a copy of
such Register shall be kept at its principal executive offices.
A Shareholder or Shareholders of the Company who holds at least five
percent (5%) in the aggregate of the outstanding voting shares of the Company
or who holds at least one percent (1%) of such voting shares and has filed a
Schedule 14B with the Securities and Exchange Commission of the United States
relating to the election of directors, may (i) inspect and copy a copy of the
records of Shareholders' names, addresses, and shareholdings at the principal
executive offices of the Company during usual business hours on five (5)
days' prior written demand on the Company and (ii) obtain from the Company
or, if applicable, the transfer agent of the Company, on written demand and
(in the case of such transfer agent) on the tender of such transfer agent's
usual charges for such list, a list of the names and addresses of the members
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
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made available to any such members by the Company or, if applicable, 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.
Any inspection and copying under this Section 7.3 may be made in
person or by an agent or attorney of the Shareholder or holder of a voting
trust certificate making the demand.
7.4 MAINTENANCE AND INSPECTION OF BYE-LAWS
The Company shall keep at its registered office in Bermuda and at its
principal business office outside Bermuda the original or a copy of these
Bye-Laws as amended to date, which Bye-Laws shall be open to inspection by
the Shareholders at all reasonable times during office hours. If the
principal business office of the Company is outside Bermuda and the Company
has no principal business office there, then the Secretary shall, upon the
written request of any Shareholder, furnish to that Shareholder a copy of
these Bye-Laws as amended to date.
7.5 ANNUAL REPORT TO SHAREHOLDERS
The Board 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 Company. 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 4.2 of these Bye-Laws for giving notice to
Shareholders of the Company.
The annual report shall contain a consolidated balance sheet of the
Company and its subsidiaries, as of the end of such fiscal year, and
consolidated statements of income, Shareholders' equity and cash flows of the
Company and its subsidiaries for such year, prepared in accordance with
generally accepted accounting principles and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and certified by independent public accountants of national standing
selected by the Company.
ARTICLE VIII -- INDEMNIFICATION
8.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY
The Directors, Secretary and other Officers for the time being of the
Company and the liquidator or trustees (if any) for the time being acting in
relation to any of the affairs of the Company and every one of them, and
their heirs, executors and administrators, shall be indemnified and secured
harmless out of the assets of the Company from and against all actions,
costs, charges, losses, damages and expenses which they or any of them, their
heirs, executors or administrators, shall or may incur or sustain by or by
reason of any act done, concurred in or omitted in or about the execution of
their duty, or supposed duty, or in their respective offices or trusts, and
none of them shall be answerable for the acts, receipts, neglects or defaults
of the others of them or for joining in any receipts for the sake of
conformity, or for any bankers or other persons with whom any moneys or
effects belonging to the Company shall or may be lodged or deposited for safe
custody, or for insufficiency or deficiency of any security upon which any
moneys of or belonging to the Company shall be placed out on or invested, or
for any other loss, misfortune or damage which may happen in the execution of
their respective offices or trusts, or in relation thereto, PROVIDED THAT
this Indemnity
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shall not extend to any matter in respect of any gross negligence, wilful
default, fraud or dishonesty which may attach to any of said persons.
8.2 WAIVER OF CLAIM BY SHAREHOLDER
Each Shareholder agrees to waive any claim or right of action such
Shareholder might have, whether individually or by or in the right of the
Company, against any Director or Officer on account of any action taken by
such Director or Officer in his or her capacity as such, or the failure of
such Director or Officer to take any action in the performance of his duties
with or for the Company, PROVIDED THAT such waiver shall not extend to any
matter in respect of any gross negligence, wilful default, fraud or
dishonesty which may attach to such Director or Officer nor to any matter in
which a Director or Officer fails to discharge his duty to act honestly and
in good faith with a view towards the best interests of the Company.
8.3 INDEMNIFICATION OF OTHERS
The Company shall have the power, to the extent and in the manner
permitted by the Companies Acts, to indemnify each of its employees and
agents (other than directors and officers) against expenses judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was
an agent of the Company. For purposes of this Article VIII, an "employee" or
"agent" of the Company (other than a director or officer) includes any person
(i) who is or was an employee or agent of the Company (ii) who is or was
serving at the request of the Company 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 Company which was a predecessor corporation
of the Company or of another enterprise at the request of such predecessor
corporation.
8.4 PAYMENT OF EXPENSES IN ADVANCE
Subject to the Companies Acts, expenses incurred in defending any
civil or criminal action or proceeding for which indemnification is required
pursuant to Section 8.1 or for which indemnification is permitted pursuant to
Section 8.2 following authorization thereof by the Board shall be paid by the
Company 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 VIII.
Each Shareholder of the Company, by virtue of his acquisition and
continued holding of a share, shall be deemed to have acknowledged and agreed
that advances of funds made by the Company to a Director under this Section
are made to meet expenditures incurred for the purpose of enabling such
Director to properly perform his or her duties as an officer of the Company.
8.5 INDEMNITY NOT EXCLUSIVE
The indemnification provided by this Article VIII shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any Bye-Law, 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 Memorandum.
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8.6 INSURANCE INDEMNIFICATION
The Company 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 Company 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 Company would have the power to indemnify him against such liability
under the provisions of this Article VIII.
8.7 CONFLICTS
No indemnification or advance shall be made under this Article VIII,
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
Memorandum, these Bye-Laws, 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 IX -- BYE-LAWS
9.1 AMENDMENT
Notwithstanding anything to the contrary contained herein, no Bye-Law
shall be rescinded, altered or amended and no new Bye-Law shall be made until
the same has been approved by a resolution by the Board and by the
affirmative vote at any general meeting of a sixty percent (60%) of all
outstanding shares entitled to vote, voting as a single class, or by such
greater majority as may be required by the Companies Act or these Bye-Laws;
provided, however, no amendment shall be made to Section 3.4(d)(iv), Section
3.6(a)(vii), Section 3.6(b) or the fourth paragraph of Section 5.2 except
with the consent of Nortel.
9.2 APPROVAL BY CLASS
A proposed amendment to these Bye-Laws must be approved by the
affirmative vote of a majority of the outstanding shares entitled to vote of
any class of stock, whether or not such class is entitled to vote thereon by
the provision of these Bye-Laws, if the amendment would:
(a) Increase or decrease the aggregate number of authorized shares
of such class, except that no such vote is required:
(i) For an amendment effecting only a stock split,
(including an increase in the authorized number of shares in proportion
thereto); or
(ii) For an amendment to increase the authorized shares of
any class to such number as will be sufficient from time to time, when added
to the previously authorized but unissued shares of such class, to satisfy
any option to purchase share or conversion right of securities convertible
into shares, if the
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Company had obtained the approval of the outstanding shares of such class for
the issue of such options or convertible securities.
(b) Effect an exchange, reclassification or cancellation of all
shares or part of the shares of such class, other than a stock split;
(c) Effect an exchange, or create a right of exchange of all or
part of the shares of another class into shares of such class;
(d) Create a new class of shares having the rights, preferences or
privileges prior to the shares of such class, or increase the rights,
preferences or privileges or the number of authorized shares of any class
having rights, preferences or privileges prior to the shares of such class;
(e) Cancel or otherwise affect dividends on the shares of such
class which have accrued but have not been paid.
For the purposes of this Section 9.2, different series of the same
class of shares shall not constitute different classes for the purpose of
voting by classes except when a series is adversely affected by an amendment
in a different manner than other series of the same class.
This Section 9.2 may only be amended by the affirmative vote of a
majority of the outstanding shares entitled to vote of each class and series
of stock of which shares are outstanding.
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BYE-LAWS
OF
INTERWAVE COMMUNICATIONS INTERNATIONAL LTD.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE I -- GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . .1
1.1 DEFINITIONS AND INTERPRETATION. . . . . . . . . . . . . . . . .1
1.2 REGISTERED OFFICE; PRINCIPAL BUSINESS OFFICE. . . . . . . . . .2
1.3 THE SEAL. . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.4 DUPLICATE SEAL. . . . . . . . . . . . . . . . . . . . . . . . .2
1.5 SECURITIES SEAL . . . . . . . . . . . . . . . . . . . . . . . .3
ARTICLE II -- SHARES AND SHAREHOLDERS GENERALLY. . . . . . . . . . . . . .3
2.1 SHARE RIGHTS GENERALLY. . . . . . . . . . . . . . . . . . . . .3
2.2 SPECIAL RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . .4
2.3 SHARE ISSUANCES . . . . . . . . . . . . . . . . . . . . . . . .4
2.4 BROKERAGE FEES AND COMMISSIONS. . . . . . . . . . . . . . . . .4
2.5 SHARE CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . .4
2.6 LOST OR DESTROYED CERTIFICATES. . . . . . . . . . . . . . . . .4
2.7 ISSUANCE UNDER SEAL; SIGNATURES . . . . . . . . . . . . . . . .4
2.8 INCREASE OF CAPITAL . . . . . . . . . . . . . . . . . . . . . .4
2.9 ALTERATION OF CAPITAL . . . . . . . . . . . . . . . . . . . . .5
2.10 REDUCTION OF CAPITAL. . . . . . . . . . . . . . . . . . . . . .5
2.11 DIVIDENDS AND OTHER PAYMENTS. . . . . . . . . . . . . . . . . .5
2.12 RESERVES. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.13 REGISTER OF SHAREHOLDERS. . . . . . . . . . . . . . . . . . . .7
2.14 REGISTER OF DIRECTORS AND OFFICERS. . . . . . . . . . . . . . .7
2.15 TRANSFER OF SHARES. . . . . . . . . . . . . . . . . . . . . . .7
2.16 TRANSMISSION OF SHARES. . . . . . . . . . . . . . . . . . . . .8
2.17 RECORD DATES. . . . . . . . . . . . . . . . . . . . . . . . . .8
2.18 SERVICE OF NOTICES AND OTHER DOCUMENTS. . . . . . . . . . . . .9
2.19 RESTRICTIONS ON TRASNFER OF SHARES. . . . . . . . . . . . . . .
ARTICLE III -- SHARE RIGHTS. . . . . . . . . . . . . . . . . . . . . . . .9
3.1 SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . .9
3.2 DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.3 LIQUIDATION PREFERENCE. . . . . . . . . . . . . . . . . . . . .
3.4 CONVERSION INTO COMMON STOCK. . . . . . . . . . . . . . . . . .
3.5 VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . .
3.6 PROTECTIVE PROVISIONS . . . . . . . . . . . . . . . . . . . . .
3.7 RESIDUAL RIGHTS . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE IV -- MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1 GENERAL MEETINGS. . . . . . . . . . . . . . . . . . . . . . . 10
4.2 SPECIAL GENERAL MEETINGS. . . . . . . . . . . . . . . . . . . 10
4.3 TELEPHONE MEETINGS. . . . . . . . . . . . . . . . . . . . . . 11
4.4 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER
BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.5 PROCEEDINGS AT GENERAL MEETINGS . . . . . . . . . . . . . . . 11
4.6 CHAIRMAN. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.7 VOTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.8 CUMULATIVE VOTING . . . . . . . . . . . . . . . . . . . . . . 13
4.9 CORPORATE TRANSACTIONS. . . . . . . . . . . . . . . . . . . . 14
4.10 PROXIES AND CORPORATE REPRESENTATIVES . . . . . . . . . . . . 14
4.11 SHAREHOLDER ACTION BY UNANIMOUS WRITTEN CONSENT WITHOUT A
MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
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ARTICLE V -- DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.1 POWERS AND DUTIES OF THE BOARD. . . . . . . . . . . . . . . . 15
5.2 DELEGATION OF THE BOARD'S POWERS. . . . . . . . . . . . . . . 16
5.3 NUMBER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.4 CLASSES OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . 17
5.5 APPOINTMENT AND REMOVAL OF DIRECTORS. . . . . . . . . . . . . 17
5.6 RESIGNATION AND DISQUALIFICATION OF DIRECTORS . . . . . . . . 18
5.7 ALTERNATE DIRECTORS . . . . . . . . . . . . . . . . . . . . . 18
5.8 DIRECTORS' FEES AND ADDITIONAL REMUNERATION AND EXPENSES. . . 19
5.9 PLACE OF MEETINGS; TELEPHONE MEETINGS . . . . . . . . . . . . 19
5.10 DIRECTOR'S INTERESTS. . . . . . . . . . . . . . . . . . . . . 19
5.11 PROCEEDINGS OF THE BOARD. . . . . . . . . . . . . . . . . . . 20
5.12 NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.13 QUORUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.14 CHAIRMAN. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.15 BOARD ACTION BY UNANIMOUS WRITTEN CONSENT WITHOUT A MEETING . 21
5.16 REPRESENTATION OF SHARES OF OTHER CORPORATIONS. . . . . . . . 21
5.17 MINUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI -- OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1 OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.2 ELECTION OF OFFICERS. . . . . . . . . . . . . . . . . . . . . 22
6.3 SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.4 CHIEF FINANCIAL OFFICER . . . . . . . . . . . . . . . . . . . 22
6.5 SUBORDINATE OFFICERS. . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VII -- RECORDS, REPORTS AND NOTICES. . . . . . . . . . . . . . . 23
7.1 ACCOUNTING RECORDS AND FINANCIAL STATEMENTS . . . . . . . . . 23
7.2 AUDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.3 MAINTENANCE OF SHAREHOLDER REGISTER . . . . . . . . . . . . . 24
7.4 MAINTENANCE AND INSPECTION OF BYE-LAWS. . . . . . . . . . . . 24
7.5 ANNUAL REPORT TO SHAREHOLDERS . . . . . . . . . . . . . . . . 24
ARTICLE VIII -- INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . 24
8.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY. . . 24
8.2 WAIVER OF CLAIM BY SHAREHOLDER. . . . . . . . . . . . . . . . 25
8.3 INDEMNIFICATION OF OTHERS . . . . . . . . . . . . . . . . . . 25
8.4 PAYMENT OF EXPENSES IN ADVANCE. . . . . . . . . . . . . . . . 25
8.5 INDEMNITY NOT EXCLUSIVE . . . . . . . . . . . . . . . . . . . 25
8.6 INSURANCE INDEMNIFICATION . . . . . . . . . . . . . . . . . . 26
8.7 CONFLICTS . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
ARTICLE IX -- BYE-LAWS . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.1 AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.2 APPROVAL BY CLASS . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
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<PAGE>
BYE-LAWS OF
INTERWAVE COMMUNICATIONS INTERNATIONAL LTD.
ARTICLE I -- GENERAL INFORMATION
1.1 DEFINITIONS AND INTERPRETATION
In these Bye-Laws unless the context otherwise requires:
(a) "Bermuda" shall mean the Islands of Bermuda;
(b) "Board" shall mean the Board of Directors of the Company or the
Directors present at a meeting of Directors at which there is a quorum;
(c) "Company" shall mean the company incorporated in Bermuda under
the name of Interwave Communications International Ltd. on the 17th day of
June, 1994;
(d) The "Companies Act" shall mean the Bermuda Companies Act, 1981,
as amended, from time to time;
(e) "Junior Shares" shall mean all Common Shares and any other
shares of the Company other than the Preferred Shares;
(f) "Memorandum" shall mean the Memorandum of Association of the
Company as filed pursuant to the Companies Act.
(g) "Paid up" shall mean paid up or credited as paid up;
(h) "Register" shall mean the Register of Members of the Company;
(i) "Seal" shall mean the common seal of the Company and includes any
duplicate thereof;
(j) "Secretary" includes a temporary or assistant Secretary and any
person appointed by the Board to perform any of the duties of the Secretary;
(k) "Securities Act" shall mean the Securities Act of 1933, as
amended, of the United States, 15 U.S.C. Section 77a et. seq.
(l) "Subsidiary" shall mean any corporation at least 50% of whose
outstanding voting shares shall at the time be owned by the Company or by one
or more Subsidiaries of the Company;
(m) "Shareholder" shall mean a shareholder or member of the Company;
(n) "these Bye-Laws" shall mean these Bye-Laws in their present form
or as from time to time amended;
<PAGE>
(o) for the purpose of these Bye-Laws a corporation shall be deemed
to be present in person if its representative duly authorized pursuant to the
Companies Act is present;
(p) words meaning the singular number only include the plural
number and vice versa;
(q) words meaning the masculine gender only include the feminine
and neuter genders respectively;
(r) words referring to persons include companies or associations or
bodies of persons, whether incorporated or not incorporated;
(s) references to writing shall include typewriting, printing,
lithography, photography, facsimile or other telecopy and other modes of
representing or reproducing words in a legible and non-transitory form;
(t) any words or expressions defined in the Companies Act in force
at the date when these Bye-Laws or any part thereof are adopted shall bear
the same meaning in these Bye-Laws or such part (as the case may be).
(u) all dollar amounts or fractions thereof stated herein shall
refer to U.S. dollars.
1.2 REGISTERED OFFICE; PRINCIPAL BUSINESS OFFICE
The Registered Office shall be at such place in Bermuda as the Board
shall from time to time appoint. The principal business office of the
Company may be at such place within or outside of Bermuda as the Board shall
determine.
1.3 THE SEAL
The Seal shall consist of a circular metal device with the name of the
Company around the outer margin thereof and the country and year of
incorporation across the center thereof. Should the Seal not have been
received at the registered office in such form at the date of adoption of
this Bye-Law then, pending such receipt, any document requiring to be sealed
with the Seal shall be sealed by affixing a red wafer seal to the document
with the name of the Company, and the country and year of incorporation type
written across the center thereof.
The Board shall provide for the custody of the Seal. The Seal shall
only be used by authority of the Board or of a committee authorized by the
Board in that behalf. Subject to these Bye-Laws, any instrument to which the
Seal is affixed shall be signed by a Director and by the Secretary or by a
second Director; provided that any Officer or Director may affix the Seal
over his signature only to authenticate copies of these Bye-Laws,
incorporating documents, the minutes of any meeting or any other documents
requiring authentication by such Officer or Director.
1.4 DUPLICATE SEAL
(a) The Company may have for use in any territory, district, or
place elsewhere than in Bermuda an official seal (in these Bye-Laws referred
to as a "Duplicate Seal"), which shall be a facsimile of the Seal.
(b) A deed or other document to which the Duplicate Seal is duly
affixed shall bind the Company as if it had been sealed with the Seal.
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<PAGE>
(c) The Company having a Duplicate Seal for use in any such
territory, district or place may, by writing under its Seal, authorize any
person or persons appointed for the purpose as its agent or agents in that
territory, district or place to affix the Duplicate Seal to any deed or other
document to which the Company is party in that territory, district or place.
(d) As between the Company and the person dealing with such an
agent or agents, the authority of such agent or agents continues during the
period (if any) mentioned in the instrument conferring the authority, or if
no period is there mentioned, then until notice of the revocation or
determination of the authority of such agent or agents has been given to the
person dealing with him.
(e) The person affixing the Duplicate Seal shall certify in writing
on the deed or other instrument to which the Duplicate Seal is affixed the
date on which it is affixed.
(f) The powers referred to in this Bye-Law shall be vested in the
Directors and whenever in these Bye-Laws reference is made to the Seal the
reference shall, when and so far as may be applicable, be deemed to include
any Duplicate Seal and any Securities Seal (as defined in Bye-Law 1.5 below).
1.5 SECURITIES SEAL
(a) The Company may have, for use for sealing securities issued by
the Company and for sealing documents creating or evidencing securities so
issued, an official seal (in these Bye-Laws referred to as a "Securities
Seal") which is a facsimile of the Seal with the addition on its face of the
word "Securities".
(b) Each certificate to which the Securities Seal shall be affixed
need not bear any signature.
ARTICLE II -- SHARES AND SHAREHOLDERS GENERALLY
2.1 SHARE RIGHTS GENERALLY
Subject to any special rights conferred on the holders of any series
or class of shares, any share in the Company may be issued with or have
attached thereto such preferred, deferred, qualified or other special rights
or such restrictions, whether in regard to dividend, voting, return of
capital or otherwise, as the Company may in general meeting determine or, if
there has not been any such determination or so far as such determination
shall not make specific provision, as the Board may determine.
Subject to the provisions of Section 42A of the Act, any preferred
shares may, with the sanction of a resolution of the Shareholders, be issued
on terms:
(a) that they are to be repurchased on the happening of a specified
event or on a given date and/or,
(b) that they are liable to be repurchased at the option of the
Company; and/or
(c) if authorized by the Memorandum of the Company, that they are
liable to be repurchased at the option of the holder.
The terms and manner of repurchase shall be provided for by way of
amendment of these Bye-Laws.
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<PAGE>
2.2 SPECIAL RIGHTS
The special rights conferred upon the holders of any series or class
of shares shall not, unless otherwise expressly provided in the rights
attaching to or the terms of issue of such shares, be deemed to be altered by
the creation or issue of further shares ranking pari passu therewith.
2.3 SHARE ISSUANCES
Subject to the provisions of these Bye-Laws, the unissued shares of
the Company (whether forming part of the original capital or any increased
capital) shall be at the disposal of the Board, which may offer, allot, grant
options over or otherwise dispose of them to such persons, at such times and
for such consideration and upon such terms and conditions as the Board may
determine.
2.4 BROKERAGE FEES AND COMMISSIONS
The Board may in connection with the issue of any shares exercise all
powers of paying commission and brokerage conferred or permitted by law.
2.5 SHARE CERTIFICATES
The preparation, issue and delivery of certificates shall be governed
by the Companies Act. In the case of a share held jointly by several
persons, delivery of a certificate to one of several joint holders shall be
sufficient delivery to all.
2.6 LOST OR DESTROYED CERTIFICATES
If a share certificate is defaced, lost or destroyed it may be
replaced without fee, subject to any applicable terms as to evidence and
indemnity and subject to the charge to the Shareholder for the reimbursement
of the reasonable payment of costs and out of pocket expenses incurred by the
Company in investigating such evidence and preparing such indemnity. In case
of defacement, a replacement certificate will be issued conditioned on
delivery of the old certificate to the Company.
2.7 ISSUANCE UNDER SEAL; SIGNATURES
All certificates for share or loan capital or other securities of the
Company (other than letters of allotment, scrip certificates and other like
documents) shall, except to the extent that the terms and conditions relating
thereto otherwise provide, be issued under the Seal. The Board may by
resolution determine, either generally or in any particular case, that any
signatures on any such certificates need not be autographic but may be
affixed to such certificates by some mechanical means or may be printed
thereon or that such certificates need not be signed by any persons.
2.8 INCREASE OF CAPITAL
The Company may from time to time increase its capital by such sum to
be divided into shares of such par value as the Company in general meeting
shall prescribe.
Any new shares shall be subject to all the provisions of these
Bye-Laws with reference to forfeiture, transfer, transmission and otherwise.
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<PAGE>
The Company shall not give, whether directly or indirectly, whether by
means of loan, guarantee, provision of security or otherwise, any financial
assistance for the purpose of a purchase of subscription made or to be made
by any person of or for any shares in the Company, but nothing in this
Bye-Law shall prohibit transactions mentioned in Sections 39A, 39B and 39C of
the Act.
2.9 ALTERATION OF CAPITAL
The Company may from time to time in general meeting;
(a) divide its shares into several classes and attach thereto
respectively any preferential, deferred, qualified or special rights,
privileges or conditions;
(b) consolidate all or any of its share capital into shares of
larger par value than its existing shares;
(c) sub-divide its shares or any of them into shares of smaller par
value than is fixed by its memorandum;
(d) change the currency denomination of its share capital in
accordance with the provisions of Sections 45 and 46 of the Companies Act;
(e) make provision for the issue and allotment of shares which do
not carry any voting rights; and
(f) cancel shares which, upon the passing of a resolution to that
effect, have not been taken or agreed to be taken by any person, and diminish
the amount of its share capital by the amount of the shares so canceled.
2.10 REDUCTION OF CAPITAL
Subject to the Companies Act, its memorandum and any confirmation or
consent required by law or these Bye-Laws, the Company may from time to time
in general meeting authorize the reduction of its issued share capital or any
capital redemption reserve fund or any share premium or contributed surplus
account in any manner. In relation to any such reduction, the Company may in
general meeting determine the terms upon which such reduction is to be
effected.
2.11 DIVIDENDS AND OTHER PAYMENTS
(a) Subject to any special rights provided pursuant to these
Bye-Laws and the provisions of Section 54 of the Act, the Board may from time
to time declare cash dividends to be paid to the Shareholders according to
their rights and interests in the profits including such interim dividends as
appear to the Board to be justified by the position of the Company. The
Board may also pay any fixed cash dividend which is payable on any shares of
the Company half yearly or on such other dates, whenever the position of the
Company, in the opinion of the Board, justifies such payment.
(b) No dividend or other moneys payable by the Company on or in
respect of any shares shall bear interest against the Company.
-5-
<PAGE>
(c) Any dividend, interest or other sum payable in cash to the
holder of shares may be paid by cheque or warrant sent through the post
addressed to the holder at his address in the Register or, in the case of
joint holders, addressed to the holder whose name stands first in the
Register in respect of the shares at his registered address as appearing in
the register or addressed to such person at such address as the holder or
joint holders may in writing direct. Every such cheque or warrant shall,
unless the holder or joint holders otherwise direct, be made payable to the
order of the holder or, in the case of joint holders, to the order of the
holder whose name stands first in the Register in respect of such shares, and
shall be sent at his or their risk and payment of the cheque or warrant by
the bank on which it is drawn shall constitute a good discharge to the
Company. Any one of two or more joint holders may give effectual receipts
for any dividends or other moneys payable or property distributable with
respect to the shares held by such joint holders.
(d) With the sanction of the Company in general meeting, the Board
may (a) declare a distribution to any Shareholder out of contributed surplus
and (b) may direct payment or satisfaction of such distribution or any
dividend wholly or in part by the distribution of specific assets, and may
fix the value for distribution or dividend purposes of any such specific
assets and may determine that cash payments shall be made to any Shareholder
upon the footing of the values so fixed in order to secure equality of
distribution and may vest such specific assets in trustees as may seem
expedient to the Board.
(e) Neither the Company nor any of its Subsidiaries shall make any
distribution to the Company's Shareholders on any shares of any class or
series which are junior to outstanding shares of any other class or series
with respect to distribution of assets on liquidation if, after giving effect
thereto, the excess of its assets (exclusive of goodwill, capitalized
research and development expenses and deferred charges) over its liabilities
(not including deferred taxes, deferred income and other deferred credits)
would be less than the liquidation preference of all shares having a
preference on liquidation over the class or series to which the distribution
is made; provided, however, that for the purpose of applying this section to
a distribution of cash or property in payment in whole or in part of an
obligation incurred by the Company in connection with the purchase of its
shares, there shall be deducted from liabilities any amount which had been
added thereto at the time the obligation was incurred, but not in excess of
the principal of the obligation which will remain unpaid after the
distribution. Notwithstanding the foregoing, neither the Company nor any of
its Subsidiaries shall make any distribution to the Company's Shareholders on
any shares of its stock of any class or series which are junior to
outstanding shares of any other class or series at any time that such senior
securities are outstanding.
(f) Neither the Company nor any of its Subsidiaries shall make any
distribution to the Company's Shareholders on any shares of any class or
series which are junior to outstanding shares of any other class or series
with respect to payment of dividends unless the amount of the retained
earnings of the Company immediately prior thereto equals or exceeds the
amount of the proposed distribution plus the aggregate amount of the
cumulative dividends in arrears on all shares having a preference with
respect to payment of dividends over the class or series to which the
distribution is made; provided, however, that for the purpose of applying
this section to a distribution of cash or property in payment in whole or in
part of an obligation incurred by the Company in connection with the purchase
of its shares, there shall be added to retained earnings any amount that had
been deducted therefrom at the time the obligation was incurred, but not in
excess of the principal of the obligation which remains unpaid immediately
prior to the distribution. Notwithstanding the foregoing, neither the Company
nor any of its Subsidiaries shall make any distribution to the Company's
Shareholders on any shares of its stock of any class or series which are
junior to outstanding shares of any other class or series at any time that
such senior securities are outstanding.
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<PAGE>
(g) Sections 2.11(e) and (f) shall not apply to a purchase or
redemption of shares of a deceased or disabled Shareholder from the proceeds
of life insurance or disability insurance in excess of the total amount of
all premiums paid by the Company for such insurance, in order to carry out
the provisions of an agreement between the Company and such Shareholder to
purchase or redeem such shares upon the death or disability of the
Shareholder. Sections 2.11(e) and (f) also shall not apply to distributions
made by the Company and approved by the Board of Directors in connection with
the repurchase of Common Shares issued to or held by directors, officers,
employees and consultants of the Company upon termination of their employment
or services pursuant to agreements providing the Company such a right of
repurchase.
2.12 RESERVES
The Board may, before recommending or declaring any dividend, set
aside out of the profits of the Company such sums as it thinks proper as
reserves which shall, at the discretion of the Board, be applicable for any
purpose to which the profits of the Company may be properly applied and
pending such application may, also at such discretion, either be employed in
the business of the Company or be invested in such investments as the Board
may from time to time think fit. The Board may also without placing the same
to reserve carry forward any profits which it may think it prudent not to
distribute.
2.13 REGISTER OF SHAREHOLDERS
In accordance with this Section 2.13 and Section 6.4 below, the
Secretary shall establish and maintain the Register of Shareholders at the
Registered Office in the manner prescribed by the Companies Act. Unless the
Board otherwise determines, the Register of Shareholders shall be open to
inspection in the manner prescribed by the Companies Act between 10:00 a.m.
and 12:00 noon on every working day.
2.14 REGISTER OF DIRECTORS AND OFFICERS
The Secretary shall establish and maintain a register of the Directors
and Officers of the Company as required by the Companies Act.
The register of Directors and Officers shall be open to inspection in
the manner prescribed by the Companies Act between 10:00 a.m. and 12:00 noon
on every working day.
2.15 TRANSFER OF SHARES
Subject to the Companies Act and to such of the restrictions contained
in these Bye-Laws as may be applicable, and to such agreements as may be
binding upon such Shareholder from time to time, any Shareholder may
transfer all or any of his shares by an instrument of transfer in the usual
common form or in any other form which the Board may approve.
No fee shall be charged by the Company for registering any transfer,
probate, letters of administration, certificate of death or marriage, power
of attorney, restraining order or stop notice, order of court or other
instrument relating to or affecting the title to any share, or otherwise
making an entry in the Register relating to any share, if properly executed
by the appropriate party or by a court of competent jurisdiction.
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<PAGE>
2.16 TRANSMISSION OF SHARES
For the purpose of this Section 2.16, legal personal representative
shall mean the person to whom probate or letters of administration has or
have been granted in Bermuda or, failing any such person, such other person
as the Board may in its absolute discretion determine to be the person
recognized by the Company for the purpose of this Section 2.16.
In the case of the death of a Shareholder, the survivor or survivors,
where the deceased was a joint holder, and the legal personal representative,
where he was sole holder, shall be the only person recognized by the Company
as having any title to his shares. Nothing herein contained shall release
the estate of a deceased holder (whether the sole or joint) from any
liability in respect of any share held by him solely or jointly with other
persons.
Any person becoming entitled to a share as a consequence of the death
of a Shareholder or otherwise by operation of applicable law may, subject as
hereafter provided and upon such evidence being produced as may from time to
time be required by the Board as to his entitlement, either be registered
himself as the holder of the share or elect to have some person nominated by
him registered as the transferee thereof. If the person so becoming entitled
elects to be registered himself, he shall deliver or send to the Company a
notice in writing signed by him stating that he so elects. If he shall elect
to have his nominee registered, he shall signify his election by signing an
instrument of transfer of such share in favor of his nominee. All the
limitations, restrictions and provisions of these Bye-Laws relating to the
right to transfer and the registration of transfer of shares shall be
applicable to any such notice or instrument of transfer as aforesaid as if
the death of the Shareholder or other event giving rise to the transmission
had not occurred and the notice or instrument of transfer was an instrument
of transfer signed by such Shareholder.
A person becoming entitled to a share as a consequence of the death of
a Shareholder or otherwise by operation of applicable law shall (upon
delivering such evidence as may from time to time be required by the Board as
to his entitlement) be entitled to receive and may give a discharge for any
dividends or other moneys payable in respect to the share, but he shall not
be entitled in respect of the share to receive notices of or to attend or
vote at general meetings of the Company or, save as aforesaid, to exercise in
respect of the share any of the rights or privileges of a Shareholder until
he shall have become registered as the holder thereof. The Board may at any
time give notice requiring such person to elect either to be registered
himself or to transfer the share and if the notice is not complied with
within sixty days the Board may thereafter withhold payment of all dividends
and other moneys payable in respect of the shares until the requirements of
the notice have been complied with.
Subject to any directions of the Board from time to time in force, the
Secretary may exercise the powers and discretions of the Board under this
Section 2.16.
2.17 RECORD DATES
Notwithstanding any other provisions of these Bye-Laws the Company in
general meeting or the Board may fix any date as the record date for any
dividend, distribution, allotment or issue and for the purpose of identifying
the persons entitled to receive notices of general meetings and proxy
solicitation materials. Any such record date may be on or at any time before
or after any date on which such dividend, distribution, allotment or issue is
declared, paid or made or such notice is dispatched.
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2.18 SERVICE OF NOTICES AND OTHER DOCUMENTS
Any notice or other document (including a share certificate) may be
served on or delivered to any Shareholder by the Company either personally or
by sending it through the post (by airmail where applicable) in a pre-paid
letter addressed to such Shareholder at his address as appearing in the
Register or by delivering it to or leaving it at such registered address. In
the case of joint holders of a share, service or delivery of any notice or
other document on or to one of the joint holders shall for all purposes be
deemed as sufficient service on or delivery to all the joint holders. Any
notice or other document if sent by post shall be deemed to have been served
or delivered seven days after it was put in the post, and in proving such
service or delivery, it shall be sufficient to prove that the notice or
document was properly addressed, stamped and put in the post.
Any notice of a general meeting of the Company shall be deemed to be
duly given to a Shareholder if it is sent to him by cable, telex, telecopier
or other mode of representing or reproducing words in a legible and
non-transitory form at his address as appearing in the Register or any other
address given by him to the Company for this purpose. Any such notice shall
be deemed to have been served twenty-four hours after its dispatch.
Any notice or other document delivered, sent or given to a Shareholder
in any manner permitted by these Bye-Laws shall, notwithstanding that such
Shareholder is then dead or bankrupt or that any other event has occurred,
and whether or not the Company has notice of the death or bankruptcy or other
event, be deemed to have been duly served or delivered in respect of any
share registered in the name of such Shareholder as sole or joint holder
unless his or her name shall, at the time of the service or delivery of the
notice or document, have been removed from the Register as the holder of the
share, and such service or delivery shall for all purposes be deemed as
sufficient service or delivery of such notice or document on all persons
interested (whether jointly with or as claiming through or under him) in the
share.
ARTICLE III -- SHARE RIGHTS
3.1 SHARE CAPITAL
(a) The capital of the Company shall be divided into such shares
with the rights and restrictions contained in these Bye-Laws as follows:
(i) The total number of Preferred Shares which the Company
shall have authority to issue shall be 10,000,000, US$0.01 par value. The
Preferred Shares may be issued from time to time in one or more series
pursuant to a resolution or resolutions providing for such issue duly adopted
by the Board of Directors (authority to do so being hereby expressly vested in
the Board). The Board of Directors is further authorized to determine or
alter the rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued series of Preferred Shares and to fix the
number of shares of any series of Preferred Shares and the designation of any
such series of Preferred Shares. The board of Directors, within the limits
and restrictions stated in any resolution or resuolutions of the Board of
Directors originally fixing the number of shares constituting any series, may
increase or decrease (but not below the number of shares in any such series
then outstanding), the number of shares of any series subsequent to the issue
of shares of that series.
(ii) 200,000,000 of Common Shares of a par value of US$.01,
the holders of which shall, subject to the provisions of these Bye-laws:
(1) be entitled to one vote per Ordinary Share;
(2) not be entitled to any dividends in respect of such
Ordinary Share;
(3) in the event of a winding-up or dissolution of
the Company, whether voluntary or involuntary or for the purposes of a
reorganization or otherwise or upon any distribution of capital, be entitled,
pari passu with the holders of Common Shares (subject to the liquidation
preferences set forth in Bye-Law 3.3) to an amount equal to the capital paid
up on such Ordinary Shares but to no other or further amount;
(4) be subject to repurchase of such Ordinary Shares,
whether at the option of the Company or the holder on such terms as the
Directors may by resolution determine;
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ARTICLE IV -- MEETINGS
4.1 GENERAL MEETINGS
The Board shall convene and the Company shall hold Annual General
Meetings in accordance with the requirements of the Companies Act at such
times and places as the Board shall appoint.
4.2 SPECIAL GENERAL MEETINGS
A special general meeting of the Shareholders may be called at any
time by the Board, 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.
If a special meeting is called by any person other than the board of
directors, 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 stockholders entitled to vote, in accordance with the provisions of
Sections 4.4 of this Article IV, that a meeting will be held at the time
requested by the person or
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persons who called the meeting, not less than ten(10) nor more than sixty
(60) days after the receipt of the request. Nothing contained in this
paragraph of this Section 4.2 shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the
board of directors may be held.
4.3 TELEPHONE MEETINGS
A meeting of the Shareholders or any class or series thereof may be
held by means of such telephone, electronic or other communication facilities
as permit all persons participating in the meeting to communicate with each
other simultaneously and instantaneously, and participating in such a meeting
shall constitute presence in person at such meeting.
4.4 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
Subject to the rights of holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation,
(a) nominations for the election of directors, and
(b) business proposed to be brought before any stockholder meeting
may be made by the board of directors or proxy committee appointed by the
board of directors or by any stockholder entitled to vote in the election of
directors generally if such nomination or business proposed is otherwise
proper business before such meeting. However, any such stockholder may
nominate one or more persons for election as directors at a meeting or propose
business to be brought before a meeting, or both, only if such stockholder
has given timely notice in proper written form of their intent to make such
nomination or nominations or to propose such business. To be timely, such
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than one hundred
twenty (120) calendar days in advance of the date specified in the
corporation's proxy statement released to stockholders in connection with the
previous year's annual meeting of stockholders; provided, however, that in
the event that no annual meeting was held in the previous year or the date of
the annual meeting has been changed by more than thirty (30) days from the
date contemplated at the time of the previous year's proxy statement, notice
by the stockholder to be timely must be so received a reasonable time before
the solicitation is made. To be in proper form, a stockholder's notice to the
secretary shall set forth:
(i) the name and address of the stockholder who intends to
make the nominations or propose the business and, as the case may be, of the
person or persons to be nominated or of the business to be proposed;
(ii) a representation that the stockholder is a holder of
record of stock of the corporation entitled to vote at such meeting and, if
applicable, intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice;
(iii) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination
or nominations are to be made by the stockholder;
(iv) such other information regarding each nominee or each
matter of business to be proposed by such stockholder as would be required to
be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or
intended to be nominated, or the matter been proposed, or intended to be
proposed by the board of directors; and
(v) if applicable, the consent of each nominee to serve as
director of the corporation if so elected.
The chairman of the meeting shall refuse to acknowledge the nomination
of any person or the proposal of any business not made in compliance with the
foregoing procedure.
4.5 PROCEEDINGS AT GENERAL MEETINGS
No business shall be transacted at any general meeting unless a quorum
is present when the meeting proceeds to business, but the absence of a quorum
shall not preclude the appointment, choice or election of a Chairman which
shall not be treated as part of the business of the meeting. 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. Notwithstanding the foregoing, no business may be
transacted at any general meeting of Shareholders unless at least two
Shareholders are present at the meeting in person. The Shareholders present
in person or by proxy 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 at such meeting by at least a
majority of the shares required to constitute a quorum.
If within five minutes (or such longer time as the Chairman of the
meeting may determine to wait) after the time appointed for the meeting, a
quorum is not present, the meeting, if convened on the requisition of
Shareholders, shall be dissolved. In any other case, it shall stand
adjourned to such other day and such other time and place as the Chairman of
the meeting may determine and at such adjourned meeting two Shareholders
present in person (whatever the number of shares held by them) shall be a
quorum.
Each Director shall be entitled to attend and speak at any general
meeting of the Company.
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4.6 CHAIRMAN
The Chairman (if any) of the Board or, in his absence, the President
shall preside as Chairman at every general meeting. If there is no such
Chairman or President, or if at any meeting neither of the Chairman nor the
President is present within five minutes after the time appointed for holding
the meeting, or if neither of them is willing to act as Chairman, the
Directors present shall choose one of their number to act or if one Director
only is present he shall preside as Chairman if willing to act. If no
Director is present or, if each of the Directors present declines to take the
chair, the persons present and entitled to vote on a poll shall elect one of
their number to be Chairman.
The Chairman may, with the consent of any meeting at which a quorum is
present (and shall if so directed by the meeting), adjourn the meeting from
time to time and from place to place but no business shall be transacted at
any adjourned meeting except business which might lawfully have been
transacted at the meeting from which the adjournment took place. When a
meeting is adjourned for thirty days or more, notice of the adjourned meeting
shall be given as in the case of an original meeting.
Save as expressly provided by these Bye-Laws, it shall not be
necessary to give any notice of an adjournment or of the business to be
transacted at an adjourned meeting.
4.7 VOTING
Save where a greater majority is required by the Companies Act or
these Bye-Laws, any question proposed for consideration at any general
meeting shall be decided on by a simple majority of votes cast.
At any general meeting, a resolution put to the vote of the meeting
shall be decided on a show of hands unless (before or on the declaration of
the result of the show of hands or on the withdrawal of any other demand for
a poll) a poll is demanded by:
(a) the Chairman of the meeting or any Director; or
(b) at least three Shareholders present in person or represented by
proxy; or
(c) any Shareholder or Shareholders present in person or
represented by proxy and holding between them not less than five percent (5%)
of the total voting rights of all the Shareholders having the right to vote
at such meeting; or
(d) a Shareholder or Shareholders present in person or represented
by proxy holding shares conferring the right to vote at such meeting, being
shares on which an aggregate sum has been paid up equal to not less than five
percent (5%) of the total sum paid up on all such shares conferring such
right.
Unless a poll is so demanded and the demand is not withdrawn, a
declaration by the Chairman that a resolution has, on a show of hands, been
carried or carried unanimously or by a particular majority or not carried by
a particular majority or lost shall be final and conclusive, and an entry to
that effect in the Minute Book of the Company shall be conclusive evidence of
the fact without proof of the number of votes recorded for or against such
resolution.
If a poll is duly demanded, the result of the poll shall be deemed to
be the resolution of the meeting at which the poll is demanded.
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Any poll demanded shall be taken forthwith.
The demand for a poll shall not prevent the continuance of a meeting
for the transaction of any business other than the question on which the poll
has been demanded and it may be withdrawn at any time before the close of the
meeting or the taking of the poll, whichever is earlier.
On a poll, votes may be cast either personally or by proxy.
A person entitled to more than one vote on a poll need not use all his
votes or cast all the votes he uses in the same way.
In the case of an equality of votes at a general meeting, whether on a
show of hands or on a poll, the Chairman of such meeting shall not be
entitled to a second or casting vote.
In the case of joint holders of a share, the vote of the senior who
tenders a vote, whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders, and for this purpose
seniority shall be determined by the order in which the names stand in the
Register in respect of the joint holding.
A Shareholder who is a patient for any purpose of any statute or
applicable law relating to mental health or in respect of whom an order has
been made by any Court having jurisdiction for the protection or management
of the affairs of persons incapable of managing their own affairs may vote,
whether on a show of hands or on a poll, by his receiver, committee, curator
bonis or other person in the nature of a receiver, committee or curator bonis
or other person may vote on a poll by proxy, and may otherwise act and be
treated as such Shareholder for the purpose of general meetings.
No Shareholder shall, unless the Board otherwise determines, be
entitled to vote at any general meeting unless all calls or other sums
presently payable by him in respect of shares in the Company have been paid.
If (i) any objection shall be raised to the qualification of any voter
or (ii) any votes have been counted which ought not been counted or which
might have been rejected or (iii) any votes are not counted which ought to
have been counted, the objection or error shall not vitiate the decision of
the meeting or adjourned meeting on any resolution unless the same is raised
or pointed out at the meeting or, as the case may be, the adjourned meeting
at which the vote objected to is given or tendered or at which the error
occurs. Any objection or error shall be referred to the Chairman of the
meeting and shall only vitiate the decision of the meeting on any resolution
if the Chairman decides that the same may have affected the decision of the
meeting. The decision of the Chairman on such matters shall be final and
conclusive.
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4.9 CORPORATE TRANSACTIONS
(a) AMALGAMATION OR MERGER: An amalgamation or merger of the
Company with or into another corporation, shall be approved by the
affirmative vote of a majority of the outstanding shares entitled to vote.
(b) SALE OF ASSETS: A sale, lease, conveyance, exchange, transfer
or other disposal of all or substantially all of the Company's assets (with
the exception of transactions which are, in the judgment of the Board, in the
usual and regular course of the Company's business) shall be approved by the
affirmative vote of a majority of the outstanding shares entitled to vote.
(c) SHARE EXCHANGE: Any transaction in which the Company acquires
shares of another corporation in exchange in whole or in part for its equity
securities (or the equity securities of a corporation which is in control of
the Company), whereby, immediately after the acquisition, the Company has
control of the other corporation, shall be approved by the affirmative vote
of a majority of the outstanding shares entitled to vote.
(d) EXCEPTIONS: No approval of the outstanding shares will be
required under subsections (a) and (c) of this Section 4.9 if the Company, or
its Shareholders immediately before the reorganization, or both, shall own
(immediately after the reorganization) equity securities, other than any
warrant or right to subscribe to or purchase such equity securities, of the
surviving or acquiring corporation or a parent party possessing more than
five-sixths of the voting power of the surviving or acquiring corporation or
parent party. In making the determination of ownership by the Shareholders
of the Company, immediately after the reorganization, of equity securities
pursuant to the preceding sentence, equity securities which Shareholders
owned immediately before the reorganization as Shareholders of another party
to the transaction shall be disregarded. For the purpose of this section
only, the voting power of a corporation shall be calculated by assuming the
conversion of all equity securities convertible, immediately or at some
future time, into shares entitled to vote but not assuming the exercise of
any warrant or right to subscribe to or purchase such shares.
(e) VOTING REQUIREMENTS: The voting requirements in this Section
4.9 are in addition to any voting requirements set forth in the Companies Act
or elsewhere in these Bye-Laws.
4.10 PROXIES AND CORPORATE REPRESENTATIVES
The instrument appointing a proxy shall be in writing under the hand
of the appointor or of his attorney authorized by him in writing or, if the
appointor is a corporation, either under its seal or under the hand of an
officer, attorney or other person authorized to sign the same.
Any Shareholder may appoint a standing proxy or (if a corporation)
representative by depositing at the Registered Office a proxy or (if a
corporation) an authorization and such proxy or authorization shall be valid
for all general meetings and adjournments thereof until notice of revocation
is received at the Registered Office. Where a standing proxy or
authorization exists, its operation shall be deemed to have been suspended at
any general meeting or adjournment thereof at which the Shareholder is
present or in respect to which the Shareholder has specially appointed a
proxy or representative. The Board may from time to time require such
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evidence as it shall deem necessary as to the due execution and continuing
validity of any such standing proxy or authorization, which shall be deemed
to be suspended until such time as the Board determines that it has received
the requested evidence or other evidence satisfactory to it.
Subject to this Section 4.10, the instrument appointing a proxy
together with such other evidence as to its due execution as the Board may
from time to time require, shall be delivered at the Registered Office (or at
such place as may be specified in the notice convening the meeting or in any
notice of any adjournment or, in either case, in any document sent therewith)
prior to the holding of the meeting or adjourned meeting at which the person
named in the instrument proposed to vote or, in the case of a poll taken
subsequently to the date of a meeting or adjourned meeting, before the time
appointed for the taking of the poll and in default the instrument of proxy
shall not be treated as valid.
Instruments of proxy shall be in any common form or in such other form
as the Board may approve and the Board may, if it thinks fit, send out with
the notice of any meeting forms of instruments of proxy for use at that
meeting. The instrument of proxy shall be deemed to confer authority to
demand or join in demanding a poll and to vote on any amendment of a
resolution put to the meeting for which it is given as the proxy thinks fit.
The instrument of proxy shall unless the contrary is stated therein be valid
as well for any adjournment of the meeting as for the meeting to which it
relates.
A vote given in accordance with the terms of an instrument of proxy
shall be valid notwithstanding the previous death or insanity of the
principal, or revocation of the instrument of proxy or of the authority under
which it was executed, provided that no intimation in writing of such death,
insanity or revocation shall have been received by the Company at the
Registered Office (or such other place as may be specified for the delivery
of instruments of proxy in the notice convening the meeting or other
documents sent therewith) one hour at least before the commencement of the
meeting or adjourned meeting, or the taking of the poll, at which the
instrument of proxy is used.
Subject to the Companies Act, the Board may at its discretion waive
any of the provisions of these Bye-Laws related to proxies or authorizations
and, in particular, may accept such verbal or other assurances as it thinks
fit as to the right of any person to attend and vote on behalf of any
Shareholder at general meetings.
4.11 SHAREHOLDER ACTION BY UNANIMOUS WRITTEN CONSENT WITHOUT A MEETING
Subject to the Companies Act, any action required or permitted to be
taken by the Shareholders may be taken without a meeting, provided that all
Shareholders 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 Shareholders. Such written consent and any counterparts
thereof shall be filed with the minutes of the proceedings of the
Shareholders.
ARTICLE V -- DIRECTORS
5.1 POWERS AND DUTIES OF THE BOARD
Subject to the provisions of the Companies Act and these Bye-Laws and
to any direction given by the Company in general meeting, the Board shall
manage the business of the Company and may pay all expenses incurred in
promoting and incorporating the Company and may exercise all the powers of
the Company. No alteration of these Bye-Laws and no such director shall
invalidate any prior act of the Board which would have been valid if that
alteration had not been made or that direction had not been given. The
powers given to the Board by these Bye-Laws and a meeting of the Board at
which a quorum is present shall be competent to exercise all the powers,
authorities and discretions for the time being vested in or exercisable by
the Board.
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The Board may exercise all the powers to borrow money and to mortgage
or charge all or any part of the undertaking, property and assets (present
and future) and uncalled capital of the Company and to issue debentures and
other securities, whether outright or as collateral security for any debt,
liability or obligation of the Company or of any other persons.
All cheques, promissory notes, drafts, bills of exchange and other
instruments, whether negotiable or transferable or not, and all receipts for
money paid to the Company shall be signed, drawn, accepted, endorsed or
otherwise executed, as the case may be, in such manner as the Board shall
from time to time by resolution determine.
The Board on behalf of the Company may provide benefits, whether by
the payment of gratuities or pensions or otherwise, for any person including
any Director or former Director who has held any executive office or
employment with the Company or with any body corporate which is or has been a
subsidiary or affiliate of the Company or a predecessor in the business of
the Company or of any such subsidiary or affiliate, and to any member of his
family or any person who is or was dependent on him, and may contribute to
any fund and pay premiums for the purchase or provision of any such gratuity,
pension or other benefit, or for the insurance of any such person.
The Board may, with the approval of the President, from time to time
appoint one or more of its body to be a managing director, joint managing
director or an assistant managing director or to hold any other employment or
executive office with the Company for such period and upon such terms as the
Board may determine and may revoke or terminate any such appointments. Any
such revocation or termination as aforesaid shall be without prejudice to any
claim for damages that such Director may have against the Company or the
Company may have against such Director for any breach of any contract of
service between him and the Company which may be involved in such revocation
or termination. Any person so appointed shall receive such remuneration (if
any) (whether by way of salary, commission, participation in profits or
otherwise) as the Board may determine, and either in addition to or in lieu
of his remuneration as a Director.
The Board may, from time to time without the approval of the
Shareholders of the Company, but subject to the requirements of the Companies
Act, authorize, and cause the Company to repurchase any of its issued and
outstanding shares.
5.2 DELEGATION OF THE BOARD'S POWERS
The Board may, by power of attorney, appoint any company, firm or
person or any fluctuating body of persons, whether nominated directly or
indirectly by the Board, to be the attorney or attorneys of the Company for
such purposes and with such powers, authorities and discretions (not
exceeding those vested in or exercisable by the Board under these Bye-Laws)
and for such period and subject to such conditions as it may think fit, and
any such power of attorney may contain such provisions for the protection and
convenience of persons dealing with any such attorney and of such attorney as
the Board may think fit, and may also authorize any such attorney to
sub-delegate all or any of the powers, authorities and discretions vested in
him.
The Board may entrust to and confer upon any Director or officer any
of the powers exercisable by it upon such terms and conditions with such
restrictions as it thinks fit, and either collaterally with, or to the
exclusion of, its own powers, and may from time to time revoke or vary all or
any of such powers but no person dealing in good faith and without notice of
such revocation or variation shall be affected thereby.
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The Board may delegate any of its powers, authorities and discretions
to committees, consisting of such person or persons (whether a member or
members of its body or not) as it thinks fit. Any committee so formed shall,
in the exercise of the powers, authorities and discretions so delegated,
conform to any regulations which may be imposed upon it by the Board.
5.3 NUMBER
The authorized number of directors of the Company shall be _________.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
5.4 CLASSES OF DIRECTORS
The Directors shall be divided into three classes designated as Class
I, Class II and Class III, respectively. Directors shall be assigned to each
class in accordance with a resolution or resolutions adopted by the Board of
Directors. At the first annual meeting of shareholders following the date
hereof, the term of office of the Class I Directors shall expire and Class I
Directors shall be elected for a full term of three years. At the second
annual meeting of shareholders following the date hereof, the term of office
of the Class II Directors shall expire and Class II Directors shall be
elected for a full term of three years. At the third annual meeting of
shareholders following the date hereof, the term of office of the Class III
Directors shall expire and Class III Directors shall be elected for a full
term of three years. At each succeeding annual meeting of shareholders,
Directors shall be elected for a full term of three years to succeed the
Directors of the class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this Article, each
Director shall serve until his successor is duly elected and qualified or
until his earlier death, resignation or removal. No decrease in the number
of Directors constituting the Board of Directors shall shorten the term of
any incumbent Director.
5.5 APPOINTMENT AND REMOVAL OF DIRECTORS
Subject to the Companies Act and these Bye-Laws, a director shall hold
office until the expiration of the term for which elected and until a
successor has been qualified and elected.
The Shareholders shall at the Annual General Meeting and may in any
general meeting determine the minimum and the maximum number of Directors and
may in general meeting determine that one or more vacancies in the Board
shall be deemed casual vacancies for the purposes of these Bye-Laws. Without
prejudice to the power of the Company in general meeting in pursuance of any
of the provisions of these Bye-Laws to appoint any person to be a Director,
the Board, so long as a quorum of Directors remains in office, shall have
power at any time and from time to time to appoint any Shareholder being an
individual to be a Director so as to fill a casual vacancy.
The Company may in a Special General Meeting called for that purpose
remove a Director provided notice of any such meeting shall be served upon
the Director concerned not less than 14 days before the meeting and he shall
be entitled to be heard at that meeting. No Director may be removed (unless
the entire Board is removed) when the votes cast against the removal would be
sufficient to elect the Director if voted cumulatively at an election at
which the same total number of votes were cast and the entire number of
Directors authorized at the time of the Director's most recent election were
then being elected. Any vacancy
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created by the removal of a Director at a Special General Meeting may be
filled at the Meeting by the election of another Director in his place or, in
the absence of any such election, by the Board.
5.6 RESIGNATION AND DISQUALIFICATION OF DIRECTORS
The office of a Director shall be vacated upon the happening of any of
the following events:
(a) if he resigns his office by notice in writing delivered to the
Registered Office or tendered at a meeting of the Board;
(b) if he becomes of unsound mind or a patient for any purpose of
any statute or applicable law relating to mental health and the Board
resolves that his office is vacated;
(c) if he becomes bankrupt or compounds with his creditors;
(d) if he is prohibited by law from being a Director;
(e) if he ceases to be a Director by virtue of the Companies Act or
is removed from office pursuant to these Bye-Laws.
5.7 ALTERNATE DIRECTORS
The Company may in general meeting elect a person or persons qualified
to be Directors to act as Directors in the alternative to any of the
Directors of the Company or may authorize the Board to appoint such Alternate
Directors. Additionally, unless otherwise resolved by the Shareholders, a
Director may appoint an Alternate Director to act as a Director in his or her
stead by notifying the Secretary in writing of such appointment. Any
Alternate Director may be removed by the Company in general meeting, and if
appointed by the Board, may be removed by the Board and, subject thereto, the
office of Alternate Director shall continue until the next annual election of
Directors or, if earlier, the date on which the relevant Director ceases to
be a Director. An Alternate Director may also be a Director in his own right
and may act as alternate to more than one Director.
An Alternate Director shall be entitled to receive notices of all
meetings of Directors, to attend, be counted in the quorum and vote at any
such meeting at which any Director to whom he is alternate is not personally
present, and generally to perform all the functions of any Director to whom
he is an alternate in his absence.
Any person acting as an Alternate Director shall (except as regards
powers to appoint an alternate and remuneration) be subject in all respects
to the provisions of these Bye-Laws relating to Directors and shall alone be
responsible to the Company for his acts and defaults and shall not be deemed
to be the agent of or for any Director for whom he is alternate. An
Alternate Director may be paid expenses and shall be entitled to be
indemnified by the Company to the same extent as if he were a Director.
Every person acting as an Alternate Director shall have one vote for each
Director for whom he acts as alternate (in addition to his own vote if he is
also a Director). The signature of an Alternate Director to any resolution
in writing of the Board or a
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<PAGE>
committee of the Board shall, unless the terms of his appointment provides to
the contrary, be as effective as the signature of the Director or Directors
to whom he is an alternate.
5.8 DIRECTORS' FEES AND ADDITIONAL REMUNERATION AND EXPENSES
The amount, if any, of Directors' fees shall from time to time be
determined by the Shareholders of the Company in a general meeting and in the
absence of a determination to the contrary in general meeting, such fees
shall be deemed to accrue from day to day. Each Director may be paid his
reasonable traveling, hotel and incidental expenses in attending and
returning from meetings of the Board or committee constituted pursuant to
these Bye-Laws or general meetings and shall be paid all expenses properly
and reasonably incurred by him in the discharge of his duties as a Director.
Any Director who, by request, goes or resides abroad for any purposes of the
Company or who performs services which in the opinion of the Board go beyond
the ordinary duties of a Director may be paid such extra remuneration
(whether by way of salary, commission, participation in profits or otherwise)
as the Board may determine, and such extra remuneration shall be in addition
to any remuneration provided for by or pursuant to any other Bye-Law.
5.9 PLACE OF MEETINGS; TELEPHONE MEETINGS
Regular meetings of the Board may be held at any place within or
outside of Bermuda 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 business office of the Company. Special meetings of
the Board may be held at any place within or outside Bermuda that has been
designated in the notice of the meeting or, if not stated in the notice, at
the registered office of the Company.
Any meeting, regular or special, of the Board or a committee appointed
by the Board may be held by means of such telephone, electronic or other
communication facilities as permit all persons participating in the meeting
to communicate with each other simultaneously and instantaneously, and
participation in such a meeting shall constitute presence in person at such
meeting.
5.10 DIRECTOR'S INTERESTS
(a) A Director may hold any other office or place of profit with
the Company (except that of auditor) in conjunction with his office of
Director for such period and upon such terms as the Board may determine, and
may be paid such extra remuneration therefor (whether by way or salary,
commission, participation in profits or otherwise) as the Board may
determine, and such extra remuneration shall be in addition to any
remuneration provided for by or pursuant to any other Bye-Law.
(b) A Director may act by himself or his firm in a professional
capacity for the Company (otherwise than as auditor) and he or his firm shall
be entitled to remuneration for professional services as if he were not a
Director.
(c) Subject to the provisions of the Companies Act, a Director may,
notwithstanding his office be a party to, or otherwise interested in, any
transaction or arrangement with the Company or in which the Company is
otherwise interested; and be a Director or other officer of, or employed by,
or a party to any transaction or arrangement with, or otherwise interested
in, any body corporate promoted by the Company or in which the Company is
interested. The Board may also cause the voting power conferred by the
shares in any other company held or owned by the Company to be exercised in
such manner in all respects as it thinks fit, including the exercise thereof
in favor of any resolution appointing the Directors or any of them to be
-19-
<PAGE>
directors or officers of such other company, or voting or providing for the
payment of remuneration to the directors or officers of such other company.
(d) So long as, where it is necessary, he declares the nature of
his interest at the first opportunity at a meeting of the Board or by writing
to the Directors as required by the Companies Act, a Director shall not by
reason of his office be accountable to the Company for any benefits which he
derives from any office or employment to which these Bye-Laws allow him to be
appointed or from any transaction or arrangement in which these Bye-Laws
allow him to be interested, and no such transaction or arrangement shall be
liable to be avoided on the ground of any interest or benefit.
(e) Subject to the Companies Act and any further disclosure
required thereby, a general notice to the Directors by a Director or officer
declaring that he is a director or officer or has an interest in a person and
is to be regarded as interested in any transaction or arrangement made with
that person, shall be a sufficient declaration of interest in relation to any
transaction or arrangement so made.
5.11 PROCEEDINGS OF THE BOARD
The Board may meet for the dispatch of business, adjourn and otherwise
regulate its meetings as it thinks fit. Questions arising at any meeting
shall be determined by a majority of votes.
Regular meetings of the Board may be held without additional notice if
the times of such meeting are fixed by the Board. No business not
contemplated in the notice of any such meeting shall be conducted at such
meeting.
Special meetings of the Board for any purpose or purposes may be
called, with reasonable notice given, at any time by the Chairman of the
Board, the President, any Vice President, the Secretary or any two directors.
No business not contemplated in the notice of any such meeting shall be
conducted at such meeting.
The meetings and proceedings of any committee consisting of two or
more members shall be governed by the provisions contained in these Bye-Laws
for regulating the meetings and proceedings of the Board so far as the same
are applicable and are not superseded by any regulations imposed by the Board.
5.12 NOTICE
Notice of a board meeting shall be deemed to be duly given to a
Director if it is given to him personally or by word of mouth or received by
post, cable, telex, telecopier or other mode of representing or reproducing
words in a legible and non-transitory form at his last known address or any
other address given by him to the Company for this purpose. A Director may
waive notice of an meeting prospectively.
5.13 QUORUM
A quorum necessary for the transaction of the business of the Board
may be fixed by the Board and, unless so fixed at any other number, shall be
a majority of the Directors. Any Director who ceases to be a Director at a
board meeting may continue to be present and to act as a Director and be
counted in the quorum until the termination of the Board meeting if no other
Director objects and if otherwise a quorum of Directors would not be present.
-20-
<PAGE>
(a) A Director who to his knowledge is in any way, whether directly
or indirectly, interested in a contract or proposed contract, transaction or
arrangement with the Company and has complied with the provisions of the
Companies Act and these Bye-Laws with regard to disclosure of his interest
shall be entitled to vote in respect of any contract, transaction or
arrangement in which he is so interested; provided, however, his vote shall
be not counted, and he shall not be taken into account in ascertaining
whether a quorum is present.
(b) So long as a quorum of Directors remains in office, the
continuing Directors may act notwithstanding any vacancy in the Board but, if
no quorum of Directors remains, the continuing Directors or a sole continuing
Director may act only for the purpose of calling a general meeting.
5.14 CHAIRMAN
The Board may elect a Chairman of the Board from amongst its members.
If no Chairman of the Board is elected or he is absent, the President shall
be Chairman. If at any meeting neither the Chairman of the Board nor the
President is present within five minutes after the time appointed for holding
the same, the Directors present may choose one of their number to be Chairman
of the meeting.
5.15 BOARD ACTION BY UNANIMOUS WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the Board or a
committee thereof may be taken without a meeting, provided that all members
of the Board or the committee, as the case may be, 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
or the committee, as the case may be. Such written consent and any
counterparts thereof shall be filed with the minutes of the proceedings of
the Board.
5.16 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 the Company,
or any other person authorized by the Board or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of the
Company all rights incidental to any and all shares of any other corporation
or corporations standing in the name of the Company. 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.
5.17 MINUTES
The Directors shall cause minutes to be made and books kept for the
purpose of recording:
(a) all appointments of officers made by the Directors;
(b) the names of the Directors and other persons (if any) present
at each meeting of Directors and of any committee;
(c) of all proceedings at meetings of the Company, of the holders
of any class of shares in the Company, and of committees;
(d) of all proceedings of managers (if any).
-21-
<PAGE>
ARTICLE VI -- OFFICERS
6.1 OFFICERS
The officers of the Company shall include a President or a Chairman
and a Vice-President or Vice-Chairman who shall be Directors and shall be
elected by the Board as soon as possible after the statutory meeting and each
annual general meeting. In addition, the Board may appoint any person
whether or not he is a Director to hold such other office (including any
additional Vice-Presidencies) as the Board may from time to time determine.
Any person elected or appointed pursuant to this Bye-Law shall hold office
for such period and upon such terms as the Board may determine and the Board
may revoke or terminate any such election or appointment. Any such
revocation or termination shall be without prejudice to any claim for damages
that such officer may have against the Company or the Company may have
against such officer for any breach of any contract of service between him
and the Company which may be involved in such revocation or termination.
Save as provided in the Companies Act or these Bye-Laws, the powers and
duties of the officers of the Company shall be such (if any) as are
determined from time to time by the Board.
6.2 ELECTION OF OFFICERS
The officers of the Company, except such officers as may be appointed
in accordance with the provisions of these Bye-Laws, shall be chosen by the
Board, subject to the rights, if any, of an officer under any contract of
employment.
6.3 SECRETARY
The secretary shall keep or cause to be kept, at the registered office
of the Company, a book of minutes of all meetings and actions of directors,
committees of the Board 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 registered
office of the Company or at the office of the Company's transfer agent or
registrar, as determined by resolution of the Board, 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 required to be given by law or by these
Bye-Laws, and shall keep the seal of the Company in safe custody and shall
have such other powers and perform such other duties as may be prescribed by
the Board or by these Bye-Laws.
6.4 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 Company, 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.
-22-
<PAGE>
The chief financial officer shall deposit all money and other
valuables in the name and to the credit of the Company with such depositaries
as may be designated by the Board, and shall disburse the funds of the
Company as may be ordered by the Board, 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 Company, and
shall have such other powers and perform such other duties as may be
prescribed by the Board or these Bye-Laws.
6.5 SUBORDINATE OFFICERS
The Board may with the approval of the President appoint, or the Board
may empower the President to appoint, such other officers as the business of
the Company may require, each of whom shall hold office for such period, have
such authority, and perform such duties as are provided in these Bye-Laws or
as the Board may from time to time determine.
ARTICLE VII -- RECORDS, REPORTS AND NOTICES
7.1 ACCOUNTING RECORDS AND FINANCIAL STATEMENTS
The Board shall cause to be kept accounting records sufficient to give
a true and fair view of the state of the Company's affairs and to show and
explain its transactions, in accordance with the Companies Act and the United
States Foreign Corrupt Practices Act, whether or not the same may be
applicable.
The records of account shall be kept at the Registered Office or at
such other place or places as the Board thinks fit, and shall at all times be
open to inspection by the Directors: provided that if the records of account
are kept at some place outside Bermuda, there shall be kept at an office of
the Company in Bermuda such records as will enable the directors to ascertain
with reasonable accuracy the financial position of the Company at the end of
each three month period. No Shareholder (other than an officer of the
Company) shall have the right to inspect any accounting record or book or
document of the Company except as conferred by law or authorized by the Board
or the Company in general meeting.
7.2 AUDIT
(a) APPOINTMENT OF AUDITOR. Subject to Section 88 of the Companies
Act, at the annual general meeting or at a subsequent special general meeting
in each year, an independent representative of the Shareholders shall be
appointed by them as Auditor of the accounts of the Company. Such Auditor
may be a Shareholder but no Director, Officer or employee of the Company
shall, during his or her continuance in office, be eligible to act as an
Auditor of the Company. Such Auditor shall be a firm of independent public
accountants of national standing in the United States.
(b) REMUNERATION OF AUDITOR. The remuneration of the Auditor shall
be fixed by the Company in general meeting or in such manner as the
Shareholders may determine.
(c) VACATION OF OFFICE OF AUDITOR. If the office of Auditor
becomes vacant by the resignation or death of the Auditor, or by the Auditor
becoming incapable of acting by reason of illness or other disability at a
time when the Auditor's services are required, the Board shall, as soon as
practicable, convene a special general meeting to fill the vacancy thereby
created.
(d) ACCESS TO BOOKS OF THE COMPANY. The Auditor shall at all
reasonable times have access to all books kept by the Company and to all
accounts and vouchers relating thereto, and the Auditor may call on the
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<PAGE>
Directors or Officers of the Company for any information in their possession
relating to the books or affairs of the Company.
7.3 MAINTENANCE OF SHAREHOLDER REGISTER
The Company shall keep either at its Registered Office or at the
office of its transfer agent or registrar (if either be appointed) or at some
other place in Bermuda of which the Registrar of Companies has received
notice, as determined by resolution of the Board, a Register of its
Shareholders listing the names and addresses of all Shareholders and the
number and class of shares held by each Shareholder. In addition, a copy of
such Register shall be kept at its principal executive offices.
7.4 MAINTENANCE AND INSPECTION OF BYE-LAWS
The Company shall keep at its registered office in Bermuda and at its
principal business office outside Bermuda the original or a copy of these
Bye-Laws as amended to date, which Bye-Laws shall be open to inspection by
the Shareholders at all reasonable times during office hours. If the
principal business office of the Company is outside Bermuda and the Company
has no principal business office there, then the Secretary shall, upon the
written request of any Shareholder, furnish to that Shareholder a copy of
these Bye-Laws as amended to date.
7.5 ANNUAL REPORT TO SHAREHOLDERS
The Board 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 Company. 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 4.2 of these Bye-Laws for giving notice to
Shareholders of the Company.
The annual report shall contain a consolidated balance sheet of the
Company and its subsidiaries, as of the end of such fiscal year, and
consolidated statements of income, Shareholders' equity and cash flows of the
Company and its subsidiaries for such year, prepared in accordance with
generally accepted accounting principles and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and certified by independent public accountants of national standing
selected by the Company.
ARTICLE VIII -- INDEMNIFICATION
8.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY
The Directors, Secretary and other Officers for the time being of the
Company and the liquidator or trustees (if any) for the time being acting in
relation to any of the affairs of the Company and every one of them, and
their heirs, executors and administrators, shall be indemnified and secured
harmless out of the assets of the Company from and against all actions,
costs, charges, losses, damages and expenses which they or any of them, their
heirs, executors or administrators, shall or may incur or sustain by or by
reason of any act done, concurred in or omitted in or about the execution of
their duty, or supposed duty, or in their respective offices or trusts, and
none of them shall be answerable for the acts, receipts, neglects or defaults
of the others of them or for joining in any receipts for the sake of
conformity, or for any bankers or other persons with whom any moneys or
effects belonging to the Company shall or may be lodged or deposited for safe
custody, or for insufficiency or deficiency of any security upon which any
moneys of or belonging to the
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<PAGE>
Company shall be placed out on or invested, or for any other loss, misfortune
or damage which may happen in the execution of their respective offices or
trusts, or in relation thereto, PROVIDED THAT this Indemnity shall not extend
to any matter in respect of any fraud or dishonesty which may attach to any
of said persons.
8.2 WAIVER OF CLAIM BY SHAREHOLDER
Each Shareholder agrees to waive any claim or right of action such
Shareholder might have, whether individually or by or in the right of the
Company, against any Director or Officer on account of any action taken by
such Director or Officer in his or her capacity as such, or the failure of
such Director or Officer to take any action in the performance of his duties
with or for the Company, PROVIDED THAT such waiver shall not extend to any
matter in respect of any fraud or dishonesty which may attach to such
Director or Officer nor to any matter in which a Director or Officer fails to
discharge his duty to act honestly and in good faith with a view towards the
best interests of the Company, PROVIDED FURTHER that such waiver is not
prohibited under the Securities Exchange Act of 1934 or the Securities Act of
1933.
8.3 INDEMNIFICATION OF OTHERS
The Company shall have the power, to the extent and in the manner
permitted by the Companies Act, to indemnify each of its employees and agents
(other than directors and officers) against expenses judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was
an agent of the Company. For purposes of this Article VIII, an "employee" or
"agent" of the Company (other than a director or officer) includes any person
(i) who is or was an employee or agent of the Company (ii) who is or was
serving at the request of the Company 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 Company which was a predecessor corporation
of the Company or of another enterprise at the request of such predecessor
corporation.
8.4 PAYMENT OF EXPENSES IN ADVANCE
Subject to the Companies Act, expenses incurred in defending any civil
or criminal action or proceeding for which indemnification is required
pursuant to Section 8.1 or for which indemnification is permitted pursuant to
Section 8.2 following authorization thereof by the Board shall be paid by the
Company 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 VIII.
Each Shareholder of the Company, by virtue of his acquisition and
continued holding of a share, shall be deemed to have acknowledged and agreed
that advances of funds made by the Company to a Director under this Section
are made to meet expenditures incurred for the purpose of enabling such
Director to properly perform his or her duties as an officer of the Company.
8.5 INDEMNITY NOT EXCLUSIVE
The indemnification provided by this Article VIII shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any Bye-Law, 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 Memorandum.
-25-
<PAGE>
8.6 INSURANCE INDEMNIFICATION
The Company 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 Company 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 Company would have the power to indemnify him against such liability
under the provisions of this Article VIII.
8.7 CONFLICTS
No indemnification or advance shall be made under this Article VIII,
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
Memorandum, these Bye-Laws, 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 IX -- BYE-LAWS
9.1 AMENDMENT
Notwithstanding anything to the contrary contained herein, no Bye-Law
shall be rescinded, altered or amended and no new Bye-Law shall be made until
the same has been approved by a resolution by the Board and by the
affirmative vote at any general meeting of a sixty percent (60%) of all
outstanding shares entitled to vote, voting as a single class, or by such
greater majority as may be required by the Companies Act or these Bye-Laws.
9.2 APPROVAL BY CLASS
A proposed amendment to these Bye-Laws must be approved by the
affirmative vote of a majority of the outstanding shares entitled to vote of
any class of stock, whether or not such class is entitled to vote thereon by
the provision of these Bye-Laws, if the amendment would:
(a) Increase or decrease the aggregate number of authorized shares
of such class, except that no such vote is required:
(i) For an amendment effecting only a stock split,
(including an increase in the authorized number of shares in proportion
thereto); or
(ii) For an amendment to increase the authorized shares of
any class to such number as will be sufficient from time to time, when added
to the previously authorized but unissued shares of such class, to satisfy
any option to purchase share or conversion right of securities convertible
into shares, if the Company had obtained the approval of the outstanding
shares of such class for the issue of such options or convertible securities.
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<PAGE>
(b) Effect an exchange, reclassification or cancellation of all
shares or part of the shares of such class, other than a stock split;
(c) Effect an exchange, or create a right of exchange of all or
part of the shares of another class into shares of such class;
(e) Cancel or otherwise affect dividends on the shares of such
class which have accrued but have not been paid.
For the purposes of this Section 9.2, different series of the same
class of shares shall not constitute different classes for the purpose of
voting by classes except when a series is adversely affected by an amendment
in a different manner than other series of the same class.
This Section 9.2 may only be amended by the affirmative vote of a
majority of the outstanding shares entitled to vote of each class and series
of stock of which shares are outstanding.
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<PAGE>
FORM NO. 2 EXHIBIT 3.3
[LOGO]
BERMUDA
THE COMPANIES ACT 1981
MEMORANDUM OF ASSOCIATION OF
COMPANY LIMITED BY SHARES
(SECTION 7(1) AND (2)
MEMORANDUM OF ASSOCIATION
OF
WAVElink Communications International Ltd.
------------------------------------------------------
(hereinafter referred to as "the Company")
1. The liability of the members of the Company is limited to the amount (if
any) for the time being unpaid on the shares respectively held by them.
2. We, the undersigned, namely,
<TABLE>
<CAPTION>
NAME ADDRESS BERMUDIAN NATIONALITY NUMBER OF
STATUS SHARES
(Yes/No) SUBSCRIBED
<S> <C> <C> <C> <C>
John Buckley Clarendon House Yes British One
Church Street
Hamilton
Bermuda
Donald Malcolm " No British One
Lisa J. Marshall " Yes British One
</TABLE>
do hereby respectively agree to take such number of shares of the Company
as may be allotted to us respectively by the provisional directors of the
Company, not exceeding the number of shares for which we have respectively
subscribed, and to satisfy such calls as may be made by the directors,
provisional directors or promoters of the Company in respect of the shares
allotted to us respectively.
<PAGE>
3. The Company is to be an exempted Company as defined by the Companies Act
1981.
4. The Company has power to hold land situated in Bermuda not exceeding in
all, including the following parcels --
Nil
5. The authorised share capital of the Company is US$12,000 divided into
shares of US$1.00 each. The minimum subscribed share capital of the
Company is US$12,000
6. The objects for the Company is formed and incorporated are --
Please see the attached schedule
*Delete as applicable.
<PAGE>
FORM NO. 6
[LOGO]
BERMUDA
CERTIFICATE OF INCORPORATION
I hereby in accordance with the provisions of section 14 of the Companies
Act, 1981, issue this Certificate of Incorporation and do certify that on the
17th day of June 1994
WAVElink Communications International Ltd.
was registered by me in the Register maintained by me under the provisions of
the said section and that the status of the said company is that of an
exempted company.
Given under my hand this 17th day of June 1994
[SEAL]
/s/ [ILLEGIBLE]
for Registrar of Companies
RC11
<PAGE>
FORM NO. 3a
[LOGO]
BERMUDA
CERTIFICATE OF INCORPORATION
ON CHANGE OF NAME
I hereby certify that
WAVElink Communications International Ltd.
having by resolution and with the approval of the Registrar of Companies
changed its name, is now registered under the name of
Interwave Communications International Ltd.
Given under my hand this 28th day of July 1995.
[SEAL]
/s/ [ILLEGIBLE]
for REGISTRAR OF COMPANIES
<PAGE>
COMMON SHARES COMMON SHARES
WINTERWAVE COMMUNICATIONS
INCORPORATED UNDER SEE REVERSE FOR
THE LAWS OF BERMUDA CERTAIN DEFINITIONS
CUSIP 64911N 10 2
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
FULLY PAID AND NON-ASSESSABLE COMMON SHARES,
$.001 PAR VALUE PER SHARE OF
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
transferable on the books of the Company by the holder hereof in person or by
duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned by the Transfer
Agent and registered by the Registrar.
WITNESS the facsimile seal of the Company and the facsimile signatures
of its duly authorized officers.
Dated:
[SEAL]
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
EXECUIVE VICE PRESIDENT AND CHAIRMAN AND
CHIEF FINANCIAL OFFICER CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
NORTHWEST BANK MINNESOTA, N.A.
TRANSFER AGENT AND REGISTRAR
AUTHORIZED SIGNATURE
<PAGE>
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
A statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of shares or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights as established, from time to time, by the Bye-laws
of the Company and by any certificate of determination, the number of shares
constituting each class and series, and the designations thereof, may be
obtained by the holder hereof upon request and without charge from the
Secretary of the Company at the registered office of the Company.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ______ Custodian ________
TEN ENT -- as tenants by the [Illegible] (Cust) (Minor)
JT TEN -- as joint tenants with right under Uniform Gifts to Minors
of survivorship and not Act _________________________
as tenants in common ([ILLEGIBLE])
COM PROP -- as community property UNIF TRF MIN ACT -- ______ Custodian Unit Age________
(Cust)
_______ with Uniform Transfers
(Minor)
[ILLEGIBLE] Act _________________
(State)
</TABLE>
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED THOUGH NOT IN THE ABOVE LIST.
FOR VALUE RECEIVED, _________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
______________________________________
______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
______________________________________________________________________________
______________________________________________________________________________
________________________________________________________________ Common Shares
represented by the within Certificate, and do not hereby irrevocably
constiture and appoint
_____________________________________________________________________ Attorney
to transfer the said shares on the books of the within named Company with
full power of substitution in the premises.
Dated ___________________
X __________________________________
X __________________________________
Notice: THE SIGNATURE(S) TO THE
ASSIGNMENT MUST CORRESPOND WITH
THE NAME(S) AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Gauranteed
By ____________________________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKER, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDIALLION PROGRAM, PURSUANT TO S.E.C. RULE 17 Apr 15.
<PAGE>
EXHIBIT 10.1
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of September
____, 1999, by and between Interwave Communications International, Ltd., a
Bermuda corporation (the "Company"), and _______________ ("Indemnitee").
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and its related
entities;
WHEREAS, in order to induce Indemnitee to continue to provide services to
the Company, the Company wishes to provide for the indemnification of, and the
advancement of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, the Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for the Company's directors, officers, employees,
agents and fiduciaries, the significant increases in the cost of such insurance
and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited; and
WHEREAS, the Company and Indemnitee desire to continue to have in place
the additional protection provided by an indemnification agreement and to
provide indemnification and advancement of expenses to the Indemnitee to the
maximum extent permitted by Bermuda and Delaware law;
WHEREAS, in view of the considerations set forth above, the Company
desires that Indemnitee shall be indemnified and advanced expenses by the
Company as set forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth
below.
1. Certain Definitions.
(a) "Change in Control" shall mean, and shall be deemed to have
occurred if, on or after the date of this Agreement, (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended, (the "Exchange Act")), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company acting in such
capacity or a corporation owned directly or indirectly by the shareholders of
the Company in substantially the same proportions as their ownership of common
shares of the
<PAGE>
Company, becomes the "beneficial owner" (as defined in Rule 13d-3 under said
Exchange Act), directly or indirectly, of securities of the Company
representing more than 50% of the total voting power represented by the
Company's then outstanding Voting Securities, (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose election by
the Board of Directors or nomination for election by the Company's
shareholders was approved by a vote of at least two thirds (2/3) of the
directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof, or (iii) the
shareholders of the Company approve a merger or consolidation of the Company
with any other corporation 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 80% 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 shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of (in one transaction or a series of related transactions) all or
substantially all of the Company's assets.
(b) "Claim" shall mean with respect to a Covered Event: any
threatened, pending or completed action, suit, proceeding or alternative dispute
resolution mechanism, or any hearing, inquiry or investigation that Indemnitee
in good faith believes might lead to the institution of any such action, suit,
proceeding or alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other.
(c) References to the "Company" shall include, in addition to
Interwave Communications International, Ltd., any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger to which Interwave Communications International, Ltd. (or any of its
wholly owned subsidiaries) is a party which, if its separate existence had
continued, would have had power and authority to indemnify its directors,
officers, employees, agents or fiduciaries, so that if Indemnitee is or was a
director, officer, employee, agent or fiduciary of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
director, officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, 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.
(d) "Covered Event" shall mean any event or occurrence related
to the fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or any subsidiary of the Company, or is or was serving
at the request of the Company as a director, officer, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust or
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other enterprise, or by reason of any action or inaction on the part of
Indemnitee while serving in such capacity.
(e) "Expenses" shall mean any and all expenses (including
attorneys' fees and all other costs, expenses and obligations incurred in
connection with investigating, defending, being a witness in or participating in
(including on appeal), or preparing to defend, to be a witness in or to
participate in, any action, suit, proceeding, alternative dispute resolution
mechanism, hearing, inquiry or investigation), judgments, fines, penalties 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, of any Claim and any federal, state, local or foreign taxes
imposed on the Indemnitee as a result of the actual or deemed receipt of any
payments under this Agreement.
(f) "Expense Advance" shall mean a payment to Indemnitee
pursuant to Section 3 of Expenses in advance of the settlement of or final
judgement in any action, suit, proceeding or alternative dispute resolution
mechanism, hearing, inquiry or investigation which constitutes a Claim.
(g) "Independent Legal Counsel" shall mean an attorney or firm
of attorneys, selected in accordance with the provisions of Section 2(d) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other indemnitees under similar
indemnity agreements).
(h) 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, agent or fiduciary of the Company which imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with respect
to an employee benefit plan, its participants or its 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.
(i) "Reviewing Party" shall mean, subject to the provisions of
Section 2(d), any person or body appointed by the Board of Directors in
accordance with applicable law to review the Company's obligations hereunder and
under applicable law, which may include a member or members of the Company's
Board of Directors, Independent Legal Counsel or any other person or body not a
party to the particular Claim for which Indemnitee is seeking indemnification.
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<PAGE>
(j) "Section refers to a section of this Agreement unless
otherwise indicated.
(k) "Voting Securities" shall mean any securities of the
Company that vote generally in the election of directors.
2. Indemnification.
(a) Indemnification of Expenses. Subject to the provisions of
Section 2(b) below, the Company shall indemnify Indemnitee for Expenses to the
fullest extent permitted by law if Indemnitee was or is or becomes a party to or
witness or other participant in, or is threatened to be made a party to or
witness or other participant in, any Claim (whether by reason of or arising in
part out of a Covered Event), including all interest, assessments and other
charges paid or payable in connection with or in respect of such Expenses.
(b) Review of Indemnification Obligations. Notwithstanding the
foregoing, in the event any Reviewing Party shall have determined (in a written
opinion, in any case in which Independent Legal Counsel is the Reviewing Party)
that Indemnitee is not entitled to be indemnified hereunder under applicable
law, (i) the Company shall have no further obligation under Section 2(a) to make
any payments to Indemnitee not made prior to such determination by such
Reviewing Party, and (ii) the Company shall be entitled to be reimbursed by
Indemnitee (who hereby agrees to reimburse the Company) for all Expenses
theretofore paid in indemnifying Indemnitee; provided, however, that if
Indemnitee has commenced or thereafter commences legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee is entitled to
be indemnified hereunder under applicable law, any determination made by any
Reviewing Party that Indemnitee is not entitled to be indemnified hereunder
under applicable law shall not be binding and Indemnitee shall not be required
to reimburse the Company for any Expenses theretofore paid in indemnifying
Indemnitee until a final judicial determination is made with respect thereto (as
to which all rights of appeal therefrom have been exhausted or lapsed).
Indemnitee's obligation to reimburse the Company for any Expenses shall be
unsecured and no interest shall be charged thereon.
(c) Indemnitee Rights on Unfavorable Determination; Binding
Effect. If any Reviewing Party determines that Indemnitee substantively is not
entitled to be indemnified hereunder in whole or in part under applicable law,
Indemnitee shall have the right to commence litigation seeking an initial
determination by the court or challenging any such determination by such
Reviewing Party or any aspect thereof, including the legal or factual bases
therefor, and, subject to the provisions of Section 15, the Company hereby
consents to service of process and to appear in any such proceeding. Absent
such litigation, any determination by any Reviewing Party shall be conclusive
and binding on the Company and Indemnitee.
(d) Selection of Reviewing Party; Change in Control. If there
has not been a Change in Control, any Reviewing Party shall be selected by the
Board of Directors, and if there
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<PAGE>
has been such a Change in Control (other than a Change in Control which has
been approved by a majority of the Company's Board of Directors who were
directors immediately prior to such Change in Control), any Reviewing Party
with respect to all matters thereafter arising concerning the rights of
Indemnitee to indemnification of Expenses under this Agreement or any other
agreement or under the Company's Memorandum of Association or Bye-laws as now
or hereafter in effect, or under any other applicable law, if desired by
Indemnitee, shall be Independent Legal Counsel selected by Indemnitee and
approved by the Company (which approval shall not be unreasonably withheld).
Such counsel, among other things, shall render its written opinion to the
Company and Indemnitee as to whether and to what extent Indemnitee would be
entitled to be indemnified hereunder under applicable law and the Company
agrees to abide by such opinion. The Company agrees to pay the reasonable
fees of the Independent Legal Counsel referred to above and to indemnify
fully such counsel against any and all expenses (including attorneys' fees),
claims, liabilities and damages arising out of or relating to this Agreement
or its engagement pursuant hereto. Notwithstanding any other provision of
this Agreement, the Company shall not be required to pay Expenses of more
than one Independent Legal Counsel in connection with all matters concerning
a single Indemnitee, and such Independent Legal Counsel shall be the
Independent Legal Counsel for any or all other Indemnitees unless (i) the
Company otherwise determines or (ii) any Indemnitee shall provide a written
statement setting forth in detail a reasonable objection to such Independent
Legal Counsel representing other Indemnitees.
(e) Mandatory Payment of Expenses. Notwithstanding any other
provision of this Agreement other than Section 10 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
Claim, Indemnitee shall be indemnified against all Expenses incurred by
Indemnitee in connection therewith.
3. Expense Advances.
(a) Obligation to Make Expense Advances. Upon receipt of a
written undertaking by or on behalf of the Indemnitee to repay such amounts if
it shall ultimately be determined that the Indemnitee is not entitled to be
indemnified therefor by the Company, the Company shall, subject to applicable
law, make Expense Advances to Indemnitee.
(b) Form of Undertaking. Any written undertaking by the
Indemnitee to repay any Expense Advances hereunder shall be unsecured and no
interest shall be charged thereon.
(c) Determination of Reasonable Expense Advances. The parties
agree that for the purposes of any Expense Advance for which Indemnitee has made
written demand to the Company in accordance with this Agreement, all Expenses
included in such Expense Advance that are certified by affidavit of Indemnitee's
counsel as being reasonable shall be presumed conclusively to be reasonable.
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<PAGE>
4. Procedures for Indemnification and Expense Advances.
(a) Timing of Payments. All payments of Expenses (including
without limitation Expense Advances) by the Company to the Indemnitee pursuant
to this Agreement shall be made to the fullest extent permitted by law as soon
as practicable after written demand by Indemnitee therefor is presented to the
Company, but in no event later than forty-five (45) business days after such
written demand by Indemnitee is presented to the Company, except in the case of
Expense Advances, which shall be made no later than twenty (20) business days
after such written demand by Indemnitee is presented to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified or Indemnitee's
right to receive Expense Advances 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). 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) No Presumptions; Burden of Proof. For purposes of this
Agreement, the termination of any Claim by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by this
Agreement or applicable law. In addition, neither the failure of any Reviewing
Party to have made a determination as to whether Indemnitee has met any
particular standard of conduct or had any particular belief, nor an actual
determination by any Reviewing Party that Indemnitee has not met such standard
of conduct or did not have such belief, prior to the commencement of legal
proceedings by Indemnitee to secure a judicial determination that Indemnitee
should be indemnified under this Agreement or applicable law, shall be a defense
to Indemnitee's claim or create a presumption that Indemnitee has not met any
particular standard of conduct or did not have any particular belief. In
connection with any determination by any Reviewing Party or otherwise as to
whether the Indemnitee is entitled to be indemnified hereunder, the burden of
proof shall be on the Company to establish that Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by
the Company of a notice of a Claim pursuant to Section 4(b) hereof, the
Company has liability insurance in effect which may cover such Claim, the
Company shall give prompt notice of the commencement of such Claim 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
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<PAGE>
behalf of the Indemnitee, all amounts payable as a result of such Claim in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be
obligated hereunder to provide indemnification for or make any Expense Advances
with respect to the Expenses of any Claim, the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by Indemnitee
(which approval shall not be unreasonably withheld) upon the delivery to
Indemnitee of written notice of the Company's election to do so. 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 or expenses of separate counsel subsequently employed by
or on behalf of Indemnitee with respect to the same Claim; provided that, (i)
Indemnitee shall have the right to employ Indemnitee's separate counsel in any
such Claim at Indemnitee's expense and (ii) if (A) the employment of separate
counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (C) the Company shall not continue to retain such counsel to defend such
Claim, then the fees and expenses of Indemnitee's separate counsel shall be
Expenses for which Indemnitee may receive indemnification or Expense Advances
hereunder.
5. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. 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 Memorandum of Association, the Company's Bye-laws or by
statute. In the event of any change after the date of this Agreement in any
applicable law, statute or rule which expands the right of a Delaware or Bermuda
corporation to indemnify a member of its board of directors or an officer,
employee, agent or fiduciary, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits afforded by such
change. In the event of any change in any applicable law, statute or rule which
narrows the right of a Bermuda or Delaware corporation to indemnify a member of
its board of directors or an officer, employee, agent or fiduciary, such change,
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 except as set forth in Section 10(a) hereof.
(b) Nonexclusivity. The indemnification and the payment of
Expense Advances provided by this Agreement shall be in addition to any rights
to which Indemnitee may be entitled under the Company's Memorandum of
Association, its Bye-laws, any other agreement, any vote of shareholders or
disinterested directors, the General Corporation Law of the State of Delaware,
or otherwise. The indemnification and the payment of Expense Advances provided
under this Agreement shall continue as to Indemnitee for any action taken or not
taken while serving in an
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<PAGE>
indemnified capacity even though subsequent thereto Indemnitee may have
ceased to serve in such capacity.
6. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's Memorandum of
Association, Bye-laws or otherwise) of the amounts otherwise payable hereunder.
7. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
8. Mutual Acknowledgement. Both the Company and Indemnitee
acknowledge that in certain instances, applicable law or applicable public
policy may prohibit the Company from indemnifying its directors, officers,
employees, agents or fiduciaries 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.
9. Liability Insurance. To the extent the Company maintains
liability insurance applicable to directors, officers, employees, agents or
fiduciaries, Indemnitee shall be covered by such policies in such a manner as to
provide Indemnitee the same rights and benefits as are provided 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, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.
10. Exceptions. Notwithstanding any other provision of this
Agreement, the Company shall not be obligated pursuant to the terms of this
Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee for
Expenses resulting from acts, omissions or transactions for which Indemnitee is
prohibited from receiving indemnification under this Agreement or applicable
law; provided, however, that notwithstanding any limitation set forth in this
Section 10(a) regarding the Company's obligation to provide indemnification,
Indemnitee shall be entitled under Section 3 to receive Expense Advances
hereunder with respect to any such Claim unless and until a court having
jurisdiction over the Claim shall have made a final judicial determination (as
to which all rights of appeal therefrom have been exhausted or lapsed) that
Indemnitee has engaged in acts, omissions or transactions for
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<PAGE>
which Indemnitee is prohibited from receiving indemnification under this
Agreement or applicable law.
(b) Claims Initiated by Indemnitee. To indemnify or make
Expense Advances to Indemnitee with respect to Claims initiated or brought
voluntarily by Indemnitee and not by way of defense, counterclaim or crossclaim,
except (i) with respect to actions or proceedings brought to establish or
enforce a right to indemnification under this Agreement or any other agreement
or insurance policy or under the Company's Memorandum of Association or Bye-laws
now or hereafter in effect relating to Claims for Covered Events, (ii) in
specific cases if the Board of Directors has approved the initiation or bringing
of such Claim, or (iii) as otherwise required under Section 145 of the Delaware
General Corporation Law, regardless of whether Indemnitee ultimately is
determined to be entitled to such indemnification or insurance recovery, as the
case may be.
(c) Lack of Good Faith. To indemnify Indemnitee for any
Expenses incurred by the Indemnitee with respect to any action instituted (i) by
Indemnitee to enforce or interpret this Agreement, if a court having
jurisdiction over such action determines as provided in Section 13 that each of
the material assertions made by the Indemnitee as a basis for such action was
not made in good faith or was frivolous, or (ii) by or in the name of the
Company to enforce or interpret this Agreement, if a court having jurisdiction
over such action determines as provided in Section 13 that each of the material
defenses asserted by Indemnitee in such action was made in bad faith or was
frivolous.
(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 Exchange Act, or
any similar successor statute; provided, however, that notwithstanding any
limitation set forth in this Section 10(d) regarding the Company's obligation to
provide indemnification, Indemnitee shall be entitled under Section 3 to receive
Expense Advances hereunder with respect to any such Claim unless and until a
court having jurisdiction over the Claim shall have made a final judicial
determination (as to which all rights of appeal therefrom have been exhausted or
lapsed) that Indemnitee has violated said statute.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs and
personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part, of
the business or assets of the Company, by written agreement in form and
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substance satisfactory to Indemnitee, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no such succession had taken place.
This Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as a director, officer, employee, agent or fiduciary (as
applicable) of the Company or of any other enterprise at the Company's
request.
13. Expenses Incurred in Action Relating to Enforcement or
Interpretation. In the event that any action is instituted by Indemnitee under
this Agreement or under any liability insurance policies maintained by the
Company to enforce or interpret any of the terms hereof or thereof, Indemnitee
shall be entitled to be indemnified for all Expenses incurred by Indemnitee with
respect to such action (including without limitation attorneys' fees),
regardless of whether Indemnitee is ultimately successful in such action, unless
as a part of such action a court having jurisdiction over such action makes a
final judicial determination (as to which all rights of appeal therefrom have
been exhausted or lapsed) that each of the material assertions made by
Indemnitee as a basis for such action was not made in good faith or was
frivolous; provided, however, that until such final judicial determination is
made, Indemnitee shall be entitled under Section 3 to receive payment of Expense
Advances hereunder with respect to such action. In the event of an action
instituted by or in the name of the Company under this Agreement to enforce or
interpret any of the terms of this Agreement, Indemnitee shall be entitled to be
indemnified for all Expenses incurred by Indemnitee in defense of such action
(including without limitation costs and expenses incurred with respect to
Indemnitee's counterclaims and cross-claims made in such action), unless as a
part of such action a court having jurisdiction over such action makes a final
judicial determination (as to which all rights of appeal therefrom have been
exhausted or lapsed) that each of the material defenses asserted by Indemnitee
in such action was made in bad faith or was frivolous; provided, however, that
until such final judicial determination is made, Indemnitee shall be entitled
under Section 3 to receive payment of Expense Advances hereunder with respect to
such action.
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 signed for by the party addressed, on the date of such
delivery, 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 Delaware
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 commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
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16. Severability. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including without limitation each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
17. Choice of Law. This Agreement, and all rights, remedies,
liabilities, powers and duties of the parties to this Agreement, shall be
governed by and construed in accordance with the laws of the State of Delaware
without regard to principles of conflicts of laws.
18. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification,
termination or cancellation of this Agreement shall be effective unless it is in
writing signed by both the parties hereto. No waiver of any of the provisions
of this Agreement shall be deemed to be or shall constitute a waiver of any
other provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver.
20. Integration and Entire Agreement. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
21. No Construction as Employment Agreement. Nothing contained in
this Agreement shall be construed as giving Indemnitee any right to be retained
in the employ of the Company or any of its subsidiaries or affiliated entities.
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement as of the date first above written.
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
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By:______________________________________
Name: Priscilla M. Lu
Title: Chief Executive Officer and Chairman of the Board
Address: 656 Bair Island Road, Suite 108
Redwood City, CA 94063
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AGREED TO AND ACCEPTED
INDEMNITEE:
_____________________________
(signature)
_____________________________
(printed)
Address:
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EXHIBIT 10.2
INTERWAVE COMMUNICATIONS INTERNATIONAL LTD.
1994 STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory 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. Stock purchase rights may also be granted
under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the United States Internal Revenue Code of
1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board of
Directors in accordance with Section 4 of the Plan.
(e) "COMMON STOCK" means the Common Stock of the Company.
(f) "COMPANY" means Interwave Communications International
Ltd., a Bermuda corporation.
(g) "CONSULTANT" means any person who is engaged by the Company
or any Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any director of the Company whether
compensated for such services or not. If and in the event the Company registers
any class of any equity security pursuant to the Exchange Act, the term
Consultant shall thereafter not include directors who are not compensated for
their services or are paid only a director's fee by the Company.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means
that the employment or consulting relationship is not interrupted or terminated
by the Company, any Parent or Subsidiary. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of: (i) any leave of
absence approved by the Company, including sick leave, military leave, or any
other personal leave; provided, however, that for purposes of Incentive Stock
Options, no such leave may exceed ninety (90) days, unless reemployment upon the
expiration of such leave is guaranteed by contract (including certain Company
policies) or statute; provided, further, that on the ninety-first (91st) day of
any such leave (where reemployment is not guaranteed by contract or statute) the
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Optionee's Incentive Stock Option shall automatically convert to a Nonstatutory
Stock Option, or (ii) transfers between locations of the Company or between the
Company, its Parent, its Subsidiaries or its successor.
(i) "DISABILITY" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(j) "EMPLOYEE" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(k) "EXCHANGE ACT" means the United States Securities Exchange
Act of 1934, as amended.
(l) "FAIR MARKET VALUE" means, as of any date, the 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 System 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 exchange or system for the last market trading
day prior to the time of determination) as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the National Market System 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 or;
(iii) In the absence of an established market for the
Common Stock, or if the Board determines that the trading volume on such
established market is so low that the trading prices do not fairly represent
the value of the stock, the Fair Market Value thereof shall be determined in
good faith by the Administrator.
(m) "INCENTIVE STOCK OPTION" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(n) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(o) "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.
(p) "OPTION" means a stock option granted pursuant to the Plan.
(q) "OPTIONED STOCK" means the Common Stock subject to an
Option or a Stock Purchase Right.
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(r) "OPTIONEE" means an Employee or Consultant who receives an
Option or Stock Purchase Right.
(s) "PARENT" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(t) "PLAN" means this 1994 Stock Plan.
(u) "RESTRICTED STOCK" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below.
(v) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 12 below.
(w) "STOCK PURCHASE RIGHT" means the right to purchase Common
Stock pursuant to Section 11 below.
(x) "SUBSIDIARY" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section
12 of the Plan, the maximum aggregate number of shares which may be optioned and
sold under the Plan is 5,230,000 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right should expire or become
unexercisable for any reason without having been exercised in full, the
unpurchased Shares which were subject thereto shall, unless the Plan shall have
been terminated, become available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) INITIAL PLAN PROCEDURE. Prior to the date, if any, upon
which the Company becomes subject to the Exchange Act, the Plan shall be
administered by the Board or a committee appointed by the Board.
(b) PLAN PROCEDURE AFTER THE DATE, IF ANY, UPON WHICH THE
COMPANY BECOMES SUBJECT TO THE EXCHANGE ACT.
(i) ADMINISTRATION WITH RESPECT TO DIRECTORS AND
OFFICERS. With respect to grants of Options or Stock Purchase Rights to
Employees who are also officers or directors of the Company, the Plan shall
be administered by (A) the Board if the Board may administer the Plan in
compliance with Rule 16b-3 promulgated under the Exchange Act or any
successor thereto ("Rule 16b-3") with respect to a plan intended to qualify
thereunder as a discretionary plan, or (B) a committee designated by the
Board to administer the Plan, which committee shall be constituted in such a
manner as to permit the Plan to comply with Rule 16b-3 with respect to a plan
intended to qualify thereunder as a discretionary plan. Once appointed, such
Committee shall continue to serve
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in its designated capacity until otherwise directed by the Board. From time
to time the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however caused,
and remove all members of the Committee and thereafter directly administer
the Plan, all to the extent permitted by Rule 16b-3 with respect to a plan
intended to qualify thereunder as a discretionary plan.
(ii) MULTIPLE ADMINISTRATIVE BODIES. If permitted by
Rule 16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers.
(iii) ADMINISTRATION WITH RESPECT TO CONSULTANTS AND
OTHER EMPLOYEES. With respect to grants of Options or Stock Purchase Rights
to Employees or Consultants who are neither directors nor officers of the
Company, the Plan shall be administered by (A) the Board or (B) a committee
designated by the Board, which committee shall be constituted in such a
manner as to satisfy the legal requirements relating to the administration of
incentive stock option plans, if any, of California corporate and securities
laws, of the Code, and of any applicable stock exchange (the "Applicable
Laws"). Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new
members in substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and thereafter directly administer the Plan, all
to the extent permitted by the Applicable Laws.
(c) POWERS OF THE ADMINISTRATOR. Subject to the provisions of
the Plan and, in the case of a Committee, the specific duties delegated by the
Board to such Committee, and subject to the approval of any relevant
authorities, including the approval, if required, of any stock exchange upon
which the Common Stock is listed, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(l) of the Plan;
(ii) to select the Consultants and Employees to whom
Options and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options
and Stock Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock
to be covered by each such award 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 award granted hereunder;
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(vii) to determine whether and under what circumstances
an Option may be settled in cash under subsection 9(f) instead of Common
Stock;
(viii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;
(ix) to determine the terms and restrictions
applicable to Stock Purchase Rights and the Restricted Stock purchased by
exercising such Stock Purchase Rights; and
(x) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan.
(d) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options or Stock Purchase
Rights.
5. ELIGIBILITY.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee or Consultant who has been granted an Option or
Stock Purchase Right may, if otherwise eligible, be granted additional Options
or Stock Purchase Rights.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.
(c) For purposes of 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 shall be determined as of the time the Option with
respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment relationship with the Company, nor shall
it interfere in any way with his or her right or the Company's right to
terminate his or her employment relationship at any time, with or without cause.
(e) The following limitations shall apply to grants of Options
to Officers:
(i) No Officer shall be granted, in any fiscal
year of the Company, Options to purchase more than 650,000 Shares, provided that
a newly-hired Officer may in addition receive a one-time grant of up to 650,000
Shares upon acceptance of employment with the Company.
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(ii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 12(a).
(iii) The limitations set forth in this Section
5(e) are intended to satisfy the requirements applicable to Options intended to
qualify as "performance-based compensation" (within the meaning of Section
162(m) of the Code). In the event the Administrator determines that such
limitations are not required to qualify Options as performance-based
compensation, the Administrator may modify or eliminate such limitations.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company, as described in Section 18 of the Plan. It shall
continue in effect for a term of ten (10) 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 (10) years from the date of grant thereof. However, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Option shall be five (5) years from the date of grant thereof or such
shorter term as may be provided in the Option Agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the
time of the grant of such Incentive Stock Option, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time
of the grant of such Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of the grant.
(B) granted to any person, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on
the date of grant.
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(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (6) any combination of the foregoing methods of payment. In
making its determination as to the type of consideration to accept, the Board
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, 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,
notwithstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. In
the event of termination of an Optionee's Continuous Status as an Employee or
Consultant with the Company (but not in the event of an Optionee's change of
status from Employee to Consultant (in which case an Employee's Incentive
Stock Option shall automatically convert to a Nonstatutory Stock Option on
the ninety-first (91st) day following such change of status) or from
Consultant to Employee), such Optionee may, but only within such period of
time as is determined by the Administrator, of at least
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thirty (30) days, with such determination in the case of an Incentive Stock
Option not exceeding three (3) months after the date of such termination (but
in no event later than the expiration date of the term of such Option as set
forth in the Option Agreement), exercise his or her Option to the extent that
Optionee was entitled to exercise it at the date of such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of
such termination, or if Optionee does not exercise such Option to the extent
so entitled within the time specified herein, the Option shall terminate.
(c) DISABILITY OF OPTIONEE. Notwithstanding the provisions of
Section 6 above, in the event of termination of an Optionee's consulting
relationship or Continuous Status as an Employee as a result of his or her
disability, Optionee may, but only within six (6) months from the date of such
termination (and 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; provided,
however, that if such disability is not a "disability" as such term is defined
in Section 22(e) (3) of the Code, in the case of an Incentive Stock Option such
Incentive Stock Option shall automatically convert to a Nonstatutory Stock
Option on the day three months and one day following such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. In the event of the death of an
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant), by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent that the Optionee was entitled to
exercise the Option at the date of death. If, at the time of death, the
Optionee was not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall immediately revert to
the Plan. If, after death, the Optionee's estate or a person who acquired the
right to exercise the Option by bequest or inheritance does not exercise the
Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(e) RULE 16b-3. Options granted to persons subject to Section
16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) BUYOUT PROVISIONS. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
10. 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 and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
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11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions related
to the offer, including the number of Shares that such person shall be entitled
to purchase, the price to be paid, and the time within which such person must
accept such offer, which shall in no event exceed thirty (30) days from the date
upon which the Administrator made the determination to grant the Stock Purchase
Right. The price to be paid shall be at least (1) 85% of the fair market value
at the time the person is granted the right to purchase shares under the Plan or
the purchase is consummated or (2) 100% of the fair market value at either of
such times if the person who is granted the stock purchase right owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or its Parent or subsidiary corporations. The offer shall
be accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator. Shares purchased pursuant to the grant of a
Stock Purchase Right shall be referred to herein as "Restricted Stock."
(b) REPURCHASE OPTION. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine, but at a minimum rate of 20% per year.
(c) OTHER PROVISIONS. The Restricted Stock purchase agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 12
of the Plan.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(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 or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding
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Option or Stock Purchase Right, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made
by the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of
stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock
subject to an Option or Stock Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) MERGER. In the event of a merger of the Company with or
into another corporation, the Option or Stock Purchase Right shall be assumed or
an equivalent option or right shall be substituted by such successor corporation
or a parent or subsidiary of such successor corporation. If, in such event, the
Option or Stock Purchase Right is not assumed or substituted, the Option or
Stock Purchase Right shall terminate as of the date of the closing of the
merger. For the purposes of this paragraph, the Option or Stock Purchase Right
shall be considered assumed if, following the merger, the option or right
confers the right to purchase, for each Share of Optioned Stock subject to the
Option or Stock Purchase Right immediately prior to the merger, the
consideration (whether stock, cash, or other securities or property) received in
the merger by holders of Common Stock for each Share held on the effective date
of the transaction (and if holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger
was 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 the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger.
13. TIME OF GRANTING OPTIONS AND STOCK PURCHASE RIGHTS. The date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Board. Notice of the
determination shall be given to each Employee or Consultant to whom an Option or
Stock Purchase Right is so granted within a reasonable time after the date of
such grant.
14. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without
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<PAGE>
his or her consent. In addition, to the extent necessary and desirable to
comply with Rule 16b-3 under the Exchange Act or with Section 422 of the Code
(or any other applicable law or regulation, including the requirements of the
NASDAQ or an established stock exchange), 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. Any such amendment or
termination of the Plan shall not affect Options or Stock Purchase Rights
already granted, and such Options and Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
15. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange 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 or Stock Purchase Right, the
Company may require the person exercising such Option or Stock Purchase Right to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned relevant provisions of
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.
The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
17. AGREEMENTS. Options and Stock Purchase Rights shall be evidenced
by written agreements in such form as the Board shall approve from time to time.
18. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
19. INFORMATION TO OPTIONEES AND PURCHASERS. The Company shall
provide to each Optionee and to each individual who acquired Shares pursuant to
the Plan, during the period such Optionee or purchaser has one or more Options
or Stock Purchase Rights outstanding, and, in the case of an individual who
acquired Shares pursuant to the Plan, during the period such individual owns
such Shares, copies of annual financial statements. The Company shall not be
required to provide such statements to key employees whose duties in connection
with the Company assure their access to equivalent information.
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EXHIBIT A
1994 STOCK PLAN
EXERCISE NOTICE
WAVElink Communications International Ltd.
_________________________
_________________________
Attention: Chief Financial Officer
1. EXERCISE OF OPTION. Effective as of today, ___________, 19__, the
undersigned ("OPTIONEE") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "SHARES") of WAVElink Communications
International Ltd. (the "COMPANY") under and pursuant to the 1994 Stock Plan, as
amended (the "PLAN") and the [ ] Incentive [ ] Nonstatutory Stock Option
Agreement dated ________ (the "OPTION AGREEMENT").
2. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
3. RIGHTS AS SHAREHOLDER. Until the stock certificate evidencing
such Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 12 of the Plan.
Optionee shall enjoy rights as a shareholder until such time as Optionee
disposes of the Shares or the Company and/or its assignee(s) exercises the Right
of First Refusal hereunder. Upon such exercise, Optionee shall have no further
rights as a holder of the Shares so purchased except the right to receive
payment for the Shares so purchased in accordance with the provisions of this
Agreement, and Optionee shall forthwith cause the certificate(s) evidencing the
Shares so purchased to be surrendered to the Company for transfer or
cancellation.
4. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Shares held by
Optionee or any transferee (either being sometimes referred to herein as the
"HOLDER") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section (the "RIGHT OF FIRST REFUSAL").
(a) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares
shall deliver to the Company a written notice (the "NOTICE") stating: (i) the
Holder's bona fide intention to sell or
<PAGE>
otherwise transfer such Shares; (ii) the name of each proposed purchaser or
other transferee ("PROPOSED TRANSFEREE"); (iii) the number of Shares to be
transferred to each Proposed Transferee; and (iv) the bona fide cash price or
other consideration for which the Holder proposes to transfer the Shares (the
"OFFERED PRICE"), and the Holder shall offer the Shares at the Offered Price
to the Company or its assignee(s).
(b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (c) below.
(c) PURCHASE PRICE. The purchase price ("PURCHASE PRICE") for
the Shares purchased by the Company or its assignee(s) under this Section shall
be the Offered Price. If the Offered Price includes consideration other than
cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(d) PAYMENT. Payment of the Purchase Price shall be made, at
the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(e) HOLDER'S RIGHT TO TRANSFER. If all of the Shares proposed
in the Notice to be transferred to a given Proposed Transferee are not purchased
by the Company and/or its assignee(s) as provided in this Section, then the
Holder may sell or otherwise transfer such Shares to that Proposed Transferee at
the Offered Price or at a higher price, provided that such sale or other
transfer is consummated within 120 days after the date of the Notice and
provided further that any such sale or other transfer is effected in accordance
with any applicable securities laws and the Proposed Transferee agrees in
writing that the provisions of this Section shall continue to apply to the
Shares in the hands of such Proposed Transferee. If the Shares described in the
Notice are not transferred to the Proposed Transferee within such period, a new
Notice shall be given to the Company, and the Company and/or its assignees shall
again be offered the Right of First Refusal before any Shares held by the Holder
may be sold or otherwise transferred.
(f) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Optionee's lifetime or on the Optionee's death by will
or intestacy to the Optionee's immediate family or a trust for the benefit of
the Optionee's immediate family shall be exempt from the provisions of this
Section. "IMMEDIATE FAMILY" as used herein shall mean spouse, lineal descendant
or antecedent, father, mother, brother or sister. In such case, the transferee
or other recipient shall receive and hold the Shares so transferred subject to
the provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
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(g) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First
Refusal shall terminate as to any Shares 90 days after the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the 1933 Act.
5. TAX CONSULTATION. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
6. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. Optionee understands and agrees that the Company
shall cause the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the Shares
together with any other legends that may be required by state or federal
securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE
THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND
RIGHT OF FIRST REFUSAL OPTIONS HELD BY THE ISSUER OR
ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE
SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING
ON TRANSFEREES OF THESE SHARES.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF
THIS SECURITY, OR ANY INTEREST THEREIN, OR TO
RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS
PERMITTED IN THE COMMISSIONER'S RULES.
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<PAGE>
Optionee understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to Exhibit B, the Investment Representation Statement.
(b) STOP-TRANSFER NOTICES. Optionee agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required
(i) to transfer on its books any Shares that have been sold or otherwise
transferred in violation of any of the provisions of this Agreement or (ii) to
treat as owner of such Shares or to accord the right to vote or pay dividends to
any purchaser or other transferee to whom such Shares shall have been so
transferred.
7. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
8. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.
9. GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by
and construed in accordance with the laws of the State of California excluding
that body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
10. NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery or
upon deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
11. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
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<PAGE>
12. DELIVERY OF PAYMENT. Optionee herewith delivers to the Company
the full Exercise Price for the Shares.
13. ENTIRE AGREEMENT. The Plan and Notice of Grant/Option Agreement
are incorporated herein by reference. This Agreement, the Plan, the Option
Agreement and the Investment Representation Statement constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof, and is governed by California law except for that body of law pertaining
to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: WAVElink Communications International Ltd.
By:____________________________________
Its:____________________________________
__________________________________
(Signature)
ADDRESS: ADDRESS:
__________________________________ _______________________________________
__________________________________ _______________________________________
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<PAGE>
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE :
COMPANY : WAVElink Communications International Ltd.
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Optionee is
acquiring these securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the securities. Optionee understands that the certificate evidencing the
securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company, a legend prohibiting their
transfer without the consent of the Commissioner of Corporations of the State of
California and any other legend required under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly from
the issuer thereof, in a non-public offering subject to the satisfaction of
certain conditions. Rule 701 provides that if the issuer qualifies under
Rule 701 at the time of the grant of the Option to the Optionee, the exercise
will be exempt from registration under the Securities Act. In the event the
Company becomes subject to the reporting requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934,
<PAGE>
ninety (90) days thereafter (or such longer period as any market stand-off
agreement may require) the securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule
144, including: (1) the resale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as
said term is defined under the Securities Exchange Act of 1934); and, in the
case of an affiliate, (2) the availability of certain public information
about the Company, (3) the amount of securities being sold during any three
month period not exceeding the limitations specified in Rule 144(e), and (4)
the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than two years after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and, in
the case of an affiliate, or of a non-affiliate who has held the securities less
than three years, the satisfaction of the conditions set forth in sections (1),
(2), (3) and (4) of the paragraph immediately above.
(d) Optionee hereby agrees that if so requested by the Company or any
representative of the underwriters in connection with any registration of the
offering of any securities of the Company under the 1933 Act, Optionee shall not
sell or otherwise transfer any Shares or other securities of the Company during
the 180-day period following the effective date of a registration statement of
the Company filed under the 1933 Act; provided, however, that such restriction
shall only apply to the first registration statement of the Company to become
effective under the 1933 Act which include securities to be sold on behalf of
the Company to the public in an underwritten public offering under the 1933 Act.
The Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such 180-day period.
(e) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that
any such other registration exemption will be available in such event.
(f) Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities without the consent of the Commissioner of Corporations of
California. Optionee has read the applicable Commissioner's Rules with respect
to such restriction, a copy of which is attached.
Date:_______________, 19___ ___________________________________
Signature of Optionee
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ATTACHMENT 1
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: RESTRICTION ON TRANSFER. (a) The issuer of any
security upon which a restriction on transfer has been imposed pursuant to
Sections 260.102.6, 260.141.10 or 260.534 shall cause a copy of this section to
be delivered to each issuee or transferee of such security at the time the
certificate evidencing the security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102
of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or
any custodian or trustee for the account of the transferor or the
transferor's ancestors, descendants, or spouse; or to a transferee by a
trustee or custodian for the account of the transferee or the
transferee's ancestors, descendants or spouse;
(5) to holders of securities of the same class of the same
issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code
(either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the
knowledge of the broker-dealer, nor actually present in this state if the
sale of such securities is not in violation of any securities law of the
foreign state, territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate
or selling group;
(9) if the interest sold or transferred is a pledge or other
lien given by the purchaser to the seller upon a sale of the security for
which the Commissioner's written consent is obtained or under this rule
not required;
(10) by way of a sale qualified under Sections 25111, 25112,
25113 or 25121 of the Code, of the securities to be transferred, provided
that no order under Section 25140 or subdivision (a) of Section 25143 is
in effect with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112
or 25113 of the Code, provided that no order under Section 25140 or
subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or
countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property
Law or to the administrator of the unclaimed property law of another
state; or
(15) by the State Controller pursuant to the Unclaimed Property
Law or by the administrator of the unclaimed property law of another
state if, in either such case, such person (i) discloses to potential
purchasers at the sale that transfer of the securities is restricted
under this rule, (ii) delivers to each purchaser a copy of this rule, and
(iii) advises the Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does
not involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of
Section 25110 of the Code but exempt from that qualification requirement
by subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject to such
a restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
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"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY,
OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN
THE COMMISSIONER'S RULES."
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WAVELINK COMMUNICATIONS INTERNATIONAL LTD.
1994 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
- -
- -
- -
You have been granted an option to purchase Common Stock of the Company, subject
to the terms and conditions of the Plan and this Option Agreement, as follows:
Date of Grant
Vesting Commencement Date
Exercise Price per Share
Total Number of Shares Granted
Total Exercise Price
Type of Option: Incentive Stock Option
--
Nonstatutory Stock Option
--
Term/Expiration Date:
VESTING SCHEDULE:
This Option may be exercised, in whole or in part, in accordance with the
following schedule:
One forty-eighth (1/48) of the Shares subject to the Option shall vest
one month after the Vesting Commencement Date, and an additional 1/48 of the
Shares subject to the Option shall vest
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<PAGE>
each month thereafter. All Shares subject to the Option shall be vested as
of four years after the Vesting Commencement Date.
TERMINATION PERIOD:
This Option may be exercised for 30 days after termination of employment
or consulting relationship, or such longer period as may be applicable upon
death or Disability of Optionee as provided in the Plan, but in no event later
than the Term/Expiration Date as provided above.
II. AGREEMENT
1. GRANT OF OPTION. WAVElink Communications International Ltd., a
Bermuda corporation (the "Company"), hereby grants to the Optionee named in the
Notice of Grant (the "Optionee"), an option (the "Option") to purchase a total
number of shares of Common Stock (the "Shares") set forth in the Notice of
Grant, at the exercise price per share set forth in the Notice of Grant (the
"Exercise Price") subject to the terms, definitions and provisions of the
WAVElink Communications International Ltd. 1994 Stock Plan (the "Plan") adopted
by the Company, which is incorporated herein by reference. Unless otherwise
defined herein, the terms defined in the Plan shall have the same defined
meanings in this Option.
If designated in the Notice of Grant as an Incentive Stock Option, this
Option is intended to qualify as an Incentive Stock Option as defined in
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option.
2. EXERCISE OF OPTION. This Option shall be exercisable during its
term in accordance with the Exercise Schedule set out in the Notice of Grant and
with the provisions of Section 9 of the Plan as follows:
(i) RIGHT TO EXERCISE.
(a) This Option may not be exercised for a fraction of a
share.
(b) In the event of Optionee's death, disability or
other termination of employment, the exercisability of the Option is governed by
Sections 6, 7 and 8 below, subject to the limitation contained in
subsection 2(i)(c).
(c) In no event may this Option be exercised after the
date of expiration of the term of this Option as set forth in the Notice of
Grant.
(ii) METHOD OF EXERCISE. This Option shall be exercisable by
written notice (in the form attached as Exhibit A) which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as to
the holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of the Plan. Such
written notice shall
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<PAGE>
be signed by the Optionee and shall be delivered in person or by certified
mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the Exercise Price. This Option shall be deemed to
be exercised upon receipt by the Company of such written notice accompanied
by the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares may then be
listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
United States Securities Act of 1933, as amended, at the time this Option is
exercised, Optionee shall, if required by the Company, concurrently with the
exercise of all or any portion of this Option, deliver to the Company his
Investment Representation Statement in the form attached hereto as Exhibit B,
and shall read the applicable rules of the Commissioner of Corporations attached
to such Investment Representation Statement.
4. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any
of the following, or a combination thereof, at the election of the Optionee:
(i) cash; or
(ii) check; or
(iii) surrender of other shares of Common Stock of the Company
which (A) in the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by the Optionee for more than six (6) months on the date
of surrender, and (B) have a fair market value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised;
provided, however, that such method of payment may not be used until after the
date on which the Company first registers a class of its equity securities under
the Exchange Act; or
(iv) delivery of a properly executed exercise notice together
with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price;
provided, however, that such method of payment may not be used until after the
date on which the Company first registers a class of its equity securities under
the Exchange Act.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised until
such time as the Plan has been approved by the shareholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by
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the Federal Reserve Board. As a condition to the exercise of this Option,
the Company may require Optionee to make any representation and warranty to
the Company as may be required by any applicable law or regulation.
6. TERMINATION OF RELATIONSHIP. In the event an Optionee's
Continuous Status as an Employee or Consultant terminates, Optionee may, to the
extent otherwise so entitled at the date of such termination (the "Termination
Date"), exercise this Option during the Termination Period set out in the Notice
of Grant. To the extent that Optionee was not entitled to exercise this Option
at the date of such termination, or if Optionee does not exercise this Option
within the time specified herein, the Option shall terminate.
7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of
Section 6 above, in the event of termination of Optionee's consulting
relationship or Continuous Status as an Employee as a result of his or her
disability, Optionee may, but only within six (6) months from the date of such
termination (and 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; provided,
however, that if such disability is not a "disability" as such term is defined
in Section 22(e) (3) of the Code, in the case of an Incentive Stock Option such
Incentive Stock Option shall automatically convert to a Nonstatutory Stock
Option on the day three months and one day following such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
8. DEATH OF OPTIONEE. In the event of termination of Optionee's
Continuous Status as an Employee or Consultant as a result of the death of
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the date of expiration
of the term of this Option as set forth in Section 10 below), by Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee could exercise the Option at
the date of death.
9. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by him. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
10. TERM OF OPTION. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Options designated as Incentive Stock Options
and Options granted to more than ten percent (10%) shareholders shall apply to
this Option.
11. TAXATION UPON EXERCISE OF OPTION. Optionee understands that, upon
exercising a Nonstatutory Stock Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then fair market value of the
Shares over the exercise price. However, the
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timing of this income recognition may be deferred for up to six months if
Optionee is subject to Section 16 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). If the Optionee is an employee, the Company
will be required to withhold from Optionee's compensation, or collect from
Optionee and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income. Additionally, the Optionee may at
some point be required to satisfy tax withholding obligations with respect to
the disqualifying disposition of an Incentive Stock Option. The Optionee
shall satisfy his or her tax withholding obligation arising upon the exercise
of this Option out of Optionee's compensation or by payment to the Company.
12. TAX CONSEQUENCES. Set forth below is a brief summary as of the
date of this Option of some of the federal and California tax consequences of
exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING
OF THE SHARES.
(i) EXERCISE OF ISO. If this Option qualifies as an ISO, there
will be no regular federal income tax liability or California income tax
liability upon the exercise of the Option, although the excess, if any, of the
fair market value of the Shares on the date of exercise over the Exercise Price
will be treated as an adjustment to the alternative minimum tax for federal tax
purposes and may subject the Optionee to the alternative minimum tax in the year
of exercise.
(ii) EXERCISE OF NONSTATUTORY STOCK OPTION. There may be a
regular federal income tax liability and California income tax liability upon
the exercise of a Nonstatutory Stock Option ("NSO"). The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the fair market value of the Shares on
the date of exercise over the Exercise Price. If Optionee is an employee, the
Company will be required to withhold from Optionee's compensation or collect
from Optionee and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of exercise.
(iii) DISPOSITION OF SHARES. In the case of an NSO, if Shares
are held for at least one year, any gain realized on disposition of the
Shares will be treated as long-term capital gain for federal and California
income tax purposes. In the case of an ISO, if Shares transferred pursuant
to the Option are held for at least one year after exercise and are disposed
of at least two years after the Date of Grant, any gain realized on
disposition of the Shares will also be treated as long-term capital gain for
federal and California income tax purposes. If Shares purchased under an ISO
are disposed of within such one-year period or within two years after the
Date of Grant, any gain realized on such disposition will be treated as
compensation income (taxable at ordinary income rates) to the extent of the
difference between the Exercise Price and the lesser of (1) the fair market
value of the Shares on the date of exercise, or (2) the sale price of the
Shares.
(iv) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
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Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
13. INFORMATION TO OPTIONEES. The Company shall provide to each
Optionee, during the period such Optionee has one or more Options outstanding,
and, in the case of an Optionee who acquired Shares pursuant to the Plan, during
the period such Optionee owns such Shares, copies of annual financial
statements. The Company shall not be required to provide such statements to key
employees whose duties in connection with the Company assure their access to
equivalent information.
WAVElink Communications International Ltd.
a Bermuda corporation
By: _________________________________________
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that
he is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Dated: _______________ _____________________________________________
Optionee
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EXHIBIT 10.3
INTERWAVE COMMUNICATIONS INTERNATIONAL,, LTD.
1999 OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1999 Option Plan are:
- to attract and retain the best available personnel for
positions of substantial responsibility,
- to provide additional incentive to Employees, Directors and
Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Share Purchase Rights may also be granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "APPLICABLE LAWS" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Shares are listed or quoted and the applicable laws
of any foreign country or jurisdiction where Options or Share Purchase Rights
are, or will be, granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a committee of Directors appointed by
the Board in accordance with Section 4 of the Plan.
(f) "COMMON SHARES" means the Common Shares of the Company.
(g) "COMPANY" means Interwave Communications International,
Ltd., a Bermuda corporation.
(h) "CONSULTANT" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary of the Company to render
services to such entity.
(i) "DIRECTOR" means a member of the Board.
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(j) "DISABILITY" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(k) "EMPLOYEE" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
A Service Provider shall not cease to be an Employee in the case of (i) any
leave of absence approved by the Company or (ii) transfers between locations of
the Company or between the Company, its Parent, any Subsidiary, or any
successor. For purposes of Incentive Stock Options, no such leave may exceed
ninety (90) days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract. If reemployment upon expiration of a leave
of absence approved by the Company is not so guaranteed, on the 181st day of
such leave any Incentive Stock Option held by the Optionee shall cease to be
treated as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute "employment" by
the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of
Common Shares determined as follows:
(i) If the Common shares are listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such Shares (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
THE WALL STREET JOURNAL or such other source as the Administrator deems
reliable;
(ii) If the Common Shares are regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of the Common Shares shall be the mean between the high bid and low
asked prices for the Common shares on the last market trading day prior to the
day 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 shares, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "INCENTIVE STOCK OPTION" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(o) "IPO EFFECTIVE DATE" means the date upon which the
Securities and Exchange Commission declares the initial public offering of the
Company's Common Shares as effective.
(p) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
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(q) "NOTICE OF GRANT" means a written or electronic notice
evidencing certain times and conditions of an individual Option or Share
Purchase Right grant. The Notice of Grant is part of the Option Agreement.
(r) "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.
(s) "OPTION" means a stock option granted pursuant to the Plan.
(t) "OPTION AGREEMENT" means an agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.
(u) "OPTION EXCHANGE PROGRAM" means a program whereby
outstanding Options are surrendered in exchange for Options with a lower
exercise price.
(v) "OPTIONED SHARE" means the Common Shares subject to an
Option or Share Purchase Right.
(w) "OPTIONEE" means the holder of an outstanding Option or
Share Purchase Right granted under the Plan.
(x) "OUTSIDE DIRECTOR" means a Director who is not an Employee.
(y) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(z) "PLAN" means this 1999 Option plan.
(aa) "RESTRICTED SHARES" means common shares acquired pursuant
to a grant of Share Purchase Rights under Section 11 of the Plan.
(bb) "RESTRICTED SHARE PURCHASE AGREEMENT" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to shares purchased under a Share Purchase Right. The
Restricted Share Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(cc) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(dd) "SECTION 16(b) " means Section 16(b) of the Exchange Act.
(ee) "SERVICE PROVIDER" means an Employee, Director or
Consultant.
(ff) "SHARE" means a Common Share, as adjusted in accordance
with Section 14 of the Plan.
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(gg) "SHARE PURCHASE RIGHT" means the right to purchase Common
Shares pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(hh) "SUBSIDIARY" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. SHARES SUBJECT TO THE PLAN. Subject to the provisions of Section
14 of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 2,500,000 Shares, plus (a) any Shares which were reserved
but unissued under the Company's 1994 Stock Plan ("1994 Plan") as of the date of
shareholder approval of the original adoption of this Plan, (b) any Shares
subsequently returned to the 1994 Plan as a result of termination of options or
repurchase of Shares issued under the 1994 Plan, and (c) an annual increase to
be added on the first day of the Company's fiscal year beginning in fiscal year
2000 equal to the lesser of (i) 2,000,000 Shares, (ii) 4% of the outstanding
shares on such date, or (iii) a lesser amount determined by the Board. The
Shares may be authorized, but unissued, or reacquired Common shares.
If an Option or Share Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated); PROVIDED, however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Share Purchase Right,
shall not be returned to the Plan and shall not become available for future
distribution under the Plan, except that if Shares of Restricted Shares are
repurchased by the Company at their original purchase price, such Shares shall
become available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) MULTIPLE ADMINISTRATIVE BODIES. The Plan may be
administered by different Committees with respect to different groups of Service
Providers.
(ii) SECTION 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options granted hereunder
as "performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) RULE 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) OTHER ADMINISTRATION. Other than as provided above,
the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
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(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of
the Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine Fair Market Value;
(ii) to select the Service Providers to whom Options and
Share Purchase Rights may be granted hereunder;
(iii) to determine the number of Common Shares to be
covered by each Option and Share Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or Share Purchase Right
granted hereunder. Such terms and conditions include, but are not limited to,
the exercise price, the time or times when Options or Share Purchase Rights 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 Share Purchase Right or the Common Shares
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or Share
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Shares covered by such Option or Share Purchase Right shall have
declined since the date the Option or Share Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(x) to modify or amend each Option or Share Purchase
Right (subject to Section 16(c) of the Plan), including the discretionary
authority to extend the post-termination exercisability period of Options longer
than is otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Share Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. 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. All elections by an
Optionee to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may deem necessary or advisable;
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(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Share
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Share Purchase Rights.
5. ELIGIBILITY. Nonstatutory Stock Options and Share Purchase Rights
may be granted to Service Providers. Incentive Stock Options may be granted
only to Employees.
6. LIMITATIONS.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Share Purchase Right
shall confer upon an Optionee any right with respect to continuing the
Optionee's relationship as a Service Provider with the Company, nor shall they
interfere in any way with the Optionee's right or the Company's right to
terminate such relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal
year of the Company, Options to purchase more than 500,000 Shares.
(ii) In connection with his or her initial service, a
Service Provider may be granted Options to purchase up to an additional 100,000
Shares, which shall not count against the limit, set forth in subsection (i)
above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 14.
(iv) If an Option is cancelled in the same fiscal year
of the Company in which it was granted (other than in connection with a
transaction described in Section 14), the cancelled Option will be counted
against the limits set forth in subsections (i) and (ii) above. For this
purpose, if the exercise price of an Option is reduced, the transaction will be
treated as a cancellation of the Option and the grant of a new Option.
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7. TERM OF PLAN. Subject to Section 20 of the Plan, the Plan shall
become effective upon its adoption by the Board. It shall continue in effect
for a term of ten (10) years unless terminated earlier under Section 16 of the
Plan.
8. TERM OF OPTION. The term of each Option shall be stated in the
Option Agreement. In the case of an Incentive Stock Option, the term shall be
ten (10) years from the date of grant or such shorter term as may be provided in
the Option Agreement. Moreover, in the case of an Incentive Stock Option
granted to an Optionee who, at the time the Incentive Stock Option is granted,
owns shares representing more than ten percent (10%) of the total combined
voting power of all classes of capital shares of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years from
the date of grant or such shorter term as may be provided in the Option
Agreement.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the
Incentive Stock Option is granted, owns capital shares representing more than
ten percent (10%) of the voting power of all classes of the capital shares of
the Company or any Parent or Subsidiary, the per Share exercise price shall be
no less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) WAITING PERIOD AND EXERCISE DATES. At the time an Option
is granted, the Administrator shall fix the period within which the Option may
be exercised and shall determine any conditions that must be satisfied before
the Option may be exercised.
(c) FORM OF CONSIDERATION. The Administrator shall determine
the acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the Administrator
shall determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
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(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (B) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised;
(v) consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the
Plan;
(vi) a reduction in the amount of any Company liability
to the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of payment;
or
(viii) such other consideration and method of payment for
the issuance of Shares to the extent permitted by Applicable Laws.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any
Option granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the Administrator
and set forth in the Option Agreement. Unless the Administrator provides
otherwise, vesting of Options granted hereunder shall be tolled during any
unpaid leave of absence. An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Shares, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 14 of the Plan.
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Exercising an Option in any manner shall decrease the
number of Shares thereafter 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 RELATIONSHIP AS A SERVICE PROVIDER. Subject
to Section 14, if an Optionee ceases to be a Service Provider (but not in the
event of an Optionee's change of status from Employee to Consultant (in which
case an Employee's Incentive Stock Option shall automatically convert to a
Nonstatutory Stock Option on the ninety-first (91st) day following such change
of status) or from Consultant to Employee), such Optionee may, but only within
such period of time as is specified in the Option Agreement (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 Optionee was
entitled to exercise it at the date of such termination. In the absence of a
specified time in the Option Agreement, the Option shall remain exercisable for
three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability, the Optionee may, but
only within twelve (12) months from the date of such termination (and 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 the extent the Option is
vested on the date of termination. If, on the date of termination, the Optionee
is not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
(d) DEATH OF OPTIONEE. If an Optionee dies while a Service
Provider, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant), by the Optionee's
estate or by a person who acquires the right to exercise the Option by bequest
or inheritance, but only to the extent that the Option is vested on the date of
death. If, at the time of death, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option shall
immediately revert to the Plan. The Option may be exercised by the executor or
administrator of the Optionee's estate or, if none, by the person(s) entitled to
exercise the Option under the Optionee's will or the laws of descent or
distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) BUYOUT PROVISIONS. The Administrator may at any time offer
to buy out for a payment in cash or Shares an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
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<PAGE>
11. SHARE PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Share Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Share Purchase Rights under the Plan, it shall
advise the offeree in writing or electronically, by means of a Notice of Grant,
of the terms, conditions and restrictions related to the offer, including the
number of Shares that the offeree shall be entitled to purchase, the price to be
paid, and the time within which the offeree must accept such offer. The offer
shall be accepted by execution of a Restricted Share Purchase Agreement in the
form determined by the Administrator.
(b) REPURCHASE OPTION. Unless the Administrator determines
otherwise, the Restricted Share Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Share Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
(c) OTHER PROVISIONS. The Restricted Share Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.
(d) RIGHTS AS A SHAREHOLDER. Once the Share Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Share Purchase Right is exercised, except as provided in Section 14
of the Plan.
12. NON-TRANSFERABILITY OF OPTIONS AND SHARE PURCHASE RIGHTS. Unless
determined otherwise by the Administrator, an Option or Share Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Share Purchase Right transferable, such Option
or Share Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. FORMULA OPTION GRANTS TO OUTSIDE DIRECTORS. Outside Directors
shall be automatically granted Options each year in accordance with the
following provisions:
(a) All Options granted pursuant to this Section shall be
Nonstatutory Stock Options and, except as otherwise provided herein, shall be
subject to the other terms and conditions of the Plan.
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<PAGE>
(b) Each Outside Director shall be automatically granted an
Option to purchase 10,000 Shares (a "Subsequent Option") following each
annual meeting of the shareholders of the Company, except in the case of the
first such annual meeting after the IPO Effective Date, if as of such date,
he or she shall continue to serve on the Board and shall have served on the
Board for at least the preceding six (6) months.
(c) Notwithstanding the provisions of subsections (b) and (c)
hereof, any exercise of an Option granted before the Company has obtained
shareholder approval of the Plan in accordance with Section 20 hereof shall be
conditioned upon obtaining such shareholder approval of the Plan in accordance
with Section 20 hereof.
(d) The terms of each Option granted pursuant to this Section
shall be as follows:
(i) the term of the Option shall be ten (10) years.
(ii) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of the Option.
(iii) Each Option shall vest as to 1/12 of the Optioned
Shares each month following the date of grant, such that the Option shall be
fully vested and exercisable one year from the date of grant of the Option.
Each new Outside Director shall also be eligible for a discretionary
option grant upon first becoming a Director, provided that such option grants
can be made to Outside Directors without violating applicable regulations of
the Securities and Exchange Commission.
14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action
by the shareholders of the Company, the number of Common Shares covered by each
outstanding Option and Share Purchase Right, the number of common shares covered
by First Options and Subsequent Options to be granted under the Plan, the number
of common shares which have been authorized for issuance under the Plan but as
to which no Options or Share Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Share
Purchase Right and the number of Common Shares which may be added to the Plan
each fiscal year (pursuant to Section 3), as well as the price per share of
Common shares covered by each such outstanding Option or Share Purchase Right,
shall be proportionately adjusted for any increase or decrease in the number of
issued common shares resulting from a share split, reverse share split, share
dividend, combination or reclassification of the Common Shares, or any other
increase or decrease in the number of issued Common 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 issuance by the Company of
shares of any class, or securities convertible into shares of any class, shall
affect, and no adjustment by reason thereof shall be made
-11-
<PAGE>
with respect to, the number or price of Common Shares subject to an Option or
Share Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee at least 15 days prior to such proposed action. To the extent it has
not been previously exercised, an Option or Share Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option and Share Purchase Right
shall be assumed or an equivalent option or right substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation.
In the event that the successor corporation refuses to assume or substitute
for the Option or Share Purchase Right, the Optionee shall fully vest in and
have the right to exercise the Option or Share Purchase Right as to all of
the Optioned Shares, including Shares as to which it would not otherwise be
vested or exercisable. If an Option or Share Purchase Right becomes fully
vested and exercisable in lieu of assumption or substitution in the event of
a merger or sale of assets, the Administrator shall notify the Optionee in
writing or electronically that the Option or Share Purchase Right shall be
fully vested and exercisable for a period of fifteen (15) days from the date
of such notice, and the Option or Share Purchase Right shall terminate upon
the expiration of such period. For the purposes of this paragraph, the
Option or Share Purchase Right shall be considered assumed if, following the
merger or sale of assets, the option or right confers the right to purchase
or receive, for each Share of Optioned Shares subject to the Option or Share
Purchase Right immediately prior to the merger or sale of assets, the
consideration (whether shares, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Shares for each
Share held on the effective date of the transaction (and if holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets 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 the exercise of the Option or Share
Purchase Right, for each Share of Optioned Shares subject to the Option or
Share Purchase Right, to be solely stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Shares in the merger or sale of assets.
15. DATE OF GRANT. The date of grant of an Option or Share Purchase
Right shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Share Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall
be provided to each Optionee within a reasonable time after the date of such
grant.
16. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time
amend, alter, suspend or terminate the Plan.
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<PAGE>
(b) SHAREHOLDER APPROVAL. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Options
granted under the Plan prior to the date of such termination.
17. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to
the exercise of an Option or Share Purchase Right unless the exercise of such
Option or Share Purchase Right and the issuance and delivery of such Shares
shall comply with Applicable Laws and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise
of an Option or Share Purchase Right, the Company may require the person
exercising such Option or Share Purchase Right to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.
18. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
19. 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.
20. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by
the shareholders of the Company within twelve (12) months after the date the
Plan is adopted. Such shareholder approval shall be obtained in the manner and
to the degree required under Applicable Laws.
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<PAGE>
EXHIBIT 10.3A
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
1999 OPTION PLAN
EMPLOYEE OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Shares of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number
-------------------------------
Date of Grant
-------------------------------
Vesting Commencement Date
-------------------------------
Exercise Price per Share $
-----------------------------
Total Number of Shares Granted
-------------------------------
Total Exercise Price $
-----------------------------
Type of Option: Incentive Stock Option
---
Nonstatutory Stock Option
---
Term/Expiration Date:
-------------------------------
VESTING SCHEDULE:
Subject to accelerated vesting as set forth in the Plan, this Option may
be exercised, in whole or in part, in accordance with the following schedule:
25% of the Shares subject to the Option shall vest twelve months after
the Vesting Commencement Date, and 1/48 of the Shares subject to the Option
shall vest each month thereafter, subject to the Optionee continuing to be a
Service Provider on such dates.
<PAGE>
TERMINATION PERIOD:
This Option may be exercised for three (3) months after Optionee ceases
to be a Service Provider. Upon the death or Disability of the Optionee, this
Option may be exercised for twelve (12) months after Optionee ceases to be a
Service Provider. In no event shall this Option be exercised later than the
Term/Expiration Date as provided above.
II. AGREEMENT
A. GRANT OF OPTION.
The Plan Administrator of the Company hereby grants to the
Optionee named in the Notice of Grant attached as Part I of this Agreement (the
"Optionee") an option (the "Option") to purchase the number of Shares, as set
forth in the Notice of Grant, at the exercise price per share set forth in the
Notice of Grant (the "Exercise Price"), subject to the terms and conditions of
the Plan, which is incorporated herein by reference. Subject to Section 16(c)
of the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
B. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option is exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Grant and
the applicable provisions of the Plan and this Option Agreement.
(b) METHOD OF EXERCISE. This Option is exercisable by delivery
of an exercise notice, in the form attached as Exhibit A (the "Exercise
Notice"), which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised (the "Exercised
Shares"), and such other representations and agreements as may be required by
the Company pursuant to the provisions of the Plan. The Exercise Notice shall
be completed by the Optionee and delivered to the Option Plan Administrator of
the Company. The Exercise Notice shall be accompanied by payment of the
aggregate Exercise Price as to all Exercised Shares. This Option shall be
deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this
Option unless such issuance and exercise complies with Applicable Laws.
Assuming such compliance, for income tax purposes the Exercised Shares shall be
considered transferred to the Optionee on the date the Option is exercised with
respect to such Exercised Shares.
-2-
<PAGE>
C. METHOD OF PAYMENT.
Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
1. cash; or
2. check; or
3. consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan; or
4. surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
D. NON-TRANSFERABILITY OF OPTION.
This Option may not be transferred in any manner otherwise than by
will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by the Optionee. The terms of the Plan and this
Option Agreement shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
E. TERM OF OPTION.
This Option may be exercised only within the term set out in the
Notice of Grant, and may be exercised during such term only in accordance with
the Plan and the terms of this Option Agreement.
F. TAX CONSEQUENCES.
Some of the federal tax consequences relating to this Option, as
of the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING
OF THE SHARES.
1. EXERCISING THE OPTION.
(a) NONSTATUTORY STOCK OPTION. The Optionee may incur
regular federal income tax liability upon exercise of a NSO. The Optionee will
be treated as having received compensation income (taxable at ordinary income
tax rates) equal to the excess, if any, of the Fair Market Value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price.
If the Optionee is an Employee or a former Employee, the Company will be
required to withhold from his or her compensation or collect from Optionee and
pay to the applicable taxing authorities an
-3-
<PAGE>
amount in cash equal to a percentage of this compensation income at the time
of exercise, and may refuse to honor the exercise and refuse to deliver
Shares if such withholding amounts are not delivered at the time of exercise.
(b) INCENTIVE STOCK OPTION. If this Option qualifies as
an ISO, the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in the year of
exercise. In the event that the Optionee ceases to be an Employee but remains a
Service Provider, any Incentive Stock Option of the Optionee that remains
unexercised shall cease to qualify as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.
2. DISPOSITION OF SHARES.
(a) NSO. If the Optionee holds NSO Shares for at least
one year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.
(b) ISO. If the Optionee holds ISO Shares for at least
one year after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.
(c) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES.
If the Optionee sells or otherwise disposes of any of the Shares acquired
pursuant to an ISO on or before the later of (i) two years after the grant date,
or (ii) one year after the exercise date, the Optionee shall immediately notify
the Company in writing of such disposition. The Optionee agrees that he or she
may be subject to income tax withholding by the Company on the compensation
income recognized from such early disposition of ISO Shares by payment in cash
or out of the current earnings paid to the Optionee.
G. ENTIRE AGREEMENT; GOVERNING LAW.
The Plan is incorporated herein by reference. The Plan and this
Option Agreement constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and Optionee. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.
-4-
<PAGE>
H. NO GUARANTEE OF CONTINUED SERVICE.
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A
SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING
HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE
FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE
PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S
RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE INTERWAVE COMMUNICATIONS
INTERNATIONAL, LTD.
- ---------------------------------- -----------------------------------
Signature By
- ---------------------------------- -----------------------------------
Print Name Title
- ----------------------------------
Residence Address
- ----------------------------------
-5-
<PAGE>
EXHIBIT A
INTERWAVE COMMUNICATIONS INTERNATIONAL LTD.
1999 OPTION PLAN
EXERCISE NOTICE
Interwave Communications International, Ltd.
656 Bair Island Boulevard, Suite 108
Redwood City, CA 94065
Attention: Chief Financial Officer
1. EXERCISE OF OPTION. Effective as of today, ________________,
_____, the undersigned ("Purchaser") hereby elects to purchase ______________
Common Shares (the "Shares") of Interwave Communications International, Ltd.
(the "Company") under and pursuant to the Interwave Communications
International, Ltd. 1999 Option Plan (the "Plan") and the Employee Option
Agreement dated, _____ (the "Option Agreement"). The purchase price for the
Shares shall be $_____, as required by the Option Agreement.
2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the Company
the full purchase price for the Shares.
3. REPRESENTATIONS OF PURCHASER. Purchaser acknowledges that
Purchaser has received, read and understood the Plan and the Option Agreement
and agrees to abide by and be bound by their terms and conditions.
4. RIGHTS AS SHAREHOLDER. 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 Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Shares, notwithstanding the exercise of the Option. The Shares so acquired
shall be issued to the Optionee as soon as practicable after exercise of the
Option. No adjustment will be made for a dividend or other right for which the
record date is prior to the date of issuance, except as provided in Section 14
of the Plan.
5. TAX CONSULTATION. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
<PAGE>
6. ENTIRE AGREEMENT; GOVERNING LAW. The Plan and Option Agreement
are incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.
Submitted by: Accepted by:
PURCHASER INTERWAVE COMMUNICATIONS
INTERNATIONAL, LTD.
- ---------------------------------- -----------------------------------
Signature By
- ---------------------------------- -----------------------------------
Print Name Its
ADDRESS: ADDRESS:
- ---------------------------------- Interwave Communications International, Ltd.
656 Bair Island Boulevard, Suite 108
- ---------------------------------- Redwood City, CA 94065
-----------------------------------
Date Received
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<PAGE>
EXHIBIT 10.3B
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
DIRECTOR OPTION AGREEMENT
Interwave Communications International, Ltd., (the "Company"), has
granted to ___________________ (the "Optionee"), an option to purchase a
total of [________ (____)] of the Company's Common Shares (the "Optioned
Shares"), at the price determined as provided herein, and in all respects
subject to the terms, definitions and provisions of the Company's 1999 Option
Plan (the "Plan") adopted by the Company which is incorporated herein by
reference. The terms defined in the Plan shall have the same defined
meanings herein.
1. NATURE OF THE OPTION. This Option is a nonstatutory option and is
not intended to qualify for any special tax benefits to the Optionee.
2. EXERCISE PRICE. The exercise price is $_______ for each Common
Share.
3. EXERCISE OF OPTION. This Option shall be exercisable during its
term in accordance with the provisions of Section 10 of the Plan as follows:
(i) RIGHT TO EXERCISE.
(a) This Option shall become exercisable with respect to
1/12 of the Optioned Shares on each month following the date of grant; provided,
however, that in no event shall any Option be exercisable prior to the date the
shareholders of the Company approve the Plan.
(b) This Option may not be exercised for a fraction of a
share.
(c) In the event of Optionee's death, Disability or
other termination of service as a Director, the exercisability of the Option is
governed by Section 10 of the Plan.
(ii) METHOD OF EXERCISE. This Option shall be exercisable by
written notice which shall state the election to exercise the Option and the
number of Shares in respect of which the Option is being exercised. Such
written notice, in the form attached hereto as Exhibit A, shall be signed by the
Optionee and shall be delivered in person or by certified mail to the Option
Plan Administrator of the Company. The written notice shall be accompanied by
payment of the exercise price.
4. METHOD OF PAYMENT. Payment of the exercise price shall be by any
of the following, or a combination thereof, at the election of the Optionee:
(i) cash;
(ii) check; or
<PAGE>
(iii) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan; or
(iv) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
6. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by the Optionee. The
terms of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
7. TERM OF OPTION. This Option may not be exercised more than ten
(10) years from the date of grant of this Option, and may be exercised during
such period only in accordance with the Plan and the terms of this Option.
8. TAXATION UPON EXERCISE OF OPTION. Optionee understands that, upon
exercise of this Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then Fair Market Value of the Shares purchased
over the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the date of exercise of the Option, to the extent
not included in income as described above, will be treated as capital gain or
loss.
<PAGE>
DATE OF GRANT:
---------------
Interwave Communications International, Ltd.,
a Bermuda corporation
By:
----------------------------------------
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.
Dated:
---------------
------------------------------------
Optionee
<PAGE>
EXHIBIT A
DIRECTOR OPTION EXERCISE NOTICE
Interwave Communications International, Ltd.
656 Bair Island Boulevard, Suite 108
Redwood City, CA 94065
Attention: Corporate Secretary
1. EXERCISE OF OPTION. The undersigned ("Optionee") hereby elects to
exercise Optionee's option to purchase ______ of the Common Shares (the
"Shares") of Interwave Communications International, Ltd. (the "Company") under
and pursuant to the Company's 1999 Option Plan and the Director Option Agreement
dated _______________ (the "Agreement").
2. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee
has received, read and understood the Agreement.
3. FEDERAL RESTRICTIONS ON TRANSFER. Optionee understands that the
Shares must be held indefinitely unless they are registered under the Securities
Act of 1933, as amended (the "1933 Act"), or unless an exemption from such
registration is available, and that the certificate(s) representing the Shares
may bear a legend to that effect. Optionee understands that the Company is
under no obligation to register the Shares and that an exemption may not be
available or may not permit Optionee to transfer Shares in the amounts or at the
times proposed by Optionee.
4. TAX CONSEQUENCES. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. DELIVERY OF PAYMENT. Optionee herewith delivers to the Company
the aggregate purchase price for the Shares that Optionee has elected to
purchase and has made provision for the payment of any federal or state
withholding taxes required to be paid or withheld by the Company.
6. ENTIRE AGREEMENT. The Agreement is incorporated herein by
reference. This Exercise Notice and the Agreement constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the
<PAGE>
subject matter hereof. This Exercise Notice and the Agreement are governed by
California law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE INTERWAVE COMMUNICATIONS
INTERNATIONAL, LTD.
- -------------------------------- ------------------------------------------
Signature By
- -------------------------------- ------------------------------------------
Print Name Its
ADDRESS: ADDRESS:
- -------------------------------- Interwave Communications International, Ltd.
656 Bair Island Boulevard, Suite 108
- -------------------------------- Redwood City, CA 94065
Date Received:
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<PAGE>
EXHIBIT 10.4
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
1999 EMPLOYEE SHARE PURCHASE PLAN
The following constitute the provisions of the 1999 Employee Share
Purchase Plan of Interwave Communications International, Ltd.
1. PURPOSE. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Shares of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. DEFINITIONS.
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "COMMON SHARES" shall mean the common shares of the
Company.
(d) "COMPANY" shall mean Interwave Communications
International, Ltd. and any Designated Subsidiary of the Company.
(e) "COMPENSATION" shall mean all base straight time gross
earnings and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "DESIGNATED SUBSIDIARY" shall mean any Subsidiary that has
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "EMPLOYEE" shall mean any individual who is an Employee of
the Company for tax purposes whose customary employment with the Company is at
least twenty (20) hours per week and more than five (5) months in any calendar
year. For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "ENROLLMENT DATE" shall mean the first Trading Day of each
Offering Period.
(i) "EXERCISE DATE" shall mean the last Trading Day of each
Purchase Period.
<PAGE>
(j) "FAIR MARKET VALUE" shall mean, as of any date, the value
of Common Shares determined as follows:
(i) If the Common Shares are listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
their Fair Market Value shall be the closing sales price for such shares (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the date of determination, as reported in
THE WALL STREET JOURNAL or such other source as the Board deems reliable;
(ii) If the Common Shares are regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Shares prior to the date of determination, as reported in THE WALL STREET
JOURNAL or such other source as the Board deems reliable;
(iii) In the absence of an established market for the
Common Shares, the Fair Market Value thereof shall be determined in good faith
by the Board; or
(iv) For purposes of the Enrollment Date of the first
Offering Period under the Plan, the Fair Market Value shall be the initial price
to the public as set forth in the final prospectus included within the
registration statement in Form F-1 filed with the Securities and Exchange
Commission for the initial public offering of the Company's Common shares (the
"Registration Statement").
(k) "OFFERING PERIODS" shall mean the periods of approximately
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after May 1 and November
1 of each year and terminating on the last Trading Day in the periods ending
twenty-four months later; provided, however, that the first Offering Period
under the Plan shall commence with the first Trading Day on or after the date on
which the Securities and Exchange Commission declares the Company's Registration
Statement effective and ending on the last Trading Day on or before October 31,
2001. The duration and timing of Offering Periods may be changed pursuant to
Section 4 of this Plan.
(l) "PLAN" shall mean this 1999 Employee Share Purchase Plan.
(m) "PURCHASE PERIOD" shall mean the approximately six month
period commencing after one Exercise Date and ending with the next Exercise
Date, except that the first Purchase Period of any Offering Period shall
commence on the Enrollment Date and end with the next Exercise Date.
(n) "PURCHASE PRICE" shall mean 85% of the Fair Market Value of
a Common share on the Enrollment Date or on the Exercise Date, whichever is
lower; provided however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
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<PAGE>
(o) "RESERVES" shall mean the number of common shares covered
by each option under the Plan which have not yet been exercised and the number
of common shares which have been authorized for issuance under the Plan but not
yet placed under option.
(p) "SUBSIDIARY" shall mean a corporation, domestic or foreign,
of which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(q) "TRADING DAY" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.
3. ELIGIBILITY.
(a) Any Employee who shall be employed by the Company on a
given Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding,
no Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose shares
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital shares of the Company and/or hold outstanding options to
purchase such shares possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital shares of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase shares
under all employee share purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
capital shares (determined at the fair market value of the shares at the time
such option is granted) for each calendar year in which such option is
outstanding at any time.
4. OFFERING PERIODS. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1 and November 1 each year, or on such other date as
the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
October 31, 2001. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan
by completing a subscription agreement authorizing payroll deductions in the
form of Exhibit A to this Plan and filing it with the Company's payroll office
prior to the applicable Enrollment Date.
-3-
<PAGE>
(b) Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last payroll in
the Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. PAYROLL DEDUCTIONS.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding fifteen percent (15%) of
the Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation in
the Plan as provided in Section 10 hereof, or may increase or decrease the rate
of his or her payroll deductions during the Offering Period by completing or
filing with the Company a new subscription agreement authorizing a change in
payroll deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to zero percent (0%) at any
time during a Purchase Period. Payroll deductions shall recommence 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 hereof.
(e) At the time the option is exercised, in whole or in part,
or at the time some or all of the Company's Common Shares issued under the Plan
are disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Shares. At any
time, the Company may, but shall not be obligated to, withhold from the
participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to make
available to the Company any tax deductions or benefits attributable to sale or
early disposition of Common Shares by the Employee.
7. GRANT OF OPTION. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on each
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<PAGE>
Exercise Date during such Offering Period (at the applicable Purchase Price)
up to a number of the Company's Common shares determined by dividing such
Employee's payroll deductions accumulated prior to such Exercise Date and
retained in the Participant's account as of the Exercise Date by the
applicable Purchase Price; provided that in no event shall an Employee be
permitted to purchase during each Purchase Period more than 10,000 of the
Company's Common Shares (subject to any adjustment pursuant to Section 19),
and provided further that such purchase shall be subject to the limitations
set forth in Sections 3(b) and 11 hereof. The Board may, for future Offering
Periods, increase or decrease, in its absolute discretion, the maximum number
of the Company's Common Shares an Employee may purchase during each Purchase
Period of such Offering Period. Exercise of the option shall occur as
provided in Section 8 hereof, unless the participant has withdrawn pursuant
to Section 10 hereof. The option shall expire on the last day of the
Offering Period.
8. EXERCISE OF OPTION.
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. 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 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date, the
number of shares with respect to which options are to be exercised may exceed
(i) the number of Common Shares that were available for sale under the Plan on
the Enrollment Date of the applicable Offering Period, or (ii) the number of
shares available for sale under the Plan on such Exercise Date, the Board may in
its sole discretion (x) provide that the Company shall make a pro rata
allocation of the Common Shares available for purchase on such Enrollment Date
or Exercise 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 Shares on such Exercise Date,
and continue all Offering Periods then in effect, or (y) provide that the
Company shall make a pro rata allocation of the shares available for purchase on
such Enrollment Date or Exercise 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 Shares on
such Exercise Date, and terminate any or all Offering Periods then in effect
pursuant to Section 20 hereof. The Company may make pro rata allocation of the
shares available on the Enrollment 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 shareholders
subsequent to such Enrollment Date.
-5-
<PAGE>
9. DELIVERY. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. WITHDRAWAL.
(a) A participant may withdraw all, but not less than all, the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's payroll
deductions credited to his or her account shall be paid to such participant
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering Period.
If a participant withdraws from an Offering Period, payroll deductions shall not
resume at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall
not have any effect upon his or her eligibility to participate in any similar
plan which may hereafter be adopted by the Company or in succeeding Offering
Periods which commence after the termination of the Offering Period from which
the participant withdraws.
11. TERMINATION OF EMPLOYMENT.
Upon a participant's ceasing to be an Employee, for any reason, he or she
shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. INTEREST. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. SHARES.
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of the Company's
Common shares which shall be made available for sale under the Plan shall be
300,000 shares, plus an annual increase to be added on the first day of each of
the Company's fiscal years during the term of this Plan beginning in fiscal year
2000 equal to the lesser of (i) 200,000 shares, (ii) 0.5% of the outstanding
shares on such date, or (iii) an amount determined by the Board. If, on a given
Exercise Date, the number of
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<PAGE>
shares with respect to which options are to be exercised exceeds the number
of shares then available under the Plan, the Company shall make a pro rata
allocation of the shares remaining available for purchase in as uniform a
manner as shall be practicable and as it shall determine to be equitable.
(b) The participant shall have no interest or voting right in
shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan
shall be registered in the name of the participant or in the name of the
participant and his or her spouse.
14. ADMINISTRATION. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision
and determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
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 an Exercise Date on which the option is exercised but prior to
delivery to such participant 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 exercise of the option. 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 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 payroll deductions 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 hereof) 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 from an Offering Period in accordance with Section 10 hereof.
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<PAGE>
17. USE OF FUNDS. All payroll deductions 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 payroll deductions.
18. REPORTS. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION,
LIQUIDATION, MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action
by the shareholders of the Company, the Reserves and the number of Common Shares
which may be added to the Plan each fiscal year (pursuant to Section 13), the
maximum number of shares each participant may purchase each Purchase Period
(pursuant to Section 7), as well as the price per share and the number of Common
Shares 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 Common Shares resulting from a share split, reverse share split, share
dividend, combination or reclassification of the Common Shares, or any other
increase or decrease in the number of Common 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 issuance by the Company of capital
shares of any class, or securities convertible into capital shares of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of common shares subject to an option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least
ten (10) business days prior to the New Exercise Date, that the Exercise Date
for the participant's option has been changed to the New Exercise Date and that
the participant's option shall be exercised automatically on the New Exercise
Date, unless prior to such date the participant has withdrawn from the Offering
Period as provided in Section 10 hereof.
(c) MERGER OR ASSET SALE. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each outstanding option shall be
assumed or an equivalent option substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the option, any
Purchase Periods then in progress shall be
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<PAGE>
shortened by setting a new Exercise Date (the "New Exercise Date") and any
Offering Periods then in progress shall end on the New Exercise Date. The
New Exercise Date shall be before the date of the Company's proposed sale or
merger. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that
the participant's option shall be exercised automatically on the New Exercise
Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. AMENDMENT OR TERMINATION.
(a) The Board of Directors of the Company may at any time and
for any reason terminate or amend the Plan. Except as provided in Section 19
hereof, no such termination can affect options previously granted, provided that
an Offering Period may be terminated by the Board of Directors on any Exercise
Date if the Board determines that the termination of the Offering Period or the
Plan is in the best interests of the Company and its shareholders. Except as
provided in Section 19 and this Section 20 hereof, no amendment may make any
change in any option theretofore granted which adversely affects the rights of
any participant. To the extent necessary to comply with Section 423 of the Code
(or any successor rule or provision or any other applicable law, regulation or
stock exchange rule), the Company shall obtain shareholder approval in such a
manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether
any participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, 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 Shares
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
(c) In the event the Board determines that the ongoing
operation of the Plan may result in unfavorable financial accounting
consequences, the Board may, in its discretion and, to the extent necessary or
desirable, modify or amend the Plan to reduce or eliminate such accounting
consequence including, but not limited to:
(i) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(ii) shortening any Offering Period so that Offering
Period ends on a new Exercise Date, including an Offering Period underway at the
time of the Board action; and
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<PAGE>
(iii) allocating shares.
Such modifications or amendments shall not require shareholder approval
or the consent of any Plan participants.
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 Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of 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. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
24. AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD. To the extent
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Shares on any Exercise Date in an Offering
Period is lower than the Fair Market Value of the Common Shares on the
Enrollment Date of such Offering Period, then all participants in such
Offering Period shall be automatically withdrawn from such Offering Period
immediately after the exercise of their option on such Exercise Date and
automatically re-enrolled in the immediately following Offering Period as of
the first day thereof.
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EXHIBIT A
INTERWAVE COMMUNICATIONS INTERNATIONAL LTD.
1999 EMPLOYEE SHARE PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ______
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ____________________ hereby elects to participate in the Interwave
Communications International, Ltd. 1999 Employee Share Purchase Plan (the
"Employee Share Purchase Plan") and subscribes to purchase the Company's
Common Shares in accordance with this Subscription Agreement and the 1999
Employee Share Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 0 to _____%) during the
Offering Period in accordance with the 1999 Employee Share Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of Common Shares at the applicable Purchase Price determined in
accordance with the 1999 Employee Share Purchase Plan. I understand that
if I do not withdraw from an Offering Period, any accumulated payroll
deductions will be used to automatically exercise my option.
4. I have received a copy of the complete 1999 Employee Share Purchase Plan.
I understand that my participation in the 1999 Employee Share Purchase
Plan is in all respects subject to the terms of the Plan. I understand
that my ability to exercise the option under this Subscription Agreement
is subject to shareholder approval of the 1999 Employee Share Purchase
Plan.
5. Shares purchased for me under the 1999 Employee Share Purchase Plan
should be issued in the name(s) of (Employee or Employee and Spouse
only):.
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after
the Exercise Date, I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an
amount equal to the
<PAGE>
excess of the fair market value of the shares at the time such shares
were purchased by me over the price which I paid for the shares. I
HEREBY AGREE TO NOTIFY THE COMPANY IN WRITING WITHIN 30 DAYS
AFTER THE DATE OF ANY DISPOSITION OF MY SHARES AND I WILL MAKE ADEQUATE
PROVISION FOR FEDERAL, STATE OR OTHER TAX WITHHOLDING OBLIGATIONS, IF
ANY, WHICH ARISE UPON THE DISPOSITION OF THE COMMON SHARES. 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 sale or early disposition of
Common Shares by me. If I dispose of such shares at any time after the
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 income
only at the time of such disposition, and that such income will be taxed
as ordinary 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, or (2)
15% of the fair market value of the shares on the first day of the
Offering Period. The remainder of the gain, if any, recognized on such
disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the 1999 Employee Share
Purchase Plan. The effectiveness of this Subscription Agreement is
dependent upon my eligibility to participate in the 1999 Employee Share
Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the 1999
Employee Share Purchase Plan:
NAME: (Please print)____________________________________________________________
(First) (Middle) (Last)
______________________________________ ________________________________________
Relationship
________________________________________
(Address)
-2-
<PAGE>
Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ ____________________________________
Signature of Employee
____________________________________
Spouse's Signature (If beneficiary
other than spouse)
-3-
<PAGE>
EXHIBIT B
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
1999 EMPLOYEE SHARE PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Interwave
Communications International, Ltd. 1999 Employee Share Purchase Plan that began
on ____________, ______ (the Enrollment Date") hereby notifies the Company that,
he or she hereby withdraws from the Offering Period. He or she hereby directs
the Company to pay to the undersigned as promptly as practicable all the payroll
deductions credited to his or her account with respect to such Offering Period.
The undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
_________________________________________
_________________________________________
_________________________________________
Signature:
_________________________________________
Date: ___________________________________
<PAGE>
EXHIBIT 10.5
FIRST AMENDMENT TO PENINSULA MARINA AND
OFFICE PARK OFFICE LEASE AGREEMENT
THIS FIRST AMENDMENT TO PENINSULA MARINA AND OFFICE PARK OFFICE LEASE
AGREEMENT is made and entered into as of February 15, 1999, by and between
MARINA INVESTMENTS, INC. ("Landlord"), and INTERWAVE COMMUNICATIONS, INC., a
California corporation ("Tenant").
R E C I T A L S:
A. Landlord and Tenant have entered into that certain Peninsula Marina
and Office Park Office Lease Agreement ("Lease") dated January 8, 1999, with
respect to certain premises (the "Premises") consisting of approximately
27,909 rentable square feet, located in Peninsula Marina Office Park, and
described therein as Suite 101 in Building 650, Suite 101 in Building 652,
Suites 101, 103, 105, 106, 108, 200, 302 and 304 in Building 656 and Suites
105 and 205 in Building 658, Bair Island Road, Redwood City, California
94063-2704.
B. Tenant desires to expand the Premises to include the approximately
624 rentable square feet located in Building 652, Suite 105, Bair Island
Road, Redwood City and depicted on EXHIBIT A hereto as the "Expansion Area."
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Landlord and Tenant hereby agree as follows:
1. AMENDMENT OF PARAGRAPH 1.6. Paragraph 1.6 of the Lease is hereby
amended and restated in its entirety to read as follows:
"1.6 PREMISES. Effective upon the Expansion Date (defined below), the
term "Premises" shall mean Suite 101 in Building 650, Suites 101 and 105
in Building 652, Suites 101, 103, 105, 106, 108, 200, 302 and 304 in
Building 656 and Suites 105 and 205 in Building 658, Bair Island Road,
Redwood City, California 94063-2704, as more particularly outlined on
the drawing attached hereto as EXHIBIT A and incorporated herein by
reference. As used herein, "Premises" shall not include any storage
area, which may be leased or rented pursuant to separate agreement."
2. AMENDMENT OF PARAGRAPH 1.7. Paragraph 1.7 of the Lease is hereby
amended and restated in its entirety to read as follows:
<PAGE>
"1.7 RENTABLE AREA OF THE PREMISES. Effective upon the Expansion
Date, the term "Rentable Area of the Premises" shall mean 28,533 square
feet, which Landlord and Tenant stipulate to be the rentable area of the
Premises."
3. AMENDMENT OF PARAGRAPH 1.13. Effective upon the Expansion Date,
the Base Rent schedule set forth in Paragraph 1.13 shall be amended as
follows:
Monthly Base
Months Rent Annual Base Rent
------ ------------ ----------------
Expansion Date -9 $63,668.40 $764,020.80
10-21 $71,051.00 $852,612.00
22-33 $75,612.00 $907,344.00
34-49 $79,892.00 $958,704.00
4. AMENDMENT OF PARAGRAPH 1.14. Paragraph 1.14 of the Lease is
hereby amended and restated in its entirety to read as follows:
"1.14 TENANT'S PERCENTAGE SHARE. Effective upon the Expansion
Date, the term "Tenant's Percentage Share" shall mean 32.97% with respect
to increases in Property Taxes and Operating Expenses (as such terms are
hereinafter defined)."
5. EXPANSION OF PREMISES. Effective February 15, 1999 (the
"Expansion Date"), the Premises covered by the Lease shall be expanded to
include the approximately 624 rentable square feet of the office space
located in Building 652, Suite 105, Bair Island Road, Redwood City and
depicted on EXHIBIT A hereto as the Expansion Area." The Expansion Area
shall be delivered by Landlord to Tenant in its "AS IS" condition. Any and
all improvements which Tenant desires to make to the Expansion Area shall be
made in accordance with the terms of the Lease.
6. EXHIBIT A. "Exhibit A" to the Lease is hereby deleted and
replaced with EXHIBIT A attached hereto.
-2-
<PAGE>
7. RATIFICATION. Except to the extent expressly amended or modified
hereby, the Landlord and Tenant hereby ratify and reaffirm each of the
covenants, agreements, obligations, representations and warranties set forth
in the Lease.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as
of the date first above written.
LANDLORD: TENANT:
MARINA INVESTMENTS, INC., INTERWAVE COMMUNICATIONS, INC.,
a Delaware Corporation a California Corporation
By: /s/ Rim Antoine Hindieh By: /s/ Illegible
----------------------------- -----------------------------------
Title: Rim Antoine Hindieh Title: Chairman, President & CEO
------------------------- --------------------------------
President
By:
----------------------------------
Title:
--------------------------------
3
<PAGE>
MARINA AND OFFICE PARK
OFFICE LEASE AGREEMENT
entered into by and between
Marina Investment, Inc., Landlord
and
interWAVE Communications, Inc., Tenant
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 DEFINITIONS.................................................. 1
1.1 Landlord..................................................... 1
1.2 Tenant....................................................... 1
1.3 Project...................................................... 1
1.4 Buildings.................................................... 1
1.5 Building..................................................... 1
1.6 Premises..................................................... 1
1.7 Rentable Area of the Premises................................ 1
1.8 Common Areas................................................. 1
1.9 Lease........................................................ 1
1.10 Lease Term................................................... 1
1.11 Commencement Date............................................ 1
1.12 Expiration Date.............................................. 2
1.13 Base Rent.................................................... 2
1.14 Tenant's Percentage Share.................................... 2
1.15 Base Year.................................................... 2
1.16 Security Deposit............................................. 2
1.17 Tenant's Permitted Use....................................... 2
1.18 Business Hours............................................... 2
1.19 Landlord's Address for Notices............................... 2
1.20 Tenant's Address for Notices................................. 2
1.21 Tenant's Address for Notices (Before Tenant Takes Possession
of Premises.................................................. 2
1.22 Guarantor(s)................................................. 2
ARTICLE 2 PREMISES..................................................... 2
2.1 Lease of Premises............................................ 2
2.2 Acceptance of Premises....................................... 3
2.3 Rentable Area of the Premises................................ 3
2.4 Right of First Offer......................................... 3
ARTICLE 3 TERM......................................................... 4
ARTICLE 4 RENTAL....................................................... 4
4.1 Definitions.................................................. 4
(A) "Base Year".............................................. 4
(B) "Property Taxes"......................................... 4
(C) "Operating Expenses"..................................... 4
4.2 Base Rent.................................................... 7
4.3 Adjustment Procedure; Estimates.............................. 7
4.4 Review of Landlord's Statement............................... 7
4.5 Payment...................................................... 8
4.6 Late Charge; Interest........................................ 9
4.7 Additional Rental............................................ 9
ARTICLE 5 ADDITIONAL TAXES............................................. 9
ARTICLE 6 SECURITY DEPOSIT............................................. 9
ARTICLE 7 USE OF PREMISES.............................................. 9
7.1 Tenant's Permitted Use....................................... 9
i
<PAGE>
<TABLE>
<S> <C> <C> <C>
7.2 Compliance With Laws and Other Requirements.................. 9
7.3 Hazardous Materials.......................................... 10
ARTICLE 8 UTILITIES AND SERVICES....................................... 11
8.1 Building Services............................................ 11
8.2 Interruption of Services..................................... 13
ARTICLE 9 MAINTENANCE AND REPAIRS...................................... 13
9.1 Landlord Repairs............................................. 13
9.2 Tenant Repairs............................................... 13
9.3 Request for Repairs.......................................... 13
9.4 Tenant Damages............................................... 13
9.5 Landlord's Rights............................................ 14
ARTICLE 10 ALTERATIONS, ADDITIONS AND IMPROVEMENTS..................... 14
10.1 Landlord's Consent; Conditions............................... 14
10.2 Performance of Alterations Work.............................. 14
10.3 Liens........................................................ 14
10.4 Lease Termination............................................ 15
ARTICLE II INDEMNIFICATION AND INSURANCE............................... 15
11.1 Indemnification.............................................. 15
11.2 Property Insurance........................................... 16
11.3 Liability Insurance.......................................... 16
11.4 Workers' Compensation Insurance.............................. 16
11.5 Policy Requirements.......................................... 17
11.6 Waiver of Subrogation........................................ 17
11.7 Failure to Insure............................................ 17
ARTICLE 12 DAMAGE OR DESTRUCTION....................................... 17
12.1 Damage....................................................... 17
12.2 Reconstruction............................................... 17
12.3 Rent Abatement............................................... 17
12.4 Excessive Damage or Destruction.............................. 17
12.5 Uninsured Casualty........................................... 18
12.6 Waiver....................................................... 18
12.7 Exception to Landlord's Obligations.......................... 18
ARTICLE 13 CONDEMNATION................................................ 18
13.1 Taking....................................................... 18
13.2 Award........................................................ 18
13.3 Temporary Taking............................................. 18
ARTICLE 14 LANDLORD'S OPTION........................................... 19
ARTICLE 15 ASSIGNMENT AND SUBLETTING................................... 19
15.1 Restriction.................................................. 19
15.2 Notice to Landlord........................................... 19
15.3 Landlord's Recapture Rights.................................. 19
15.4 Landlord's Consent; Standards................................ 19
15.5 Additional Rent.............................................. 20
15.6 Landlord's Costs............................................. 20
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
15.7 Continuing Liability of Tenant................................ 20
15.8 Non-Waiver.................................................... 20
ARTICLE 16 DEFAULT AND REMEDIES.......................................... 20
16.1 Events of Default by Tenant.................................... 20
16.2 Landlord's Right to Terminate Upon Tenant Default.............. 21
16.3 Landlord's Right to Continue Lease Upon Tenant Default......... 21
16.4 Right of Landlord to Perform................................... 22
16.5 Default Under Other Leases..................................... 22
16.6 Non-Waiver..................................................... 22
16.7 Cumulative Remedies............................................ 22
16.8 Default by Landlord............................................ 22
ARTICLE 17 ATTORNEYS' FEES: COSTS OF SUIT................................. 23
17.1 Attorneys' Fees................................................ 23
17.2 Indemnification................................................ 23
ARTICLE 18 SUBORDINATION AND ATTORNMENT................................... 23
18.1 Subordination.................................................. 23
18.2 Attornment..................................................... 23
18.3 Mortgage and Ground Lessor Protection.......................... 24
ARTICLE 19 QUIET ENJOYMENT................................................ 24
ARTICLE 20 RULES AND REGULATIONS.......................................... 24
ARTICLE 21 ESTOPPEL CERTIFICATES.......................................... 24
ARTICLE 22 ENTRY BY LANDLORD.............................................. 25
ARTICLE 23 LANDLORD'S LEASE UNDERTAKINGS - EXCULPATION FROM
PERSONAL LIABILITY; TRANSFER OF LANDLORD'S INTEREST............ 25
23.1 Landlord's Lease Undertaking................................... 25
23.2 Transfer of Landlord's Interest................................ 26
ARTICLE 24 HOLDOVER TENANCY............................................... 26
ARTICLE 25 NOTICES........................................................ 26
ARTICLE 26 MISCELLANEOUS.................................................. 26
26.1 Entire Agreement............................................... 26
26.2 Amendments..................................................... 26
26.3 Successors..................................................... 26
26.4 Force Majeure.................................................. 27
26.5 Survival of Obligations........................................ 27
26.6 Light and Air.................................................. 27
26.7 Governing Law.................................................. 27
26.8 Severability................................................... 27
26.9 Captions....................................................... 27
26.10 Interpretation................................................. 27
26.11 Independent Covenants.......................................... 27
26.12 Number and Gender.............................................. 27
26.13 Time is of the Essence......................................... 27
26.14 Joint and Several Liability.................................... 27
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
26.15 Exhibits...................................................... 27
26.16 Offer to Lease................................................ 27
26.17 No Counterclaim; Choice of Laws............................... 28
26.18 Rights Reserved by Landlord................................... 28
</TABLE>
iv
<PAGE>
PENINSULA MARINA AND OFFICE PARK
OFFICE LEASE AGREEMENT
THIS LEASE ("Lease"), dated as of JAN 8, 1999, is made and entered into
by and between Marina Investments, Inc. ("Landlord") and interWAVE
Communications, Inc., a California corporation (hereinafter "Tenant") upon
the following terms and conditions.
ARTICLE 1
DEFINITIONS
Unless the context otherwise specifies or requires, the following terms
shall have the meanings specified herein:
1.1 LANDLORD. "Landlord" means Marina Investments, Inc.
1.2 TENANT. "Tenant" means interWAVE Communications, Inc.
1.3 PROJECT. "Project" means the land, buildings, improvements and
common areas comprising the Peninsula Marina Office Park.
1.4. BUILDINGS. The term "Buildings" shall mean those office buildings
located in the Project, Building Nos. 650, 652, 654, 656, 658 and any
additional buildings that may be constructed hereafter, together with all
related land, improvements, common areas, driveways, sidewalks and landscaping.
1.5. BUILDING. The term "Building" shall mean each of the buildings
in which the Leased Premises is located.
1.6. PREMISES. The term "Premises" shall mean Suite 101 in Building
650, Suite 101 in Building 652, Suites 101, 103, 105, 106, 108, 200, 302 and
304 in Building 656 and Suites 105 and 205 in Building 658, Bair Island Road,
Redwood City, California 94063-2704, as more particularly outlined on the
drawing attached hereto as EXHIBIT A and incorporated herein by reference.
As used herein, "Premises" shall not include any storage area, which may be
leased or rented pursuant to separate agreement.
1.7 RENTABLE AREA OF THE PREMISES. The term "Rentable Area of the
Premises" shall mean 27,909 square feet, which Landlord and Tenant stipulate
to be the Rental Area of the Premises.
1.8 COMMON AREAS. The term "Common Areas" shall mean all areas in the
Project not reserved for the exclusive use of the Landlord, Tenant, or any
other tenant, including the areas on individual floors devoted to corridors,
fire vestibules, elevator foyers, lobbies, electric and telephone closets,
restrooms, mechanical rooms, janitor closets and other similar facilities for
the benefit of all tenants (or invitees) on the particular floor, parking
facilities, walkways and landscaped areas. Landlord retains the right to
make changes in boundaries and in facilities, and to grant exclusive rights
over certain Common Areas. Landlord retains the right to the user and
licensing of the use of, the exterior walls and roof of the Buildings and to
the name of the Project.
1.9 LEASE. The term "Lease" shall mean this Lease document and any
Exhibits and Addenda attached hereto now or in the future.
1.10 LEASE TERM. The term "Lease Term" shall mean the period between
the Commencement Date and the Expiration Date (as such terms are hereinafter
defined), unless sooner terminated or renewed as otherwise provided in this
Lease.
1.11 COMMENCEMENT DATE. Subject to adjustment as provided in Article
3, the term
1
<PAGE>
"Commencement Date" shall mean September 1, 1998.
1.12 EXPIRATION DATE. The term "Expiration Date" shall mean September 30,
2002.
1.13 BASE RENT. Subject to adjustment as provided in Article 4, the term
"Base Rent" shall mean:
<TABLE>
<CAPTION>
Monthly Base
Months Rent Annual Base Rent
------ ------------ ----------------
<S> <C> <C>
1-4 $57,014.00 $684,168.00
5-9 $62,202.00 $746,424.00
10-21 $69,491.00 $833,892.00
22-33 $73,959.00 $887,508.00
34-49 $78,145.00 $937,740.00
</TABLE>
which Base Rent is calculated in accordance with the Rent Schedule attached
hereto and incorporated herein.
1.14 TENANT'S PERCENTAGE SHARE. The term "Tenant's Percentage Share"
shall mean 32.25% with respect to increases in Property Taxes and Operating
Expenses (as such terms are hereinafter defined).
1.15 BASE YEAR. The term "Base Year" shall mean the calendar year 1998.
1.16 SECURITY DEPOSIT. The term "Security Deposit" shall mean Forty-Four
Thousand Nine Hundred Sixteen and 10/100's Dollars ($44,916.10), currently
held by Landlord.
1.17 TENANT'S PERMITTED USE. The term "Tenant's Permitted Use" shall mean
general office and development and light manufacturing (using no heavy
equipment) of electronic equipment use.
1.18 BUSINESS HOURS. The term "Business Hours" shall mean the hours of
8:00 a.m. to 6:00 p.m., Monday through Friday and with respect to Building
656 only, also the hours of 9:00 a.m. to 1:00 p.m., Saturday (federal and
state holidays excepted).
1.19 LANDLORD'S ADDRESS FOR NOTICES. The term "Landlord's Address for
Notices" shall mean: Peninsula Marina Office Park, 650 Bair Island Road,
Suite 204, Redwood City, California 94063-2704.
1.20 TENANT'S ADDRESS FOR NOTICES. The term "Tenant's Address for
Notices" shall mean 656 Bair Island Road, Suite 108, Redwood City, California
94063-2704.
1.21 (Intentionally Omitted.)
1.22 (Intentionally Omitted.).
ARTICLE 2
PREMISES
2.1 LEASE OF PREMISES. Landlord hereby leases the Premises to Tenant, and
Tenant hereby leases the Premises from Landlord, upon all of the terms,
covenants and conditions contained in this Lease. On the Commencement Date
described herein, Landlord shall deliver the Premises to Tenant "AS IS"
except only for any covenants or representations made in any attached
addendum and Tenant accepts the Premises in its present condition and
acknowledges that Landlord has no responsibility or obligation to make any
tenant improvements whatsoever. Notwithstanding the foregoing, Landlord shall
repair and take such other measures as are necessary to eliminate flooding in
the breezeway between Buildings 656 and 658 of the Project.
2
<PAGE>
2.2 ACCEPTANCE OF PREMISES. Tenant acknowledges that Landlord has not
made any representation or warranty with respect to the condition of the
Premises or the Building or with respect to the suitability or fitness of
either for the conduct of Tenant's Permitted Use or for any other purpose.
2.3 RENTABLE AREA OF THE PREMISES. The square feet referred to in
paragraph 1.7 of the Lease reflects Landlord's good faith estimate of the
approximate rentable area of the Premises based upon information supplied to
Landlord by its architect.
2.4 RIGHT OF FIRST OFFER.
(A) Landlord shall make a one-time offer to Tenant as provided below
in the event that Landlord, in its sole and absolute discretion, desires to
lease premises within the Project adjacent to any portion of the Premises
("Adjacent Premises") to any party other than the then-current tenant of
such premises, provided that each of the following conditions is met: (1)
Tenant is not then in default under this Lease beyond the expiration of any
applicable cure period and has not, at any prior time during the Term, been
in default of any material term this Lease after expiration of any applicable
grace or cure period; and (ii) interWAVE Communications, Inc., a California
corporation, shall be and have been during the entire Term the Tenant under
this Lease and shall not have made any sublet in the aggregate in excess of
5,000 square feet of rentable area, assignment or other transfer of this
Lease, the Premises or any portion thereof during the Term.
(B) Any offer of a Adjacent Premises by Landlord to Tenant shall be
upon the following terms and conditions: (1) Landlord's offer to Tenant shall
be at a rental and such upon other economic and business terms as Landlord
intends to offer the Adjacent Premises to third parties; (2) except as may be
otherwise expressly provided in Landlord's offer, the lease shall not provide
any construction allowance or tenant improvement allowance to Tenant but
shall provide that Tenant is responsible to accept the offered premises in
"AS-IS" condition and, at Tenant's sole cost and expense, to do
construction and installation work in and to the new premises to prepare the
same for use by Tenant, in accordance with the applicable criteria of
Landlord; (3) the use permitted under such lease shall be the same as
Tenant's Permitted Use specified in Section 1.17 of this Lease; and (4) the
lease shall otherwise be upon the terms and conditions of this Lease.
(C) For a period of fourteen (14) days following Landlord's offer,
Tenant shall have the right to accept the offer by written notice given to
Landlord. In the event that Landlord, at the time of making its offer to
Tenant, shall have provided Tenant with execution copies of a written lease
agreement embodying the offered terms, which execution copies shall conform
to the requirements of this Section 2.4, Tenant's written notice of
acceptance of Landlord's offer shall be effective only if such execution
copies are duly executed and delivered by Tenant to Landlord at the time
notice of acceptance is given. If Landlord's offer is not accompanied by
execution copies, Tenant shall execute and return to Landlord execution
copies of a written lease agreement embodying the offered terms within ten
(10) days after Landlord sends the same to Tenant.
(D) In the event that Tenant shall fail to accept any offer made by
Landlord as provided in the foregoing provisions of this Section 2.4,
Landlord shall have no further obligation whatsoever to offer to Tenant such
Adjacent Premises or to negotiate with Tenant for a lease covering the
Adjacent Premises, unless Landlord fails to lease such Adjacent Premises to a
third party for no less than ninety-five percent (95%) of the rental offered
to Tenant (taking into account all financial terms of the Lease, including,
but not limited to, base rent, tenant improvement allowances and free rent
periods). In the event that Landlord desires to offer the Adjacent Premises
for lease at a market rate of less than ninety-five percent (95%) of the
rental Landlord offered Tenant, than Landlord shall offer the Adjacent
Premises to Tenant again in accordance with the provisions of this
Section 2.4.
3
<PAGE>
ARTICLE 3
TERM
Except as otherwise provided in this Lease, the Lease Term shall be for
the period described in Section 1.10 of this Lease, commencing on the
Commencement Date described in Section 1.11 of this Lease and ending on the
Expiration Date described in Section 1.12 of this Lease; provided, however,
that, if, for any reason, Landlord is unable to deliver possession of the
Premises on the date described in Section 1.11 of this Lease, Landlord shall
not be liable for any damage caused thereby, nor shall the Lease be void or
voidable, but, rather, the Lease Term shall commence upon, and the
Commencement Date shall be, the date that possession of the Premises is so
tendered to Tenant (except for Tenant-caused delays which shall not be deemed
to delay commencement of the Lease Term), and the Expiration Date described
in Section 1.12 of this Lease shall be extended by an equal number of days.
As of the date of this Lease, Tenant occupies the Demised Premises
pursuant to a written lease dated August 1, 1994, as amended (the "Existing
Lease"). The term of the Existing Lease is hereby terminated as of 11:59 p.m.
on the day immediately preceding the commencement of the term of this Lease,
in the same manner as if such date were originally specified in the Existing
Lease as the date the term thereof expired.
ARTICLE 4
RENTAL
4.1 DEFINITIONS. As used herein,
(A) "Base Year" shall mean the calendar year 1998. Tenant shall be
responsible for paying Tenant's Percentage Share of the increase in Building
Operating Expenses, if any, above the Operating Expenses for the Base Year
and the Tenant's Percentage Share of increases in Property Taxes over
Property Taxes during the Base Year. The Base year figure for Building
Operating Expenses and Property Taxes shall be based on an assumed ninety-five
percent (95%) occupancy level with real property taxes to be projected as if
fully assessed.
(B) "Property Taxes" shall mean all payments and related expenses
paid or incurred by Landlord with respect to taxes and assessments affecting
the Project or the Premises, including without limitation, any form of real
property tax, assessment, special assessment(s), transit tax or assessment,
benefit assessment, business or license fee or tax, commercial rental tax,
and any tax or similar imposition in substitution for any of the foregoing
imposed by any governmental or quasi-governmental authority, including but
not limited to any increases in any such tax as a result of any sale,
transfer, financing, refinancing or exchange of the Project, or any part
thereof, and any reasonable attorneys' fees, accounting and appraisal fees
and other costs incurred in connection with any proceedings to contest or
determine any taxes or assessments. "Property Taxes" shall not include any
federal, state or local net income, franchise, gift, estate or inheritance
tax; or any documentary transfer, stamp, recording or other similar transfer
tax assessed upon a transfer of an interest of Landlord in the Project. With
respect to improvements within the Project the construction of which is
typically financed by a loan or loans secured by all or a portion of land
comprising a project or by the investment made by the owner of a project, in
the event Landlord elects to finance the construction of such improvements by
means of the creation of a special assessment district covering only the
Project or by means of bonded indebtedness repayable through the imposition
of a special tax exclusively upon the Project, neither the assessments
attributable to such special assessment district nor any such special tax
shall be included within "Property Taxes" for purposes of determining the
amount Tenant is required to pay pursuant to Article 4.
(C) "Operating Expenses" shall mean all costs, fees, disbursements
and expenses paid or incurred by or on behalf of Landlord in the operation,
ownership, maintenance, insurance, management, replacement and repair of the
Project (excluding Property Taxes) including without limitation:
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[GRAPHIC]
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(i) Premiums for property, casualty, liability, rent
interruption and other types of insurance carried by Landlord.
(ii) Salaries, wages and other amounts paid or payable to
personnel including the Project manager, superintendent, operation and
maintenance staff, and other employees of Landlord involved in the
maintenance and operation of the Project, including contributions and
premiums towards fringe benefits, unemployment, disability and worker's
compensation insurance, pension plan contributions and similar premiums and
contributions and the total charges of any independent contractors or
property managers engaged in the operation, repair, care, maintenance and
cleaning of any portion of the Project.
(iii) Cleaning expenses, including without limitation
janitorial services, window cleaning, and garbage and refuse removal.
(iv) Landscaping expenses, including without limitation
irrigating, trimming, fertilizing, and replacing plants.
(v) Heating, ventilating, air conditioning and
steam/utilities expenses, including fuel, gas, electricity, water, sewer,
telephone, and other services.
(vi) The cost of maintaining, operating, repairing and
replacing components of equipment or machinery, including without limitation
heating, refrigeration, ventilation, electrical, plumbing, mechanical,
elevator, escalator, sprinklers, fire/life safety, security and energy
management systems, including service contracts, maintenance contracts,
supplies and parts.
(vii) Other items of repair or maintenance of elements of the
Project.
(viii) The cost of the rental of any machinery or equipment and
the cost of supplies used in the maintenance and operation of the Project.
(ix) Audit fees and the cost of accounting services incurred
in the preparation of statements referred to in this Lease and financial
statements, and in the computation of the rents and charges payable by
tenants of the Project.
(x) The costs of improvements, repairs, or replacements to
the Project or the equipment or machinery used in connection with the
Building if the capital improvement is made after the date of this Lease and
is intended to reduce Operating Expenses; provided, however, any such costs
which are properly charged to a capital account shall not be included in
Operating Expenses in a single year but shall instead be amortized over their
useful lives, as reasonably determined by the Landlord in accordance with
generally accepted accounting principles, and only the annual amortization
amount shall be included in the Operating Expenses for a particular year.
(xi) Reasonable legal fees and expenses, including, but not
limited to, such expenses that relate to seeking or obtaining reductions in
or refunds of Property Taxes, or components thereof.
(xii) A fee for the administration and management of the
Building appropriate to the first class nature of the Building as reasonably
determined by the Landlord from time to time.
(xiii) The cost of any improvements, capital expenditures,
repairs or replacements to the Project, or any equipment or machinery used in
connection with the Project, if any such item is required under governmental
laws, regulations, ordinances, or interpretations thereof, which were not
applicable to the Project at the time the Project was constructed; provided,
however, that any such costs which are properly charged to a capital account
shall not be payable in a single year but shall instead be amortized over
their useful lives,
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as reasonably determined by the Landlord in accordance with generally
acceptable accounting principles, and only the annual amortization amount
(prorated based on the number of days of the Lease term in the calendar year)
shall be payable by the Tenant with respect to any calendar year.
Notwithstanding anything contained in this Section 4.1, Operating
Expenses shall not include the following:
(a) Fines or penalties which Landlord incurs by reason of its
failure to comply with applicable laws.
(b) Fines, penalties or damages which Landlord incurs by reason
of its failure to perform any obligation under this Lease or under other
leases of premises in the Premises;
(c) Any items for which Landlord is reimbursed by insurance or
otherwise compensated, to the extent of the net receipts from such insurance
or compensation, including direct reimbursement by any tenant or occupant of
the Project (exclusive of reimbursement pursuant to a provision similar to
Article 4 of this Lease);
(d) The costs and expenses incurred by Landlord in performing
work necessary to remedy violations of code requirements concerning Project
improvements where such code requirements were applicable at the time of the
initial installation or construction of such improvements;
(e) The cost of providing or performing improvements, work or
repairs to or within the premises of another tenant or occupant of the
Project where such improvements are of a nature which are not Landlord's
responsibility to perform pursuant to this Lease, except where Landlord may
do such improvements, work or repairs both to such other premises and to the
Premises;
(f) Costs associated exclusively with the operation of the
marina and related recreational facilities;
(g) Legal and other fees, leasing commissions, advertising
expenses and other costs incurred exclusively in connection with the leasing
of the Project;
(h) Costs attributable to enforcing leases against other
tenants in the Project, such as attorneys' fees, court costs, adverse
judgments and similar expenses;
(i) Depreciation on maintenance or operating equipment if and
to the extent that the replacement cost thereof is or has previously been
included within Operating Expenses;
(j) Reserve funds for expenses anticipated to be incurred in
later calendar years;
(k) Any interest or principal payments on financing secured by
a deed of trust or mortgage on the Project;
(l) Costs associated exclusively with the operation of the
business of the entity which constitutes Landlord which are not directly
related to the operation of the Project and which relate to the following:
the formation of the entity which constitutes Landlord, the internal
accounting and legal matters which relate exclusively to preparation of the
tax returns and financial statements of such entity, together with the
gathering of data therefor, the cost of defending any lawsuits with any
mortgage (except as the actions of Tenant may be an issue); the costs of
selling, syndication, financing, mortgaging or hypothecating any of
Landlord's interest in the real property and improvements constituting the
Project; and the costs of any dispute between Landlord and any employee to
the extent that the other costs attributable to the
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employment of such employee are not permitted to be included within Operating
Expenses pursuant to this Lease; and
(m) The cost of inspecting, monitoring and remediating
Hazardous Materials brought onto the Project by Landlord or its employees or
agents;
In the case of any Operating Expense that is a capital expenditure
in accordance with generally accepted accounting principles for the office
building industry, the amount payable by Tenant under this Lease in respect of
such expenditure shall be determined by amortizing the expenditure over a
useful life determined by Landlord in accordance with such accounting
principles, and Landlord may include a provision for interest on the
remaining unamortized balance.
4.2 BASE RENT. During the Lease Term, Tenant shall pay to Landlord as
rental for the Premises the Base Rent described in Section 1.12 above,
subject to the following adjustments (herein called the "Rent Adjustments").
During each calendar year subsequent to the Base Year, the Base Rent payable
by Tenant to Landlord shall be increased by (collectively, the "Tax and
Operating Expense Adjustment"): (i) Tenant's Percentage Share of the total
dollar increase, if any, in Property Taxes paid or incurred by Landlord
during such year over Property Taxes for the Base Year, and (ii) Tenant's
Percentage Share of the total dollar increase, if any, in Operating Expenses
paid or incurred by Landlord during such year over Operating Expenses paid or
incurred by Landlord during the Base Year.
4.3 ADJUSTMENT PROCEDURE; ESTIMATES. The Tax and Operating Expense
Adjustment specified in Section 4.2 shall be determined and paid as follows:
(A) During each calendar year subsequent to the Base Year,
Landlord shall give Tenant written notice of its estimate of any increased
amounts payable under Section 4.2 for that calendar year. On or before the
first day of each calendar month during the calendar year. Tenant shall pay
to Landlord one-twelfth (1/12th) of such estimated amounts, provided,
however, that, not more often than quarterly, Landlord may, by written notice
to Tenant, revise its estimate for such year, and subsequent payments by
Tenant for such year shall be based upon such revised estimate.
(B) Within ninety (90) days after the close of each calendar year
or as soon thereafter as is practicable, Landlord shall deliver to Tenant a
statement of that year's actual Property Taxes and Operating Expenses, as
determined and certified by Landlord (the "Landlord's Statement") and such
Landlord's Statement shall be binding upon Landlord and Tenant, except as
provided in Section 4.4 below. If the amount of the actual Tax and Operating
Expenses is more than the estimated payments for such calendar year made by
Tenant, Tenant shall pay the deficiency to Landlord upon receipt of
Landlord's Statement. If the amount of the actual Tax and Operating Expenses
is less than the estimated payments for such calendar year made by Tenant,
any excess shall be credited against Rent (as hereinafter defined) next
payable by Tenant under this Lease or, if the Lease Term has expired, any
excess shall be paid to Tenant. No delay in providing the statement described
in this subparagraph (B) shall act as a waiver of Landlord's right to payment
under Section 4.2.
(C) If this Lease shall terminate on a day other than the end of a
calendar year, the amount of the Tax and Operating Expense Adjustment to be paid
pursuant to Section 4.1 that is applicable to the calendar year in which such
termination occurs shall be prorated on the basis of the number of days from
January 1 of the calendar year to the termination date bears to 365. The
termination of this Lease shall not affect the obligations of Landlord and
Tenant pursuant to Section 4.2 to be performed after such termination.
4.4 REVIEW OF LANDLORD'S STATEMENT. Provided that Tenant is not then
in default under this Lease and provided further that Tenant strictly
complies with the provisions of this Section 4.4, Tenant shall have the
right, once each calendar year, to reasonably review supporting data for any
portion of a Landlord's Statement that Tenant claims is incorrect, in
accordance with the following procedure:
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(A) Tenant shall, within ten (10) business days after any such
Landlord's Statement is delivered, deliver a written notice to Landlord
specifying the portions of the Landlord's Statement that are claimed to be
incorrect, and Tenant shall simultaneously pay to Landlord all amounts due
from Tenant to Landlord as specified in the Landlord's Statement. Except as
expressly set forth in subsection (C) below, in no event shall Tenant be
entitled to withhold, deduct, or offset any monetary obligation of Tenant to
Landlord under the Lease (including without limitation, Tenant's obligation
to make all payments of Base Rent including the CPI Adjustment, if any, and
all payments of Tenant's Tax and Operating Expense Adjustment) pending the
completion of and regardless of the results of any review of records under
this paragraph. The right of Tenant under this paragraph may only be
exercised once for any Landlord's Statement, and if Tenant fails to meet any
of the above conditions as a prerequisite to the exercise of such right, the
right of Tenant under this paragraph for a particular Landlord's Statement
shall be deemed waived.
(B) Tenant acknowledges that Landlord may maintain its records for
the Building at Landlord's office, Landlord's attorneys' offices or
Landlord's accountants offices and Tenant agrees that any review of records
under this section shall be at the sole expense of Tenant and shall be
conducted by an independent firm of certified public accountants of national
standing. Tenant acknowledges and agrees that any records reviewed under this
paragraph constitute confidential information of Landlord, which shall not be
disclosed to anyone other than the accountants performing the review and the
principals of Tenant who receive the results of the review. Tenant
acknowledges that Tenant shall not be entitled to review Landlord's financial
statements or tax returns or any leases, operating agreements, reciprocal
easement agreements or other agreements with tenants or occupants of the
Project. The disclosure of such information to any other person, whether or
not caused by the conduct of Tenant, shall constitute a material breach of
this Lease. Landlord, depending on the nature of Tenant's written notice, may
elect to make its records for the Building available to Tenant's accountants
at Landlord's office.
(C) Any errors disclosed by the review shall be promptly corrected
by Landlord, provided, however, that if Landlord disagrees with any such
claimed errors. Landlord shall have the right to cause another review to be
made by an independent firm of certified public accountants of national
standing. In the event of a disagreement between the two accounting firms,
the review that discloses the least amount of deviation from the Landlord's
Statement shall be deemed to be correct. In the event that the results of the
review of records taking into account, if applicable, the results of any
additional review caused by Landlord reveal that Tenant has overpaid
obligations for a preceding period, the amount of such overpayment shall be
credited against Tenant's subsequent installment obligations to pay the
estimated Tax and Operating Expense Adjustment. In the event that such results
show that Tenant has underpaid its obligations for a preceding period, Tenant
shall be liable for Landlord's accounting fees, and the amount of such
underpayment shall be paid by Tenant to Landlord with the next succeeding
installment obligation of estimated Tax and Operating Expense Adjustment.
4.5 PAYMENT. Concurrent with the execution hereof, Tenant shall pay
Landlord Base Rent for the first calendar month of the Term. Thereafter, Base
Rent described in Section 1.13, as adjusted as provided in Section 4.2, shall
be payable in advance on the first day of each calendar month, the prepaid Base
Rent for such partial month shall be prorated in the proportion that the
number of days this Lease is in effect during such partial month bears to the
total number of days in the calendar month. All prepaid Base Rent, and all
other amounts payable to Landlord by Tenant pursuant to the provisions of
this Lease, shall be paid to Landlord, without notice, demand, abatement,
deduction or offset, in lawful money of the United States at Landlord's
office in the Building or to such other person or at such other place as
Landlord may designate from time to time by written notice given to Tenant.
No payment by Tenant or receipt by Landlord of a lesser amount than the
correct Rent due hereunder shall be deemed to be other than a payment on
account; nor shall any endorsement or statement on any check or any letter
accompanying any check or payment be deemed to effect or evidence an accord
and satisfaction; and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance or pursue any other
remedy in this Lease or at law or in equity provided.
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4.6 LATE CHARGE; INTEREST. Other remedies for non-payment of rent
notwithstanding, if any Monthly Base Rent payment or of additional rent is
not received by Landlord on or before the 10th day of the month next
following the month in which Tenant was invoiced, a late charge of ten
percent (10%) of such past due amount shall become due and payable in
addition to such amounts owed under this Lease.
4.7 ADDITIONAL RENTAL. For purposes of this Lease, all amounts
payable by Tenant to Landlord pursuant to this Lease, whether or not
denominated as such, shall constitute additional rental hereunder. Such
additional rental, together with the Base Rent and Rent Adjustments, shall
sometimes be referred to in this Lease as "Rent."
ARTICLE 5
ADDITIONAL TAXES
In addition to the Base Rent and other charges to be paid by Tenant
hereunder, Tenant shall reimburse Landlord upon demand for any and all taxes
payable by or imposed upon Landlord upon or with respect to: any fixtures or
personal property located in the Premises; any leasehold improvements made
in or to the Premises by or for Tenant; the Rent payable hereunder,
including, without limitation, any gross receipts tax, license fee or excise
tax levied by any governmental authority; the possession, leasing, operation,
management, maintenance, alteration, repair, use or occupancy of any portion
of the Premises (including without limitation any applicable possessory
interest taxes); or this transaction or any document to which Tenant is a
party creating or transferring an interest or an estate in the Premises.
ARTICLE 6
SECURITY DEPOSIT
Landlord and Tenant acknowledge and agree that Tenant has previously
deposited with Landlord the Security Deposit described in Section 1.16 above.
The Security Deposit is made by Tenant to secure the faithful performance of
all the terms, covenants and conditions of this Lease to be performed by
Tenant. If Tenant shall default with respect to any covenant of provision
hereof, Landlord may use, apply or retain all or any portion of the Security
Deposit to cure such default or to compensate Landlord for any loss or damage
which Landlord may suffer thereby. If Landlord so uses or applies all or any
portion of the Security Deposit, Tenant shall immediately upon written demand
deposit cash with Landlord in an amount sufficient to restore the Security
Deposit to the full amount hereinabove stated. Landlord shall not be required
to keep the Security Deposit separate from its general accounts and Tenant
shall not be entitled to interest on the Security Deposit. Within thirty (30)
days after the expiration of the Lease Term and the vacation of the Premises
by Tenant, the Security Deposit, or such part as has not been applied to cure
the default, shall be returned to Tenant.
ARTICLE 7
USE OF PREMISES
7.1 TENANT'S PERMITTED USE. Tenant shall use the Premises only for
Tenant's Permitted Use as set forth in Section 1.16 above and shall not use
or permit the Premises to be used for any other purpose. Tenant shall, at its
sole cost and expense, obtain all governmental licenses and permits required
to allow Tenant to conduct Tenant's Permitted Use.
7.2 COMPLIANCE WITH LAWS AND OTHER REQUIREMENTS.
(A) Tenant shall not use the Premises, or permit the
Premises to be used in any manner which: (a) violates any law, ordinance,
regulation or directive of any governmental authority having jurisdiction,
including without limitation any Certificate of Occupancy, or any covenant,
condition or restriction affecting the Building or the Premises; (b) causes
or is reasonably likely to cause damage to the Building or the Premises; (c)
violates a requirement or
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condition of any fire and extended insurance policy covering the Building
and/or the Premises, or increases the cost of each policy; (d) constitutes or
is reasonably likely to constitute a nuisance, annoyance or inconvenience to
other tenants or occupants of the Project or interferes with the use and
occupancy of any portion of the Project for other tenants or occupants; (e)
impairs or is reasonably likely to impair the proper maintenance, operation
or repair of the Project or its equipment, facilities or systems; (f)
interferes with, or is reasonably likely to interfere with, the transmission
or reception of microwave, television, radio, telephone, or other
communication signals by antennae or other facilities located in the Project;
or (g) violates the Rules and Regulations described in Article 20.
(B) In addition to any other amounts payable by Tenant to Landlord
hereunder, Tenant shall pay to Landlord, as when billed by Landlord and as
additional rent, Tenant's Percentage Share of the cost of any improvements,
capital expenditures, repairs or replacements to the Building, or any
equipment or machinery used in connection with the Building, if any such item
is required under governmental laws, regulations, ordinances, or
interpretations thereof; however, any such costs that are properly charged to
a capital account shall not be payable in a single year but instead shall be
amortized over their useful lives, as determined by the Landlord in accordance
with generally accepted accounting practices, and only the annual
amortization amount (prorated based on the number of days of the Lease term
in the calendar year) shall be payable by Tenant with respect to any calendar
year.
(C) COMPLIANCE WITH ADA REQUIREMENTS. Without limiting the generality
of the foregoing, Tenant shall promptly comply with all requirements of the
American with Disabilities Act and the regulations promulgated thereunder in
effect from time to time ("ADA Requirements").
Tenant shall have exclusive responsibility for compliance with ADA
Requirements pertaining to the interior of the Premises, including for the
design and construction of the access thereto and egress therefrom. Landlord
shall have responsibility for compliance with ADA Requirements which affect
the common areas of the Building, subject to Tenant's obligations to pay for
its share of the expense of such compliance pursuant to Article 4 of this
Lease. Tenant shall comply promptly with any direction of any governmental
authority having jurisdiction which imposes any duty upon Tenant or Landlord
with respect to Premises or with respect to the use or occupation thereof,
and Tenant agrees to furnish Landlord with a copy of any such direction
promptly after receipt of the same. In addition, Tenant shall comply with
any reasonable plan adopted by Landlord which is designed to fulfill the
requirements of any Laws, including ADA Requirements.
Should compliance by Tenant with this Paragraph require Landlord's
consent pursuant to Article 10, Tenant shall promptly seek such consent,
provide the assurances and documents required by said Article and, following
receipt of such consent, promptly comply with the provisions of such Article
and this Paragraph.
If Tenant fails to comply as required in this Paragraph, after
notice to Tenant, Landlord may comply of cause compliance, in which case
Tenant shall reimburse Landlord upon demand for Landlord's costs incurred in
connection therewith.
7.3 HAZARDOUS MATERIALS.
(A) No Hazardous Materials, as defined herein, shall be Handled, as
also defined herein, upon, about, above or beneath the Premises or any
portion of the Project by or on behalf of Tenant, its subtenants or its
assignees, or their respective contractors, clients, officers, directors,
employees, agents, or invitees. Any such Hazardous Materials so Handled shall
be known as Tenant's Hazardous Materials. Notwithstanding the foregoing,
normal quantities of those Hazardous Materials customarily used in the
conduct of general administrative and executive office activities (e.g.,
copier fluids and cleaning supplies) may be used and stored at the Premises
without Landlord's prior written consent, but only in compliance with all
applicable Environmental Laws, as defined herein.
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(B) Notwithstanding the obligation of Tenant to indemnify Landlord
pursuant to this Lease, Tenant shall, at its sole cost and expense, promptly
take all actions required by any federal, state or local governmental agency
or political subdivision, or necessary for Landlord to make full economic
use of the Premises or any portion of the Project, which requirements or
necessity arises from the Handling of Tenant's Hazardous Materials upon,
about, above or beneath the Premises or any portion of the Project. Such
actions shall include, but not be limited to, the investigation of the
environmental condition of the Premises or any portion of the Building, the
preparation of any feasibility studies or reports and the performance of any
cleanup, remedial, removal or restoration work. Tenant shall take all actions
necessary to restore the Premises or any portion of the Building to the
condition existing prior to the introduction of Tenant's Hazardous Materials,
notwithstanding any less stringent standards or remediation allowable under
applicable Environmental Laws. Tenant shall nevertheless obtain Landlord's
written approval prior to undertaking any actions required by this Section,
which approval shall not be unreasonably withheld so long as such actions
would not potentially have a material adverse long-term or short-term effect
on the Premises or any portion of the Project.
(C) "Environmental Laws" means and includes all now and hereafter
existing statutes, laws, ordinances, codes, regulations, rules, rulings,
orders, decrees, directives, policies and requirements by any federal, state
or local governmental authority regulating, relating to, or imposing
liability or standards of conduct concerning public health and safety or the
environment.
(D) "Hazardous Materials" means: (a) any material or substance: (i)
which is defined or becomes defined as a "hazardous substance," "hazardous
waste," "infectious waste," "chemical mixture or substance," or "air
pollutant" under Environmental Laws; (ii) containing petroleum, crude oil or
any fraction thereof which is liquid at standard conditions of temperature
and pressure; (iii) containing polychlorinated biphenyls (PCB's); (iv)
containing asbestos; (v) which is radioactive, or (b) any other pollutant or
contaminant or hazardous, toxic, flammable or dangerous chemical, waste,
material or substance, as all such terms are used in their broadest sense,
and defined, regulated or become regulated by Environmental Laws, or which
cause a nuisance upon or waste to the Premises or any portion of the Building.
(E) "Handle," "Handled," or "Handling" shall mean any installation,
handling, generation, storage, treatment, use, disposal, discharge, release,
manufacture, refinement, presence, migration, emission, abatement, removal,
transportation, or any other activity of any type in connection with or
involving Hazardous Materials.
ARTICLE 8
UTILITIES AND SERVICES
8.1 BUILDING SERVICES. As long as Tenant is not in default under this
Lease, Landlord agrees to furnish or cause to be furnished to the Premises
the following utilities and services, subject to the conditions and standards
set forth herein:
(A) During Business Hours, non-attended automatic elevator service,
Monday through Friday.
(B) During Business Hours, Monday through Friday, such air
conditioning, heating and ventilation as, in Landlord's judgment, are
required for the comfortable use and occupancy of the Premises; provided,
however, that if Tenant shall require heating, ventilation or air conditioning
in excess of that which Landlord shall be required to provide hereunder,
Landlord shall provide such heating, ventilation or air conditioning upon
Tenant's written request made at least three (3) hours before Tenant desires
to use heating, ventilation or air conditioning outside Business Hours on a
Monday through Friday and at least five (5) hours before the end of Business
Hours on the last week day that is not a holiday before Tenant desires to use
such heating, ventilation or air conditioning on a Saturday, Sunday or
holiday. Within ten (10) days of receiving an invoice therefor, Tenant shall
pay Landlord Landlord's established rates per hour, per Building for the use
of overtime heating, ventilation or air conditioning, which rates may be
adjusted from time to time, which rates shall reflect Landlord's actual cost
of providing such
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utilities, with no profit to Landlord.
(C) At all reasonable times, electric current as required for
building standard lighting and fractional horsepower office machines;
provided, however, that: (i) without Landlord's consent, Tenant shall not
install, or permit the installation, in the Premises of any computers, word
processors, electronic data processing equipment or other type of equipment
or machines which will increase Tenant's use of electric current in excess of
that which Landlord is obligated to provide hereunder (provided, however,
that the foregoing shall not preclude the use of personal computers or
similar office equipment); (ii) if Tenant shall require electric current
which may disrupt the provision of electrical service to other tenants,
Landlord may condition its consent upon Tenant's payment of the cost of
installing and providing any additional facilities required to furnish such
excess power to the Premises and upon the installation in the Premises of
electric current meters to measure the amount of electric current consumed,
in which latter event Tenant shall pay for the cost of such meter(s) and the
cost of installation, maintenance and repair thereof, as well as for all
excess electric current consumed at the rates charged by the applicable local
public utility, plus a reasonable amount to cover the additional expenses
incurred by Landlord in keeping account of the electric current so consumed;
and (iii) if Tenant's increased electrical requirements will materially
affect the temperature level in the Premises or the Building, Landlord's
consent may be conditioned upon Tenant's requirement to pay such amounts as
will be incurred by Landlord to install and operate any machinery or
equipment necessary to restore the temperature level to that otherwise
required to be provided by Landlord, including but not limited to the cost of
modifications to the air conditioning system. Landlord shall not, in any way,
be liable or responsible to Tenant for any loss or damage or expense which
Tenant may incur or sustain if, for any reasons beyond Landlord's control,
either the quantity or character of electric service is changed or is no
longer available or suitable for Tenant's requirements. Tenant covenants that
at all times its use of electric current shall never exceed the capacity of
the feeders, risers or electrical installations of the Building. Landlord
shall provide at Landlord's cost no more than 5.0 Watts per useable square
foot of floor area of the Premises per Business Hour for both lighting and
power, and Landlord shall provide additional power to the Premises, as
needed, subject to the restrictions set forth above, at Tenant's sole cost
and expense pursuant to the provisions set forth below. A submeter on the
second floor Building 656 measures Tenant's electrical usage in a portion of
the Premises. The parties agree that Tenant's electrical usage each month per
Watt per useable square foot of floor area of the Premises per Business Hour
shall be deemed to be the total Watts used in the submetered portion of the
Premises during such month (as measured by the submeter) divided by the total
number of Business Hours during such month divided by the number of usable
square feet of floor area in the submetered portion of the Premises (the
"Actual Watts Used"). In the event the Actual Watts Used exceeds 5.0 Watts,
Tenant shall pay to Landlord each month within ten (10) days after receiving a
bill therefor the difference between the Actual Watts Used and 5.0 Watts
multiplied by the price charged per Watt per hour by the applicable local
electric utility used by Landlord in the Project multiplied by the number of
Business Hours in the applicable month multiplied by the total number of
usable square feet of floor area of the Premises. If submetering of
electricity in the Building will not be permitted under future laws or
regulations, the Rent will then be equitably and periodically adjusted to
include an additional payment to Landlord reflecting the cost to Landlord for
furnishing electricity to Tenant in the Premises.
(D) Water for drinking and rest room purposes.
(E) Reasonable janitorial and cleaning services, provided that the
Premises are used exclusively for office purposes and are kept reasonably in
order by Tenant. If the Premises are not used exclusively as offices, or if
the Tenant elects and Landlord consents, the Premises shall be kept clean and
in order by Tenant, at Tenant's expense, to the reasonable satisfaction of
Landlord and by persons approved by Landlord; and, in all events, Tenant
shall pay to Landlord the cost of removal of Tenant's refuse and rubbish, to
the extent that the same exceeds the refuse and rubbish attendant to normal
office usage.
Any amounts which Tenant is required to pay to Landlord pursuant to this
Section 8.1 shall be payable upon demand by Landlord and shall constitute
additional rent.
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8.2 INTERRUPTION OF SERVICES. Landlord shall not be liable for any
failure to furnish, stoppage of, or interruption in furnishing any of the
services or utilities described in Section 8.1, and, in such event, Tenant
shall not be entitled to any damages nor shall any failure or interruption
abate or suspend Tenant's obligation to pay Base Rent and additional rent
required under this Lease or constitute or be construed as a constructive or
other eviction of Tenant. Further, in the event any governmental authority or
public utility promulgates or revises any law, ordinance, rule or regulation,
or issues mandatory controls or voluntary controls relating to the use or
conservation of energy, water, gas, light or electricity, the reduction of
automobile or other emissions, or the provision of any other utility or
service, Landlord may take any reasonably appropriate action to comply with
such law, ordinance, rule, regulation, mandatory control or voluntary
guideline without affecting Tenant's obligations hereunder. If utilities
provided by Landlord are interrupted for a period of more than three
consecutive days and such interruption is due to Landlord's fault or the
failure of equipment under Landlord's control, and if the Premises are
thereby rendered untenantable for the use intended, then during the period of
utility interruption, the Base Rental payable hereunder shall be abated, and
Tenant shall not be required to pay any charge for utilities provided by
Landlord.
ARTICLE 9
MAINTENANCE AND REPAIRS
9.1 LANDLORD REPAIRS. Landlord shall not be required to make any
improvements, replacements or repairs of any kind or character to the Premises
during the Term of this Lease except as are set forth in this Section.
Landlord shall maintain only the roof, the mechanical equipment of the
Building, lighting, HVAC, foundation, parking, Common Areas, the structural
soundness of the load bearing, exterior walls and exterior glass. In
addition, Landlord shall repair and maintain interior, load bearing walls to
the extent that the need for such repair or maintenance is not caused by
Tenant's negligent or willful act or omission or an alteration to the
Premises made by Tenant. Notwithstanding anything to the contrary contained
herein. Landlord shall have no responsibility to maintain, repair or replace
any heating, ventilation and air conditioning units in the Premises
installed at any time by Tenant at Tenant's sole cost and expense ("Tenant's
HVAC"). Landlord's cost of maintaining and repairing the items set forth in
this Section are subject to the additional Rent provisions in Section 4.1(C).
Landlord shall not be liable to Tenant, except as expressly provided in this
Lease, for any damage or inconvenience, and Tenant shall not be entitled to
any damages nor to any abatement or reduction of Rent by reason of any
repairs, alterations or additions made by Landlord under this Lease. Except
for Landlord's obligations under this Section, it is intended by the parties
that Landlord shall have no obligation, in any manner whatsoever, to repair
and maintain the Premises, nor the Project, nor the equipment therein,
whether structural or non-structural, all of which obligations are intended
to be Tenant's obligations under this Lease. Tenant expressly waives the
benefit of any statute now or hereinafter in effect which would otherwise
afford Tenant the right to make repairs at Landlord's expense or to terminate
this Lease because of Landlord's failure to keep the Premises in good order,
condition and repair.
9.2 TENANT REPAIRS. Tenant, at its own cost and expense, shall maintain
the Premises in a good condition (except for the items that are the
responsibility of Landlord under Section 9.1). Without limiting the
generality of the foregoing, Tenant shall maintain and keep in good repair
(including replacement when necessary): (a) the interior of the Premises,
including walls (except as set forth in Section 9.1 above), floors and
ceilings; (b) all interior windows and doors, including frames, glass,
skylights, molding and hardware; (c) all wires and plumbing within the
Premises which serve the Premises (as distinguished from those serving the
Building generally); (d) all signs, air conditioning and heating equipment,
including Tenant's HVAC, mechanical doors and other mechanical equipment
situated on or in the Premises or serving the Premises (as distinguished
from those serving the Property generally); and (e) those utility
facilities that are not Landlord's responsibility hereunder. Tenant shall
further make all other repairs to the Premises made necessary by Tenant's
failure to comply with its obligations under this Section. All fixtures
installed by Tenant shall be new or shall have been completely and recently
reconditioned.
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9.3 REQUEST FOR REPAIRS. All requests for repairs or maintenance that
are the responsibility of the Landlord pursuant to any provision of this
Lease must be made in writing to Landlord at the address in Section 1.8.
9.4 TENANT DAMAGES. Tenant, its agents, invitees or representatives
shall not cause any damage to be committed on any portion of the Premises or
Project, and at the expiration or earlier termination of this Lease, by lapse
of time or otherwise. Tenant shall deliver the Premises to Landlord in as
good condition as existed at the Commencement Date of this Lease, ordinary
wear and tear excepted. The cost and expense of any repairs necessary to
restore the condition of the Premises shall be borne by Tenant.
Notwithstanding anything to the contrary contained herein, Tenant shall leave
all electrical distribution systems, lighting fixtures, space heaters, air
conditioning, plumbing and other power systems upon the Premises in good
operating condition. In the event Tenant fails to perform Tenant's
obligations of repairs and maintenance under this Section, Landlord may at
its option, but shall not be required to, enter upon the Premises after ten
(10) days prior written notice to Tenant (except in case of an emergency, in
which case no notice shall be required), to perform such obligations on
Tenant's behalf and to place the Premises in good order, condition and
repair, and Tenant shall pay the cost thereof, together with any interest
thereon at the maximum rate allowed by law, as Additional Rent to Landlord.
9.5 LANDLORD'S RIGHTS. Landlord and its contractors shall have the
right, at all reasonable times, to enter upon the Premises to make any
repairs to the Premises or the Building reasonably required or deemed
reasonably necessary by Landlord and to erect such equipment, including
scaffolding, as is reasonably necessary to effect such repairs. Provided
Landlord shall first provide Tenant with 24 hours prior notification; except
when such notification is not required in cases involving and emergency
situation.
ARTICLE 10
ALTERATIONS, ADDITIONS AND IMPROVEMENTS
10.1 LANDLORD'S CONSENT; CONDITIONS. Tenant shall not make or permit to
be made any alterations, additions, or improvements in or to the Premises
("Alterations") without the prior written consent of Landlord. Landlord may
impose as a condition to such consent such requirements as Landlord in its
sole discretion deems necessary or desirable including without limitation;
Tenant's submission to Landlord, for Landlord's prior written approval, of
all plans and specifications relating to the Alterations; Landlord's prior
written approval of the time or times when the Alterations are to be
performed; Landlord's prior written approval of the contractors and
subcontractors performing work in connection with the Alterations; Tenant's
receipt of all necessary permits and approvals from all governmental
authorities having jurisdiction prior to the construction of the Alterations;
Tenant's written notice of whether the Alterations include the Handling of
any Hazardous Materials, pursuant to Section 7.3; Tenant's delivery to
Landlord of such bonds and insurance as Landlord shall reasonably require;
and Tenant's payment to Landlord of all costs and expenses incurred by
Landlord because of Tenant's Alterations, including but not limited to costs
incurred in reviewing the plans and specifications for, and the progress of,
the Alterations.
10.2 PERFORMANCE OF ALTERATIONS WORK. All work relating to the
Alterations shall be performed in compliance with the plans and
specifications approved by Landlord, all applicable laws, ordinances, rules,
regulations and directives of all governmental authorities having
jurisdiction (including without limitation Title 24 of the California Code of
Regulations) and the requirements of all carriers of insurance on the
Premises and the Project, the Board of Underwriters, Fire Rating Bureau, or
similar organization. All work shall be performed in a diligent, first class
manner and so as not to unreasonably interfere with any other tenants or
occupants of the Project. All costs incurred by Landlord relating to the
Alterations shall be payable to Landlord by Tenant as additional rent upon
demand.
10.3 LIENS. Tenant shall pay when due all costs for work performed and
materials supplied to the Premises. Tenant shall keep Landlord, the Premises
and the Project free from all liens, stop notices and violation notices
relating to the Alterations or any other work performed
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for, materials furnished to or obligations incurred by Tenant and Tenant
shall protect, indemnify, hold harmless and defend Landlord, the Premises and
the Project of and from any and all loss, cost, damage, liability and
expense, including attorneys' fees, arising out of or related to any such
liens or notices. Further, Tenant shall give Landlord not less than seven (7)
business days prior written notice before commencing any Alterations in or
about the Premises to permit Landlord to post appropriate notices of
non-responsibility. Tenant shall secure, at Tenant's sole expense, a
completion and payments bond satisfactory to Landlord for such work, and
during the progress of such work, Tenant shall, upon Landlord's request,
furnish Landlord with sworn contractor's statements and lien waivers covering
all work theretofore performed. Tenant shall satisfy or otherwise discharge
all liens, stop notices or other claims or encumbrances within ten (10) days
after Landlord notifies Tenant in writing that any such lien, stop notice,
claim or encumbrance has been filed. If Tenant fails to pay and remove such
lien, claim or encumbrance within such ten (10) days. Landlord, at its
election, may pay and satisfy the same and in such event the sums so paid by
Landlord, with interest from the date of payment at the rate set forth in
Section 4.6 hereof for amounts owed Landlord by Tenant shall be deemed to be
additional rent due and payable by Tenant at once without notice or demand.
10.4 LEASE TERMINATION. Except as provided in this section, upon
expiration or termination of this Lease Tenant shall surrender the Premises
to Landlord in the same condition as when received, subject to reasonable
wear and tear. All Alterations (excluding Tenant's HVAC) shall become a part
of the Premises and shall become the property of Landlord upon the expiration
or earlier termination of this Lease, unless Landlord shall, by written
notice given to Tenant, require Tenant to remove some or all of Tenant's
Alterations, in which event Tenant shall promptly remove the designated
Alterations and shall promptly repair any resulting damage, all at Tenant's
sole expense. Notwithstanding the foregoing or anything to the contrary
contained herein, Tenant shall not be required to remove, at the expiration
or sooner termination of this Lease, any alterations made by Tenant to the
Premises prior to the Commencement Date of this Lease. All business and trade
fixtures, machinery and equipment, furniture, movable partitions and items of
personal property owned by Tenant or installed by Tenant at its expense in
the Premises including, but not limited to Tenant's HVAC, shall be and remain
the property of Tenant; upon the expiration or sooner termination of this
Lease, Tenant shall, at its sole expense, remove all such items and repair
any damage to the Premises or the Building caused by such removal. If Tenant
fails to remove any such items or repair such damage promptly after the
expiration or sooner termination of the Lease, Landlord may, but need not, do
so with no liability to Tenant, and Tenant shall pay Landlord the cost
thereof upon demand.
ARTICLE II
INDEMNIFICATION AND INSURANCE
11.1 INDEMNIFICATION. Tenant and Tenant's officers and directors agree
to protect, indemnify, hold harmless and defend Landlord and any mortgagee or
ground lessor, and each of their respective partners, directors, officers,
agents and employees, successors and assigns, regardless of any negligence
imputed to any indemnitee from and against:
(A) any and all loss, cost, damage, liability or expense as
incurred (including but not limited to attorneys' fees and legal costs)
arising out of or related to any claim, suit or judgment brought by or in
favor of any person or persons for damage, loss or expense due to but not
limited to, bodily injury, including death, or property damage sustained by
such person or persons which arises out of, is occasioned by or is in any way
attributable to the use or occupancy of the Premises or any portion of the
Project by Tenant or the acts or omissions of Tenant or its agents,
employees, contractors, clients, invitees or subtenants except that caused by
the sole gross negligence of Landlord or its agents or employees. Such loss
or damage shall include, but not be limited to, any injury or damage to, or
death of, Landlord's employees or agents or damage to the Premises or any
portion of the Project.
(B) any and all environmental damages which arise from: (i) the
Handling of any Tenant's Hazardous Materials, as defined pursuant to
Section 7.3 or (ii) the breach of any of the provisions of this Lease. For
the purpose of this Lease, "environmental damages" shall
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mean (a) all claims, judgments, damages, penalties, fines, costs,
liabilities, and losses (including without limitation, diminution in the
value of the Premises or any portion of the Building, damages for the loss of
or restriction on use of rentable or usable space or of any amenity of the
Premises or any portion of the Building, and from any adverse impact of
Landlord's marketing of space); (b) all reasonable sums paid for settlement
of claims, attorneys' fees, consultants' fees and experts' fees; and (c) all
costs incurred by Landlord in connection with investigation or remediation
relating to the Handling of Tenant's Hazardous Materials, whether or not
required by Environmental Laws, necessary for Landlord to make full economic
use of the Premises or any portion of the Building, or otherwise required
under this Lease. To the extent that Landlord is strictly liable under any
Environmental Laws, Tenant's obligation to Landlord and the other
indemnities under the foregoing indemnification shall likewise be without
regard to fault on Tenant's part with respect to the violation of any
Environmental Law which results in liability to the indemnitee. Tenant's
obligations and liabilities pursuant to this Section 11.1 shall survive the
expiration or earlier termination of this Lease.
Tenant shall not be liable for any damage or liability of any kind
or for any injury to or death of persons arising in the Common Areas if
caused by or resulting from any negligent or willful act or omission of
Landlord or its employees or agents, and Landlords shall indemnify, defend,
protect and save Tenant harmless from all losses, costs, damages, claims and
liability whatsoever on account of any such damage or injury; provided,
however, that Landlord's obligation to indemnify and hold harmless Tenant
pursuant to the foregoing provisions is made for the purpose of providing any
benefit from time to time available to Tenant under policies of insurance
carried by Landlord, and further provided that the foregoing provisions shall
in no event require Landlord to provide any defense to Tenant or pay any sum
to or on behalf of Tenant in addition to that which may be provided and paid
pursuant to such policies of insurance as may be carried by Landlord from
time to time.
Tenant shall not be liable for any damage or liability of any kind
for any and all environmental damages which arise from the Handling of any
Hazardous Materials, as defined pursuant to Section 7.3, by Landlord or its
employees or agents after the date of this Lease, and Landlord shall
indemnify, defend, protect and save Tenant harmless from all losses, costs,
damages, claims and liability whatsoever on account of any such damage.
11.2 PROPERTY INSURANCE.
(A) At all times during the Lease Term, Tenant shall procure and
maintain, at its sole expense, "all-risk" property insurance, in an amount
not less than on hundred percent (100%) of the replacement cost covering (a)
all leasehold improvements in and to the Premises which are made at the
expense of Tenant; and (b) Tenant's trade fixtures, equipment and other
personal property from time to time situated in the Premises. The proceeds
of such insurance shall be used for the repair or replacement of the property
so insured, except that if not so applied or if this Lease is terminated
following a casualty, the proceeds applicable to the leasehold improvements
shall be paid to Landlord and the proceeds applicable to Tenant's personal
property shall be paid to Tenant.
(B) At all times during the Lease Term, Tenant shall procure and
maintain business interruption insurance in such amount as will reimburse
Tenant for direct or indirect loss of earnings attributable to all perils
insured against in Section 11.2(A).
11.3 LIABILITY INSURANCE.
(A) At all times during the Lease Term, Tenant shall procure and
maintain, at its sole expense, general liability insurance applying to the
use and occupancy of the Premises and the business operated by Tenant. Such
insurance shall have a minimum combined single limit of liability of at least
$1,000,000 per occurrence and a general aggregate limit of $2,000,000. All
such policies shall be written to apply to all bodily injury, property
damage, personal injury losses and shall be endorsed to include Landlord and
its agents, beneficiaries, partners, employees, and any deed of trust holder
or mortgagee of Landlord or any ground lessor as additional insureds. Such
liability insurance shall be primary and not excess or contributing to any
other
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insurance as may be available to the additional insureds.
(B) Prior to the sale, storage, use or giving away of alcoholic
beverages on or from the Premises by Tenant or another person, Tenant, at its
own expense, shall obtain a policy or policies of insurance issued by a
responsible insurance company and in a form acceptable to Landlord saving
harmless and protecting Landlord and the Premises against any and all
damages, claims, liens, judgments, expenses and costs arising under any
present or future law, statute, or ordinance of the State of California or
other governmental authority having jurisdiction of the Premises, by reason
of any storage, sale, use or giving away of alcoholic beverages on or from
the Premises. Such policy or policies of insurance shall have a minimum
combined single limit of $2 million per occurrence and shall apply to bodily
injury, fatal or nonfatal; injury to means of support; and injury to property
of any person. Such policy or policies of insurance shall name the Landlord
and its agents, beneficiaries, partners, employees and any mortgagee of
Landlord or any ground lessor of Landlord as additional insureds.
11.4 WORKERS' COMPENSATION INSURANCE. At all times during the Lease Term,
Tenant shall procure and maintain Workers' Compensation Insurance in
accordance with the laws of the State of California, and Employer's Liability
insurance with a limit not less than $1,000,000 Bodily Injury Each Accident;
$1,000,000 Bodily Injury By Disease -- Each Person; and $1,000,000 Bodily
Injury to Disease -- Policy Limit.
11.5 POLICY REQUIREMENTS. All insurance required to be maintained by
Tenant shall be issued by insurance companies authorized to do insurance
business in the State of California and rated not less than A-VII in Best's
Insurance Guide. A certificate of insurance (or, at Landlord's option, copies
of the applicable policies) evidencing the insurance required under this
Article shall be delivered to Landlord not less than five (5) days prior to
the Commencement Date. No such policy shall be subject to cancellation or
modification without thirty (30) days prior written notice to Landlord and to
any deed of trust holder, mortgagee or ground lessor designated by Landlord
to Tenant. Tenant shall furnish Landlord with a replacement certificate with
respect to any insurance not less than thirty (30) days prior to the
expiration of the current policy. Tenant shall have the right to provide the
insurance required by this Article pursuant to blanket policies, but only if
such blanket policies expressly provide coverage to the Premises and the
Landlord as required by this Lease.
11.6 WAIVER OF SUBROGATION. Notwithstanding anything to the contrary
contained in this Lease, Landlord and Tenant hereby waive any rights each may
have against the other, on account of any loss or damage occasioned to
Landlord or Tenant, as the case may be, or their respective property, the
Premises, its contents or to the other portions of the Project, arising from
any risk which is covered by the property insurance actually maintained by
the other party or, if not covered, which the other party is obligated to
insure or self-insure under this Lease; and the parties each, on behalf of
their respective insurance companies insuring the property of either Landlord
or Tenant against any such loss, waive any right of subrogation that it may
have against Landlord or Tenant, as the case may be without regard to the
negligence of the party being so released. The foregoing waivers of
subrogation shall be operative only so long as available in the State where
the Project is situated and provided further that no such policy is
invalidated thereby.
11.7 FAILURE TO INSURE. If Tenant fails to maintain any insurance which
Tenant is required to maintain pursuant to this Article, Tenant shall be
liable to Landlord for any loss or cost resulting from such failure to
maintain. Landlord shall have the right, in its sole discretion, to procure
and maintain such insurance which Tenant is required to maintain hereunder
and the cost thereof shall be deemed additional rent due and payable by
Tenant. Tenant may not self-insure against any risks required to be covered
by insurance without Landlord's prior written consent.
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ARTICLE 12
DAMAGE OR DESTRUCTION
12.1 DAMAGE. In the event of a casualty to the Project, the following
shall apply:
12.2 RECONSTRUCTION. If the Premises are damaged or destroyed during the
term by a casualty typically covered by "all-risk" insurance, Landlord shall,
to the extent that insurance proceeds are available therefor and are not
applied by any lender against payment of any existing loan on the Project,
except as hereinafter provided, diligently repair or rebuild them to
substantially the same condition in which they existed immediately prior to
such damage or destruction.
12.3 RENT ABATEMENT. The Base Rent shall be abated from the date of the
damage or destruction in the same proportion that the rentable area of the
portion of the Premises which is unusable by Tenant bears to the total
rentable area of the Premises.
12.4 EXCESSIVE DAMAGE OR DESTRUCTION. Notwithstanding whether the
Premises have been damaged or destroyed, if any of the Buildings are damaged
or destroyed to the extent that Landlord determines that they cannot, with
reasonable diligence, be fully repaired or restored by Landlord within ninety
(90) days after the date of the damage or destruction, Landlord may terminate
this Lease. Notwithstanding whether the Premises have been damaged or
destroyed, Landlord shall determine whether any of the Buildings damaged or
destroyed can be fully repaired or restored within the ninety (90) day
period, and Landlord's reasonable determination shall be binding upon Tenant.
Landlord shall notify Tenant of its determination, in writing, within forty
five (45) days after the date of the damage or destruction. If Landlord
reasonably determines that any of the Buildings damaged or destroyed can be
fully repaired or restored within the ninety (90) day period, this Lease
shall remain in force and effect and Landlord shall diligently repair and
restore the damage as soon as reasonably possible. If Landlord is required to
or elects to restore the Premises but Landlord reasonably estimates that such
restoration may require more than one hundred eighty (180) days, then Tenant
may terminate Lease upon written notice to Landlord given within fifteen (15)
days following Landlord's notice of the estimated time for restoration.
12.5 UNINSURED CASUALTY. Notwithstanding anything contained herein to
the contrary, in the event of damage to or destruction of all or any portion
of the Buildings, which damage is not fully covered by the insurance policies
required hereinabove, Landlord may terminate this Lease by written notice to
Tenant, given within 45 days after the date of notice to Landlord that said
damage or destruction is not so covered.
12.6 WAIVER. With respect to any destruction to which Landlord is
obligated to repair or may elect to repair under the terms of this Article,
Tenant hereby waives all rights to terminate this Lease pursuant to rights
otherwise presently or hereafter accorded by law to Tenant including, but not
limited to, Sections 1932 and 1933 of the California Civil Code.
12.7 EXCEPTION TO LANDLORD'S OBLIGATIONS. Notwithstanding anything to the
contrary contained in this Article, Landlord shall have no obligation to
repair the Premises if either (a) the Building is so damaged as to require
repairs to the Building exceeding 20% of the full insurable value of the
Building; or (b) Landlord elects to demolish the Building; or (c) the damage
or destruction occurs less than one year prior to the Expiration Date,
exclusive of any option periods. Further, Tenant's rent shall not be abated
if either (i) the damage or destruction is repaired within five (5) business
days after Landlord receives written notice of Tenant of the casualty, or
(ii) Tenant, or any officers, partners, employees, agents or invitees of
Tenant, or any assignee or subtenant of Tenant is, in whole or in part,
responsible for the damage or destruction.
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ARTICLE 13
CONDEMNATION
13.1 TAKING. If the entire Premises or so much of the Premises as
to render the balance unusable by Tenant shall be taken by condemnation, sale
in lieu of condemnation or in any other manner for any public or quasi-public
purpose (collectively "Condemnation"), this Lease shall terminate on the date
that title or possession to the Premises is taken by the condemning authority,
whichever is earlier.
13.2 AWARD. In the event of any Condemnation, the entire award for
such taking shall belong to Landlord, except that Tenant shall be entitled to
independently pursue a separate award relating to the loss of, or damage to,
Tenant's personal property and trade fixtures and Tenant's moving costs
directly associated with the taking. Tenant shall have no claim against
Landlord or the award for the value of any unexpired term of this Lease or
otherwise.
13.3 TEMPORARY TAKING. No temporary taking of the Premises shall
terminate this Lease or entitle Tenant to any abatement of the Rent payable
to Landlord under this Lease; provided, further, that any award for such
temporary taking shall belong to Tenant to the extent that the award applies
to any time period during the Lease Term and to Landlord to the extent that
the award applies to any time period outside the Lease Term.
ARTICLE 14
LANDLORD'S OPTION
[Intentionally Omitted.]
ARTICLE 15
ASSIGNMENT AND SUBLETTING
15.1 RESTRICTION. Without the prior written consent of Landlord
which consent shall not be unreasonably withheld or delayed, Tenant shall
not, either voluntarily or by operation of law, assign, encumber, or
otherwise transfer this Lease or any interest herein, or sublet the Premises
or any part thereof, or permit the Premises to be occupied by anyone other
than Tenant or Tenant's employees. An assignment, subletting or other action
in violation of the foregoing shall be void and, at Landlord's option, shall
constitute a material breach of this Lease. For purposes of this Section, an
assignment shall not include any transfer of any interest in this Lease or
the Premises by Tenant pursuant to a merger, division, consolidation,
liquidation or stock or asset sale, or pursuant to a change in ownership of
Tenant involving a transfer of voting control in Tenant (whether by transfer
of partnership or other beneficial, corporate stock or otherwise), unless
such transaction conflicts with the rights of other occupants of the Project.
Notwithstanding anything contained in this Article to the contrary, Tenant
expressly covenants and agrees not to enter into any lease, sublease,
license, concession or other agreement for use, occupancy or utilization of
the Premises which provides for rental or other payment for such use,
occupancy or utilization based in whole or in part on the net income or
profits derived by any person from the property leased, used, occupied or
utilized (other than an amount based on a fixed percentage or percentages of
receipts or sales), and that any such purported lease, sublease, license,
concession or other agreement shall be absolutely void and ineffective as a
conveyance of any right or interest in the possession, use, occupancy or
utilization of any part of the Premises.
15.2 NOTICE TO LANDLORD. If Tenant desires to assign this Lease or
any interest herein, or to sublet all or any part of the Premises, then at
least twenty (20) business days prior to the effective date of the proposed
assignment or subletting, Tenant shall submit to Landlord in connection with
Tenant's request for Landlord's consent:
(A) A statement containing (i) the name and address of the
proposed assignee or subtenant; (ii) such financial information with respect
to the proposed assignee or subtenant
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as Landlord shall reasonably require; (iii) the type of use proposed for the
Premises; and (iv) all of the principal terms of the proposed assignment or
subletting; and
(B) Four (4) originals of the assignment or sublease on a
form approved by Landlord and four (4) originals of the Landlord's Consent to
Sublease or Assignment and Assumption of Lease and Consent.
15.3 LANDLORD'S RECAPTURE RIGHTS. At any time within twenty (20)
business days after Landlord's receipt of all (but not less than all) of the
information and documents described in Section 15.2 above, Landlord may, at
its option by written notice to Tenant, elect to: (a) sublease the Premises or
the portion thereof proposed to be sublet by Tenant upon the same terms as
those offered to the proposed subtenant; (b) take an assignment of the Lease
upon the same terms as those offered to the proposed assignee; or (c)
terminate the Lease as to the portion of the Premises proposed to be assigned
or sublet, with a proportionate adjustment in the Rent payable hereunder if
the Lease is terminated as to less than all of the Premises or if more than
fifty percent (50%) of the Premises are proposed to be sublet or assigned,
then Landlord may terminate this Lease in its entirety. If Landlord does not
exercise any of the options described in the preceding sentence, then, during
the above-described twenty (20) business day period, Landlord shall either
consent or deny its consent to the proposed assignment or subletting.
15.4 LANDLORD'S CONSENT: STANDARDS. Landlord's consent shall not be
unreasonably withheld; but, in addition to any other grounds for denial,
Landlord's consent shall be deemed reasonably withheld if, in Landlord's good
faith judgment: (i) the proposed assignee or subtenant does not have the
financial strength to perform its obligations under this Lease or any
proposed sublease; (ii) the business and operations of the proposed assignee
or subtenant are not of comparable quality to the business and operations
being conducted by other tenants in the Building; (iii) the proposed assignee
or subtenant intends to use any part of the Premises for a purpose not
permitted under this Lease; (iv) either the proposed assignee or subtenant,
or any person which directly or indirectly controls, is controlled by, or is
under common control with the proposed assignee or subtenant occupies space
in the Project, or is negotiating with Landlord to lease space in the
Project; (v) the proposed assignee or subtenant is disreputable; or (vi) the
use of the Premises by the proposed assignee or subtenant would, in
Landlord's reasonable judgment, significantly increase the pedestrian traffic
in and out of the Building or would require any alterations to the Project to
comply with applicable laws.
15.5 ADDITIONAL RENT. If Landlord consents to any such assignment
or subletting, all sums or other economic consideration received by Tenant in
connection with such assignment or subletting, whether denominated as rent or
otherwise, which exceeds, in the aggregate, the total sum which Tenant is
obligated to pay Landlord under this Lease (prorated to reflect obligations
allocable to less than all of the Premises under a sublease) after tenant
recovers all of its reasonable and customary costs associated with such
sublease, including but not limited to leasing commissions, attorney's fees
and tenant improvements for the sublessee, shall be paid to Landlord as
additional rent under the Lease without affecting or reducing any other
obligation of Tenant hereunder.
15.6 LANDLORD'S COSTS. If Tenant shall assign this Lease or shall
sublet all or any part of the Premises or shall request the consent of
Landlord to any assignment, subletting or other act, Tenant shall pay to
Landlord as additional rent Landlord's costs related thereto, including
Landlord's reasonable attorneys' fees.
15.7 CONTINUING LIABILITY OF TENANT. Notwithstanding any assignment
or sublease, Tenant shall remain as fully and primarily liable for the
payment of Rent and for the performance of all other obligations of Tenant
contained in this Lease to the same extent as if the assignment or sublease
had not occurred; provided, however, that any act or omission of any assignee
or subtenant, other than Landlord, that violates the terms of this Lease
shall be deemed a violation of this Lease by Tenant.
15.8 NON-WAIVER. The consent by Landlord to any assignment or
subletting shall not relieve Tenant, or any person claiming through or by
Tenant, of the obligation to obtain the
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consent of Landlord, pursuant to this Article, to any further
assignment or subletting. In the event of an assignment or subletting,
Landlord may collect rent from the assignee or the subtenant without waiving
any rights hereunder and collection of the rent from a person other than
Tenant shall not be deemed a waiver of any of Landlord's rights under this
Article, an acceptance of assignee or subtenant as Tenant, or a release of
Tenant from the performance of Tenant's obligations under this Lease.
ARTICLE 16
DEFAULT AND REMEDIES
16.1 EVENTS OF DEFAULT BY TENANT. The occurrence of any of the
following shall constitute a material default and breach of this Lease by
Tenant:
(A) The failure by Tenant to pay Base Rent or make any other
payment required to be made by Tenant hereunder within five (5) days after
written notice thereof by Landlord to Tenant.
(B) The abandonment of the Premises by Tenant or the vacation of
the Premises by Tenant for six (6) consecutive months (with or without the
payment of Rent).
(C) The failure by Tenant to observe or perform any other
provision of this Lease to be observed or performed by Tenant, other than
those described in Sections 16.1(A) and 16.1(B) above, if such failure
continues for ten (10) days after written notice thereof by Landlord to
Tenant: provided, however, that if the nature of the default is such that it
cannot be cured within the ten (10) day period, no default shall exist if
Tenant commences the curing of the default within the ten (10) day period and
thereafter diligently prosecutes the same to completion. The ten (10) day
notice described herein shall be in lieu of, and not in addition to, any
notice required under Section 1161 of the California Code of Civil Procedure
or any other law now or hereafter in effect requiring that notice of default
be given prior to the commencement of an unlawful detainer or other legal
proceeding.
(D) The making by Tenant of any general assignment for the
benefit of creditors, the filing by or against Tenant of a petition under any
federal or state bankruptcy or insolvency laws (unless, in the case of a
petition filed against Tenant, the same is dismissed within thirty (30) days
after filing); the appointment of a trustee or receiver to take possession of
substantially all of Tenant's assets at the Premises or Tenant's interest in
this Lease or the Premises, when possession is not restored to Tenant within
thirty (30) days; or the attachment, execution or other seizure of
substantially all of Tenant's assets located at the Premises or Tenant's
interest in this Lease or the Premises, if such seizure is not discharged
within thirty (30) days.
16.2 LANDLORD'S RIGHT TO TERMINATE UPON TENANT DEFAULT. In the event
of any default by Tenant as provided in Section 16.1 above, Landlord shall
have the right to terminate this Lease and recover possession of the Premises
by giving written notice to Tenant of Landlord's election to terminate this
Lease, in which event Landlord shall be entitled to receive 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
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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; and
(E) At Landlord's election, such other amounts in addition to or
in lieu of the foregoing as may be permitted from time to time by applicable
law.
As used in subparagraphs (A) and (B) above, "worth at the time of award"
shall be computed by allowing interest at the rate of twelve percent (12%) per
annum, or such lower rate as shall be the then highest lawful rate. As used
in paragraph (C) above, "worth at the time of award" shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of award plus one percent (1%).
16.3 LANDLORD'S RIGHT TO CONTINUE LEASE UPON TENANT DEFAULT. In the
event of a breach of this Lease and abandonment of the Premises by Tenant, if
Landlord does not elect to terminate this Lease as provided in Section 16.2
above, Landlord may from time to time, without terminating this Lease,
enforce all of its rights and remedies under this Lease. Without limiting the
foregoing, Landlord has the remedy described in California Civil Code Section
1951.4 (Landlord may continue this Lease in effect after Tenant's breach and
abandonment and recover Rent as it becomes due, if Tenant has the right to
sublet or assign, subject only to reasonable limitations). To the fullest
extent permitted by law, the proceeds of any reletting shall be applied
first to pay to Landlord all costs and expenses of such reletting (including
without limitation, costs and expenses of retaking or repossessing the
Premises, removing persons and property therefrom, securing new tenants,
including expenses for redecoration, alterations and other costs in
connection with preparing the Premises for new tenant, and if Landlord shall
maintain and operate the Premises, the costs thereof) and receivers' fees
incurred in connection with the appointment of and performance by a receiver
to protect the Premises and Landlord's interest under this Lease and any
necessary or reasonable alterations; second, to the payment of any
indebtedness of Tenant to Landlord other than Rent due and unpaid hereunder;
third, to the payment of Rent due and unpaid hereunder; and the residue, if
any, shall be held by Landlord and applied in payment of other or future
obligations of Tenant to Landlord as the same may become due and payable, and
Tenant shall not be entitled to receive any portion of such revenue.
16.4 RIGHT OF LANDLORD TO PERFORM. All covenants and agreements to be
performed by Tenant under this Lease shall be performed by Tenant at Tenant's
sole cost and expense. If Tenant shall fail to pay any sum of money, other
than Rent, required to be paid by it hereunder or shall fail to perform any
other act on its part to be performed hereunder, Landlord may, but shall not
be obligated to, make any payment or after ten (10) days written notice and
opportunity to cure, except in the case of an emergency when no such notice
shall be required, perform any such other act on Tenant's part to be made or
performed, without waiving or releasing Tenant of its obligations under this
Lease. Any sums so paid by Landlord and all necessary incidental costs,
together with interest thereon at the lesser of the maximum rate permitted by
law, if any, or twelve percent (12%) per annum from the date of such payment,
shall be payable to Landlord as additional rent on demand and Landlord shall
have the same rights and remedies in the event of nonpayment as in the case
of default by Tenant in the payment of Rent.
16.5 DEFAULT UNDER OTHER LEASES. If the term of any lease, other than
this Lease, heretofore or hereafter made by Tenant for any space in the
Project shall be terminated or terminable after the making of this Lease
because of any default by Tenant under such other lease, such fact shall
empower Landlord, at Landlord's sold option, to terminate this Lease by
notice to Tenant or to exercise any of the rights or remedies set forth in
Section 16.2.
16.6 NON-WAIVER. Nothing in this Article shall be deemed to affect
either parties rights to indemnification for liability or liabilities arising
prior to termination of this Lease for personal injury or property damages
under the indemnification clause or clauses contained in this Lease. No
acceptance by Landlord of a lesser sum than the Rent then due shall be deemed
to be other than on account of the earliest installment of such rent due, nor
shall any endorsement or statement on any check or any letter accompanying
any check or payment as rent be deemed an accord and satisfaction, and
Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such installment or pursue any other remedy
in the
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Lease provided. The delivery of keys to any employee of
Landlord or to Landlord's agent or any employee thereof shall
not operate as a termination of this Lease or a surrender of
the Premises.
16.7 CUMULATIVE REMEDIES. The specific remedies to
which either party may resort under the terms of the Lease are
cumulative and are not intended to be exclusive of any other
remedies or means of redress to which it may be lawfully
entitled in case of any breach or threatened breach by either
party of any provisions of the Lease. In addition to the other
remedies provided in the Lease, either party shall be entitled
to a restraint by injunction of the violation or attempted or
threatened violation of any of the covenants, conditions or
provisions of the Lease or to a decree compelling specific
performance of any such covenants, conditions or provisions.
16.8 DEFAULT BY LANDLORD. Landlord's failure to
perform or observe any of its obligations under this Lease
shall constitute a default by Landlord under this Lease only
if such failure shall continue for a period of thirty (30)
days (or the additional time, if any, that is reasonably
necessary promptly and diligently to cure the failure) after
Landlord receives written notice from Tenant specifying the
default. The notice shall give in reasonable detail the nature
and extent of the failure and shall identify the Lease
provision(s) containing the obligation(s). If Landlord shall
default in the performance of any of its obligations under
this Lease (after notice and opportunity to cure as provided
herein), Tenant may pursue any remedies available to it under
the law and this Lease.
ARTICLE 17
ATTORNEYS' FEES: COSTS OF SUIT
17.1 ATTORNEYS' FEES. If either Landlord or Tenant
shall commence any action or other proceeding against the
other arising out of, or relating to, this Lease ar the
Premises, the prevailing party shall be entitled to recover
from the losing party, in addition to any other relief, its
actual attorneys fees irrespective of whether or not the
action or other proceeding is prosecuted to judgment and
irrespective of any court schedule of reasonable attorneys'
fees. In addition, Tenant shall reimburse Landlord, upon
demand, for all reasonable attorneys' fees incurred in
collecting Rent or otherwise seeking enforcement against
Tenant, its sublessees and assigns, of Tenant's obligations
under this Lease.
17.2 INDEMNIFICATION. Except to the extent set forth
in Section 11.1 above, should Landlord be made a party to any
litigation instituted by Tenant against a party other than
Landlord, or by a third party against Tenant, Tenant shall
indemnify, hold harmless and defend Landlord from any and all
loss, cost, liability, damage or expense incurred by Landlord,
including attorneys' fees, in connection with the litigation.
ARTICLE 18
SUBORDINATION AND ATTORNMENT
18.1 SUBORDINATION. This Lease, and the rights of
Tenant hereunder, are and shall be subordinate to the
interests of (i) all present and future ground leases and
master leases of all or any part of the Building; (ii) present
and future mortgages and deeds of trust encumbering all or any
part of the Building; (iii) all past and future advances made
under any such mortgages or deeds of trust; and (iv) all
renewals, modifications, replacements and extensions of any
such ground leases, master leases, mortgages and deeds of
trust; provided, however, that any lessor under any such
ground lease or master lease or any mortgagee or beneficiary
under any such mortgage or deed of trust shall have the right
to elect, by written notice given to Tenant, to have this
Lease made superior in whole or in part to any such ground
lease, master lease, mortgage or deed of trust. Upon demand,
Tenant shall execute, acknowledge and deliver any instruments
reasonably requested by Landlord or any such lessor, mortgagee
or beneficiary to effect the purposes of this Section 18.1.
Such instruments may contain, among other things, provisions
to the effect that such lessor, mortgagee or beneficiary
(hereafter, for the purposes of this Section 18.1, a
"Successor Landlord") shall (i) not be liable for any act or
omission of Landlord or its
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predecessors, if any, prior to the date of such Successor
Landlord's succession to Landlord's interest under this Lease;
(ii) not be subject to any offsets or defenses which Tenant
might have been able to assert against Landlord or its
predecessors, if any, prior to the date of such Successor
Landlord's succession to Landlord's interest under this Lease;
(iii) not be liable for the return of any security deposit
under the Lease unless the same shall have actually been
deposited with such Successor Landlord; and (iv) be entitled
to receive notice of any Landlord default under this Lease
plus a reasonable opportunity to cure such default prior to
Tenant having any right or ability to terminate this Lease as
a result of such Landlord default. Notwithstanding anything to
the contrary contained this Lease, this Lease shall not be
subordinate to any hereafter placed mortgage, deed of trust or
lease, unless the holder thereof shall be willing to enter
into a non-disturbance agreement or subordination agreement
with Tenant on commercially reasonable terms pursuant to
which, so long as Tenant is not in default of any of Tenant's
obligations under this Lease after notice and expiration of
the applicable cure periods, Tenant's possession of the
Premises and its rights under this Lease shall not be
disturbed nor terminated as a result of any default by
Landlord under any mortgage, deed of trust or lease or as a
result of foreclosure or termination of such mortgage, deed of
trust or lease.
18.2 ATTORNMENT. If requested to do so, Tenant shall
attorn to and recognize as Tenant's landlord under this Lease
any superior lessor, superior mortgagee or other purchaser or
person taking title to the Building by reason of the
termination of any superior lease or the foreclosure of any
superior mortgage or deed of trust, and Tenant shall, upon
demand, execute any documents reasonably requested by any such
person to evidence the attornment described in this Section.
18.3 MORTGAGE AND GROUND LESSOR PROTECTION. Tenant
agrees to give any holder of any mortgage and any ground
lessor, by registered or certified mail, a copy of any notice
of default served upon the Landlord by Tenant, provided that
prior to such notice Tenant has been notified in writing (by
way of service on Tenant of a copy of Assignment of Rents and
Leases, or otherwise) of the address of such mortgage holder
or ground lessor (hereafter the "Notified Party"). Tenant
further agrees that if Landlord shall have failed to cure such
default within twenty (20) days after such notice to Landlord
(or if such default cannot be cured or corrected within that
time, then such additional time as may be necessary if
Landlord has commenced within such twenty (20) days and is
diligently pursuing the remedies or steps necessary to cure or
correct such default), then the Notified Party shall have an
additional thirty (30) days within which to cure or correct
such default (or if such default cannot be cured or corrected
within that time, then such additional time as may be
necessary if the Notified Party has commenced within such
thirty (30) days and is diligently pursuing the remedies or
steps necessary to cure or correct such default). Until the
time allowed, as aforesaid, for the Notified Party to cure
such default has expired without cure, Tenant shall have no
right to, and shall not, terminate this Lease on account of
Landlord's default.
ARTICLE 19
QUIET ENJOYMENT
Provided that Tenant performs all of its obligations
hereunder, Tenant shall have and peaceably enjoy the Premises
during the Lease Term, subject to all of the terms and
conditions contained in this Lease.
ARTICLE 20
RULES AND REGULATIONS
The Rules and Regulations attached hereto as
EXHIBIT B are hereby incorporated by reference herein and
made a part hereof. Tenant shall abide by, and faithfully
observe and comply with the Rules and Regulations and any
reasonable and nondiscriminatory amendments, modifications
and/or additions thereto as may hereafter be adopted and
published by written notice to tenants by Landlord for the
safety, care, security, good order and/or cleanliness of
the Premises and/or Building. Landlord shall not be liable
to Tenant for any violation of such
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rules and regulations by any other tenant or occupant of the Building.
ARTICLE 21
ESTOPPEL CERTIFICATES
Tenant agrees at any time and from time to time upon not more than ten
(10) days' prior written notice from Landlord to execute, acknowledge and
deliver to Landlord a statement in writing addressed and certifying to
Landlord, or to the holder or assignee of any existing or prospective
mortgage encumbering the Building or any part thereof (hereafter a
"Mortgagee"), or to the lessor, or existing or prospective assignee of the
lessor's position, under any existing or prospective ground lease of the land
underlying the Project (hereafter a "Ground Lessor"), or to any prospective
purchaser of the land, improvements or both comprising the Project, that this
Lease is unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect as modified and
stating the modifications); that Tenant has accepted possession of the
Premises, which are acceptable in all respects, and that any improvements
required by the terms of this Lease to be made by Landlord have been
completed to the satisfaction of Tenant; that Tenant is in full occupancy of
the Premises; that no rent has been paid more than 30 days in advance; that
the first month's Base Rent has been paid; that Tenant is entitled to no free
rent or other concessions except as stated in this Lease; that Tenant has not
been notified of any previous assignment of Landlord's or any predecessor
landlord's interest under this Lease; the dates to which Base Rent,
additional rent and other charges have been paid; that Tenant, as of the date
of such certificate, has no charge, lien or claim of setoff under this Lease
or otherwise against Base Rent, additional rent or other charges due or to
become due under this Lease; and that Landlord is not in default in
performance of any covenant, agreement or condition contained in this Lease
or any other matter relating to this Lease or the Premises or, if so,
specifying each such default. In addition, in the event that such certificate
is being given to any Mortgagee or Ground Lessor, such statement may contain
any other provisions customarily required by such Mortgagee or Ground Lessor
including, without limitation, an agreement on the part of Tenant to furnish
to such Mortgagee or Ground Lessor, as applicable, written notice of any
Landlord default and a reasonable opportunity for such Mortgagee or Ground
Lessor to cure such default prior to Tenant being able to terminate this
Lease. Any such statement delivered pursuant to this Section may be relied
upon by Landlord or any Mortgagee, Ground Lessor or prospective purchaser to
whom it is addressed and such statement, if required by its addressee, may so
specifically state. If Tenant does not execute, acknowledge and deliver to
Landlord the statement as and when required herein, Landlord is hereby
granted a power-of-attorney, coupled with an interest and irrevocable, to
execute such statement on Tenant's behalf, which statement shall be binding
on Tenant to the same extent as if executed by Tenant.
ARTICLE 22
ENTRY BY LANDLORD
Landlord may enter the Premises at all reasonable times to: inspect the
same; exhibit the same to prospective purchasers, lenders or tenants;
determine whether Tenant is complying with all of its obligations under this
Lease; supply janitorial and other services to be provided by Landlord to
Tenant under this Lease; post notices of non-responsibility; and make repairs
or improvements in or to the Building or the Premises; provided, however,
that all such work shall be done as promptly as reasonably possible and so as
to cause as little interference to Tenant as reasonably possible. Except to
the extent resulting from or relating to the negligence or willful misconduct
of Landlord, Tenant hereby waives any claim for damages for any injury or
inconvenience to, or interference with, Tenant's business, any loss of
occupancy or quiet enjoyment of the Premises or any other loss occasioned
by such entry. Landlord shall at all times have and retain a key with which
to unlock all of the doors in, on or about the Premises (excluding Tenant's
values, safes and similar areas designated by Tenant in writing in advance),
and Landlord shall have the right to use any and all means by which Landlord
may deem proper to open such doors to obtain entry to the Premises, and any
entry to the Premises obtained by Landlord by any such means, or otherwise,
shall not under any circumstances be deemed or construed to be a forcible or
unlawful entry into or a detainer of the Premises or an eviction,
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actual or constructive, of Tenant from any part of the Premises. Such entry
by Landlord shall not act as a termination of Tenant's duties under this
Lease. If Landlord shall be required to obtain entry by means other than a
key provided by Tenant, the cost of such entry shall be payable by Tenant to
Landlord as additional rent.
ARTICLE 23
LANDLORD'S LEASE UNDERTAKINGS
EXCULPATION FROM PERSONAL LIABILITY;
TRANSFER OF LANDLORD'S INTEREST
23.1 LANDLORD'S LEASE UNDERTAKING. Notwithstanding anything to the
contrary contained in this Lease or in any exhibits, Riders or addenda hereto
attached (collectively the "Lease Documents"), it is expressly understood and
agreed by and between the parties hereto that: (a) the recourse of Tenant or
its successors or assigns against Landlord with respect to the alleged breach
by or on the part of Landlord of any representation, warranty, covenant,
undertaking or agreement contained in any of the Lease Documents
(collectively, "Landlord's Lease Undertakings") shall extend only to
Landlord's interest in the real estate of which the Premises demised under
the Lease Documents are a part ("Landlord's Real Estate") and not to any other
assets of Landlord or its beneficiaries; and (b) except to the extent of
Landlord's interest in Landlord's Real Estate, no personal liability or
personal responsibility of any sort with respect to any of Landlord's Lease
Undertakings or any alleged breach thereof is assumed by, or shall at any
time be asserted or enforceable against, Landlord, the individual fee owners
of the Building, or against any of their respective directors, officers,
employees, agents, constituent partners, beneficiaries, trustees or
representatives.
23.2 TRANSFER OF LANDLORD'S INTEREST. Landlord and each successor to
Landlord shall be fully released from the performance of Landlord's
obligations subsequent to their transfer of Landlord's interest in the
Building. Landlord shall not be liable for any obligation hereunder after a
transfer of its interest in the Building.
ARTICLE 24
HOLDOVER TENANCY
If Tenant holds possession of the Premises after the expiration or
termination of the Lease Term, by lapse of time or otherwise, Tenant shall
become a tenant at sufferance upon all of the terms contained herein, expect
as to Lease Term and Rent. During such holdover period, Tenant shall pay to
Landlord a monthly rental equivalent to one hundred fifty percent (150%) of
the Rent payable by Tenant to Landlord with respect to the last month of the
Lease Term. The monthly rent payable for such holdover period shall in no
event be construed as a penalty or as liquidated damages for such retention
of possession. Without limiting the foregoing, Tenant hereby agrees to
indemnify, defend and hold harmless Landlord, its beneficiary, and their
respective agents, contractors and employees, from and against any and all
claims, liabilities, actions, losses, damages (including without limitation,
direct, indirect, incidental and consequential) and expenses (including,
without limitation, court costs and reasonable attorneys' fees) asserted
against or sustained by any such party and arising from or by reason of such
retention of possession, which obligations shall survive the expiration of
termination of the Lease Term.
ARTICLE 25
NOTICES
All notices which Landlord or Tenant may be required, or may desire, to
serve on the other shall be in writing and shall be deemed given upon the
earlier of may be served, personal service or upon deposit in the U.S. Mail,
registered or certified mail, postage prepaid, addressed to the Landlord at
the address for Landlord set forth in Section 1.18 above and to Tenant at the
address for Tenant set forth in Section 1.19 above, or, from and after the
Commencement Date, to the Tenant at the Premises whether or not Tenant has
departed from, abandoned or vacated the
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Premises, or addressed to such other address or addresses as either
Landlord or Tenant may from time to time designate to the other in writing.
Any notice shall be deemed to have been served at the time the same was
posted.
ARTICLE 26
MISCELLANEOUS
26.1 ENTIRE AGREEMENT. This Lease contains all of the agreements and
understandings relating to the leasing of the Premises and the obligations of
Landlord and Tenant in connection with such leasing. Landlord has not made,
and Tenant is not relying upon, any warranties, or representations, promises
or statements made by Landlord or any agent of Landlord, except as expressly
set forth herein. This Lease supersedes any and all prior agreements and
understandings between Landlord and Tenant and alone expresses the agreement
of the parties.
26.2 AMENDMENTS. This Lease shall not be amended, changed or modified
in any way unless in writing executed by Landlord and Tenant. Landlord shall
not have waived or released any of its rights hereunder unless in writing and
executed by the Landlord.
26.3 SUCCESSORS. Except as expressly provided herein, this lease and
the obligations of Landlord and Tenant contained herein shall bind and
benefit the successors and assigns of the parties hereto.
26.4 FORCE MAJEURE. Landlord shall incur no liability to Tenant with
respect to, and shall not be responsible for any failure to perform, any of
Landlord's obligations hereunder if such failure is caused by reason of
strike, other labor trouble, governmental rule, regulations, ordinance,
statute or interpretation, or by fire, earthquake, civil commotion, or
failure or disruption of utility services, or any and all other causes
reasonably beyond control of Landlord. The amount of time for Landlord to
perform any of Landlord's obligations shall be extended by the amount of time
Landlord is delayed in performing such obligation by reason of such force
majeure occurrence.
26.5 SURVIVAL OF OBLIGATIONS. Any obligations of Tenant accruing prior
to the expiration of the Lease shall survive the termination of the Lease,
and Tenant shall promptly perform all such obligations whether or not this
Lease has expired.
26.6 LIGHT AND AIR. No diminution or shutting off of any light, air or
view by any structure now or hereafter erected shall in any manner affect
this Lease or the obligations of Tenant hereunder, or increase any of the
obligations of Landlord hereunder.
26.7 GOVERNING LAW. This Lease shall be governed by, and construed in
accordance with, the laws of the State of California.
26.8 SEVERABILITY. In the event any provision of this Lease is found to
be unenforceable, the remainder of this Lease shall not be affected, and any
provision found to be invalid shall be enforceable to the extent permitted by
law. The parties agree that in the event two different interpretations may be
given to any provision hereunder, one of which will render the provision
unenforceable, and one of which will render the provision enforceable, the
interpretation rendering the provision enforceable shall be adopted.
26.9 CAPTIONS. All captions, headings, titles, numerical references and
computer highlighting are for convenience only and shall have no effect on
the interpretation of this Lease.
26.10 INTERPRETATION. Tenant acknowledges that it has read and reviewed
this Lease and that it has had the opportunity to confer with counsel in the
negotiation of this Lease. Accordingly, this Lease shall be construed neither
for nor against Landlord or Tenant, but shall be given a fair and reasonable
interpretation in accordance with the meaning of its terms and the intent of
the parties.
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26.11 INDEPENDENT COVENANTS. Each covenant, agreement, obligation or
other provision of this Lease to be performed by Tenant are separate and
independent covenants of Tenant, and not dependent on any other provision of
the Lease.
26.12 NUMBER AND GENDER. All terms and words used in this Lease,
regardless of the number or gender in which they are used, shall be deemed to
include the appropriate number and gender, as the context may require.
26.13 TIME IS OF THE ESSENCE. Time is of the essence of this Lease and
the performance of all obligations hereunder.
26.14 JOINT AND SEVERAL LIABILITY. If Tenant comprises more than one
person or entity, or if this Lease is guaranteed by any party, all such
persons shall be jointly and severally liable for payment of rents and the
performance of Tenant's obligations hereunder.
26.15 EXHIBITS AND SCHEDULE. EXHIBITS A (Outline of Premises) and
B (Building Rules and Regulations) and the RENT SCHEDULE are incorporated into
this Lease by reference and made a part hereof.
26.16 OFFER TO LEASE. The submission of this Lease to Tenant or its
broker or other agent, does not constitute an offer to Tenant to lease the
Premises. This Lease shall have no force and effect until it is executed and
delivered by Tenant to Landlord and executed by Landlord; provided, however,
that, upon execution of this Lease by Tenant and delivery to Landlord, such
execution and delivery by Tenant shall, in consideration of the time and
expense incurred by Landlord in reviewing the Lease and Tenant's credit,
constitute an offer to Lease the Premises upon the terms and conditions set
forth herein (which offer to Lease shall be irrevocable for five (5) business
days following the date of delivery).
26.17 NO COUNTERCLAIM; CHOICE OF LAWS. It is mutually agreed that in
the event Landlord commences any summary proceeding for non-payment of Rent,
Tenant will not interpose any counterclaim of whatever nature or description
in any such proceeding, except for compulsory counterclaims. In addition,
Tenant hereby submits to local jurisdiction in the State of California and
agrees that any action by Tenant against Landlord shall be instituted in the
State of California and that Landlord shall have personal jurisdiction over
Tenant for any action brought by Landlord against Tenant in the State of
California.
26.18 RIGHTS RESERVED BY LANDLORD. Landlord reserves the following
rights exercisable without notice (except as otherwise expressly provided to
the contrary of this Lease) and without being deemed an eviction or
disturbance of Tenant's use or possession of the Premises or giving rise to
any claim for set-off or abatement of Rent: (i) to change the name or street
address of the Building; (ii) to install, affix and maintain all signs on the
exterior and/or interior of the Building; (iii) to designate and/or approve
prior to installation, all types of signs, window shades, blinds, drapes,
awnings or other similar items, and all internal lighting that may be visible
from the exterior of the Premises; (iv) subject to the provisions of Article
22 above, to display the Premises and/or the Building to mortgagees,
prospective mortgagees, prospective purchasers and ground lessors at
reasonable hours upon reasonable advance notice to Tenant; (v) to change the
arrangement of entrances, doors, corridors, elevators and/or stairs in the
Building, provided no such change shall materially adversely affect access to
the Premises; (vi) to grant any party the exclusive right to conduct any
business or render any service in the Building, provided such exclusive right
shall not operate to prohibit Tenant from using the Premises for the purposes
permitted under this Lease; (vii) to prohibit the placement of vending or
dispensing machines of any kind in or about the Premises other than for use
by Tenant's employees; (viii) to prohibit the placement of video or other
electronic games in the Premises; (ix) to have access for Landlord and other
tenants of the Building to any mail chutes and boxes located in or on the
Premises according to the rules of the United States Post Office and to
discontinue any mail chute business in the Building; (x) to close the
Building after normal business hours, except that Tenant and its employees
and invitees shall be entitled to admission at all times under such rules and
regulations as Landlord prescribes for security purposes; (xi) to install,
operate and maintain security systems which monitor, by close circuit
television or otherwise, all persons entering or leaving the
28
<PAGE>
Building; (xiii) to install and maintain pipes, ducts, conduits, wires
and structural elements located in the Premises which serve other parts
or other tenants of the Building; and (xiii) to retain at all times master
keys or pass keys to the Premises.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as
of the date first above written.
LANDLORD: TENANT:
MARINA INVESTMENTS, INC., INTERWAVE COMMUNICATIONS, INC.,
a Delaware Corporation a California corporation
By: /s/ Rim Antoine Hindieh By: /s/ [ILLEGIBLE]
-------------------------- ----------------------------
Title: RIM ANTOINE HENDIEH Title: Chairman, CEO & President
----------------------- --------------------------
PRESIDENT By:
Date: ----------------------------
------------------------ Title:
--------------------------
Date:
--------------------------
29
<PAGE>
EXHIBIT A
[FLOORPLAN]
FIRST FLOOR
PENINSULA MARINA
652 BAIR ISLAND BOULEVARD, REDWOOD CITY, CA.
Page 1 of 7
<PAGE>
EXHIBIT A
[FLOORPLAN]
FIRST FLOOR
PENINSULA MARINA
656 BAIR ISLAND BOULEVARD, REDWOOD CITY, CA.
Page 2 of 7
<PAGE>
[FLOORPLAN]
SECOND FLOOR
PENINSULA MARINA
656 BAIR ISLAND BOULEVARD, REDWOOD CITY, CA.
Page 3 of 7
<PAGE>
[FLOORPLAN]
THIRD FLOOR
PENINSULA MARINA
656 BAIR ISLAND BOULEVARD, REDWOOD CITY, CA.
Page 4 of 7
<PAGE>
[FLOORPLAN]
FIRST FLOOR
PENINSULA MARINA
658 BAIR ISLAND BOULEVARD, REDWOOD CITY, CA.
Page 5 of 7
<PAGE>
[FLOORPLAN]
SECOND FLOOR
PENINSULA MARINA
658 BAIR ISLAND BOULEVARD, REDWOOD CITY, CA.
Page 6 of 7
<PAGE>
EXHIBIT A
[FLOORPLAN]
FIRST FLOOR
PENINSULA MARINA
650 BAIR ISLAND BOULEVARD, REDWOOD CITY, CA.
Page 7 of 7
<PAGE>
PENINSULA MARINA & OFFICE PARK
RULES & REGULATIONS
EXHIBIT B
1. The plumbing facilities shall not be used for any purpose other than
that which they are constructed, and no foreign substance of any kind shall
be thrown therein, and the expense of any breakage, stoppage, or damage
resulting from a violation of this provision shall be borne by the Tenant,
who shall, or whose employees, agents and invitees shall have caused it.
2. Tenant shall not mark, nail, drill, or otherwise deface walls, ceilings,
partitions, floors, doors, wood, paint, stone or metal work of the building,
except that Lessee may, nail walls for hanging book shelves, pictures, and
advertising provided all holes and any related damages are repaired at the
close of tenancy.
3. Tenant shall not use, keep or permit to be used, or kept, any foul or
noxious gas or substance in the Premises or permit or suffer the Premises to
be used or occupied in any manner offensive or objectionable to Landlord or
other occupants of the Building by reason of any noise, odors, and/or
vibrations.
4. Tenant, or its agents, shall not play any musical instruments or make
or permit any improper noises in the Building.
5. Tenant, or its employees, shall not loiter in the entrance or corridor
of the Building, or in any way obstruct the sidewalks, hallways, stairways,
and elevators, and shall use the same only as a means of access to and from the
Premises.
6. Tenant shall not load the floor area with more than twenty five (25)
pounds per square foot deadweight, and the weight, size and position of all
safes and other heavy equipment shall be subject to location designated by
Landlord, except for common office furniture and library providing the weight
limit is not exceeded.
7. All furniture, equipment, and freight shall be moved in and out of
building only at hours designated by Lessor according to regulations posted
in the Building. Lessor will not be responsible for loss or damage to any
furniture, equipment, or other personal property of Tenant from any cause,
except for water damage and damage caused by an act of Landlord or it's
agents.
8. All keys for the Premises shall be provided to Tenant by Landlord and
Tenant shall return to Lessor any of such keys so provided upon the
termination of the Lease. Tenant shall not change locks or install other
locks on doors of the Premises, without consent of Landlord, which shall not
be unreasonably withheld.
9. No person shall enter or remain in the building while intoxicated or
under the influence of liquor or drugs. Landlord shall have the right to
exclude or expel from the Building any person who, in the absolute discretion
of Landlord, is under the influence of liquor or drugs, except for an
occasional use of alcohol in connection with promotional functions.
<PAGE>
Page 2
PENINSULA MARINA & OFFICE PARK
RULES & REGULATIONS
EXHIBIT B
10. No sale, storage, use or giving away of alcoholic beverages on or from
the Premises by Tenant or agent of the Tenant is allowed unless duly
stipulated in the Lease Agreement.
11. Landlord reserves the right to lock all entrances to the Building
during such hours as Landlord, in its sole discretion, may determine to be
necessary for the adequate protection of the building. Access to the Building
during such times as the entrances are locked shall be subject to the
permission of the Landlord and in accordance with additional rules and
regulations prescribed at such times. In the event a building entrance is
locked, Tenant shall be provided with a key to assure access to the Premises
at all times.
12. There shall be no overnight parking by Tenant, Tenant's employees or
Tenant's invitees in any of the parking lot at the Peninsula Marina Office
Building, unless Tenant requests a parking permit from the Building
Management Office.
13. Tenant shall not install any form of window covering or ventilators or
similar devices visible from the outside of the building without the prior
written consent of Landlord. All window coverings shall be provided at the
sole cost of the Landlord.
14. Tenant shall not keep or permit to be kept in the building any
flammable or combustible material.
15. Tenant shall not keep or permit to be kept in the building, any cash
money unless it is kept in a locked fire safe which is secured each night.
16. Tenant shall upon completion of work, turn off all lights and other
machinery in the Premises to prevent waste and damage.
17. No vending machines or machines of any description may be installed,
operated or maintained on the Premises without the written consent of
Landlord, which shall not be unreasonably withheld.
18. Tenant shall use care when food is stored and/or consumed on the
Premises to help prevent attracting ants, roaches, and other insects.
19. Tenant shall not keep or permit to be kept in the building any animals
or fowls.
20. Tenant shall not attach or affix any antenna or dish of any kind or any
other special devise to the building without the express written consent of
the Landlord.
21. Landlord reserves the right, in its sole discretion, to revise and or
amend the current rules for the common good of all Tenants and or complex in
general.
22. There is no smoking allowed within the buildings. Smoking is allowed on
open patios and along the exterior walkways. Ashtrays are placed on each
building for your convenience.
<PAGE>
EXHIBIT 10.18
March 16, 1998
TECHNICAL INFORMATION AGREEMENT
Revision 11
Northern Telecom Limited
interWAVE
<PAGE>
INDEX
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
1 DEFINITIONS 2
2 TECHNICAL INFORMATION GRANT 3
3 PATENT GRANT 4
4 SOFTWARE GRANT 4
5 FURNISHING OF TECHNICAL INFORMATION 6
6 TECHNICAL ASSISTANCE AND TESTING SERVICES 6
7 OTHER ASSISTANCE 9
8 CONFIDENTIAL INFORMATION 10
9 GRANT BACK LICENSE 12
10 DEVELOPMENT AGREEMENT 12
11 LIABILITY 15
12 FORCE MAJEURE 16
13 REGISTRATION 17
14 DURATION 17
15 TERMINATION 17
16 DISPUTE RESOLUTION 18
17 NOTICES 19
18 ASSIGNMENT 19
19 GENERAL 21
SCHEDULE A - SUPPORT INFORMATION 24
SCHEDULE B - NORTEL LAB COSTS 27
SCHEDULE C - TEST BED SPECIFICATIONS 28
SCHEDULE D - PARTIAL TERMINATION REFUND 29
</TABLE>
<PAGE>
TECHNICAL INFORMATION AGREEMENT
MEMORANDUM OF AGREEMENT made and entered into on the _______ day of
_____________, 1998
BY AND BETWEEN:
NORTHERN TELECOM LIMITED, a corporation duly incorporated under the
laws of Canada, having its executive offices at 8200 Dixie Road,
Brampton, Ontario, Canada, on behalf of itself and its Subsidiaries,
(hereinafter called "NORTEL")
AND:
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD., a Bermuda corporation
having its offices at c/o Codan Services Ltd. Clarendon House, Church
Street, Hamilton, HM CX, Bermuda,
(hereinafter called "INTERWAVE")
WHEREAS Nortel manufactures and markets, globally, certain mobile and
fixed wireless telecommunications systems;
WHEREAS interWAVE has developed a low-capacity microcellular system
("MICROCELLULAR PUBLIC RADIO SYSTEM") which is based on the Global System for
Mobility standards and which utilizes microcellular infrastructure products
("MICROCELLULAR INFRASTRUCTURE PRODUCTS");
WHEREAS Nortel desires to be interWAVE's preferred channel to market for
the Microcellular Public Radio System on a global basis and is prepared to
participate, financially and otherwise, in its evolution;
WHEREAS interWAVE recognizes the benefits of being associated with a
global company of Nortel's stature and is prepared to accept Nortel's funding
and participation in the evolution of the Microcellular Public Radio System;
WHEREAS both Parties anticipate that they may wish to collaborate in the
development of future products and
WHEREAS interWAVE has provided economic consideration via the Shareholder
Agreement in the amount of US$3.5 million.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH THAT, IN CONSIDERATION OF THE
SHAREHOLDER AGREEMENT AND THE ORIGINAL EQUIPMENT MANUFACTURING (OEM)
AGREEMENT EXECUTED CONCURRENTLY HEREWITH AND THE MUTUAL PROMISES HEREINAFTER
SET FORTH, THE PARTIES AGREE AS FOLLOWS:
Page 1 of 29
<PAGE>
ARTICLE I
DEFINITIONS
1.1. As used herein, unless otherwise defined:
a) "AFFILIATE" shall mean a corporation or company which a Party hereto
effectively controls, directly or indirectly, other than a Subsidiary,
through the ownership or control of shares in the corporation or
company; in the case of Nortel, "Affiliate" shall include the parent
company Northern Telecom Limited, and Northern Telecom Inc., and any
corporation which the parent corporation controls directly or indirectly
through the ownership or control of shares or securities in such other
corporation or otherwise;
b) "EFFECTIVE DATE" shall mean the date of any governmental approvals
required to carry out this Agreement or in the event no such approvals
are necessary, the date first set forth above;
c) "INTERWAVE PRODUCTS" shall mean the Microcellular Infrastructure
Products as manufactured by or on behalf of interWAVE that complies
with the Global System for Mobility standards;
d) "MICROCELLULAR INFRASTRUCTURE PRODUCTS" shall have the meaning ascribed
to it in the Patent License Agreement among Northern Telecom Limited,
Nortel Matra Cellular SCA, and interWAVE, executed concurrently with
the execution of this Agreement.
e) "MICROCELLULAR PUBLIC RADIO SYSTEM" shall have the meaning ascribed to
it in the Patent License Agreement among Northern Telecom Limited,
Nortel Matra Cellular SCA, and interWAVE, executed concurrently with
the execution of this Agreement.
f) "OEM AGREEMENT" shall mean the ORIGINAL EQUIPMENT MANUFACTURING (OEM)
AGREEMENT executed concurrently herewith; "PATENT LICENSE" shall mean
the PATENT LICENSE AGREEMENT executed concurrently herewith;
g) "PRODUCT SOFTWARE" shall mean the compiled, assembled or otherwise
processed version of Support Software that constitutes, in whole or in
part, the software that executes in, and controls the normal
functionality of, interWAVE Products;
h) "SUPPORT INFORMATION" or "TECHNICAL INFORMATION" shall mean that
information related to the functionality, performance, testing and
interfaces of Nortel's products with which the Microcellular
Infrastructure Products must be capable of interworking, and similar
information related to other Nortel Products, all as set forth in
Schedule "A" attached hereto and forming a part hereof, as from time to
time amended by the Parties, to the extent available in accordance with
Article 5 ("Furnishing of Technical Information") hereof;
i) "SUPPORT SOFTWARE" shall mean the software, if any, contained in the
Support Information; and
j) "SUBSIDIARY" shall mean a corporation or company in which a Party
hereto effectively owns or controls, and continues to own or control,
directly or indirectly, more than fifty percent (50%) of the voting
stock or shares.
Page 2 of 29
<PAGE>
ARTICLE 2
TECHNICAL INFORMATION GRANT
2.1 SUPPORT INFORMATION: Nortel, to the extent of its legal right so to do,
hereby grants to interWAVE, as of the Effective Date, subject to the
terms and conditions of this Agreement, personal, non-transferable,
non-assignable except under the terms set forth in Article 18.1,
indivisible, non-exclusive rights:
(a) to use and modify Support Information supplied hereunder solely
to develop, manufacture and test interWAVE Products; and
(b) to sell interWAVE Products based on or incorporating Support
Information to its customers worldwide.
2.2 PROCUREMENT SPECIFICATIONS: The aforesaid rights shall include:
(a) the right to communicate relevant procurement specifications
related to Support Information to suppliers in all countries of
the world reasonably necessary for, and solely for, the
procurement by interWAVE of commercially available materials,
parts, components and assemblies for use in the manufacture
and/or installation of interWAVE Products; and
(b) the right to communicate to customers purchasing or leasing
interWAVE Products such portions of Support Information as are
reasonably needed by such customers for operating and maintaining
interWAVE Products;
provided, however, the recipients of Support Information shall be
advised by interWAVE, in writing at the time of or before such
communication, that proprietary information is being communicated and
that such information is to be kept confidential and not used except as
permitted hereunder, and provided further, that such recipients have
contractually agreed, in writing, prior to such disclosure, to respect
such confidentiality obligations.
ARTICLE 3
[INTENTIONALLY BLANK]
ARTICLE 4
SOFTWARE GRANT
4.1 INTEGRATION: Notwithstanding Article 2 ("Technical Information Grant")
hereof, in the event Support Information includes Support Software,
interWAVE's rights in respect of Support Software shall be as set out
below in this Article 4 ("Software Grant").
4.2 GRANT: Nortel, to the extent of its legal right so to do, hereby grants
to interWAVE, as of the Effective Date, subject to the terms and
conditions of this Agreement, personal, non-transferable,
non-assignable, indivisible, non-exclusive rights:
4.3 (a) to modify and use Support Software to develop and produce Product
Software for use solely in interWAVE Products; and
Page 3 of 29
<PAGE>
(b) to sublicense the Product Software solely for the purpose of
operating and maintaining interWAVE Products used, leased or sold by
interWAVE pursuant to this Agreement.
4.3. LIMITED LICENSE RIGHTS: Nothing contained herein shall transfer, or be
deemed to transfer, or contemplate the transfer of, any rights in or to
Support Software other than those rights specifically granted herein and,
in particular but without restricting the generality of the foregoing,
Nortel does not in any way transfer any right, title or interest in or to
Support Software, or derivatives thereof or any element constituting a
portion thereof, to interWAVE or its sublicensees, other than the limited
rights granted herein.
4.4. FIRMWARE MARKING: In respect of Product Software residing in
non-reprogrammable memory devices forming an integral part of interWAVE
Products (commonly referred to as "firmware"), interWAVE shall, having
regard to the laws of the country(ies) in which such interWAVE Product is
intended to be sold, affix to such devices a copyright notice and/or such
other notice in accordance with prudent procedure to assist in the
prohibition of the reproduction, decompilation or the like of, and to
ensure the continuation of Nortel's proprietary rights in, the Support
Software.
4.5. NON-FIRMWARE SUBLICENSING: In respect of Product Software that resides
other than in non-reprogrammable memory devices forming an integral part
of the interWAVE Product (commonly referred to as "firmware"), interWAVE's
right to furnish Product Software to its sublicensees shall be subject to
the prior or concurrent entering into of an enforceable sublicense
agreement between interWAVE and each sublicensee containing the following
provisions:
(a) sublicensee shall acquire no right, title or interest in or to
Product Software other than the right to use Product Software for
the operation and maintenance of interWAVE Products and such use
shall be limited to specific individual central processing units
bearing a specific serial number and having a specific location;
(b) sublicensee shall hold Product Software in confidence for Nortel and
interWAVE and shall not, at any time, without the prior written
consent of Nortel and interWAVE, use or reproduce Product Software
except as expressly permitted hereunder or divulge Product Software
to any person other than employees of sublicensee with a need to
know; and
(c) the right to use Product Software shall be in accordance with the
laws applicable in the country in which the relevant instance of
interWAVE Product is sold but so as not to affect, but to preserve,
the proprietary and confidential nature of Product Software and any
patent, copyright, or other rights of Nortel, its Subsidiaries and
Affiliates applicable to Support Software.
4.6. SUBLICENSE ENFORCEMENT: interWAVE shall negotiate, execute, administer and
monitor each of Product Software sublicense agreements to ensure
compliance with all of the relevant provisions of this Agreement. In the
event a Sublicensee is in default under its sublicense agreement,
interWAVE shall so advise Nortel in writing, promptly, and exercise as
soon as reasonably possible such rights and recourses as it may have in
the circumstances with particular emphasis on preserving the proprietary
and confidential nature of Support Software and any patent, copyright or
other rights of Nortel, its Subsidiaries or Affiliates, applicable to
Support Software.
Page 4 of 29
<PAGE>
4.7. USE BY INTERWAVE: In the event interWAVE uses interWAVE Products for its
own purposes other than for matters associated with the exercise of this
Agreement (such matters including, by way of example, captive offices for
developing, testing and demonstrating interWAVE Products, or training, as
contemplated herein) interWAVE's use of the related Product Software shall
be subject to the provisions hereunder applicable to its sublicensees
therefor.
4.8. THIRD PARTY SOFTWARE: In the event use of Support Software or Product
Software derived therefrom requires the presence or associated execution
of software proprietary to a third party, interWAVE, solely, shall be
responsible for acquiring the necessary rights to such third party
software and shall bear all the costs associated therewith.
4.9. COPYRIGHT NOTICES, USE BY GOVERNMENT: interWAVE shall not remove or
destroy any copyright or restricted rights notices affixed by Nortel to
any original media containing Support Software or Documentation. All
interWAVE Products incorporating Product Software or portions thereof
distributed to the U.S. Government shall contain required "Restricted
Rights" notices substantially as follows: "Use, duplication or disclosure
by the U.S. government is subject to restrictions as set forth in DFARS
252.227-7013(c)(i)-(ii); FAR 52.227-19; and FAR 52.227-14, Alternate III,
as applicable (including any subsequent clauses) or any other applicable
Federal government regulations." Any copies of Product Software or
Documentation distributed by interWAVE shall either be labeled in the same
manner as on the original media or in a manner substantially similar to
the following:
-C- Copyright "YEAR" interWAVE and its licensors.
All Rights Reserved.
ARTICLE 5
FURNISHING OF TECHNICAL INFORMATION
5.1. SUPPORT INFORMATION: Nortel shall, to the extent of its legal right so to
do, furnish to interWAVE Support Information, in the form then being
used in Nortel's facilities at Richardson, Texas; Guyancourt, France; and
Ottawa, Canada in its day to day operations. An initial listing of said
Support Information is attached hereto as Schedule A. Further Support
Information provided by Nortel shall be treated as such provided the
parties execute by written amendment a revised Schedule A; in the absence
of such written amendment, such information shall be treated as
Confidential Information. Except with respect to the information in
Schedule A, Nortel shall not be obligated to develop or produce any new
or unavailable Support Information to perform its obligations under this
Agreement.
5.2. TIMETABLE: Nortel shall commence the supply of Support Information as soon
as reasonably possible following execution hereof.
5.3. DELIVERY: Technical Information shall be deemed delivered upon delivery to
interWAVE, care of the common carrier designated by interWAVE, at Nortel's
facility from which such information is furnished.
5.4. NORTEL NETWORK ACCESS: interWAVE acknowledges that it shall not acquire
under this Agreement any rights to access systems, databases, applications
or services resident or based on, or constituting a portion of, the
various mainframe computer systems and local area and wide-area network
facilities (including, without limitation, workstations
Page 5 of 29
<PAGE>
and personal computers connected thereto) operated by Nortel and
its Subsidiaries or Affiliates. In the event the Parties jointly
determine that such access is appropriate, they shall enter into a
separate written agreement in respect thereof.
ARTICLE 6
TECHNICAL ASSISTANCE AND TESTING SERVICES
6.1. PRODUCTS TO BE TESTED, TESTING FACILITIES: interWAVE shall delvier
to Nortel interWAVE Products, specified in a written product
schedule, along with interWAVE-developed testing, interconnecting,
or other equipment or items deemed necessary by Nortel and
interWAVE ("Ancillary Equipment") to enable Nortel and interWAVE
to perform Testing Services hereunder. interWAVE shall deliver the
interWAVE Products and Ancillary Equipment to Nortel and Nortel
shall use its best efforts to schedule the tests of the interWAVE
Products in accordance with dates set forth in a written timetable
schedule, provided (a) said product schedule and said timetable
schedules are provided not less than ninety (90) days in advance of
the times set forth for Testing; and (b) time is not of the essence
with respect to the performance of Testing by Nortel. Notwithstanding
interWAVE's failure to provide said ninety (90) days notice, Nortel
will make good-faith efforts to perform Testing Services in
accordance with the written schedules proposed. To facilitate
Nortel's efforts to make its testing facilities available, interWAVE
shall provide, on a quarterly basis, a written schedule showing new
product release dates and projected testing facility needs for the
following twelve months.
6.2 TECHNICAL REPRESENTATIVES: interWAVE and Nortel shall each supply
to the other the name of a technical representative through whom
all communications relating to the Testing shall be made
(respectively "interWAVE's Technical Representative" and "Nortel's
Technical Representative"). interWAVE's Technical Representative
shall provide such assistance as Nortel may require in order to set
up and adjust the interWAVE Products and Ancillary Equipment to
enable Testing of the interWAVE Products to determine its
inter-operability with Nortel's GSM Products. interWAVE's Technical
Representative shall be informed of the time, location and identity
of the Testing and shall attend the Testing and witness all aspect
thereof. In the event interWAVE's Technical Representative or
another interWAVE employee designated by interWAVE is unavailable
or otherwise fails to attend, Nortel shall at its option either
perform, postpone or cancel the Testing.
6.3 INFORMATION TO BE PROVIDED BY INTERWAVE: interWAVE shall supply to
Nortel technical and operating descriptions of the interWAVE
Products as may be required by Nortel to facilitate the performance
of Testing Services, including, without limitation the following (to
be hereinafter referred to as "interWAVE SUPPORT INFORMATION"):
(a) a general description of the interWAVE Products including
its interaction with the telephone network;
(b) full details of all physical interconnections required by
the interWAVE Products in all modes of operation;
(c) full details of the methods required to allow Nortel to
provide normal and appropriate input signals to the
interWAVE Products during the Testing;
<PAGE>
(d) a completed questionnaire, said questionnaire supplied by
Nortel at least two (2) weeks prior to the date the
Testing is scheduled to begin;
(e) any information derived by interWAVE from prior
certification tests involving the interWAVE Products or
from the operation of the interWAVE Products which would
relate to the Testing of the interWAVE Products; and
(f) interWAVE system test scripts and interWAVE test
specifications.
6.4. TESTING SERVICES: The Testing Services shall consist of "Initial
Testing" and "Retesting". Nortel shall provide Testing Services
(i.e., Initial Testing followed by Retesting) at a frequency of
three (3) times per year. The duration of said Testing Services
shall be not more than two weeks of Initial Testing and not more
than one week of Retesting. As well, Nortel shall schedule an
additional two (2) weeks of Initial Testing for the first Initial
Testing period and an additional one (1) week of Initial Testing
for the second Initial Testing period, and Nortel shall use
reasonable efforts to accommodate interWAVE's schedule in connection
therewith.
6.5. INITIAL TESTING: The "INITIAL TESTING" shall consist of a test
suite as Nortel and interWAVE jointly determine and specify in
writing to be appropriate with respect to interWAVE Products. The
Testing Services will be based upon the Support Information
specified in Schedule A and the interWAVE Support Information. The
Initial Testing shall determine the compliance of the interWAVE
Products with the Specifications in Schedule A and the interWAVE
Support Information. The Initial Testing will not determine the
causes of any noncompliance with said Specifications and interWAVE
Support Information.
6.6. RETESTING: Upon receipt of a written request from interWAVE, and in
accordance with a retesting schedule as shall be mutually agreed
upon by the parties, Nortel shall provide interWAVE a subset of the
above-referenced Initial Testing for the purpose of retesting
("RETESTING") any interWAVE Products which has been modified by
interWAVE in order to correct issues which may have been discovered
during Initial Testing; PROVIDED, however, that such access shall
be provided to interWAVE only one time per Testing Services cycle,
for a period not to exceed one week of time.
6.7. ADDITIONAL TESTING: For Testing Services in excess of the stated
frequency or duration of the Initial Testing and Retesting, Nortel
may, at its option, following written notification to interWAVE,
invoice interWAVE at Nortel's then-existing fully loaded costs (a
schedule of Nortel's current fully loaded costs for Lab Services,
which may be changed by Nortel from time to time in its sole
discretion, is attached hereto as Schedule B). Nortel shall invoice
interWAVE for such fees plus any taxes or like fees or charges
which may be assessed against, or otherwise payable by, Nortel for
Nortel's performance, except for any such tax, fee, or charge on
Nortel's net income. interWAVE shall pay Nortel such fees within
thirty (30) days of receipt of such invoice.
6.8. COMMUNICATION AND DISCLOSURE OF RESULTS: Nortel shall promptly
communicate the results of all Testing Services and any "Retesting"
performed hereunder to interWAVE. interWAVE shall be entitled to
disclose such results and the non-proprietary test methods,
provided that interWAVE shall not include any reference to Nortel
or include any information that would identify Nortel without
Nortel's written consent. Nortel may, with interWAVE's written
permission, provide such results to Nortel's customers, subject to
such restrictions as the Parties deem to be appropriate regarding
further disclosure by such customers of the results.
<PAGE>
6.9. OTHER FACILITIES: Nortel shall make available to interWAVE two
cubicles of office space for use by interWAVE personnel, furnished with
basic office furniture; provided that interWAVE shall provide any
necessary computing equipment and test equipment it should choose to
maintain at said office.
ARTICLE 7
OTHER ASSISTANCE
7.1. MOBILE SWITCHING CENTER: The Parties acknowledge that the testing of
the interWAVE Products and Developed Products may require access to the
Nortel Mobile Switching Center ("MSC") to facilitate base station
subsystem ("BSS") testing. interWAVE shall be accorded three (3) days
use of the Nortel MSC per calendar quarter, usages in excess of this
amount to be provided at Nortel's then-existing fully loaded cost (see
Schedule B for Nortel's current "MSC Access Cost"). When interWAVE
requires access to the Nortel MSC, it shall advise Nortel at the earliest
opportunity (providing not less than thirty (30) days notice) and Nortel
shall use reasonable endeavors to make such facilities available at the
requested times. Notwithstanding interWAVE's failure to provide said
thirty (30) days notice, Nortel will make good-faith efforts to provide
access at the requested times.
7.2. GSM COMPONENT PURCHASES: To the extent of its legal right to do so,
Nortel will use reasonable efforts to make available, through its
existing GSM Component suppliers, the prices, terms and conditions
associated with the provision of GSM Components for products of the
type covered by the ORIGINAL EQUIPMENT MANUFACTURING (OEM) AGREEMENT
executed concurrently herewith. interWAVE shall communicate to Nortel
on a quarterly basis its projected 12-month forecast of requirements
for such GSM Components so that these requirements can be
incorporated by Nortel into its purchasing negotiations with its GSM
Component suppliers. In the case where Nortel can obtain lower costs
from an alternate GSM Component supplier for one or more GSM
Components, interWAVE shall consider using said GSM Component
supplier for the supply of said GSM Components.
7.3. TEST BED: interWAVE shall develop a test bed at Redwood City,
California to facilitate Nortel's testing of the hardware and
software necessary to support the ORIGINAL EQUIPMENT MANUFACTURING
(OEM) AGREEMENT and to facilitate such other purposes to which the
parties have mutually agreed. The Test Bed shall meet the
specifications attached hereto in Schedule C. interWAVE shall invoice
Nortel for a fixed amount of $320,370.00U.S. according to the terms of
Section 9.1.1 ("Price and Payment") of Schedule 1 of the ORIGINAL
EQUIPMENT MANUFACTURING (OEM) AGREEMENT for the creation and ongoing
maintenance of the Test Bed.
7.4. ACCESS: The parties agree that, when Nortel is not utilizing the Test
Bed, it may be utilized by interWAVE; therefore, access to and use of
the Test Bed shall be governed by written schedule, said schedule to be
maintained by interWAVE so as to avoid conflicting needs therefor, said
schedule further maintained so as to give Nortel absolute priority of
use on three (3) days notice and preferential priority of use on one
(1) days notice.
ARTICLE 8
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<PAGE>
CONFIDENTIAL INFORMATION
8.1. CONFIDENTIAL INFORMATION: Each of the parties recognizes and agrees
that the unauthorized use or disclosure of the other party's
confidential or proprietary information relating to such party's
business, plans, technology, and products ("Confidential Information")
would cause irreparable injury to the disclosing party for which it
would have no adequate remedy at law, and that an actual or threatened
breach of this section shall entitle the disclosing party to obtain
immediate injunctive relief prohibiting such breach, in addition to any
other rights and remedies available to it. If Confidential Information
is disclosed orally, the disclosing party shall notify the receiving
party of the confidential nature of the Confidential Information at the
time of disclosure and such Confidential Information shall be reduced
to writing, marked as confidential and delivered to the receiving party
within thirty (30) days after oral disclosure.
8.2. TECHNICAL INFORMATION CONSTITUTES CONFIDENTIAL INFORMATION: interWAVE
acknowledges that Technical Information furnished by Nortel pursuant
hereto, or information communicated to or acquired by interWAVE as a
consequence of the provision of technical assistance pursuant hereto,
is Confidential Information as defined above and is and shall continue
to be the exclusive property of Nortel. interWAVE shall hold
Confidential Information in confidence for Nortel and only make use of,
or disclose, it as permitted by this Agreement.
8.3. PROTECTION OF CONFIDENTIAL INFORMATION: For the period during and for
three (3) years following the last day of the term all Confidential
Information shall be subject to the following:
(a) The recipient shall restrict disclosure of the Confidential
Information to only those of recipient's employees and
contractors who (1) have a legal or contractual obligation to
maintain the information in confidence according to this
Article; and to those who (2) have a "need to know" (i.e.
employees and contractors that require the Confidential
Information to perform their responsibilities in connection with
this Agreement). The recipient shall not disclose Confidential
Information to any other person or entity without the prior
written consent of the disclosing party;
(b) The recipient shall use the Confidential Information only for
the purposes of performing under this Agreement;
(c) The recipient shall advise those employees or contractors who
access the Confidential Information of their obligations with
respect thereto;
(d) The recipient shall copy the Confidential Information only as
necessary for those employees or contractors who are entitled
to receive it and ensure that all confidentiality notices are
reproduced in full on such copies; and
(e) The recipient shall return all copies of such Confidential
Information to the disclosing party at the disclosing party's
request.
(f) If any Confidential Information is required to be disclosed in
response to a valid order of the court or lawful request of a
government agency, the recipient shall first notify the
disclosing party of the order or request and permit the
disclosing party to seek an appropriate protective order.
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<PAGE>
(g) interWAVE shall not make or have made or permit to be made any
copies or translations of Confidential Information, except those
copies or translations which are necessary to the use hereunder by
interWAVE, and all such copies or translations shall, upon
reproduction by interWAVE, contain the same proprietary and
confidentiality notices or legends as appear on Confidential
Information.
8.1. EXCLUSIONS: The confidentiality obligations set forth in this Section 8
will not apply to any Confidential Information that:
(a) becomes known to the general public without fault or breach on the
part of the receiving party;
(b) the receiving party obtains from a third party without breach of a
nondisclosure obligation and without restriction on disclosure;
(c) is furnished to a third party by the disclosing party without a
similar restriction on such third party's rights;
(d) can by written records be shown to have been known by the receiving
party at the time of disclosure; or
(e) the receiving party can demonstrate to the reasonable satisfaction
of the disclosing party was developed independently by employees or
contractors of the receiving party who had no access to
Confidential Information directly related to such independent
development.
8.1. NONDISCLOSURE OF TERMS: Neither party shall publicly disclose any
information regarding the terms and conditions contained herein without
having received prior approval, in writing, from the other party.
ARTICLE 9
GRANT BACK LICENSE
9.1. IMPROVEMENTS: If interWAVE makes any improvements, developments,
inventions, changes or innovations directly related to the Technical
Information (hereinafter called "Improvements"), and interWAVE files for
a patent covering such Improvements, then:
(a) if interWAVE files for and obtains, or otherwise acquires, any patent
thereon in any country, interWAVE shall grant to Nortel a personal,
non-exclusive, non-transferable, Sublicensable (as defined below),
royalty-free full term license to make, have made, use, lease and
sell products and software under any such patents, to the extent
such patents directly relate to Improvements; or
(b) if interWAVE intends to file such patent application(s) only in
certain countries, interWAVE shall, within such time as will enable
Nortel conveniently to make timely patent applications in such
countries, provide Nortel, at its request, with all signature and
documents necessary for filling applications for an obtaining such
patent or patents in such countries wherein interWAVE does not
intend, but in which Nortel may elect, to apply for patents covering
any such patentable subject matter, provided Nortel shall file such
patent applications at its own expense (but with such assistance as
interWAVE may properly give) and interWAVE shall be
Page 10 of 29
<PAGE>
granted, a non-exclusive, free, unrestricted full term license (with
the right to grant sublicenses) for such patents.
9.2. For the purposes of section 9.1, "Sublicensable" shall mean sublicensable
to:
(a) any joint venture, partnership, corporation or other entity in
which Nortel owns or controls, directly or indirectly, twenty (20%)
percent or more of the shares or other mechanism of control or
influence by way of contractual or other legally enforceable
rights; and/or
(b) any entity that acquires, directly or indirectly, any Nortel
business or portion thereof whose products are covered by such
patent.
ARTICLE 10
DEVELOPMENT AGREEMENT
10.1. DEVELOPMENT INFORMATION: From time to time the Parties may agree that
interWAVE, Nortel, or the Parties jointly, shall undertake the
development of products utilizing information of a design or other
technical nature other than Support Information made available to
interWAVE by Nortel (hereinafter termed "Development Information"). The
Parties acknowledge that the following items will receive priority
consideration as projects to be undertaken under the Development
Agreement:
(a) Cost effective MAP interface for rural systems using low cost
transmission and signalling;
(b) Integration of interWAVE OMC with Nortel OMC;
(c) Integration of interWAVE system with Nortel M1 PBX including
delivery of features to GSM users; and
(d) Interface interWAVE MSC with Nortel IWF.
10.2. DEVELOPMENT AGREEMENT: With respect to such development, the Parties
agree as follows:
(a) TIMELY EXECUTED DEVELOPMENT AGREEMENT: Joint development of
products utilizing Development Information shall take place only
pursuant to a written Development Agreement between the Parties,
SAID DEVELOPMENT AGREEMENT TO BE NEGOTIATED AND EXECUTED BY THE
PARTIES NOT LATER THAN THE FIRST BUSINESS DAY FOLLOWING THE
SIXTIETH (60) DAY AFTER THE EFFECTIVE DATE OF THIS AGREEMENT;
(b) PROJECT ADDENDA: The Development Agreement shall anticipate the
performance of development activity on a project-by-project basis,
with the details associated with a particular Project contained
within one or more Project Addenda attached thereto;
(c) CONTENTS OF PROJECT ADDENDA: The Project Addenda shall specifically
contain (1) a Project Title; (2) a Project Summary; (3) a Work Plan
containing a Description and Specification of Deliverables, the
Acceptance Criteria therefor;
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<PAGE>
the Delivery Dates for said Deliverables; (4) Descriptions of
any required Reports; (5) Pricing / Payment Terms; (6) Termination
conditions; and (7) Project Management contacts. The Project
Addenda may or may not contain provisions with respect to
Intellectual Property issues; however, if the Project Addenda
does contain Intellectual Property provisions, and these
provisions cannot be interpreted consistently with the
Development Agreement, then the Intellectual Property
provisions of the Project Addenda shall control.
(d) CONTENTS OF DEVELOPMENT AGREEMENT: The Development Agreement
shall specifically contain (1) Definitions of important terms;
(2) provisions governing the Working Relationship (e.g.,
Provision of Deliverables, Delivery Dates, Acceptance Tests,
Change Requests, Notices and Contacts); (3) provisions governing
the handling of Confidential Information; (4) provisions
governing the Intellectual Property rights of the Parties in
the event any Project Addenda are silent upon the subject of
Intellectual Property; (5) provisions governing the provision
of necessary technical support and training; (6) appropriate
representations, warranties, limitations of liability and duties
to indemnify; and (7) conditions upon which the Development
Agreement will terminate; PROVIDED, however, that the provisions
of said Development Agreement with respect to, INTER ALIA,
intellectual property rights may always be modified by the
Parties on a project-by-project basis in the project-based
Addenda attached thereto.
10.3. IPR IN THE ABSENCE OF A TIMELY EXECUTED DEVELOPMENT AGREEMENT: In the
event the Parties have not negotiated and executed the Development
Agreement by the said first business day following the sixtieth (60th)
day after the Effective Date of this Agreement, the ownership of the
intellectual property rights arising from such development shall be as
follows:
(a) if one Party contributes all material monetary funding and
material human resources for any development activity, such Party
shall, subject to the provisions of section 9.1 hereof, own all
right, title and interest in and to any intellectual property
rights arising from such development.
(b) if each Party has contributed material monetary funding or
material human resources for any development activity, all
intellectual property rights arising from such development, save
for patents, shall be jointly owned with each Party having the
right to exploit such intellectual property, including sublicensing
thereof, at its sole discretion without reference to the other
Party; in the event of a patentable invention, the Parties shall
agree as to which of the Parties is to take ownership of any
patents which may issue (disputes to be resolved according to the
provisions of Article 16 ("Dispute Resolution")). The Party taking
ownership may file applications for such patents file such patents,
subject to the following:
i. where the Party having ownership of the patents elects to
file for any patent thereon in any country, that Party shall
grant to the other Party a non-exclusive, free, unrestricted,
full term license (with the right to grant sub-licenses
thereunder) to make, have made, use, lease and sell under any
such patents; and
ii. the Party not having ownership of the Patents may file for
patents thereon in countries not filed in by the Party having
ownership; in such case, the Party having ownership shall,
within such time as will enable
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<PAGE>
the other Party conveniently to make timely patent applications
in such countries, provide the other Party, at its request,
with all signatures and documents necessary for filing
applications for and obtaining such patent or patents in such
countries, provided that the other Party shall file such patent
applications at its own expense (but with such assistance as
the Party having ownership may properly give) and the Party
having ownership shall be granted, if it so requests, a
non-exclusive, free, unrestricted, full term license (with the
right to grant sublicenses) for such patents.
ARTICLE 11
LIABILITY
11.1. DISCLAIMER REGARDING TECHNICAL INFORMATION AND TECHNICAL ASSISTANCE:
Nortel makes no representations in respect of Technical Information or
technical assistance furnished pursuant hereto, but shall furnish such in
good faith to the best of its knowledge and ability. Without restricting
the generality of the foregoing, there are no representations, warranties
or implied conditions as to merchantability or fitness for a particular
purpose, or as to whether or not the use of Technical Information or
technical assistance supplied hereunder will infringe any patent or any
other rights (including intellectual property rights) of any other
person.
11.2. INDEMNIFICATION REGARDING TECHNICAL INFORMATION AND TECHNICAL
ASSISTANCE: Except as set forth in section 11.5, interWAVE shall
indemnify and hold Nortel harmless from any and all claims for damages,
losses, expenses or costs (including counsel fees and expenses) arising
out of the furnishing or receipt of any Technical Information or
technical assistance pursuant hereto and hereby waives any claims that it
might have or might pretend to have against Nortel, its employees and
agents, as well as those of its Subsidiaries and Affiliates for or
arising from the provision of Technical Information or technical
assistance.
11.3. LIABILITY FOR DAMAGE TO INTERWAVE PRODUCTS AND ANCILLARY EQUIPMENT:
Liability for damage to, or loss of, the interWAVE Products and Ancillary
Equipment during shipment and while on Nortel's premises, shall remain
with interWAVE, unless such loss or damage is occasioned by the fault or
negligence of Nortel, its agents or employees.
11.4. DISCLAIMER AND INDEMNITY REGARDING TESTING SERVICES. NORTEL MAKES NO
REPRESENTATIONS WITH RESPECT TO ANY TESTING SERVICES PERFORMED HEREUNDER
OR ANY INFORMATION (INCLUDING TEST RESULTS) OR ANY TECHNICAL ASSISTANCE,
ADVICE OR CONSULTATION FURNISHED IN CONNECTION WITH THIS AGREEMENT.
WITHOUT RESTRICTING THE GENERALITY OF THE FOREGOING, NORTEL MAKES NO
WARRANTIES, CONDITIONS, OR REPRESENTATIONS, WRITTEN OR ORAL, STATUTORY,
EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. EXCEPT FOR BREACH
OF THE COVENANTS OF ARTICLE 8 ("CONFIDENTIAL INFORMATION"), NEITHER
NORTEL, NOR ANY DIRECT OR INDIRECT SUBSIDIARY, AFFILIATE, EMPLOYEE OR
AGENT OF NORTEL SHALL BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OF ANY NATURE WHATSOEVER FOR ANY BREACH OF THIS
AGREEMENT, FOR ANY DISCLOSURE OF THE RESULTS OF THE TESTING SERVICES AS
PERMITTED BY SECTION 6 ("TECHNICAL
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<PAGE>
ASSISTANCE AND TESTING SERVICES"), WHETHER ARISING IN CONTRACT, TORT, OR
OTHERWISE. IN NO EVENT WILL NORTEL'S, OR ITS SUBSIDIARY'S, AFFILIATE'S,
EMPLOYEE'S OR AGENT'S LIABILITY IN CONNECTION WITH THIS AGREEMENT,
WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE, EXCEED THE COST OF THE
TESTING SERVICES PROVIDED HEREUNDER. interWAVE SHALL INDEMNIFY AND HOLD
NORTEL, ITS DIRECT OR INDIRECT SUBSIDIARIES, AFFILIATES, EMPLOYEES AND
AGENTS, HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS OR SUITS BROUGHT
BY ANY THIRD PARTIES IN RESPECT OF ANY SUCH TESTING SERVICES,
DISCLOSURE OF THE RESULTS OF SUCH TESTING SERVICES AS PERMITTED BY
SECTION 6, INFORMATION, TECHNICAL ASSISTANCE, ADVICE, OR CONSULTATION,
EXCEPT WHERE SUCH ACTIONS OR SUITS ARE ATTRIBUTABLE TO THE NEGLIGENCE
OF NORTEL AND ARE FOR DIRECT DAMAGES DUE TO PERSONAL INJURY OR TANGIBLE
PROPERTY DAMAGE WHICH OCCURS (A) AT NORTEL'S PREMISES WHERE TESTING
SERVICES TAKES PLACE AND (B) DURING THE PERFORMANCE OF THE TESTING
SERVICES.
11.5. Each party (the "Indemnifying Party") shall indemnify and save
harmless the other party (the "Indemnified Party") from any liability
or claim (including, without limitation, the costs and reasonable
attorney's fees in connection therewith) that may be made by a third
party for injury, including death, to persons or damages to property
arising directly out of the Indemnifying Party's negligent acts or
omissions in connection with such Indemnifying Party's performance of
its obligations or exercise of its rights under this Agreement
provided that the Indemnified Party has no contributory fault in
connection with such liability or claim.
ARTICLE 12
FORCE MAJEURE
12.1. If the performance of a party of any of its obligations pursuant to
this Agreement is prevented, restricted, or interfered with by any
circumstances beyond the reasonable control of that party, including
without limitation, (a) fire, explosion, epidemic, hailstorm,
hurricane, lightning, tornado, cyclone, flood, or other act of nature,
(b) unavailability of supplies or sources of energy, power failure or
breakdown of machinery, (c) war, revolution, civil commotion, acts of
public enemies, blockade, or embargo, (d) any law, order, proclamation,
regulation, ordinance, demand, or requirement of any government or any
subdivision, authority or representative of any government, or (e)
labor difficulties, including, without limitation, strikes, slowdowns,
picketing or boycotts, then the party whose performance has been
prevented, restricted, or interfered with shall be excused from such
performance on a day-to-day basis to the extent of such prevention,
restriction, or interference; provided such party shall use its best
efforts to avoid or remove such causes of non-performance and shall
proceed to perform with dispatch whenever such causes are removed or
cease. In the event Nortel is unable to perform the Testing in
accordance with Nortel's schedule as a result of any non-performance by
interWAVE which is excused pursuant to this Section, Nortel shall be
entitled to reschedule such Testing as Nortel determines to be
appropriate.
ARTICLE 13
REGISTRATION
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<PAGE>
13.1 Any approval of this Agreement by the Government of Bermuda, or any
other government, or any officer or agent thereof, which is required
to enable interWAVE to perform this Agreement shall be secured in
writing by interWAVE who shall supply the same, or a true copy
thereof, to Nortel within ninety (90) days of the date of execution
of this Agreement.
ARTICLE 14
DURATION
14.1. This Agreement shall commence on the date of its execution and
terminate (save with the exception of the survivorship provisions)
upon termination of the OEM Agreement, unless earlier terminated as
hereinafter set forth, provided that upon termination, the parties
agree to negotiate in good faith the extension of those portions of
this Agreement relevant to interWAVE's ongoing support obligations
to Nortel including any obligations arising under the ORIGINAL
EQUIPMENT MANUFACTURING (OEM) AGREEMENT.
ARTICLE 15
TERMINATION
15.1. BREACH: In the event either Party shall be in breach of, or fail to
perform one or more of its material obligations under, this Agreement,
the other Party may, by notice to the Party in default, require the
remedy of the breach or the performance of the obligation and, if the
Party so notified fails to remedy such breach or perform such
obligation within ninety (90) days of the forwarding of a notice so to
do, the other Party may, by notice, terminate this Agreement.
15.2. UNENFORCEABILITY: In the event of an enforceable decision or
directive declaring invalid an essential part of this Agreement,
without which this Agreement would not have been entered into, this
Agreement may, at the option of either Party, be terminated upon the
giving of notice to the other Party. Save as before set forth, in
the event that any term, clause, provision or condition of this
Agreement shall be similarly adjudged invalid for any reason
whatsoever, such invalidity shall not affect the validity or
operation of any other term, clause, provision or condition and such
invalid term, clause, provision or condition shall be deemed to have
been deleted from this Agreement.
15.3. INSOLVENCY: In the event interWAVE commits any act of bankruptcy, or
compounds with its creditors; or a petition or receiving order in
bankruptcy is presented or made against interWAVE; or a petition for
an administration order is presented in relation to interWAVE; or a
resolution or petition to wind up interWAVE (other than for a legal
reconstruction, reorganization or amalgamation) or a receiver or
administrative receiver is appointed; and such act or petition is not
cured, dismissed, or withdrawn within sixty (60) days thereafter; or
interWAVE ceases to carry on business, Nortel may, without any delay,
by notice, terminate this Agreement. Any licenses and rights granted
under this Agreement by interWAVE to and through Nortel are, for
purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of
"intellectual property" within the meaning of Section 101 of the
Bankruptcy Code. Upon the commencement of a bankruptcy proceeding
involving interWAVE, Nortel shall be entitled to retain and may fully
exercise all rights and elections available under the Bankruptcy Code.
15.4. GOVERNMENTAL APPROVALS: In the event this Agreement does not receive
all requisite approvals of any Government or governmental agency or
officer within the period
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<PAGE>
stipulated in Article 13 ('Registration") hereof, this Agreement may, at
the option of either Party, be terminated upon notice to the other
Party, but such termination shall not affect any undertakings of
confidentiality or non-use provided in this Agreement.
15.5. PRODUCT SOFTWARE: Notwithstanding anything else contained herein, in
the event this Agreement is terminated, each sublicensee of Product
Software shall continue to have the right to use Product Software
provided:
(a) such sublicensee is not in default under its written sublicense
agreement with interWAVE; and
(b) such sublicense agreement is not inconsistent with the terms of
this Agreement.
15.6. SURVIVAL: The provisions of Article 2 (Technical Information Grant),
Article 4 (Software Grant), Article 8 ("Confidential Information")
related to confidentiality and non-use, the provisions of Article 9
("Grant Back License"), the provisions of Article 10 ("Development
Agreements"), and the provisions of Article 11 ("Liability") shall
survive the termination of this Agreement. Upon any termination of
this Agreement, interWAVE shall, at Nortel's expense, ship the Test Bed
to a location in the continental United States as designated by Nortel.
ARTICLE 16
DISPUTE RESOLUTION
16.1. In the event the Parties are unable to amicably settle disputes between
them, and unless the Parties mutually elect to pursue an alternative
dispute procedure, whether binding or non-binding, all actions or
proceedings to enforce, or which arise in connection with or relate to,
this Agreement, any of the agreements in the form of Exhibits hereto or
any of the transactions contemplated hereby or thereby shall be brought
and litigated exclusively in the United States District Court, Northern
District of California (or, in the event such court does not have
jurisdiction, the courts of the State of California located in such
district), unless such actions or proceedings are required to be
brought in another court to obtain subject matter jurisdiction over the
matter in controversy. In any such actions or proceedings, service of
process may be made upon the other Party hereto by registered or
certified mail, return receipt requested, to its address indicated
herein, which service shall be deemed effective 10 days after mailing.
Each of the Parties hereto (i) consents to the jurisdiction of such
court or courts and to service of process by registered or certified
mail, as provided above, or by any other manner provided by the laws of
the State of California and the rules of such courts and (ii) waives
any right it may have to assert the doctrine of FORUM NON CONVENIENS,
to assert that it is not subject to the jurisdiction of such courts or
to object to venue to the extent any action or proceeding is brought in
accordance with this sub-clause.
16.2 WAIVER OF TRIAL BY JURY. INTERWAVE AND NORTEL WAIVE THE RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING UNDER THIS AGREEMENT OR ANY
ACTION OR PROCEEDING ARISING OUT OF THE TRANSACTIONS CONTEMPLATED
HEREBY, REGARDLESS OF WHICH PARTY INITIATES ANY SUCH ACTION OR
PROCEEDING.
ARTICLE 17
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NOTICES
17.1. FORM OF NOTICE: Any and all notices or other information to be given by
one of the Parties to the other shall be in writing and shall be deemed
sufficiently given when forwarded by prepaid, registered or certified
first class air mail or by telegram, telex, facsimile transmission or
hand delivery to the other Party at the following address:
(a) if to Nortel: Northern Telecom Limited
8200 Dixie Road, Suite 100
Brampton, Ontario
Canada L6T 5P6
Attention: Secretary
(b) if to interWAVE: interWAVE Communications International
656 Bair Island Road
Redwood City, CA 94063
Attention: Chief Financial Officer
and such notices shall be deemed to have been received fifteen (15)
business days after mailing if forwarded by mail, and the following
business day if forwarded by telegram, telex, facsimile transmission or
hand.
17.2. CHANGE OF ADDRESS: The aforementioned address of either Party may be
changed at any time by giving fifteen (15) business days prior notice
to the other Party in accordance with the foregoing.
17.3. BEST EFFORTS: In the event of a generally-prevailing labor dispute or
other situation which will delay or impede the giving of notice by any
such means, in either the country of origin or of destination, the
notice shall be given by such specified mode as will be most reliable
and expeditious and least affected by such dispute or situation.
ARTICLE 18
ASSIGNMENT
18.1. ASSIGNMENT: This Agreement shall not be assigned or transferred by
either Party, whether by way of merger, amalgamation, consolidation,
reorganization, assignment, transfer, operation of law or otherwise,
except with the written consent of the other or as otherwise provided
pursuant to this Article.
18.2. Notwithstanding section 18.1, nothing herein shall prevent interWAVE
from asssigning this Agreement, in its entirety, including all of its
rights hereunder, to any person (the "Assignee"):
(a) to whom interWAVE transfers substantially all of its assets; or
(b) with whom interWAVE merges, amalgamates, consolidates or
reorganizes and who thereby becomes the successor to the
business of interWAVE;
provided that:
(a) if such Assignee is a Competitor of Nortel (as defined below)
the provisions of section 18.4 below shall apply; and
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(b) the financial condition of such Assignee as of the date of
such assignment shall be not substantially worse than the
financial condition of interWAVE as of the Effective Date of
this Agreement; and
(c) such Assignee agrees in writing to Nortel (the
"Acknowledgment") that it has assumed all obligations of
interWAVE hereunder and shall be bound by the terms and
conditions of this Agreement.
18.3. For the purpose of this section a "Competitor of Nortel" means any
person with whom Nortel competes and which has greater than two
(2%) percent market share in the wireless telecommunications
infrastructure products market. Notwithstanding the foregoing, a
person shall not be deemed to be a Competitor of Nortel simply by
virtue of any competition arising solely from its acquisition of
the business of interWAVE. Nortel shall, from time to time, upon
request from interWAVE, and in consultation with interWAVE, provide
interWAVE with a current list of Competitors of Nortel and
interWAVE shall be entitled to rely on such list for the purposes
of section 18.2 until the later of: (i) one hundred and eighty
(180) days from the date of issue by Nortel; or (ii) the date on
which a new list is received by interWAVE.
18.4. If the Assignee is a Competitor of Nortel, then within thirty (30)
days of Nortel's receipt of the Acknowledgment, Nortel shall be
entitled, at its option effective upon written notice to
interWAVE, to terminate the following provisions of this Agreement
(a "Partial Termination"): "Furnishing of Technical Information"
(Article 5), "Technical Assistance and Testing Services" (Article
6), "Mobile Switching Centre" (Section 7.1), GSM Component
Purchases (Section 7.2), and "Access" (Section 7.4) and to
terminate any Development Agreement made between the parties as
contemplated by Article 10. In the event:
(a) of a Partial Termination; or
(b) that this Agreement is terminated by interWAVE as a result
of a breach hereunder by Nortel; or,
(c) that this Agreement is terminated as a result of a breach
by Nortel under the OEM Agreement causing a termination of
the OEM Agreement; or
(d) that this Agreement is terminated by Nortel pursuant to the
provisions of section 15.2 hereof (Unenforceability),
Nortel shall refund to interWAVE, in either $US dollars or interWAVE shares
at Nortel's option, an amount calculated in accordance with the provisions of
Schedule D. Notwithstanding the foregoing, Nortel shall pay the refund in
cash if the Fair Market Value (defined in accordance with the principles
articulated in Section 3.4(d)(iv)(d) of interWAVE's By-Laws) of one share of
interWAVE Series G Preferred Stock (a "Share") is less than six dollars and
six cents United States dollars ($U.S.6.06) per share.
18.5. Notwithstanding section 18.1, this Agreement may be assigned by
Nortel to any of its Subsidiaries or Affiliates upon notice to
interWAVE.
18.6. Notwithstanding any assignment, the Parties hereto shall remain
liable for their respective obligations hereunder
Page 18 of 29
<PAGE>
ARTICLE 19
GENERAL
19.1. GOVERNMENTAL APPROVALS: The Parties recognize that the transfer of
Technical Information and Development Software to foreign countries
may be subject to the specific approval of the governments of said
foreign countries, or various agencies thereof, and international
control organizations in which that government participates, and
that such governments or agencies may require further approval
before the communication or transfer of any Technical Information
or the sale of interWAVE Products and Developed Products is made to
or for a country other than the U.S.A. Accordingly, interWAVE shall
not sell or lease interWAVE Products and Developed Products or
transfer or communicate Technical Information into any such
countries without receiving such prior specific approval.
19.2. PREEXISTING DUTIES: Nothing in this Agreement shall be construed
as requiring Nortel to disclose Technical Information, to grant
rights under licenses, or to render any technical assistance, which
would violate any confidentiality undertakings which it has towards
third persons or which would violate any present or future law or
decree of any government or governmental officer or agency, and
nothing contained herein shall require the disclosure of Technical
Information which would increase or impose any obligations on
Nortel with respect to third parties. In the event that Nortel
determines that any disclosure by it hereunder would require the
consent of any third party, Nortel agrees to use reasonable efforts
to obtain the consent of such third party to the disclosure.
19.3. EXCLUSIONS: Nothing contained in this Agreement shall be construed
as:
(a) requiring Nortel to file any patent application, to secure
any patent or other intellectual property right or to
maintain any patent or other intellectual property right in
force;
(b) constituting a warranty or representation by Nortel as to the
validity or scope of any patent or other intellectual
property right licensed hereunder;
(c) constituting a warranty or representation by Nortel that any
manufacture, use, lease, sale or sublicense by interWAVE
hereunder will be free from infringement of patents or other
intellectual property rights other than those under which,
and to the extent to which, licenses are granted hereunder;
(d) constituting an agreement to bring or prosecute actions or
suits against third parties for infringements;
(e) conferring any right to use, in advertising, publicity or
otherwise, any name, trade name or trademark, or any
contraction, abbreviation or simulation thereof; or
(f) conferring by implication, estoppel or otherwise upon
interWAVE any license or other right under any patent or
other intellectual property right, except the licenses and
rights expressly granted hereunder to interWAVE.
19.4. AUTONOMY: Nothing contained in this Agreement shall limit in any
manner Nortel's right to discontinue or change the design or
characteristics of its products at any time without notice and
without liability.
Page 19 of 29
<PAGE>
19.5. NOTICE OF BREACH: The failure of either Party to give notice to
the other Party of the breach or non-fulfillment of any term,
clause, provision or condition of this Agreement shall not
constitute a waiver thereof, nor shall the waiver of any breach or
non-fulfillment of any term, clause, provision or condition of this
Agreement constitute a waiver of any other breach or
non-fulfillment of that or any other term, clause, provision or
condition of this Agreement.
19.6. INTEGRATION / ENTIRE AGREEMENT: This Agreement sets forth the entire
agreement and understanding between the Parties with respect to
Technical Information and interWAVE's use thereof, save for
Development Agreements, and supersedes and cancels all previous
negotiations, agreements, commitments and writings in respect to the
subject matter hereof. Neither Party hereto shall be bound by any
term, clause, provision or condition save as expressly provided in
this Agreement or as duly set forth on or subsequent to the date
hereof in writing, signed by duly authorized officers of the Parties.
19.7. INDEPENDENT PARTIES: Nothing in this Agreement shall be construed
as establishing or implying any partnership between the Parties
hereto, and nothing in this Agreement shall be deemed to constitute
either of the Parties hereto as the agent of the other Party or
authorize either Party to incur any expenses on behalf of the other
Party or to commit the other Party in any way whatsoever, without
obtaining the other Party's prior written consent.
19.8. CONFIDENTIALITY OF TERMS, PUBLICITY: The existence of this
Agreement, as well as its terms and conditions, shall be held in
confidence by both Parties and only disclosed as may be agreed to
by both Parties or as may be required to meet security disclosure
or export permit requirements. Neither Party shall make public
statements or issue publicity or media releases with regard to this
agreement or the relationship between the Parties without the prior
written approval of the other Party.
19.9. GOVERNING LAW: This Agreement and all Purchase Orders shall be
governed by the laws of the State of California, without
application of conflict of law rules. The Vienna International
Convention for the Sale of Goods shall not apply.
IN WITNESS WHEREOF, the Parties hereto have signed and executed
this Agreement on the date first above mentioned.
NORTHERN TELECOM LIMITED interWAVE Communications International, Ltd.
Per: /s/ [ILLEGIBLE] Per: /s/ [ILLEGIBLE]
-------------------- ---------------------
Per: Per:
-------------------- ---------------------
Page 20 of 29
<PAGE>
SCHEDULE "A"
SUPPORT INFORMATION
A-interface
<TABLE>
<CAPTION>
# Title Reference Description
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Approved GSM http://136.147.68.68/ References the latest GSM specs.
specs. Reference plm/PLP/index.html That are used by Nortel
table
- -----------------------------------------------------------------------------------------------
2 BSS v9 conformance Pe/bss/dd/94 Provides the table of compliance
to GSM phase2 3.2en against the latest GSM specs.
- -----------------------------------------------------------------------------------------------
3 BSS fmg validation Pe/sys/djd/244 Test specifications used to establish
test specification 5.1en compliancy
- -----------------------------------------------------------------------------------------------
4 BSS load, fmg, Pe/sys/djd/402 Test spec for traffic management
stability test spec functions under load
- -----------------------------------------------------------------------------------------------
5 GSM BSSMAP spec. Pe/bss/dd/0060 A interface procedure definition in the
Procedures V8.02 view of the BSS
- -----------------------------------------------------------------------------------------------
6 GSM BSSMAP spec. Pe/bss/dd/0066 A interface message dictionary
Messages V8.02
- -----------------------------------------------------------------------------------------------
7 DMS-MSC MAP PLS/MMA2BC Complete MAP Phase 2 spec
Phase 2
Specification
- -----------------------------------------------------------------------------------------------
8 NSS GSM08 http://136.147.68.68/ This document provides the NSS
compliance rdops/sysint/SPECX compliance table for the GSM08
FR/approved spec/i release
ndex.html
- -----------------------------------------------------------------------------------------------
</TABLE>
Air-interface
<TABLE>
<CAPTION>
# Title Reference Description
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
9 BSS L1M validation test Pe/sys/djd/025 BSS v10 layer 1
specification 0 management
V06.02/en functions
- -----------------------------------------------------------------------------------------------
10 BSS TMG validation test Pe/sys/djd/024 Traffic management
specification Tome1 4 functional test (V10)
V06.02/en
- -----------------------------------------------------------------------------------------------
11 BSS TMG validation test Pe/sys/djd/024 Traffic management
specification Tome2 2 functional test (V10)
V02.02/en
- -----------------------------------------------------------------------------------------------
</TABLE>
Page 21 of 29
<PAGE>
MSC - PSTN (SS7,R1,R2,PRI)
<TABLE>
<CAPTION>
# Title Reference Description
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
12 NSS GSM08 compliance http://136.147.68.68 This document
/rdops/sysint/SPEC provides the NSS
XFR/approved_spec compliance table for
/index.html the GSM08 release
- -----------------------------------------------------------------------------------------------
13 ETSI ISUP Specification PLS/ETSIISUP/AD0 Generic list of
4 specification and
procedure to adopt
country specific ISUP
- -----------------------------------------------------------------------------------------------
14 ETSI ISUP R2 Interworking PLS/ETSIIR2IW/AB Specification and tests
03 for R2 PSTN
termination
- -----------------------------------------------------------------------------------------------
15 ETSI PRI < > ETSI ISUP PLS/EPRIESUP/AA Specification and tests
Interworking 09 for PRI PSTN
Release 8.3 termination
- -----------------------------------------------------------------------------------------------
</TABLE>
MSC - TWF
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
# Title Reference Description
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
16 MSC/IWF interface Protocol PLS/MSCIWF Specifies the interface with
Specification the Motorola IWF
- -----------------------------------------------------------------------------------------------
</TABLE>
MAP (HLR - MSC, MSC - MSC, SMS - HLR/MSC, HLR/MSC-SIM)
<TABLE>
<CAPTION>
# Title Reference Description
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
17 DMS HLR MAP v.2 Ae1338rt.ab01 Description of the MAP access
Support protocols to the HLR
- -----------------------------------------------------------------------------------------------
18 DMS HLR basic Ae1338dd.ab01 Description of inter-MSC
roaming protocols for roaming
- -----------------------------------------------------------------------------------------------
19 HLR/AUC PS FILE FMDOC/HMDFT Describes the interfaces
TRANSFER SPEC. supported by the HLR/AUC
Provisioning Server for the
processing of files containing
provisioning data.
- -----------------------------------------------------------------------------------------------
20 MOBILE SUBSCRIBER PLS Describes the interface between
PROVISIONING FMDOC/MSPPS the (AdC) for subscription
PROTOCOL administration towards a DMS
HLR via a DMS HLR/AUC
Provisioning Server (HLR-PS).
- -----------------------------------------------------------------------------------------------
21 SIM PERSONALIZATION PLS Describes the interface between
SYSTEM INTERFACE FMDOC/SPSIS the SIM Personalization System
(SPS) and the HLR/AUC
Mediation Device for the
creation and deletion of
subscribers.
- -----------------------------------------------------------------------------------------------
</TABLE>
VMS - MSC/HLR
<TABLE>
<CAPTION>
# Title Reference Description
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
22 VMS acceptance test Inter - op test lab library Lists the test cases and
plan procedures for VMS
- -----------------------------------------------------------------------------------------------
</TABLE>
Page 22 of 29
<PAGE>
SMS - MSC/HLR
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
# Title Reference Description
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
23 SMS acceptance test plan Inter - op test lab library Lists the test cases and
procedures for SMS
- -----------------------------------------------------------------------------------------
</TABLE>
BILLING
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
# Title Reference Description
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
24 MSC FTAM PLS/DOC/MSC/FTAM Describes the structure of
the CDR in FTAM mode
- -----------------------------------------------------------------------------------------
25 MSC XFER PLS/DOC/MSC/XFER Describes the structure of
the CDR in XFER mode
- -----------------------------------------------------------------------------------------
26 Q-239-1 MSC PLS/DOC/MSC/Q239 Lists CDR parameters
- -----------------------------------------------------------------------------------------
</TABLE>
PBX INTERWORKING
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
# Title Reference Description
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
27 PABX Interworking Document in progress This document will describe
test specification the interworking test for GSM
MSC with Nortel PBX products
- -------------------------------------------------------------------------------------------
</TABLE>
Page 23 of 29
<PAGE>
SCHEDULE "B"
NORTEL LAB COSTS
<TABLE>
<S> <C>
NTP Documentation* $200/doc
Consulting Services $195/hr
Engineering Support $195/hr
Lab Setup Fee $3200/visit
Test Plan Review Fee $1200/plan
Onsite Lab Access (incl. Technical Support) $3120/day
Remote Lab Access $3120/day
Author Test Plan $8000/plan
Exit Report $5200/report
MSC Access Cost
Lab Setup Fee $3200/visit
Engineering Support [two engineers] $390/hr
</TABLE>
- - Documentation fees are per document and do not include interpretation.
*"NTP" means Northern Telecom Practice.
- - Consulting Services and Lab Access are quoted per job based on a specific
statement of work.
- - On site and remote access is available in one-day (i.e., 8-hour) increments.
- - Fees are required in advance.
Page 24 of 29
<PAGE>
SCHEDULE C
TEST BED SPECIFICATIONS
<TABLE>
<CAPTION>
Part No. Description Qty
- -------------------------------------------------------------
<S> <C> <C>
M5060N WAVEXchange NSS 1
S500400N WAVEXchange NSS S/W - Base 1
S500500N WAVEXchange NSS S/W - per TRX 24
M5030N WAVEXpress BSC-30 2
M5320N WAVEXpress 3-TRX BTS (900Mhz) 4
M5322N WAVEXpress 3-TRX BTS (1800Mhz) 4
M8050SN WAVEView OMC-200 1
S500600N WAVEView OMC-200 S/W - Base 1
S500700N WAVEView OMC-200 S/W - per TRX 24
</TABLE>
interWAVE shall provide like for like card substitutions to allow Nortel to
test GSM 1900 versions of interWAVE products.
Page 25 of 29
<PAGE>
SCHEDULE D
PARTIAL TERMINATION REFUND
<TABLE>
<CAPTION>
DATE OF PARTIAL TERMINATION PERCENT REFUND INTERWAVE SHARES* OR US$*
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Prior to 1st Anniversary** 65% 375,556 $2.275 m
Prior to 2nd Anniversary 45% 260,000 $1.575 m
Prior to 3rd Anniversary 30% 173,333 $1.05 m
Prior to 4th Anniversary 15% 86,667 $0.525 m
After 4th Anniversary 0 0 $0
</TABLE>
* For greater certainty, the refund shall be paid in Shares or cash, but not
both, and the amounts shown are based on consideration of three million, five
hundred thousand US dollars (US$3,500,000) or five hundred and seventy-seven
thousand, seven hundred and seventy-eight (577,778) interWAVE shares.
** Anniversary refers to the anniversary of the Effective Date.
Page 26 of 29
<PAGE>
EXHIBIT 10.6
CONFIDENTIALITY REQUESTED
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
REVISED OEM PURCHASE AGREEMENT
THIS AGREEMENT NO. [ ........] is made this [ 27TH ] day of [March ] 1998
BETWEEN
A) NORTHERN TELECOM LIMITED, a company incorporated under the laws of
Canada, having an office at 8200 Dixie Road, Brampton, Ontario, L6T 5P6
Canada, (hereafter referred to as "NTL")
AND
B) interWAVE Communications International, a B.V. company incorporated in
the Netherlands with offices at Emmaplein 5, 1075 AW Amsterdam, P.O.
Box 75215m 1070 Amsterdam, The Netherlands, (hereinafter referred to as
"the Supplier").
collectively referred to as the "Parties" and individually as "Party".
WHEREAS the Purchaser desires to purchase Goods and Services in accordance with
the Specifications and requirements detailed in the Agreement and the Supplier
agrees to supply the same, subject to the terms and conditions set out hereunder
and the Schedules comprising part of the Agreement.
IT IS HEREBY AGREED BETWEEN THE PARTIES AS FOLLOWS:
1. Definitions
The following definitions shall apply to the Agreement and all Purchase Orders:
a) "Affiliates" shall, in the case of NTL, include the parent
corporation Northern Telecom Limited, and Northern Telecom
Inc., and any corporation which the parent corporation
controls directly or indirectly, through the ownership or
control of shares or securities in such other corporation, or
otherwise, and in the case of the Supplier shall include the
parent corporation interWAVE Communications International,
Ltd., a Bermuda corporation, and any corporation which the
parent corporation controls directly or indirectly, through
the ownership or control of shares or securities in such other
corporation, or otherwise.
b) "Agreement" shall mean this agreement between the Purchaser
and the Supplier for the supply of Goods and Services,
including herein all documents to which reference may properly
be made in order to ascertain the rights and obligations of
the Parties.
c) "Customer(s)" shall mean any customer of the Purchaser for
which Goods and/or Services may ultimately be required.
PAGE 1 OF 58
<PAGE>
d) "Equipment" shall mean the materials and hardware described in
Schedule 10.
e) "Goods" shall be the collective term given to Equipment and
Software.
f) "OEM Purchase Agreement Number" shall mean the Agreement No.
first above written.
g) "Purchase Order(s)" shall mean the Purchaser's order placed on
the Supplier in accordance with Clause 4 of the Agreement for
the supply of Goods and/or Services for which the terms and
conditions under the relevant Schedule and those referred to
under Clause 6 shall apply.
h) "Purchaser" shall mean NTL and any Amliate issuing Purchase
Orders under this Agreement.
i) "Services" shall mean the services to be provided by the
Supplier to the Purchaser as detailed in any Purchase
Order(s), including but not limited to, engineering services
and Technical Support.
j) "Specification" shall mean the document(s) detailed in
Schedule 3.
k) "Software" shall mean software programs and associated
documentation described in Schedule 10.
l) "Technical Support" shall mean the provision, by the Supplier,
of the support and maintenance services for Equipment and
Software as detailed in Schedule 4, Clause 4.
m) The singular includes the plural and vice versa, where the
context so requires.
n) The masculine includes the feminine and vice versa.
2. SCOPE
The Agreement provides a simplified procedure under which, from lime m
time, the Purchaser may place Purchase Orders for the supply of Goods
and/or Services in accordance with the terms detailed therein. The
Goods and Services which may be supplied under the Agreement are:
2.1 Supply of Goods;
2.2 Engineering/Installation Services (only to the extent mutually
agreed upon by the parties);
2.3 Spares of Equipment;
2.4 Support services in accordance with the provisions of Schedule
4;
2.5 Training courses for Purchaser and Customer personnel in
accordance with Schedule 5; and
2.6 Documentation for Goods as described in Schedule 3.
3. TERM AND TERMINATION OF THE AGREEMENT
PAGE 2 OF 58
<PAGE>
3.1 The Agreement shall commence on the date first above written
and shall, subject to the earlier termination in accordance
with the provisions contained therein, continue for a period
of five (5) years wherein it shall terminate unless extended
for such further period or periods as shall be agreed, in
writing, between the Parties.
3.2 Without prejudice to other rights, either party shall have the
right forthwith to terminate the Agreement upon written
notice, including all Purchase Orders, and to claim for any
resulting losses or expenses if the other party commits a
breach of the Agreement and fails to remedy the breach within
60 days of written notice from the non-defaulting parties
indicating: (i) the nature and basis of such default with
reference to the applicable provisions of this Agreement, and
(ii) the non-defaulting party's intention to terminate this
Agreement under this sub-clause 3.2 if such default continues.
3.3 Termination of this Agreement shall not affect the validity of
software licenses for Equipment previously sold by Supplier.
Upon termination of the Agreement pursuant to sub-clause 3.2,
all obligations of both parties accruing after the date of
termination, shall be terminated (except as set forth in
sub-clause 3.4), including Purchaser's obligation to pay
penalties for subsequent quarters pursuant to Schedule 9,
provided that any such termination shall have no effect on the
terminating party's rights to claim for any resulting losses
and expenses as set forth in sub-clause 3.2.
3.4 The provisions of Clauses 7, 10 and sub-clause 11.5 shall
survive any termination or expiration of this Agreement.
4. ORDERING PROCEDURE AND FORECAST
4.1 Goods and Services shall be supplied in accordance with
accepted Purchase Order submitted by the "Procurement
Administrator" of the Purchaser. Such Procurement
Administrator is detailed in Schedule 7.
4.2 Purchase Orders will be sent to the address detailed in
Schedule 7.
4.3 All Purchase Orders will quote the "OEM Purchase Agreement
Number" and the Supplier's Part Number (as shown in Schedule
2 ).
4.3.1 This Agreement will be supplemented by a
configuration guide to be completed jointly by the
Purchaser and Supplier within 30 days of signing this
Agreement. The material in the configuration guide
shall be created to assist the Purchaser in
developing sales materials and to facilitate the
ordering process as further described in sub-clause
4.3.2.
4.3.2 This Agreement will be supplemented by an ordering
guide to be completed jointly by the Purchaser and
Supplier within 45 days of signing this Agreement.
The material in the ordering guide will contain
further clarifications to Schedule 2 and will be
consistent with the contents of this Agreement. In
the case of dispute between this agreement and the
ordering guide, this agreement shall prevail. The
sole purpose of these actions will be to simplify the
ordering and delivery of the goods and is not meant
to alter or modify this agreement.
PAGE 3 OF 58
<PAGE>
4.4 The Supplier hereby agrees to acknowledge all Purchase Orders
which conform to the terms of the Agreement. The Supplier
shall forward a written acknowledgement of receipt of Purchase
Orders within 2 working days of receipt thereof to the address
given in Schedule 7 (sub-clause 3.1), and written acceptance
or rejection within seven (7) days, failing which the Purchase
Order shall be deemed accepted by the Supplier. Supplier shall
use best efforts to accept Purchase Orders for aggregate
quantities up to those in Purchaser's forecast for the
corresponding period as described in Schedule 2. All Purchase
Orders once accepted shall constitute separate and individual
contracts under the Agreement.
4.5 The delivery/performance lead times for Goods and Services are
detailed in Schedule 2 Paragraph 4.
4.6 Periodic Reviews and Goods Volume Forecast
4.6.1 Purchaser shall provide forecasts of the Purchaser's
required volume of Goods as set forth in Schedule 2.
Manufacture of Goods in advance of receipt of valid
Purchase Orders shall be at the Supplier's sole risk
and expense, except as set forth in Schedule 9.
4.6.2 The Parties will meet monthly to review each other's
performance of its obligations under the Agreement.
Such reviews will include:
4.6.2.1 The Suppliers performance in respect off
quality requirement stock holding levels,
lead times;
4.6.2.2 Price;
4.6.2.3 Forward order book;
4.6.2.4 Forecasts and orders and open technical
issues; and
4.6.2.5 under the Agreement.
4.7 Each Affiliate may, but shall not be obligated to, issue
Purchase Orders to the Supplier, and the Supplier shall
fulfill such Purchase Order in accordance with the provisions
of this Agreement. Each Purchase Order issued to Supplier
shall create rights and obligations solely between the
Supplier and the Affiliate which issues the Purchase Order. No
Affiliate shall be liable to Supplier for performance of any
obligation of another Affiliate arising in connection to this
Agreement. For purpose of this Agreement, an Affiliate issuing
a Purchase Order shall be considered as Purchaser in terms of
the rights and obligations set forth in this Agreement. Such
Purchase Orders shall be submitted to the Supplier by the
Affiliate through the Procurement Administrator as set forth
in Schedule 7.
5. PRICE
5.1 The price(s) to be paid by the Purchaser for the supply of
Goods and Services:
PAGE 4 OF 58
<PAGE>
- are detailed in Schedule 2 of the Agreement., as may
be amended from time to time in accordance with the
provisions detailed therein;
- will be stated on the Purchase Order and shall be
consistent with this Agreement;
- are exclusive of VAT, sales and all other like taxes,
customs, duties, tariffs, and other similar charges,
provided that the Supplier agrees not to assess any
applicable excise or sales tax where the Purchaser
furnishes Supplier a valid tax exemption certificate,
a certificate of authority, a direct pay permit
and/or any equivalent acceptable to the applicable
taxing authority.
- do not include all shipping, freight, delivery and
insurance charges for shipments to the address
detailed on the Purchase Order in the United States,
which will be born by the Purchaser, and unless
otherwise agreed to in writing, the Supplier shall be
entitled to invoice the Purchaser for the price of
Goods shipped outside the United States including any
transport, packaging, and insurance charges.
- shall be set forth on the invoice billed to Purchaser
along with a reference to the Purchase Order for such
Goods.
5.2 Supplier shall use all reasonable efforts to provide accurate
tax, delivery, and insurance information on all invoices where
appropriate.
5.3 The Purchaser shall withhold taxes required to be withheld
from payments made by the Purchaser to the Supplier.
5.4 The price(s) stated in Schedule 2 are FOB Supplier's plant.
6. PURCHASE ORDER TERMS AND CONDITIONS
6.1 Unless otherwise agreed in writing by both parties, the terms
and conditions detailed in Schedule 1 shall apply to all
Purchase Orders and shall prevail over and be to the exclusion
of any terms. and conditions proposed by either party in any
Purchase Order acknowledgment or any other document.
6.2 Sub-clause 6.1 shall not serve to prevent either party
requesting amendments to the terms and conditions detailed in
Schedule 1 to reflect Customer, supplier or other requirements
for specific projects. The Parties agree to discuss, in good
faith, any such requested amendments.
7. CONFIDENTIALITY
7.1 Each of the parties recognizes and agrees that the
unauthorized use or disclosure of the other party's
confidential or proprietary information relating to such
party's business plans, technology, and products
("Confidential Information") would cause irreparable injury to
the disclosing party for which it would have no adequate
remedy at law, and that an actual or
PAGE 5 OF 58
<PAGE>
threatened breach of this Clause shall entitle the disclosing
party to obtain immediate injunctive relief prohibiting such
breach, in addition to any other rights and remedies available
to it. If Confidential Information is disclosed orally, the
disclosing party shall notify the receiving party of the
confidential nature of the Confidential Information at the
time of disclosure and such Confidential Information shall be
reduced to writing, marked as confidential and delivered to
the receiving party within thirty (30) days after oral
disclosure.
7.2 For the period during and for three (3) years following the
last clay of the term all Confidential Information shall be
subject to the following:
7.2.1 The recipient shall restrict disclosure of the
Confidential Information to recipient's employees and
contractors with a "need to know" (i.e. employees and
contractors that require the Confidential Information
to perform their responsibilities in connection with
this Agreement) and shall not disclose it to any
other person or entity without the prior written
consent of the disclosing party,
7.2.2 The recipient shall use the Confidential Information
only for the purposes of performing under this
Agreement;
7.2.3 The recipient shall advise those employees and
contractors who access the Confidential Information
of their obligations with respect thereto;
7.2.4 The recipient shall copy the Confidential-Information
only as necessary for those employees and contractors
who are entitled to receive it and ensure that all
confidentiality notices are reproduced in full on
such copies; and
7.2.5 The recipient shall return all copies of such
Confidential Information to the disclosing party at
the disclosing party's request.
7.2.6 If any Confidential Information is required to be
disclosed in response to a valid order of the court
or lawful request of a government agency, the
recipient shall first notify the disclosing party of
the order or request and permit the disclosing party
to seek an appropriate protective order.
7.3 The confidentiality obligations set forth in this Clause 7
will not apply to any Confidential Information that:
- becomes known to the general public without fault or
breach on the part of the receiving party;
- the receiving party obtains from a third party
without breach of a nondisclosure obligation and
without restriction on disclosure;
- is furnished to a third party by the disclosing party
without a similar restriction on such third party's
rights;
- can by written records be shown to have been known by
the receiving party at the time of disclosure; or
PAGE 6 OF 58
<PAGE>
- the receiving party can demonstrate to the reasonable
satisfaction of the disclosing party was developed
independently by employees or contractors of the
receiving party who had no access to Confidential
Information directly related to such independent
development
7.4 Neither party shall publicly disclose any information
regarding the terms and conditions contained herein without
having received prior approval, in writing, from the other
party.
8. QUALITY REQUIREMENTS
The quality requirements detailed in Schedule 6 shall apply to all
Goods and Services supplied under or in connection with the Agreement.
9. ENTIRE AGREEMENT
This Agreement, together with its Schedules and all Purchase Orders,
along with the Series G Preferred Stock and Warrant Purchase Agreement,
the Technical Information Agreement, and the Patent License Agreement,
together constitute the complete statement of the obligations of the
Parties as to the subject matter hereof and supersedes all previous
agreements and understandings between the Parties, whether oral or
written, and may not be modified except in writing signed by the duly
authorized representatives of both Parties. The OEM Purchase Agreement
entered into between the parties and dated March 17, 1998 is superseded
and replaced in its entirety by this Revised OEM Purchase Agreement.
10. DISPUTES AND GOVERNING LAWS
10.1 In the event the Parties are unable to amicably settle
disputes between them, and unless the Parties mutually elect
to pursue an alternative dispute procedure, whether binding or
non-binding, all actions or proceedings to enforce, or which
arise in connection with or relate to, this Agreement, any of
the agreement in the form of Exhibits hereto or any of the
transactions contemplated hereby or thereby shall be brought
and litigated exclusively in the United States District Court,
Northern District of California (or, in the event such court
does not have jurisdiction, the courts of the State of
California located in such district), unless such actions or
proceedings are required to be brought in another court to
obtain subject matter jurisdiction over the matter in
controversy. In any such actions or proceedings, service of
process may be made upon the other Party hereto by registered
or certified mail, return receipt requested, to its address
indicated herein, which service shall be deemed effective 10
days after mailing, Each of the Parties hereto (i) consents to
the jurisdiction of such court or courts and to service of
process by registered or certified mail, as provided above, or
by any other manner provided by the laws of the State of
California and the rules of such courts and (ii) waives any
right it may have to assert the doctrine of FORUM NON
CONVENIENS, to assert that it is not subject to the
jurisdiction of such courts or to object to venue to the
extent any action or proceeding is brought in accordance with
this sub-clause.
10.2 WAIVER OF TRIAL BY JURY. THE SUPPLIER AND NTL WAIVE THE RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING UNDER THIS
AGREEMENT OR ANY
PAGE 7 OF 58
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ACTION OR PROCEEDING ARISING OUT OF THE TRANSACTIONS
CONTEMPLATED HEREBY, REGARDLESS OF WHICH PARTY INITIATES
ANY SUCH ACTION OR PROCEEDING.
10.3 This Agreement and all Purchase Orders shall be governed by
the laws of the State of California, without application of
conflict of law rules. The Vienna International Convention for
the Sale of Goods shall not apply.
11. GENERAL
11.1 Any notice to be given under the Agreement must be in writing
and may either be delivered by hand or sent by prepaid post to
the appropriate "Authorized Representative" or "Procurement
Administrator" at the address given in Schedule 7.
11.2 Nothing in this Agreement shall prevent either Party from
entering ,into other supply and/or marketing arrangements with
third parties for similar Goods and Services except as
specified in Schedule 9 or in a manner which otherwise
conflicts with the rights granted to the Purchaser under
sub-clause 11.1 of Schedule 1.
11.3 No claim or right arising out of breach of the Agreement by
either party may be discharged in whole or in part by any
waiver or renunciation of the claim or right unless such
waiver or renunciation is in writing, signed by the other
party.
11.4 Neither party may novate or assign this Agreement or any of
its rights benefits or obligations arising thereunder without
the prior written consent of the other party, except that
either party may assign and delegate all of is rights and
obligations hereunder in conjunction with a sale of all or
substantially all of it business or assets to which the
Agreement relates, and that Supplier may assign this Agreement
to a Supplier Affiliate provided that Supplier shall remain
liable for its obligations hereunder.
11.5 EXCEPT FOR INDEMNIFICATION UNDER SCHEDULE 1, SECTION 19 (FOR
WHICH LIABILITY IS ADDRESSED IN SECTION 19.7) OK WILLFUL
BREACH OF CLAUSE 7, IN NO EVENT SHALL EITHER PARTY'S LIABILITY
ARISING OUT OF OR RELATED TO THIS AGREEMENT EXCEED THE NET
AMOUNTS PAID OR OWED BY PURCHASER TO SUPPLER HEREUNDER DURING
THE PREVIOUS TWELVE MONTHS. IN NO EVENT SHALL EITHER PARTY BE
LIABLE HEREUNDER, WHETHER IN CONTRACT, TORT (INCLUDING
NEGLIGENCE) OR OTHERWISE FOR ANY FORM OF INDIRECT OR
CONSEQUENTIAL LOSS, INCLUDING BUT NOT LIMITED TO, LOSS
(WHETHER DIRECT OR INDIRECT) OK USE, PRODUCTION, BUSINESS,
ANTICIPATED SAVINGS, INCOME OR PROFITS EVEN IF SUCH LOSS WAS
REASONABLY FORESEEABLE OR IF SUCH PARTY HAD BEEN ADVISED OF
THE POSSIBILITY OF THE OTHER PARTY INCURRING THE SAME.
SCHEDULE 1 TERMS AND CONDITIONS FOR SUPPLY
SCHEDULE 2 PRICES
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SCHEDULE 3 SPECIFICATIONS
SCHEDULE 4 SUPPORT REQUIREMENTS
SCHEDULE 5 TRAINING PROGRAMS
SCHEDULE 6 QUALITY REQUIREMENTS
SCHEDULE 7 ORDERING AND BILLING DETAILS
SCHEDULE 8 ESCROW
SCHEDULE 9 PURCHASING BASELINE AND EXCLUSIVITIES
SCHEDULE 10 PRODUCT DESCRIPTIONS
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<PAGE>
IN WITNESS WHEREOF the Parties have entered into this Agreement the day and year
first above written
SIGNED BY
a duly authorized person on
behalf of Northern Telecom Limited
Signature } /s/: James Cochrane
-----------------------
Name }JAMES J. COCHRANE
------------------------
Position }MANAGER M & A
------------------------
Signature }
-----------------------
Name }
-----------------------
Position }
-----------------------
SIGNED BY
a duly authorized person on
behalf of interWAVE Communications International
Signature }/s/: xxxx
------------------------
Name }THOMAS W. HUBBS
------------------------
Position }Sr. VP CFO
------------------------
PAGE 10 OF 58
<PAGE>
SCHEDULE 1
TERMS AND CONDITIONS FOR SUPPLY
<TABLE>
<CAPTION>
CONTENTS PAGE
<S> <C>
1. DEFINITIONS...........................................................................................................12
2. STANDARD AND SCOPE OF WORK............................................................................................12
3. PURCHASER SUPPLIED ITEMS..............................................................................................12
4. DELIVERY..............................................................................................................13
5. QUALITY ASSURANCE.....................................................................................................14
6. REGULATORY COMPLIANCE.................................................................................................14
7. INSPECTION, ACCEPTANCE AND REJECTION..................................................................................15
8. ACCESS................................................................................................................16
9. PAYMENT ..............................................................................................................16
10. TITLE AND RISK.......................................................................................................17
11. LICENSES - GENERAL...................................................................................................17
12. SOFTWARE LICENSE RIGHTS..............................................................................................18
13. BADGING..............................................................................................................18
14. VARIATIONS...........................................................................................................18
15. GUARANTEE............................................................................................................19
16. DELAYS...............................................................................................................23
17. TERMINATION..........................................................................................................23
18. CANCELLATION.........................................................................................................23
19. INTELLECTUAL PROPERTY................................................................................................24
20. INDEMNIFICATION AND INSURANCE........................................................................................25
21. CONFIDENTIALITY......................................................................................................25
22. FORCE MAJEURE........................................................................................................25
23. PROPRIETARY NOTICES..................................................................................................26
24. RECOVERY OF SUMS DUE.................................................................................................26
25. GENERAL..............................................................................................................26
</TABLE>
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1. DEFINITIONS
In addition to the definitions detailed in Clause 1 of the Agreement,
the following definitions shall apply to the Purchase Order:
a) "Acceptance" shall mean that the Goods or part thereof have
been completed in accordance with the terms of the Purchase
Order and to the satisfaction of the Purchaser.
b) "Acceptance Tests" shall mean the inspection and testing,
including field testing, to be carried out by the Purchaser to
establish that the Goods have been completed in accordance
with the Purchase Order. The inspection and testing to be
carried out are detailed in the Acceptance Test Specification,
identified in Schedule 3, and/or such other tests as may be
agreed in writing between the Purchaser and the Supplier.
c) "Design Defect" shall mean a defect inherent in the design or
manufacture of the Goods.
d) "Factory Tests" shall mean the inspection and testing of
Goods, to be carried out by the Supplier at his works prior to
shipment, in accordance with the Factory Test Specification
identified in Schedule 3.
2. STANDARD AND SCOPE OF WORK
2.1 Goods and Services shall be supplied in accordance with the
Specification(s) and Schedules of the Agreement and any other
requirements as may be agreed in writing by the parties .
2.2 The Supplier shall use good quality materials, techniques and
standards and execute the Purchase Order with the care, skill
and diligence required in accordance with best engineering and
telecommunications practice and the provisions of this
agreement.
3. PURCHASER SUPPLIED ITEMS
All property issued (hereinafter referred to as "Issued Property") by
the Purchaser to the Supplier under the Purchase Order shall be subject
to the following:
3.1 Title in Issued Property shall remain at all times with the
Purchaser;
3.2 Issued Property shall be used solely for the purpose of
carrying out the requirements of the Purchase Order, and
3.3 Issued Property shall be at the risk of the Supplier from
delivery to the Supplier's site or other premises, as agreed,
until the Issued Property is returned to the Purchaser in
accordance with 3.3.1 or 3.3.2, as appropriate.
3.3.1 Where Issued Property is embedded in or combined with
the Goods, risk in such Issued Property shall revert
to the Purchaser when such Issued Property has been
delivered to the Purchaser in accordance with the
Purchase Order.
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<PAGE>
3.3.2 Any issued Property not used by the Supplier for
his performance of the Purchase Order shall be
returned to the Purchaser within fourteen (14) days
of completion of the Purchase Order, in good
condition and at the Supplier's expense.
3.4 Unless the Supplier advises the Purchaser to the contrary
within five (5) days of receiving Issued Property, such Issued
Property shall be deemed to have been delivered to the
Supplier in a satisfactory condition and be fit for the
purpose detailed in the Purchase Order.
3.5 While Issued Property is at the risk of the Supplier in
accordance with sub-clause 3.3, the Supplier shall maintain
adequate insurance policies to cover such risk. On request, by
the Purchaser, the Supplier shall provide evidence that such
insurance is in effect. Where the Supplier cannot demonstrate,
to the reasonable satisfaction of the Purchaser, the existence
of such insurance, the Purchaser shall have the right to
effect such insurance as may be necessary. The cost of such
insurance shall be for the Supplier's account.
3.6 While in the Supplier's custody, the Goods shall be clearly
marked as the property of the Purchaser. The Purchaser shall
be permitted access to the Supplier's. premises at any time to
inspect and/or remove Issued Property.
4. DELIVERY
4.1 The Goods and Services are to be supplied/performed in
accordance with the time scales stated on the Purchase Order
and consistent with the time frames and lead times of Clause 4
of Schedule 2 in the provisions of this agreement.
4.2 The Goods and Services shall be delivered to or performed at
the address(es) stated on the Purchase Order. No shipments
shall be made to such address(es) without the prior
notification of the Purchaser.
4.3 The Supplier shall:
4.3.1 package the Goods in such a manner to ensure their
delivery undamaged to the delivery address(es). Each
package shall be clearly marked with the Purchaser's
name, delivery address and the number of packages;
and
4.3.2 supply an advice note showing the Purchase Order
number, the Purchaser's part number, quantity
delivered, number of packages, method and route of
transportation to the Purchasers "Goods-In Receiving
Office". One copy of such advice note shall accompany
the Goods on delivery.
4.4 The Supplier shall give the Purchaser such prior written
notice as the Purchaser may require of delivery of Goods or
any other items having a toxic hazard or other hazard to the
safety or health of persons or property. Such notice shall
identify the hazards and give full details of any precautions
to be taken by the Purchaser on receipt of such Goods or other
items and their appropriate storage or handling requirements.
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<PAGE>
4.5 The Supplier shall notify the Purchaser immediately where any
event occurs that will or is likely to delay delivery of the
Goods or performance of Services. Such notification shall
include details of the Supplier's recovery plan to remedy the
delay. The submission of such notification shall not release
the Supplier from the performance of its obligations under the
Purchase Order.
5. QUALITY ASSURANCE
The Supplier shall comply with the quality requirements detailed in Schedule 6
of the Agreement.
6. REGULATORY COMPLIANCE
6.1 To the extent applicable all Goods delivered to Purchaser or
Affiliate-under this Agreement shall:
a) be approved and listed and listed as authorized to
bear the CE Mark certifying the product as meeting
all safety and emissions standards as required for
the equipment;
b) be verified, accepted and approved by Underwriter's
Laboratories ("U.L") and in compliance with Class B
under part 15 and other applicable limits under part
24 of the Regulations of the U.S. Federal
Communications Commission.
6.2 To the extent applicable, all user manuals or other operator
manuals and/or written material supplied with the Products
shall contain any appropriate warning notices.
6.3 Supplier agrees it shall ship no Goods prior to issuance of
the approvals set forth in sub-clause 6.1 or those identified
in 6.4 without the prior written consent of the Purchaser or
its Affiliate.
6.4 Both parties agree to the following steps to determine if all
necessary approvals have been issued by the appropriate
agencies before committing to delivery.
6.4.1 Supplier shall provide to Purchaser a list of
regulatory/compliance approvals it has received. This
list will be updated on a quarterly basis.
6.4.2 Purchaser shall identify and provide to Supplier
information on the nature and scope of additional
regulatory/compliance approvals required to pursue an
opportunity within 30 days after the country specific
requirement appears in the 12 month forecast
Based upon the information in sub-clause 6.4.2 the Parties will agree
to do one of the following.
6.4.2.1 Supplier may agree to obtain regulatory plus
government approvals within 120 days of the
initial notification stated in sub-clause
6.4.2. Supplier must confirm its intentions
to do so within 30 days after receipt of a
written request. If Supplier agrees to
obtain the necessary approvals it must
provide to Purchaser written verification of
such approvals within the 90 day period
after has stated its intentions to do so.
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<PAGE>
6.4.2.2 If Supplier declines to obtain such
approvals, the Purchaser may agree to obtain
the necessary approvals and Purchaser shall
be compensated for its out-of-pocket costs
by the Supplier after obtaining such
approval.
6.4.2.3 If both Purchaser and Supplier decline to
obtain such approvals ,the Purchaser's
volume commitment shall be reduced by the
dollar amount of the forecast for the
affected countries.
7. INSPECTION, ACCEPTANCE AND REJECTION
7.1 Factory Inspection and Testing
7.1.1 Prior to shipment, all Goods shall be subject to
Factory Tests.
7.1.2 The Purchaser shall make a request to the Supplier to
attend and witness Factory Testing of Goods five (5)
days prior to the commencement of Factory Tests, if
the Purchaser so desires. If the Purchaser fails to
attend Factory Tests, the Supplier shall nevertheless
carry out Factory Tests, the results of which shall
accompany the Goods when delivery takes place, unless
otherwise agreed.
7.1.3 Without prejudice to the Supplier's obligations to
deliver Goods by the due date(s), Goods shall not be
shipped to the Purchaser until they have successfully
completed all Factory Tests.
7.2 Inspection and Testing after Delivery
7.2.1 Goods shall, at the Purchaser's discretion be subject
to Acceptance Tests by the Purchaser after delivery.
On successful completion of the Acceptance Tests, the
Purchaser will, subject to 7.2.2, issue to the
Supplier a certificate of "Acceptance" which shall
detail the date the Acceptance Tests were
successfully completed or commercial service
whichever is first.
7.2.2 Where Goods do not successfully complete the
Acceptance Tests, the Purchaser will issue within two
(2) days of completion of Acceptance Tests to the
Supplier, a notice of rejection which shall detail
the faults complained of. The Supplier shall:
- within a period of fifteen (15) days,
immediately following notification, remedy
such faults.
7.2.3 The Purchaser in accordance with sub-clause 7.2.2
shall be subject to repeat Acceptance Tests.
7.2.4 Where the Supplier fails to remedy faults within the
period detailed in 7.2.2, the Purchaser shall without
prejudice to any other rights or remedies, have the
option to either:
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<PAGE>
- extend the period for remedy of faults by
the Supplier, or
- remedy the faults, or have the faults
remedied by a third party and recover from
the Supplier any costs and expenses recurred
in so doing with prior notification from the
Purchaser. Remedy of faults under this
clause shall not invalidate the guarantee
given under Clause 15.
7.2.5 In the event that neither the Supplier nor the
Purchaser chooses to remedy the faults, the Purchaser
shall be allowed to cancel that portion of the
Purchase Order that relates to the faulty Goods.
8. ACCESS
8.1 The Purchaser, and if required its Customer, shall be
permitted to enter the Supplier's premises, at any reasonable
time, for any purpose in connection with the Purchase Order,
provided that the Purchaser gives to the Supplier at least two
(2) working days prior written notice.
8.2 The Supplier shall make best efforts possible to ensure that
any sub-contracts relating to the Purchase Order permit
similar access rights to the sub-contractor's premises for the
Purchaser's and, if required, its Customer's personnel.
9. PAYMENT
9.1 The Supplier may submit invoices for payment to the Purchaser:
9.1.1 for Goods based upon the following schedule
30% on Order
50% on Shipment
20% payment of invoice due upon the earlier of:
- completion of the Acceptance Tests, or
- Goods in commercial service, or
- 120 days after shipment where the Goods have
not been rejected or returned in accordance
with sub-clause 7.2.2. in Schedule 1.
9.1.2 for spares; on shipment; or
9.1.3 ten (10) days after shipment of documentation
conforming to the requirements of this Agreement; or
9.1.4 for training; on completion of the training course;
or
9.1.5 unless otherwise agreed, monthly in arrears for the
provision of engineering/installation services; or
PAGE 16 OF 58
<PAGE>
9.1.6 quarterly in advance for the provision of Technical
Support.
9.1.7 for Shortfall Payments at the end of the
corresponding quarter as per Schedule 9.
9.2 Payment of valid invoices is due within days of date of
invoice by the Purchaser.
9.3 Invoices must be submitted to the address detailed in
sub-clause 3.2 of Schedule 7 to the Agreement, quote the
Purchase Order number and detail the Goods and Services to
which they relate.
10. TITLE AND RISK
10.1 Title in Goods (excluding Software for which a license to use
will be granted in accordance with Clause 12) shall pass to
the Purchaser FOB Supplier's plant for shipments within the
United States and title in Goods for all other shipments shall
pass to the Purchaser at port of entry of the country
addressed on the Purchase Order.
10.2 Risk of loss or damage to the Goods shall pass according to
sub-clause 10.1. Where Goods are rejected in accordance with
sub-clause 7.2.2, risk in the Goods shall revert back to the
Supplier if rejected Goods are not remedied and re-delivered
in accordance with sub-clause 7.2.2.
11. LICENSES- GENERAL
11.1 It is acknowledged by the Supplier that procurement of Goods,
by the Purchaser, may be for direct or indirect re-sale
(including installation), lease or hire to Customers anywhere
in the world in accordance with 11.4.
11.2 In pursuance of 11.1, the Supplier hereby grants to the
Purchaser a non-exclusive, irrevocable, royalty free license
to:
11.2.1 use, lease, hire, sell (including installation) and
maintain Equipment anywhere in the world; and
11.2.2 use, copy and reproduce in whole or in part any
literature whatever relating to Goods for the
purposes of such lease, hire, maintenance and sale of
Goods anywhere in the world.
11.3 The Supplier warrants that it has the right to grant the
licenses detailed under Clause 11.2.
11.4 Purchaser shall have sole responsibility for ensuring that it
has obtained all necessary approvals and licenses from the
relevant export authorities prior to the delivery date for any
Purchase Order for delivery outside the United States, or
before re-exporting any Goods outside the United States. The
Supplier shall provide the information to assist the Purchaser
in obtaining necessary licenses for re-exportation of Goods to
any ultimate destination outside of the United States.
PAGE 17 OF 58
<PAGE>
Further, the supplier shall provide such assistance as the
Purchaser may reasonably require to obtain import duty
relief for onward sale of Goods.
11.5 The Supplier undertakes, without delay, to notify the
Purchaser of any export restrictions that arise that may
affect the Purchaser's ability to maintain or offer for sale,
lease or hire Goods in a particular country. The Supplier
shall provide written notification to the Purchaser
immediately after cessation of such export restrictions.
12. SOFTWARE LICENSE RIGHTS
12.1 Where Software is supplied under the Purchase Order whether
incorporated in any Equipment or otherwise, then without
prejudice to any other licenses or rights granted to the
Purchaser under the Purchase Order, the Supplier hereby grants
to the Purchaser a non-exclusive, irrevocable, royalty free
license to use, sell, lease, hire, install repair, maintain
and/or dispose of the Software anywhere in the world. Such
license shall include the right for the Purchaser to
sub-license the Software directly or indirectly on
substantially the same terms to Customers and the right to:
12.1.1 use the Software for the purpose of training,
operating networks, maintaining and supporting
Customer's telecommunications networks and making
copies for back-up purposes;
12.1.2 modify documentation provided to the Purchaser and
distribute such modified documentation directly or
indirectly to Customer's.
12.2 The Supplier confirms that it has full right and title to
grant to the Purchaser the Software license rights included
under this Clause 12.
12.3 The provisions of this Clause 12 shall survive the expiry or
termination of the Purchase Order..
13. BADGING
13.1 The Purchaser shall sell or sub-license Goods under the
Northern Telecom name or for that of its Customer(s), with
prior written consent of the Supplier, which is not to be
unreasonably withheld. If requested, by the Purchaser, the
Supplier shall supply Goods complete with the appropriate logo
affixed to the Goods.
13.2 Where the Purchaser exercises its rights under sub-clause
13.1, the Purchaser shall provide details of the logo and
positioning not later than three (3) weeks prior to the due
date for delivery.
14. Variations
14.1 The Purchaser shall make every effort to place Purchase Orders
in accord with this agreement. In the event of unusual
circumstances, the Purchaser may request the Supplier to make
modifications to the Purchase Order. The Supplier shall make
best efforts to furnish details of the effect such Variation
will have on the Goods and Services within ten (10) days of
receipt of the Purchaser's request or such other period as may
be agreed.
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14.2 Where the Supplier shows that a Variation in accordance with
sub-clause 14. 1 involves a change in the cost or time scales
for the Goods and/or Services, the Supplier shall use best
efforts to keep the change to the time scales and extra costs
or savings arising from the Variation reasonable. The
provisions of Schedule 2 of the Agreement sub-clause 3.2 shall
apply.
14.3 The Supplier shall not vary the Goods and Services to be
supplied under the Purchase Order in any respect unless
instructed in writing to do so by the Purchaser and so long as
the variations still conform with and are included in this
Agreement.
15. GUARANTEE
15.1 If during a period of sixteen (16) months from shipment
acceptance or during the "Guarantee Period", the Supplier is
notified of a material defect in the Goods that is due to
faulty design, manufacture, materials, workmanship, inadequate
performance against Specification or the negligence of the
Supplier, the Supplier shall, at the Supplier's option,
correct, modify, repair or replace the Goods at the Supplier's
expense. Such correction, modification, repair or replacement
shall be carried out:
- for Equipment; within a period of thirty (30) days of
return of the Equipment to the Supplier's works; and
- for Software; within the time scales detailed in
Schedule 4, Clause 4.2, appropriate to the category
of defect; and
- the parties agree to make their best effort to work
together to reduce the above lead time in the future.
15.2 All Goods shall be marked (in a manner to be agreed by the
Purchaser) with a date code which corresponds to the date that
the Equipment was finished being Factory Tested at the
Supplier's works.
15.3 All Goods corrected, modified, repaired or replaced in
accordance with sub-clause 15.1 shall from the date of
shipment of the repaid Equipment to the Customer site, be
re-warranted for the remainder of the original Guarantee
Period or for a period of seven (7) calendar months, whichever
is the longer.
15.4 If any defect notified in accordance with sub-clause 15.1 is
not remedied within the period specified, the Purchaser may,
without prejudice to its other rights and remedies in respect
of the Supplier's failure to remedy such defect, proceed to do
the work at the Supplier's risk and expense with the
Supplier's prior approval. Remedy of defects under this
sub-clause 15.4 shall not invalidate the guarantee given under
sub-clause 15. 1.
15.5 Equipment Deficiency and Product Change Notices
Supplier may, at any time, make Class A, Class B or Class D
product changes to the Equipment or modify the drawings and
specifications relating thereto (hereinafter referred to as
"Product Change"), provided that any such Product Change, does
not affect form, fit or function of the
PAGE 19 OF 58
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Equipment or the interchangeability of the Equipment with
other Equipment, or with spare parts, and that Supplier
notifies the Purchaser in writing thereof as soon as
practicable. In the event any Product Change affect form, fit
or function or interchangeability of the Products, Supplier
shall notify the Purchaser in writing thereof prior to any
planned changes 120 days in advance, except Class D Changes -
non Customer Affecting, and if such change adversely affects
Purchaser or its Customers, Purchaser may reject such Product
Change. In the event the Purchaser rejects the planned change
and so notifies Supplier within ten (10) days and Supplier
fails to reach agreement thereon, the Purchaser shall have the
right to terminate any and all orders, in whole or in part,
for the Equipment affected by such change. Notwithstanding any
notice requirement above to the contrary, Supplier shall
immediately notify the Purchaser when it determines that a
Class A Product Change (as defined hereinafter) shall be made.
Supplier shall be authorized to make Class A Product Changes
as soon as practical.
15.5.1 Class A Product Change
Class A Product Changes are changes required to
correct an Equipment deficiency (e.g., safety or fire
hazard, electrically or mechanically inoperative,
unsatisfactory operation, design defects, Equipment
does not operate as specified). If after at least 750
units of a board or equipment are in service, the
monthly board or equipment failure rate (Number of
board or equipment returned within a month/Total
Number of board or equipment in service), as
specified by the Purchaser's trouble tickets,
averages higher than 2% over a three (3) month
period, a Class A Product Change will be required.
The number of board or equipment failures shall not
include the number of "No Fault Founds" or any
failures due to improper operation, handling or
maintenance as described in the Supplier's relevant
Equipment documentation. Class A Product Changes
require immediate action by Supplier to correct all
affected Equipment, whether in the hands of Supplier
or the Purchaser or their Customers including spare
Products. In some cases, however, it may be necessary
to make a change to only a limited number of a
particular type of Equipment. (This occurs when it is
necessary to correct a condition that occurs only in
certain Equipment combinations or with the use of
certain options). Such conditions shall be described
in the Product Change Notice.
Supplier shall, no later than thirty (30) days from
the date of the notification of a Class A Product
Change, provide a schedule, acceptable to the
Purchaser for promptly implementing, at Supplier's
expense, such changes with respect to the Equipment
in the Purchaser's or their Customer's possession.
Such implementation shall include the
de-installation, if necessary, of existing Equipment
and the engineering and installation of replacement
or modified Equipment or any additional materials.
The Guaranty period for redesigned Equipment will be
twelve (12) calendar months from the date of shipment
and for repaired Equipment seven (7) calendar months
from date of shipment.
15.5.2 Class B Product Change
Class B Product Changes ere changes are made to
incorporate improvements in design resulting in
better operation, improved testing, better
maintenance, longer life, service
PAGE 20 OF 58
<PAGE>
improvements, cost reductions, new features, and the
like.
All Equipment shipped to the Purchaser after the
effective date of any Class B Product Change shall
incorporate such change. Any Equipment shipped to the
Purchaser prior to such date may be modified by the
Purchaser at its option and expense.
No Class B changes shall effect interoperability of
the Equipment.
15.5.3 Class D Product Change
Class D Product Changes are design improvements,
component changes, or other minor improvements not
sufficiently significant as to require a Class B
classification. Class D Product Changes are also used
when a change is required to facilitate manufacture
or to effect a cost reduction not sufficiently
important to justify a Class B classification.
No Class D changes shall effect the interoperability
of the Equipment.
15.5.4 Notices
Supplier shall furnish monthly status reports to the
Purchaser for all Class A Product Changes of which
Supplier has notified the Purchaser. This report
shall contain the following information:
- Product Change Notice Number
- Identity of the Equipment
- Model or part number and issue
- Date Product Change Notice issued
- Equipment ship date
- Installation or application responsibility
- Locations at which change is to be made (to
be supplied by the Purchaser)
- Date completed, by location - Changes on
hold at any location
Supplier shall furnish in accordance with the
"Notices" sub-clause a quarterly report listing all
Product Change Notices released during the previous
twelve (12) months. This report will contain the
following information: (a) Product Change Notice
Number, (b) Issue Date of Change, (c) Drawing Number,
(d) Change Classification, and (e) Modification
Expiration Date. Supplier will provide the Purchaser
a copy of all change notices as soon as they become
available.
Notwithstanding any notice requirements to the
contrary elsewhere in this Agreement, all Class A
Product Change Notices shall be provided, at no
charge, and forwarded in accordance with the
sub-clause titled "Notices". Product Change Notices
shall contain all the information set forth in
Notices. If Supplier cancels a Product Change Notice,
Supplier must provide notification in accordance with
clause tide "Notices" hereto and state the reason for
cancellation and what action, if any, is to be taken
in locations where the change may already have been
implemented.
PAGE 21 OF 58
<PAGE>
Supplier shall determine the classification per the
requirements of Bellcore Technical Requirement
Document TR-OPT-000209 or any successor document
agreed to between the Parties of any proposed Product
Change. If the Purchaser disagrees with any
classification assigned by Supplier, the Purchaser
shall have the right to challenge such
classification, and Supplier shall, in good faith,
re-evaluate its classification. In the event that the
Purchaser and Supplier fail to reach agreement on any
such classification, then the Purchaser shall have
the right to terminate any or all Orders, in whole or
in part, for Equipment affected by such Product
Change without penalty or obligation of any kind
until this Agreement is reached.
15.6 The Supplier shall provide, Technical Support for the Goods as
detailed in Clause 4 of Schedule 4 to the Agreement,
throughout the Guarantee Period.
15.7 Guarantee Period Extension
The Purchaser may elect, at any time during the Guarantee
Period, to extend the Guarantee Period for such further period
or periods as detailed in Schedule 2. The price to paid by the
Purchaser for extending the Guarantee Period shall be as
detailed in Schedule 2.
15.8 EXCEPT FOR THE WARRANTIES SET FORTH IN THIS CLAUSE 15,
SUPPLIER HEREBY DISCLAIMS ALL OTHER WARRANTIES, WHETHER
EXPRESSED, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING WITHOUT
LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY,
NONINFRINGEMENT OR FITNESS OR A PARTICULAR PURPOSE.
15.9 The provisions of sub-clauses 15.1-15.8 shall survive
termination of the Agreement and/or Purchase Order howsoever
caused.
15.10 The Supplier represents and warrants that the Software
contains no authorization strings, time limiting codes or any
other limiting codes that will disable the operation of the
Software.
15.11 The Supplier represents and warrants that, to the best of
Supplier's knowledge, the Software contains no computer
viruses or other contaminates programmed or installed in the
Software by Supplier, including but not limited to, any code
or instructions that may be used to damage, disable, or
compromise the security of any Purchaser products, Customer
networks or Purchaser computer systems or networks.
15.121 The Supplier represents and warrants that the Software shall
(i) process date and time related data without causing any
processing interruptions, abnormal terminations, or changes in
performance characteristics, and, (ii) shall process and
manipulate all date and time related functions correctly.
Without limiting the generality of the foregoing, all Software
shall:
- correctly handle date and time related data
before, during and after January 1, 2000,
including but not limited to accepting date and
time input, output, and performing ongoing
operations on dates and times and portions of
dates and times including, but not limited to,
calculating, comparing and sequencing of dates
and times (in both forward and backward
operations spanning century boundaries).
PAGE 22 OF 58
<PAGE>
15.13 The supplier shall immediately notify the Purchaser of any
Software that is not in compliance with sub-clauses 15.10,
15.11, or 15.12 and shall correct such Software as set forth
in sub-clause 15.1.
16. DELAYS
16.1 Time shall be of the essence for the performance of the
Supplier's obligations under the Purchase Order, and the
Supplier shall make good faith efforts to meet dates specified
in the Purchase Order.
16.2 In the event that the Supplier fails to deliver Goods, the
Purchaser shall not be obligated to pay for any shortfalls and
shall be given relief against their commitments as described
in Schedule 9.
17. TERMINATION
Without prejudice to its other rights, either party shall have the
right forthwith to terminate a Purchase Order, in whole or in part, and
to claim for any resulting LOSSES or expenses if the other party:
- commits a breach of the Purchase Order and fails to remedy
the breach within 60 days of written notice from the
non-defaulting party indicating: (i) the nature and basis of
such default with reference to the applicable provisions of
this Agreement, and (ii) the non-defaulting party's intention
to terminate the Purchase Order under this Clause 17 if such
default continues; or
- commits any act of bankruptcy; or compounds with its
creditors; or a petition or receiving order in bankruptcy is
presented or made against the other party, or a petition for
an administration order is presented in relation to the other
party or a resolution or petition to wind up the other party
(otherwise than for a legal reconstruction or amalgamation) or
a receiver or administrative receiver is appointed; and such
act or petition is not cured, dismissed, or withdrawn within
60 days thereafter, or
- ceases to carry on business.
18. CANCELLATION
The Purchaser shall have the right to cancel any Purchase
Order for which the Purchaser provides to the Supplier written
notice of such a cancellation at least 90 days prior to the
requested delivery date in such Purchase Order. In addition,
the Purchaser shall have the right to reschedule any Purchase
Order to delay the delivery date by no more than 60 days after
the requested delivery date in such Purchase Order, provided
that the Purchaser provides to the Supplier written notice of
such rescheduling at least 45 days prior to the requested
delivery date in such Purchase Order. Any Purchase Order may
only be rescheduled once, and once rescheduled may not be
cancelled. Except as set forth in this Clause 18, the
Purchaser shall have no right to cancel or reschedule any
Purchase Order.
PAGE 23 OF 58
<PAGE>
19.1 The Supplier shall indemnify and shall keep fully indemnified
the Purchaser against all actions, claims, proceedings,
damages, costs and expenses arising from any claim of
infringement, anywhere in the world, of any trade secret,
trademark, service mark, copyright, or patent arising solely
by reason of the Purchasers use, possession, re-sale, hire or
lease of Goods as provided by Supplier, as expressly
authorized in the Agreement. Notwithstanding the foregoing,
supplier assumes no liability for infringement claims related
to (i) the combination of Goods with other products not
provided by Supplier, if such infringement would have been
avoided by the use of such Goods alone, (ii) modification of
Goods after delivery by Supplier, or (iii) failure by
Purchaser, its employees, and agents after it becomes aware of
infringement to take all reasonable actions to prevent or
mitigate losses, damages, costs or expenses. Supplier shall
not be obligated to pay any liability, costs, or expenses
until finally adjudicated or settled without right of further
appeal.
19.2 Supplier's obligation to indemnify Purchaser under this Clause
19 shall be subject to Purchaser providing Supplier: (i)
prompt notice of the claim giving rise to the indemnity, (ii)
sole control and authority regarding the defense and
settlement of such claim; and (iii) all information and
assistance reasonably requested the Supplier in connection
with the defense and/or settlement of such claim. The Parties
shall immediately on becoming aware notify the other promptly
in writing of any infringement or alleged infringement
referred to in 19.1.
19.3 In the event of infringement as set forth in sub-clause 19.1,
the Supplier shall, at its own option and expense:
19.3.1 secure a license, the Supplier being responsible for
the payment of any and all royalty fees due or
becoming due, allowing the Purchaser use of the
infringing Goods and Services in and to exercise its
other rights granted under the Purchase Order and as
set out in the Agreement in respect of the Goods and
Services, provided that Purchaser agrees to cooperate
with Supplier and use all reasonable afforts to
assist Supplier; or
19.3.2 modify or replace the Goods and Services to avoid the
claim of infringement and any injunction or court
order, provided that such modification or replacement
does not affect materially performance of the Goods
and Services; or
19.3.3 if neither of the remedies in sub-clause 19.3.1 or
19.3.2 are reasonably practicable in Supplier's
reasonable judgement, Supplier may terminate this
Agreement and refund to Purchase the amounts paid for
the infringing Goods which cannot be used or sold due
to such infringement, depreciated on a five year
straight-line basis.
19.4 The copyright and all other intellectual property rights in
all documents, drawings and information supplied by the
Purchaser in connection with this Purchase Order shall remain
vested in the Purchaser. Such documents, drawings and
information shall not be copied, disclosed or used except in
the performance of Supplier's obligations and exercise of its
rights pursuant to this Agreement and other agreements between
Supplier and Purchaser without the prior written consent of
the Purchaser.
PAGE 24 OF 58
<PAGE>
19.5 THE FOREGOING CLAUSE 19 STATES THE SOLE OBLIGATIONS OF
SUPPLIER AND THE SOLE AND EXCLUSIVE REMEDY OF PURCHASER FOR
ANY ACTUAL OR ALLEGED INTELLECTUAL PROPERTY INFRINGEMENT.
19.6 EXCEPT FOR INDEMNIFICATION HEREUNDER FOR WILLFUL TRADE SECRET
MISAPPROPRIATION OR WILLFUL COPYRIGHT INFRINGEMENT, IN NO
EVENT SHALL SUPPLIER'S LIABILITY AND OBLIGATION UNDER THIS
CLAUSE 19 EXCEED THE NET AMOUNTS PAID BY PURCHASER TO SUPPLIER
FOR THE INFRINGING SYSTEMS GIVING RISE TO SUCH LIABILITY.
20. INDEMNIFICATION AND INSURANCE
20.1 Each party (the "Indemnifying Party") shall indemnify and save
harmless the other party (the "Indemnified Party") from any
liability or claim (including, without limitation, the costs
and reasonable attorney's fees in connection therewith) that
may be made by a third party for injury, including death, to
persons or damage to property arising directly out of the
Indemnifying Party's negligent acts or omissions in connection
with such Indemnifying Party's performance of its obligations
or exercise of its rights under this Agreement provided that
the indemnified Party has no contributory fault in connection
with such liability or claim.
20.2 Without thereby limiting its responsibilities under the
Purchase Order Supplier shall maintain during its performance
under this Agreement General Liability Insurance, including
contractual, products liability and broad form vendors'
property damage endorsement with the limits of either
$5,000,000 combined single limit per occurrence for bodily
injury and property damage or $3,000,000 bodily injury per
occurrence and $2,000,000 property damage per occurrence.
Supplier must provide property insurance to cover all
consigned Purchaser material on Supplier's premises during the
term of the Agreement.
20.3 The Supplier shall supply to the Purchaser written evidence
that such cover is in force for the required period. On
receipt of the Purchaser's request, the Supplier shall provide
evidence that such insurance is in force. Where the Supplier
cannot demonstrate, to the reasonable satisfaction of the
Purchaser the existence of adequate insurance, the Purchaser
shall have the right to effect such insurance as may be
necessary. The cost of such insurance shall be for the
Supplier's account.
21. CONFIDENTIALITY
The provisions of Clause 7 of the Agreement shall similarly apply to
the Purchase Order(s).
22. FORCE MAJEURE
Except to obligations to pay money, (other than with respect to a
Purchase Order which is itself subject to an event of force majeure
declared by the Supplier), neither Party shall be liable for any breach
of the Purchase Order owing to any of the following causes, or any
similar causes, anywhere in the world, to the extent beyond its
reasonable control: Act of God, fire, industrial action or lock-outs
(except for industrial
PAGE 25 OF 58
<PAGE>
action or lock-outs by the Supplier's employees), the act or omission
of Government, war, military operations or riot.
23. PROPRIETARY NOTICES
Purchaser agrees that all Goods and accompanying documentation shall
include re-productions of the copyright notices and other proprietary
legends of the supplier and its vendors. Purchaser shall not remove,
efface or obscure any such notice or legends without approval of
Supplier.
24. RECOVERY OF SUMS DUE
Whenever a sum of money due to one party from the other party, in
relation to the Purchase Order or otherwise, is not paid by the due
date, it may be deducted from any sum then due, or which at any time
thereafter may become due to the other party under the Purchase Order
or any other contract between the parties. Any sums due and not
recovered by such deductions may be recovered as a debt.
25. GENERAL
25.1 The invalidity or unenforceability for any reason of any
provision of the Purchase Order shall not prejudice or affect
the validity or enforceability of its other provisions.
25.2 The headings to these clauses are for reference only and shall
not affect their interpretation.
25.3 Any notice to be given under the Purchase Order must be in
writing and may be delivered by hand or sent by prepaid post
to the "authorized representative" at the address given in
Schedule 7.
25.4 No claim or right arising out of breach of the Purchase Order
by either party may be discharged in whole or in part by any
waiver or renunciation of the claim or right unless such
waiver or renunciation is in writing, signed by the other
party.
25.5 Neither party may novate or assign this Purchase Order or any
of its rights benefits or obligations arising thereunder
without the prior written consent of the other party, except
that either party may assign and delegate all of its rights
and obligations hereunder in conjunction with a sale of all or
substantially all of its business or assets to which this
Purchase Order relates.
25.6 The settlement of any dispute shall be done as per article 10
of the Agreement.
25.7 Supplier represents that it has the rights which herein are
granted to Purchaser to sell the Goods for resale throughout
the world (subject to any applicable export control
restrictions), and that Supplier has taken appropriate action
with any of its existing distributors of similar goods to
remove any restrictions which would impede the granting of
these rights to Purchaser.
PAGE 26 OF 58
<PAGE>
SCHEDULE 2
PRICES AND PRODUCT DESCRIPTION
1. The prices detailed hereunder are firm and fixed for the calendar year
in which this Agreement commenced (the "Initial Period"). Sixty (60)
days prior to the expiration of the Initial Period, and each subsequent
twelve (12) month period the Parties shall review and agree upon the
prices that shall apply to Goods and Services for the next twelve (12)
month period. The prices listed below include warranty during the
Guarantee Period and technical support for 12 months.
The prices listed below are subject to amendments according to the
clauses below:
- As for the BSC and the NSS, the prices are applicable only for
a period of three months following the Signature of this
Agreement As soon as the configurations and functions of the
BSC and NSS are clarified by the Supplier, the prices of the
BSC and of the NSS will be adjusted for price coherence
between the functions provided by the BSC and the NSS and
between this equipment and the NSS/BSC functions integrated in
the Combo. This adjustment should not impact the price of the
Combo nor the aggregate prices.
- In the event that the market prices have substantially
decreased, the Purchaser may request good faith efforts from
the Supplier to re-negotiate prices accordingly. Such price
reduction will become effective for all following deliveries
to the Purchaser.
- The Purchaser will discuss with the Supplier any single
opportunity for the Supplier's Goods that is greater than
(U.S.) dollars. In the event that the single opportunity
pricing is granted to the Purchaser by the Supplier, it will
not impact the OEM pricing at that time.
- For each of the calendar years, the Purchaser and Supplier
will use their best efforts to agree upon and execute an
amendment to this Agreement that sets forth the prices and
volume discounts applicable for such a calendar year. The
Supplier guarantees a minimum of decrease of price for the
Products from one calendar year to the next.
- The prices listed will be subject to a volume discount
according to the table below:
<TABLE>
<CAPTION>
------------------------------- -----------------------------
NUMBER OF TRX'S DISCOUNT*
------------------------------- -----------------------------
<S> <C>
1 to 999 0%
------------------------------- -----------------------------
1000 to 1499 2%
------------------------------- -----------------------------
1500 to 1999 4%
------------------------------- -----------------------------
2000 and over 10%
------------------------------- -----------------------------
</TABLE>
*These volume discounts do not apply to the WAVEView OMC-200 or its
associated software
- The Supplier represents to the Purchaser that the prices
listed herein for Goods and Services are no higher than those
charged by the Supplier to other parties who purchase similar
goods for resale (excluding exceptions for flexibility in
markets and for Customers Purchaser is not pursuing, and other
special circumstances on an agreed upon individual basis). At
the request of the Purchaser, Supplier shall internally review
its compliance with this requirement on an annual calendar
year basis and shall credit any overcharge to the Purchaser in
accordance with Schedule 1, Clause 24. In
PAGE 27 OF 58
<PAGE>
any event, the Purchaser shall receive a minimum sixty-five (65) %
discount off the Supplier then current list prices.
1.1 PRICES FOR GOODS
<TABLE>
<CAPTION>
- -------------------------------------------------------------- -------------------------------- ----------------------------------
DESCRIPTION OF GOODS PART NUMBER PRICE (US$)
- -------------------------------------------------------------- -------------------------------- ----------------------------------
<S> <C> <C>
WAVEXpress 1-TRX BTS (900MHz) M5120N 10,500
- -------------------------------------------------------------- -------------------------------- ----------------------------------
WAVEXpress 2-'TRX BTS (900MHz) M5220N 15,750
- -------------------------------------------------------------- -------------------------------- ----------------------------------
WAVEXpress 3-TRX BTS (900MHz) M5320N 23,625
- -------------------------------------------------------------- -------------------------------- ----------------------------------
WAVEXpress 1-TRX BTS (1800MHz) M5122N 10,500
- -------------------------------------------------------------- -------------------------------- ----------------------------------
WAVEXpress 2-TRX BTS (1800MHz) M5222N 15,750
- -------------------------------------------------------------- -------------------------------- ----------------------------------
WAVEXpress 3-TRX BTS (1800MHz) M5322N 23,625
- -------------------------------------------------------------- -------------------------------- ----------------------------------
WAVEXpress 1-TRX BTS (1900MHz) N/A N/A
- -------------------------------------------------------------- -------------------------------- ----------------------------------
WAVEXpress 2-TRX BTS (1900MHz) N/A N/A
- -------------------------------------------------------------- -------------------------------- ----------------------------------
WAVEXpress 3-TRX BTS (1900MHz) N/A N/A
- -------------------------------------------------------------- -------------------------------- ----------------------------------
TurboWAVE 4 Watt(900 MHz) M640154N 4,200
- -------------------------------------------------------------- -------------------------------- ----------------------------------
TurboWAVE 8 Watt(900 MHz) M640157N 4,200
- -------------------------------------------------------------- -------------------------------- ----------------------------------
TurboWAVE 16 Watt(900 MHz) M640158N 8,925
- -------------------------------------------------------------- -------------------------------- ----------------------------------
TurboWAVE 4 Watt (1800 MHz) M648154N 4,200
- -------------------------------------------------------------- -------------------------------- ----------------------------------
TurboWAVE 8 Watt (1800 MHz) M648157N 4,200
- -------------------------------------------------------------- -------------------------------- ----------------------------------
TurboWAVE 16 Watt (1800 MHz) M648158N 8,925
- -------------------------------------------------------------- -------------------------------- ----------------------------------
TurboWAVE 4 Watt (1900 MHz) NIA N/A
- -------------------------------------------------------------- -------------------------------- ----------------------------------
TurboWAVE 8 Watt (1900 MHz) N/A N/A
- -------------------------------------------------------------- -------------------------------- ----------------------------------
TurboWAVE 6 Watt (1900 MHz) N/A N/A
- -------------------------------------------------------------- -------------------------------- ----------------------------------
WAVEXpress BSC-30 M5030N 24,850
- -------------------------------------------------------------- -------------------------------- ----------------------------------
Combo 1-TRX (900 MHz) M5131N 14,335
- -------------------------------------------------------------- -------------------------------- ----------------------------------
Combo 2-TRX (900 MHz) M5132N 19,590
- -------------------------------------------------------------- -------------------------------- ----------------------------------
Combo 1-TRX (1800 MHz) M5831N 14,335
- -------------------------------------------------------------- -------------------------------- ----------------------------------
Combo 1-TRX (1800 MHz) M5832N 19,590
- -------------------------------------------------------------- -------------------------------- ----------------------------------
Combo 1-TRX (1900 MHz) N/A N/A
- -------------------------------------------------------------- -------------------------------- ----------------------------------
Combo 2-TRX (1900 MHz) N/A N/A
- -------------------------------------------------------------- -------------------------------- ----------------------------------
WAVEXchange NSS M5060N 40,645
- -------------------------------------------------------------- -------------------------------- ----------------------------------
WAVEView,OMC-200 M8050SN 23,670
- -------------------------------------------------------------- -------------------------------- ----------------------------------
- -------------------------------------------------------------- -------------------------------- ----------------------------------
Combo S/W - 1 TRX S500200N 7,350
- -------------------------------------------------------------- -------------------------------- ----------------------------------
Combo S/W - 2 TRX S500300N 13,125
- -------------------------------------------------------------- -------------------------------- ----------------------------------
WAVEXchange NSS S/W- Base S500400N 11,025
- -------------------------------------------------------------- -------------------------------- ----------------------------------
WAVEXchange NSS S/W- Base S500500N 3,675
- -------------------------------------------------------------- -------------------------------- ----------------------------------
WAVEView,OMC-200 S/W - Base S500600N 11,025
- -------------------------------------------------------------- -------------------------------- ----------------------------------
WAVEView,OMC-200 S/W - per TRX (not to exceed $70k/ OMC) S500700N 735
- -------------------------------------------------------------- -------------------------------- ----------------------------------
</TABLE>
PAGE 28 OF 58
<PAGE>
1.2 PRICES FOR ENGINEERING SERVICES
EMERGENCY CALL OUT SERVICES *
BASE RATES
<TABLE>
<CAPTION>
EMERGENCY CALL OUT Standard Weeknights Nights/Weekends Sundays/Holidays
8am-5pm 5pm-11pm 11pm-8am
<S> <C> <C> <C> <C>
Junior Engineer $ 90 $110 $125 $150
Engineer $110 $130 $150 $185
Sr. Engineer/Spec. $150 $180 $185 $250
Project Manager $190 $225 $250 $315
</TABLE>
Purchaser will be offered a discount of 30% from these rates
for these rates during the first year of the agreement. These
rates are subject to a six month adjustment based upon good
faith negotiations, and an agreed to, price escalation
table(s).
*Rates do not include transportation, nor a Per Diem for food
and lodging, nor out-of-pocket expenses for personnel
rendering such services.
1.3 PRICES FOR SPARES
<TABLE>
<CAPTION>
--------------------------------- ------------------------------------------------------ --------------------------------
Part Number Description of Field Replaceable Unit Spares Price (US$)
--------------------------------- ------------------------------------------------------ --------------------------------
<S> <C> <C>
M340220 Clock, 13MHz 1,370
--------------------------------- ------------------------------------------------------ --------------------------------
M340014 E-l, Long Haul, 2 Port 5,670
--------------------------------- ------------------------------------------------------ --------------------------------
M340098 E-1 with 2 TRAUS 8,400
--------------------------------- ------------------------------------------------------ --------------------------------
M340121 IWP 3,970
--------------------------------- ------------------------------------------------------ --------------------------------
M640034 Power supply 350W, Hi24, 115v AC 1,370
--------------------------------- ------------------------------------------------------ --------------------------------
M640035 Power supply 350W, Hi24, 230v AC 1,370
--------------------------------- ------------------------------------------------------ --------------------------------
M640026 Power supply 350W, Hi24, -48V DC 1,370
--------------------------------- ------------------------------------------------------ --------------------------------
M640027 Power Supply 50A, 115V AC 1,660
--------------------------------- ------------------------------------------------------ --------------------------------
M640028 Power Supply 50A, 230V AC 1,660
--------------------------------- ------------------------------------------------------ --------------------------------
M340063 RF Distribution 900 MHz 3,150
--------------------------------- ------------------------------------------------------ --------------------------------
M340088 RF Distribution 1800 MHz 3,150
--------------------------------- ------------------------------------------------------ --------------------------------
N/A RF Distribution 1900 MHz N/A
--------------------------------- ------------------------------------------------------ --------------------------------
M640116 TRX 900 MHz 7,875
--------------------------------- ------------------------------------------------------ --------------------------------
M640117 TRX 1800 MHz 7,875
--------------------------------- ------------------------------------------------------ --------------------------------
N/A TRX 1900 MHz N/A
--------------------------------- ------------------------------------------------------ --------------------------------
M640025 Fan, 12V Power Supply 450
--------------------------------- ------------------------------------------------------ --------------------------------
M640021 Cable kit, full set, indoor 450
--------------------------------- ------------------------------------------------------ --------------------------------
M640048 WAVEXpress Chassis 1,850
--------------------------------- ------------------------------------------------------ --------------------------------
</TABLE>
PAGE 29 OF 58
<PAGE>
1.4 Prices for Post Guarantee Repair Service
<TABLE>
<CAPTION>
--------------------------------- ------------------------------------------------------ ----------------------------------
Part Number Description of Field Replaceable Unit Repair Price (US$)
--------------------------------- ------------------------------------------------------ ----------------------------------
<S> <C> <C>
M340220 Clock, 13MHz 600
--------------------------------- ------------------------------------------------------ ----------------------------------
M340014 E-l, Long Haul, 2 Port 1,900
--------------------------------- ------------------------------------------------------ ----------------------------------
M340098 E-1 with 2 TRAUS 3,200
--------------------------------- ------------------------------------------------------ ----------------------------------
M340121 IWP 1,300
--------------------------------- ------------------------------------------------------ ----------------------------------
M640034 Power supply 350W, Hi24, 115v AC 450
--------------------------------- ------------------------------------------------------ ----------------------------------
M640035 Power supply 350W, Hi24, 230v AC 450
--------------------------------- ------------------------------------------------------ ----------------------------------
M640026 Power supply 350W, Hi24, -48V DC 450
--------------------------------- ------------------------------------------------------ ----------------------------------
M640027 Power Supply 50A, 115V AC 500
--------------------------------- ------------------------------------------------------ ----------------------------------
M640028 Power Supply 50A, 230V AC 500
--------------------------------- ------------------------------------------------------ ----------------------------------
M340063 RF Distribution 900 MHz 350
--------------------------------- ------------------------------------------------------ ----------------------------------
M340088 RF Distribution 1800 MHz 350
--------------------------------- ------------------------------------------------------ ----------------------------------
N/A RF Distribution 1900 MHz N/A
--------------------------------- ------------------------------------------------------ ----------------------------------
M640116 TRX 900 MHz 2,500
--------------------------------- ------------------------------------------------------ ----------------------------------
M640117 TRX 1800 MHz 2,500
--------------------------------- ------------------------------------------------------ ----------------------------------
N/A TRX 1900 MHz N/A
--------------------------------- ------------------------------------------------------ ----------------------------------
M640025 Fan, 12V Power Supply N/A
--------------------------------- ------------------------------------------------------ ----------------------------------
M640021 Cable kit, full set, indoor N/A
--------------------------------- ------------------------------------------------------ ----------------------------------
M640048 WAVEXpress Chassis N/A
--------------------------------- ------------------------------------------------------ ----------------------------------
</TABLE>
1.5 PRICES FOR TECHNICAL SUPPORT
Telephone Support and Software Updates shall include third
level support from the Supplier's Technical Support Center in
Redwood City, CA and shall include those items identified in
Schedule 4. Prices are calculated at the beginning of each
quarter based upon the cumulative volume of Goods shipped
during the term of this agreement except that the purchaser
shall have, no obligation to pay for support for Goods shipped
in the 12 months prior to the beginning of the current
quarter. Payment for such services are provided in Schedule 1,
Clause 9.
1.5.1 The rate will be 2.28% of the Price of the Goods per
year measured on a quarterly basis
1.5.2 The Purchaser will make available for a period of not
less than 12 calendar months following Agreement
signing, 2 or 3 senior technical Level 3 (Product
Support) specialists. At least one of these
specialists will be NSS trained.
1.5.3 Supplier will make available Product Support
Specialists on an emergency call basis and use best
efforts to meet Purchasers requirements.
1.5.4 Purchaser will provide 6 person- months of assistance
during the first four month period following the
signing of this Agreement in the area of OSS and NSS
curriculum development at locations to be determined
by both parties in an effort to accelerate the
availability of the courses and familiarity of the
instructors with the Supplier's product.
PAGE 30 OF 58
<PAGE>
1.6 PRICES FOR TRAINING
Customer Training will be provided if available resources
permits as it is expected that Purchaser will train it own
personnel and personnel of its Customers
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PART NO. NAME OF TRAINING COURSE CHARGE IN U.S.$ DURATION (DAYS)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
T100 GSM Overview $400 1
- -----------------------------------------------------------------------------------------------------------------------------------
T200 Product Overview $200 1/2
- -----------------------------------------------------------------------------------------------------------------------------------
T300 OMC-R system Administration $800 2
- -----------------------------------------------------------------------------------------------------------------------------------
T400 OMC-R Network Operations $1200 3
- -----------------------------------------------------------------------------------------------------------------------------------
T500 BSS Operations & Maintenance $1200 3
- -----------------------------------------------------------------------------------------------------------------------------------
T600 BSS Installation & Commissioning $800 2
- -----------------------------------------------------------------------------------------------------------------------------------
T700 OMC-s System Administration $800 2
- -----------------------------------------------------------------------------------------------------------------------------------
T800 OMC Network Operations $1200 3
- -----------------------------------------------------------------------------------------------------------------------------------
T900 WAVEXchange Operations & Maintenance $1200 3
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Supplier's Training Guide for further details.
Train the Trainer courseware shall be developed and agreed
upon within 30 days of the agreement signing. During this
period of time Funding and Pricing will be negotiated in good
faith and be consistent with the above training course pricing
table.
1.7 PRICES FOR DOCUMENTATION
A. Sample Customer Documentation Structure
---------------------------------------------------------------------
D640134C 2.0 Includes the Following:
WAVEXpress/BTS Installation and
Commissioning Guide
WAVEXpress/BSC Installation and
Commissioning Guide
WAVEXpress OMC-R Installation and
Commissioning Guide
WAVEXpress OMC-R System
Administrator's Guide
WAVEView Operations and Maintenance Guide
Craft PC Guide
InterWAVE Parameter Dictionary
Network Implementation Guide
BSS Maintenance Guide
---------------------------------------------------------------------
B. Training Material
Includes Instructor and Student Guido
C. Documentation Cost
$52.00Annual Fee. All documentation to be
distributed on electronic media.
PAGE 31 OF 58
<PAGE>
1.8 PRICES FOR GUARANTEE PERIOD EXTENSION
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
STANDARD PERIOD OF EXTENSION
---------------------------------------------------------------------------------------------------
FIRST YEAR ONE YEAR TWO YEARS
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equipment Return to Factory - No Charge of Price N/A
---------------------------------------------------------------------------------------------------
Software No Charge N/A N/A
---------------------------------------------------------------------------------------------------
</TABLE>
1.9 PRODUCT DESCRIPTIONS
See Schedule 10
2. Notwithstanding Clause 1 above, the prices for individual Purchase
Orders once issued shall remain firm and fixed for their duration,
unless otherwise provided for by operation or: any other term of the
Agreement.
3. PRICING OF ENHANCEMENTS
3.1 Where the Supplier enhances the Goods above and beyond the
requirements of the relevant Specification, including the new
features or facilities, the Supplier shall state in writing
the effect such enhancement will have on the Goods and what
adjustment, if any, will be required to the Agreement. The
Supplier shall furnish such details in a time scale agreed
between the Parties.
3.2 Where the Supplier shows that an enhancement involves a change
in the price or lead times for the Goods, the Supplier shall
make best efforts as to the reasonableness of the changes
arising therefrom.
3.3 The Supplier shall not enhance the Goods in any respect unless
instructed in writing to do so, by the Purchaser.
3.4 The Supplier shall demonstrate best faith efforts to ensure
that the price for enhancements does not include any work that
should be performed under any other term of the Agreement or
any Purchase Order. This shall include, but not be restricted
to, enhancements in respect of operational support, repair,
build management and guarantee.
4. FORECASTING MECHANISM FOR GOODS
The forecasting mechanism for Goods volume shall be as follows:
4.1. The Purchaser will provide monthly a rolling 12 month
forecast, broken down by country, of their requirements as
precise as possible of the Goods to the Supplier by a date
to be agreed. The
PAGE 32 OF 58
<PAGE>
Purchaser shall use best efforts to forecast and purchase at
least the amounts set forth in the Purchase Baseline in
Schedule 9.
4.2 The forecast, broken down by country, for the current month
and the two months following are firm and not subject to
change. The third month following the current month can have
the quantity changed by ten percent up or down and each item
forecast as precisely as possible. Global bulk Purchase Orders
for the third month following the current month are due at the
end of the current month. Specific Purchase Orders as
described in Schedule 7 are due six (6) weeks before shipment.
The fourth month can have the quantity change by twenty per
cent up or down and each forecast item as precisely as
possible twenty per cent up or down. The fifth month can have
the quantity changed twenty per cent up or down and each item
forecast as precisely as possible. The sixth month can have
the quantity changed ten per cent up or down and each item
forecast as precisely as possible. For all other months the
forecast is given as information.
4.3 The parties agree from time to time to discuss in good faith
whether the three (3) month fixed forecast period should be
reduced to conform with market requirements.
5. CREDIT FOR TECHNICAL SUPPORT FROM THE PURCHASER
In consideration of the Purchaser providing first and second level
support to its Customers and the value of other assistance being
provided to the Supplier hereunder, including product evolution and
marketing support, the Supplier shall provide a credit to the Purchaser
equal to five (5%) percent of the net Price of Goods, excluding
Services, until such time as the Parties have developed more detailed
information on the reasonableness of such charges in relation to the
services provided by the Purchaser and have reached mutual agreement on
alternate charges. The credit shall be indicated on each invoice
submitted by the Supplier to the Purchaser and may be deducted by the
Purchaser from such invoice. The Supplier shall not provide any similar
credit to any other distributor of its products (including OEM
distributors) unless such other distributor provides similar support
services and assistance to the Supplier.
PAGE 33 OF 58
<PAGE>
SCHEDULE 3
SPECIFICATIONS
FACTORY TEST SPECIFICATIONS
ACCEPTANCE TEST SPECIFICATIONS
Supplier will provide to Purchaser these documents within thirty calendar days
of the signing of the Agreement.
A meeting to accept those documents will be held within 60 days of the signing
of this Agreement.
PAGE 34 OF 58
<PAGE>
SCHEDULE 4
SUPPORT REQUIREMENTS
For the purposes of this Schedule 4 "Support Period" shall mean a period of time
commencing from the date of Agreement and terminating five (5) years from the
date of delivery of the last Goods supplied under the Agreement.
1. POST GUARANTEE REPAIR SERVICE
The Supplier hereby undertakes to maintain a repair capability for
Goods throughout the Support period. In accordance with this
undertaking, the Supplier shall, if required by the Purchaser, provide
a "post guarantee repair service" for Goods. The Supplier's charges for
such repair are detailed in Schedule Goods repaired in accordance with
such "post guarantee repair service" shall be repaired and re-delivered
to the Purchaser within 30 days of return of the Goods to the Supplies
works.
If the product is damaged beyond reasonable cost to repair or due to
improper maintenance because of being modified or incorrectly repaired
by a non-authorized third party, the Supplier will not be obliged to
effect a repair but will offer the Purchaser a replacement product at a
price defined in this agreement. The Supplier's repair obligation does
not extend to defects arising out of improper handling or uses of Goods
such as, but not limited to, excessive water, or other environmental
conditions, excessive force or vandalism, etc. In those case the
Supplier will offer to the Purchaser replacement Goods at the prices
quoted for Spares below with an explanation regarding the reasons not
to repair the Goods.
2. SPARES
2.1 The Supplier shall, if requested, during the Support Period,
provide the Purchaser with any spare or replacement parts as
may be required subject to the field replaceable units defined
by the Supplier. Where agreed prices do not exist, such spares
or replacement parts shall be provided at prices and in time
scales that are fair and reasonable.
2.2 The Supplier accepts that the Purchaser requires continuity of
supply and hereby undertakes to give the Purchaser at least
six (6) months written notice of its being unable to supply
Goods, spares or replacement parts covered by the Agreement.
In such an event the Supplier shall, without any additional
cost whatsoever to the Purchaser, maintain such stocks of
Goods, spares, replacements parts as the Supplier believes
necessary, to fulfill its obligations under existing Purchase
Orders and guarantee obligations.
2.3 For future requirements, the Supplier will undertake to
propose an alternative source of supply or will offer to the
Purchaser the opportunity of a last time buy in respect of
such Goods, spares and replacements parts for stock. Such
offer shall remain open for acceptance, by the Purchaser, for
a period of not less than three (3) months from the date of
submission. Where agreed prices do not exist, such Goods,
spares and replacement parts shall be provided at prices and
in time scales that are fair and reasonable.
PAGE 35 OF 58
<PAGE>
3. DOCUMENTATION
The Supplier shall, if requested, during the Support Period, provide
the Purchaser with such information and documentation as the Purchaser
may reasonably require in order to fulfill Customer maintenance and
support requirements. Where agreed prices do not exist, such
information and documentation shall be provided at prices and in time
scales that are fair and reasonable.
4. TECHNICAL SUPPORT
4.1 FOR EQUIPMENT
The Supplier hereby agrees to make available to the Purchaser
a support service for Equipment for the Support Period in
successive renewable twelve (12) month periods. The Equipment
support service shall as a minimum provide for:
4.1.1 A service desk (contacted through a telephone
helpline) to enable the Purchaser to obtain a quick
response to the Purchaser's fault enquiries. The
service desk shall operate between 8:30a.m. -
5:30p.m. Pacific Standard Time for logging and
tracking fault reports Alternatively, the Purchaser
may use the mail or email to communicate with the
Supplier relative to such support. A central number
will be provided for 24 hour pager support for after
hours calls on emergency situations.
4.1.2 The allocation of a case number upon placing of a
fault report. The Purchaser shall use the case number
in all communications associated with the fault
report.
4.1.3 The investigation, by the Supplier, of any
fault/technical queries in the Equipment reported by
the Purchaser. If such investigation reveals an
error, defect or malfunction the Equipment, to
provide a return to service using a temporary
solution, acceptable to the Purchaser ("Workaround")
in event of failure in the time frame provided in
4.1.7 has upon the severity of the problem.
4.1.4 The Supplier shall keep the Purchaser informed of the
progress in resolving any fault/technical query.
4.1.5 Visits to the Purchaser's/Customer's sites where
deemed necessary for the purpose of investigation or
fault resolution. Attendance at the
Purchaser's/Customer's sites shall be on a best
efforts basis. The charge for such site visits is
detailed in Schedule 2.
4.1.6 The Supplier shall also provide the following
services as part of the support service for
Equipment:
- Co-ordination of 3rd party support
- Simulation of problems using equipment
available in Suppliers test facilities
- Multi-vendor product expertise
- Prioritization of faults/events and escalate
as required to next level
- Access to the system design authorities and
highest level design documentation.
- Specific designs or modifications to
Equipment will be developed, as required.
- Documentation Updates
PAGE 36 OF 58
<PAGE>
4.1.7 Case Seventy Definition and Closure Policy
The parties will agree to perform a comparison of
their case severity classifications within sixty days
of the signing of this Agreement to ensure
understanding and consistency of such classifications
using the definitions below as the guideline.
S1 EMERGENCY System or network is down
and unusable as a result
of a problem which causes
fails, or results in
severe intermittent
operations with no Customer
acceptable work-arounds, or
the Customer states the
problem has a critical
impact on their operation.
S2 SIGNIFICANT Impact System or network
is up and will run,
however, the problem
exists with significant
impact and which has
difficult or no
work-arounds causing
substantial performance
degradation, or prevents
the Customer from using a
critical feature of the
product or the system.
S3 LIMITED IMPACT System or network is up
and running, but minor
problems exist having
limited impact. Customer
can use the system or
product with limitation
or workarounds that are not
critically impacting the
overall operations. This
could be a non-problematic
information issue such as a
documentation error as
well.
S4 RMA Logging a request for a
Return Material
Authorization.
S5 ENHANCEMENT Required for a new
product or feature. This
is used by both the
Customer Advocacy function
and Marketing to prioritize
future releases(includes
documentation).
S6 INFORMATIONAL Used for Customer
Information Requests
4.1.8 Escalation Table
<TABLE>
<CAPTION>
------------------ --------------------- -------------------- -------------------- ---------------------- ------------------
VICE PRESIDENT
INITIAL RESPONSE RELEVANT ENGR. CUSTOMER
SEVERTY (VIA TELEPHONE) MANAGER TAC DIRECTOR/MGR. ADVOCACY/ENGR EXECUTIVE STAFF
------------------ --------------------- -------------------- -------------------- ---------------------- ------------------
<S> <C> <C> <C> <C> <C>
S1 15 Minutes To+4 hours To+8 hours To+4 hours To+24 hours
------------------ --------------------- -------------------- -------------------- ---------------------- ------------------
S2 15 Minutes To+24 hours To+36 hours To+4 hours N/A
------------------ --------------------- -------------------- -------------------- ---------------------- ------------------
S3 Next Working Day To+48 hours To+120 hours N/A N/A
------------------ --------------------- -------------------- -------------------- ---------------------- ------------------
</TABLE>
TO = time of receipt of initial call
4.1.9 Target Time to Resolve within Receipt of Initial
Fault Report
Supplier shall use all reasonable effort to provide
resolution in accord with table below
PAGE 37 OF 58
<PAGE>
<TABLE>
<CAPTION>
------------------ ------------------------ ------------------------ --------------------------------------------------
SEVERTY NSS WORKAROUND BSS WORKAROUND FULL FIX
------------------ ------------------------ ------------------------ --------------------------------------------------
<S> <C> <C> <C>
S1 Within 24 Hours Within 48 hours 2 Weeks Via Patch
------------------ ------------------------ ------------------------ --------------------------------------------------
S2 1 Week 1 Week 90 Days with maintenance release
------------------ ------------------------ ------------------------ --------------------------------------------------
S3 Not Required Not Required Commitment will be made within 60 days to a
scheduled full or maintenance release
------------------ ------------------------ ------------------------ --------------------------------------------------
</TABLE>
4.2 FOR SOFTWARE
The Supplier hereby agrees to make available to the Purchaser
a Software maintenance and support service for the Support
Period in successive renewable twelve (12) month periods. The
Software maintenance and support service shall provide for:
4.2.1 A service desk (contacted through a telephone help
line) to enable the Purchaser to obtain a quick
response to the Purchaser's Software Problems. The
service desk shall operate during 8:30a.m. - 5:30p.m.
Pacific Standard Time for logging and tracking fault
response Alternatively, the Purchaser may use the
mail to communicate with the Supplier relative to
such support
4.2.2 The allocation of a case log number upon placing of a
fault report. The Purchaser shall use the call case
number in all communications associated with the
fault report.
4.2.3 The investigation, by the Supplier, of any Software
Problem in the Software reported by the Purchaser. If
such investigation reveals an error, defect or
malfunction in the Software, to provide Correction
according to the following time scales based upon the
severity as defined in sub-clause 4.1.7:
Supplier shall use all reasonable effort to
provide resolution in accord with table below
<TABLE>
<CAPTION>
------------------ ------------------------ ------------------------ --------------------------------------------------
SEVERTY NSS WORKAROUND BSS WORKAROUND FULL FIX
------------------ ------------------------ ------------------------ --------------------------------------------------
<S> <C> <C> <C>
S1 Within 24 Hours Within 48 hours 2 Weeks Via Patch
------------------ ------------------------ ------------------------ --------------------------------------------------
S2 1 Week 1 Week 90 Days with maintenance release
------------------ ------------------------ ------------------------ --------------------------------------------------
S3 Not Required Not Required Commitment will be made within 60 days to a
scheduled full or maintenance release
------------------ ------------------------ ------------------------ --------------------------------------------------
</TABLE>
4.2.4 The Supplier shall keep the Purchaser informed of the
progress in resolving any Software Problem.
4.2.5 The Supplier shall notify the Purchaser:
- as soon as practicable when a new Release or
new Version is issued; and
- when issued new Releases or new Versions
bear upon a Software Problem which the
Purchaser has reported.
PAGE 38 OF 58
<PAGE>
4.2.6 The Supplier shall deliver to the Purchaser at an
agreed upon price, new Releases and or new Versions
of the Software, as soon as practicable, including
any new documentation or portions thereof.
4.2.7 Visits to the Purchaser's/Customer's sites where
deemed necessary for the purpose of investigation or
for the installation of new Software. Attendance at
the Purchaser's/Customer's sites shall be on a best
efforts basis in response with the Purchaser's
request. The charge for such site visits is detailed
in Schedule 2.
4.2.8 The Supplier shall, when in-depth analysis is
required, provide direct access to its support
computer for the purposes of downloading critical
patches or provide information needed by the
Purchaser to access the computer over telephone
lines.
4.2.9 The Supplier agrees to support the then current
version and two previous versions of Software under
pricing conditions stated in sub-clause 1.5 of
Schedule 2. Upon release of the third Version of the
Software provided to the Purchaser under this
Agreement, the Parties agree to discuss in good faith
whether any modifications to this support policy is
required.
4.2.10 Supplier will issue a first root cause analysis
report within48 hours on S1 severity cases. A final
root cause analysis will be issued within thirty (30)
days on these cases.
4.2.11 The Supplier and Purchaser will hold weekly
conference calls to discuss and prioritize technical
issues.
For the purpose of 4.2 above, the following definitions
shall apply:
a) "Release" or "Update" means a maintenance
revision to the Software (including
documentation) designed to correct an error
or improve performance. A new Release
(Update) is indicated by a change in
characters to the right of the decimal point
in the Product version number (e.g. V1.1
changes to V1.2).
b) "Versions" or "Upgrade" means a new version
of the Software (including documentation)
which incorporates a series of new releases
of Software and may incorporate other
changes, improvements and new features. A
new Version (Upgrade) is indicated by a
change in characters to the left of the
decimal point in the Software version number
(e.g. V I. 1 changes to V2.1).
c) "Previous Sequential Releases" shall mean
the new Version of the Software which has
been replaced by a subsequent Version which
is supported as indicated in paragraph
4.2.9.
d) "Software Problem" means a defect in the
Software distribution media and or Software
function which is inconsistent with the
Software Specification.
PAGE 39 OF 58
<PAGE>
e) "Correction" of a Software Problem means the
replacement of defective software
distribution media and or making the
function of Software consistent with the
Software Specification.
f) "Workaround" shall mean an alternative
method to provide a temporary solution to a
reported problem with Software to enable the
continued operation of the Software that is
reasonably acceptable to the Purchaser.
PAGE 40 OF 58
<PAGE>
SCHEDULE 5
TRAINING PROGRAMS
SUPPLIER OBLIGATIONS
The Supplier shall make available the necessary documentation and
training courseware to enable the Purchaser and its Customers to use
and perform maintenance and provide support for the Goods. The courses
available to the Purchaser and Customers are detailed below:
COURSES FOR THE PURCHASER PERSONNEL
Are the same as those stated in sub-clause 1.6 of Schedule 2.
For details please refer to the Supplier's Training Catalog
COURSES FOR CUSTOMER PERSONNEL
Are the same as those stated in sub-clause 1.6 of Schedule 2.
For details please refer to the Supplier's Training Catalog
PURCHASER OBLIGATIONS
The Purchaser will make the necessary facilities available for the
training of their employees and Customers.
OBLIGATIONS OF BOTH PARTIES
The Supplier shall develop a plan with the Purchaser to train the
trainers identified by the Purchaser who will be conducting the
training at sites to be mutually agreed to.
PAGE 41 OF 58
<PAGE>
SCHEDULE 6
QUALITY REQUIREMENTS
1. QUALITY CONTROL
1.1 The Supplier shall operate a quality system that meets the
requirements of ISO 9001 within twelve (12) months of signing
this Agreement and to the reasonable satisfaction of the
Purchaser at all locations undertaking activities in support
of the Agreement.
1.2 The Purchaser's and the Supplier's named contacts who have
management responsibility for quality assurance for all
activities covered by the Agreement are identified below:
The Supplier's Quality Manager Dave Spaulding
656 Bait Island Road
Redwood City, CA, 94063
The Purchaser's Quality Manager Claude Duez
Nortel Matra Cellular
Guyancourt, France
1.3 The Supplier shall provide access to the premises',
undertaking work relating to the Agreement, for the personnel
of the Purchaser and its Customers' to carrying out any
assessments deemed necessary to ensure the Supplier's
compliance with ISO 9001, process capability, and any other
reasonable requirements of the Purchaser.
1.4 All activities associated with the Agreement, and in
particular all release activities associated with procurement,
manufacturing, testing and repairs, shall be clearly
documented to show the sequence of activities and the
acceptance criteria. This information shall be documented such
that a controlled copy is supplied to the Purchaser within
three (3) months of signing the Agreement. Such documentation
shall be kept up to-date at all times by the Supplier.
1.5 Final Factory Test results will be supplied with the shipment
of the Goods.
1.6 All Goods shall be new, of sound design, materials and
workmanship.
2. REPORTS AND SUPPLIER PERFORMANCE
2.1 The Supplier shall provide regular monthly reports, to be
submitted on a date to be agreed between the Parties, on the
performance of Goods and Services in relation to:
- delivery against lead time;
- reject rate at manufacturing release;
- Commissioning Failure Rate;
- Reliability;
- repair turn-around-time;
PAGE 42 OF 58
<PAGE>
- level of no fault found; and
- repair diagnostics for Customer returned product.
The above reports shall provide data for each performance
measure in relation to the preceding calendar month. The
performance levels to be achieved by the Supplier, where
appropriate, are detailed in the Appendix to this Schedule 6.
Where the Supplier fails to achieve the required level(s), the
Purchaser and the Supplier shall agree a corrective action
plan which shall put in place activities and procedures to
remedy such non-achievement. Such corrective action plan shall
be without prejudice to any rights or remedies available to
the Purchaser under the Agreement. The performance levels
shall be reviewed and agreed annually.
2.2 The Purchaser shall provide monthly reports of the failure
rate of Goods prior to going into service and the "In service"
reliability of Goods.
3. MANUFACTURING CHANGES
3.1 The Supplier shall formally document, in accordance with the
Supplier's "Change Control Procedure", all changes and/or
concessions approved by the Purchaser according to Clause 15
of Schedule 1 which affect the Goods' configuration or
compatibility.
3.2 Goods will only be accepted and paid for on condition that no
Product Change in design has been introduced by the Supplier
without notifying the Purchaser in writing.
4. Reliability
4.1 The Supplier shall submit to the Purchaser as part of its
deliverable documentation a "Reliability Plan" for each Goods
type required under the Agreement. The Reliability Plan shall
be provided to the Purchaser for review and approval not later
than 90 days from the date of the Agreement.
4.2 The content and format of the Reliability Plan shall be agreed
with the Purchaser and shall include details of the Suppliers
method's, process and activities for predicting, demonstrating
and improving reliability of the Goods. The Reliability Plan
shall also identify the planned test phases and activities
during manufacture, to demonstrate the Goods compliance with
the Purchaser's requirements.
4.3 As part of the Reliability Plan, the Supplier shall provide to
the Purchaser reports and results of the outcome/output of
those activities detailed in the Reliability Plan.
5. GENERAL
5.1 The Supplier shall co-operate with the Purchaser in
investigating and resolving any Customer inquiries and
complaints.
PAGE 43 OF 58
<PAGE>
5.2 The Supplier shall keep the Purchaser informed of its
manufacturing capacity and the effect of any changes including
process and location that may impact upon the manufacturing
capability. This information shall be provided so as to be
complimentary to the forecasting process.
PAGE 44 OF 58
<PAGE>
APPENDIX TO SCHEDULE 6
This Appendix provides details of the performance measures for Goods and
Services. Supplier fully intends to meet the Target Performance Levels described
below and shall use all reasonable efforts to do so.
1. DELIVERY
The quantifies of Goods delivered by the due date as a percentage of
the total quantity of Goods required to be delivered during any
Supplier fiscal quarter shall be measured and communicated to the
Purchaser no later than fifteen (15) days after the end of the
Supplier' s quarter and track a four (4) quarter history.
Target Performance Level = 100%
2. MANUFACTURING RELEASE FAILURE RATES
The number of Goods passing the final test stage on first submission,
as a percentage of the total number of Goods submitted to the final
test during any Supplier fiscal quarter shall be measured and
communicated to the Purchaser no later than fifteen (15) days after the
end of the Supplier's quarter. The data shall be tracked for four (4)
consecutive quarters.
Target Performance Level = > 95%
3. COMMISSIONING FAILURE RATE
The number of Goods returned to the Supplier for repair from test stage
prior to be being placed in service, as a percentage of the Goods that
have been supplied within the "window". The data shall be tracked for
four (4) consecutive quarters.
Target Performance Level = TBD In next 60 days
4. RELIABILITY
The MTBF of each unit measured using the in-services returns for repair
and the in-service equipment services population. The data shall be
tracked for four (4) consecutive quarters.
Target Performance Level= > Agreed MTBFs
<TABLE>
<CAPTION>
--------------------------------- ------------------------------------------------------ --------------------------------
PART NUMBER DESCRIPTION OF FIELD REPLACEABLE UNIT ESTIMATED MTBF - HOURS
--------------------------------- ------------------------------------------------------ --------------------------------
<S> <C> <C>
M340220 Clock, 13MHz 1,344,267
--------------------------------- ------------------------------------------------------ --------------------------------
M340014 E-l, Long Haul, 2 Port 406,861
--------------------------------- ------------------------------------------------------ --------------------------------
M340098 E-1 with 2 TRAUS 244,141
--------------------------------- ------------------------------------------------------ --------------------------------
M340121 IWP 188,621
--------------------------------- ------------------------------------------------------ --------------------------------
M640034 Power supply 350W, Hi24, 115v AC 297,300
--------------------------------- ------------------------------------------------------ --------------------------------
M640035 Power supply 350W, Hi24, 230v AC 297,300
--------------------------------- ------------------------------------------------------ --------------------------------
M640026 Power supply 350W, Hi24, -48V DC 297,300
--------------------------------- ------------------------------------------------------ --------------------------------
M640027 Power Supply 50A, 115V AC 297,300
--------------------------------- ------------------------------------------------------ --------------------------------
M640028 Power Supply 50A, 230V AC 297,300
--------------------------------- ------------------------------------------------------ --------------------------------
M340063 RF Distribution 900 MHz 305,437
--------------------------------- ------------------------------------------------------ --------------------------------
PAGE 45 OF 58
<PAGE>
--------------------------------- ------------------------------------------------------ --------------------------------
M340088 RF Distribution 1800 MHz 305,437
--------------------------------- ------------------------------------------------------ --------------------------------
N/A RF Distribution 1900 MHz N/A
--------------------------------- ------------------------------------------------------ --------------------------------
M640116 TRX 900 MHz 122,392
--------------------------------- ------------------------------------------------------ --------------------------------
M640117 TRX 1800 MHz 122,392
--------------------------------- ------------------------------------------------------ --------------------------------
N/A TRX 1900 MHz N/A
--------------------------------- ------------------------------------------------------ --------------------------------
M640154 TurboWAVE (900 MHz) 100,000
--------------------------------- ------------------------------------------------------ --------------------------------
M648154 TurboWAVE (1800 MHz) 100,000
--------------------------------- ------------------------------------------------------ --------------------------------
M640025 Fan, 12V Power Supply 66,241
--------------------------------- ------------------------------------------------------ --------------------------------
M640021 Cable kit, full set, indoor N/A
--------------------------------- ------------------------------------------------------ --------------------------------
M640048 WAVEXpress Chassis N/A
--------------------------------- ------------------------------------------------------ --------------------------------
</TABLE>
5. REPAIR TURN AROUND TIME
The number of Goods repaired and returned to the Purchaser within the
turnaround time, as a percentage of the total number of Goods repaired
and returned to the Purchaser
The turnaround time is thirty (30) days measured from receipt by the
Supplier to dispatch by the Supplier to the Purchaser.
Target Performance Level = 100%
6. NO FAULT FOUND
The number of units diagnosed as no fault found as a percentage of the
units returned to the Purchaser during each Supplier fiscal quarter
shall be measured and communicated to the Purchaser no later than
fifteen (15) days after the end of the Supplier's quarter. The data
shall be tracked for four (4) consecutive quarters.
Target Perforce Level = 75%
7. REPAIR DIAGNOSTICS
Details of the reported fault and repair action taken on each unit
diagnosed during the Supplier's fiscal quarter will be gathered and
returned to the Purchaser no later than twenty-one (21) days after the
end of each quarter. Both parties will strive to reduce this reporting
interval over the next twelve months with the targeting a one month
turnaround time.
Performance Level = No target applicable.
PAGE 46 OF 58
<PAGE>
SCHEDULE 7
ORDERING AND BILLING DETAILS
1. Purchase Orders shall contain the following details:
- Unique Purchase Order Number,
- The Purchaser's Address;
- Description, Part Number, Specification and Quantity of Goods;
- Description of Services required;
- Delivery Date;
- Delivery Address;
- Price;
- Name of the Purchaser's Authorized Procurement Administrator,
and
- Reference to the Agreement.
Purchase Orders shall be sent to the following address:
656 Bair Island Road
Redwood City, CA, 94063
The Supplier's Authorized Representative is Stephen Lavallee
2. Signed Purchase Order acknowledgments shall be returned to the
Purchaser's Contract Administration Department at the address given in
clause 3, below.
3. THE PURCHASER'S ADDRESSES AND PROCUREMENT ADMINISTRATOR
3.1 PURCHASING AND CONTRACT ADMINISTRATION
Nortel-Malra Cellular
BP 50
1 Place des fres Montgolfier
78042 Guyancourt
France
The Procurement Administrator is John Haydon
3.2 INVOICING
Invoices should be sent to the following address. They will be
forwarded by the Procurement Administration for payment by the
appropriate Purchaser.
Nortel-Malra Cellular
1 Place des fres Montgolfier
78042 Guyancourt
PAGE 47 OF 58
<PAGE>
France
The Purchaser's Authorized Invoicing Administrator is John Haydon
PAGE 48 OF 58
<PAGE>
SCHEDULE 8
ESCROW
1. The Supplier shall, within thirty (30) days of receipt of a written
request from the Purchaser, enter into an escrow agreement with a
reputable escrow agent for the deposit of Software source code
information and hardware design information relating to Goods
(hereinafter collectively referred to as "Escrow Information"). The
terms of the escrow agreement are to be agreed between the Parties, but
shall at minimum provide:
1.1 an undertaking by the Supplier that all modifications, updates
and changes to the Escrow Information are deposited within
thirty (30) days of them becoming available;
1.2 that if Supplier fails, through no fault of Purchaser, to
provide a Correction or Workaround for an S1 severity Software
Problem within ninety (90) days of Purchaser's fault report to
Supplier, then copy of the Escrow Information necessary to
remedy such Software Problem shall be released to Purchaser,
provided that Purchaser may only use such Escrow information
to remedy such Software Problem, and all such Escrow
Information shall be returned to the escrow agent immediately
after resolution of thc Software Problem;
1.3 that if Supplier commits any act of bankrupt, or compounds
with its creditors, or a petition or receiving order in
bankrupt is presented or made against the Supplier, or a
petition for an administration order is presented in relation
to the Supplier, or a resolution or petition to wind up the
Supplier, or a receiver or administrative receiver is
appointed, other than for reconstruction reorganization or
amalgamation, and such act or petition is not cured,
dismissed, or withdrawn within 90 days thereafter, or Supplier
ceases to carry on business, then the Escrow Information shall
be released to Purchaser, provided that Purchaser shall only
be entitled to use the Escrow Information to enable the
continued supply of Goods and the provision of maintenance a
support services to existing Customers.
2. All costs associated with the deposit and update of Escrow
Information shall be for the Purchaser's account.
PAGE 49 OF 58
<PAGE>
SCHEDULE 9
PURCHASING BASELINE AND EXCLUSIVITIES
1. The Purchaser's Purchase Baseline is defined as follows (all revenues
are net of service credit as described in Schedule 2, clause 5):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
US$M 1998 1999 2000 2001 2002
Calendar Quarter Q2 Q3 Q4 Q1 Q2 Q3 Q4
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Quarterly Revenue 3 5 8 11 5 5 0
Annual Revenue 16* 21* 50* 82* 131
Cumulative Revenue 16 37 87 169 300
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Purchaser does not have the obligation to place these Purchase Order,
except as set forth in Schedule 9, sub-clause 2.1 and Schedule 2, Clause 4
and subject to the payment of the sums described in sub-clause 1.2 below
upon the Purchaser's failure to purchase Goods as anticipated in 1998 and
1999.
1.1 The Purchase Baseline can be adjusted, by good faith
negotiations, if, any material microcellular product
milestones as defined in the Development Plan (as stated in
Schedule 10, and subject to revision by mutual agreement of
the parties within 30 days after signing this Agreement) are
not met within 90 days of the target date in the Development
Plan.
1.2 If the purchases by the Purchaser, during any quarter of 1998
or 1999 are less than those indicated in the Purchase Baseline
above, the Purchaser shall pay the Supplier, at the end of
such quarter sum equal to 38.1% of the Price of the shortfall
of Goods not purchased by the Purchaser ("Shortfall Payment").
1.2.1 To the extent that the Purchaser makes up the
shortfall with an excess in the following quarter
(over the purchase baseline for such following
quarter), the Supplier will credit the Purchaser for
the shortfall payment.
1.2.2 The Purchaser shall not be obligated to pay for any
shortfalls due to the Supplier's failure to deliver
Goods which meet mutually agreed acceptance criteria.
2. Reflecting the fact that the Purchaser will supply
substantial, valuable and proprietary technology, technical
information and know-how to the Supplier pursuant to the
Technical Information Agreement being entered into between the
Parties, the Supplier shall be restricted from entering into
an OEM or distributor agreement with Nokia or Ericsson until
December 31, 1999 ("Limited Exclusivity"). After such time,
the Purchaser's Limited Exclusivity shall be terminated only
if the annual purchase of Goods by the Purchaser is less than
eighty (80%) percent of the annual Purchase Baseline at the
end of any of the calendar years 2000, 2001, 2002. Nothing in
this Agreement shall be construed to prevent the Supplier from
developing other products, whether or not competing with the
Goods, for supply to Nokia or Ericsson or any other purchaser,
provided that the Supplier complies with all provisions of
this Agreement, the Technical Information Agreement and the
Patent License Agreement.
2.1 If, however, the Purchaser's failure to meet an
eighty (80%) percent annual target is attributable
solely to the Supplier's delay in meeting a material
microcellular product milestone, or the Supplier's
delay in delivering goods which meet mutually agreed
PAGE 50 OF 58
<PAGE>
acceptance criteria, the annual period for determining
achievement of the annual target shall be extended for the
length of such delay
3. On or before the Second Closing Date, the parties shall, by exercise of
their commercially reasonable best efforts acting in good faith, agree
upon a methodology for periodic reviews of the market forces, including
pricing and other factors that are materially impacting the Purchaser's
ability to achieve the commitments in the Purchaser's Purchase Baseline
and related commitments hereunder and from time to time to negotiate in
good faith any clarifications or modifications that may be appropriate
and equitable in the interests of each of the parties by reasons of
conditions prevailing from time to time in markets for the Goods.
PAGE 51 OF 58
<PAGE>
SCHEDULE 10
PRODUCT DESCRIPTIONS
EQUIPMENT
1. WAVEXpress BTS
SPECIFICATIONS
Cellular Standards Supported ETSI GSM Phase 2
Features Supported Base transceiver
station (BTS); GSM RF
management, data and fax,
short message service,
antenna receive diversity,
encryption, optional power
supply redundancy
Transmit RF Frequency GSM 935- 960 MHz
DCS 1805 - 1880 MHz
Receive RF Frequency GSM 890- 915 MHz
DCS1710 - 1785 MHz
Antenna Power Up to 2.0 watts at antenna
port (may be extremely
amplified for greater
transmit power)
Cell Size (Range) Up to 3 kilometers maximum
radius depending on
topography and environment
Number of TRXs per BTS 1 - 3
Channels per BTS 7- 22 simultaneous
Mobile Stations Supported GSM/DCS-compliant mobile
station (Phase 1, 2 or 2+)
GSM/PCS Interfaces Supported Abis and Radio (Phase 2)
Processors Distributed Motorola 68040
and 68360
Mobile Interfaces Supported GSM full-rate RF interface,
2400 bps -- 9600 bps
transparent
data/FAX
Trunk Network Interfaces G.703-compliant. E1, T1
planned
Power Requirements Power consumption: 150
watts, 110/220 volts 50-60
Hz ac, -48 volts dc planned
Dimensions (h x w x d) 55 x 23 x 41 centimeters
(21.5 x 9 x 16 inches)
Weight 20 kg (44 lbs.)
Operating Environment Temperature: -10 DEG. to
45 DEG. C
Humidity: 10% to 90%
noncondensing,
10% to 95%
noncondensing
(outdoor)
2. WAVEXpress BSC
SPECIFICATIONS
Cellular Standards Supported ETSI GSM Phase 2
Features Supported Base station
controller (BSC); GSM RF
power management, data and
fax, short message service,
optional CPU and power
supply redundancy, optional
local transcoding (TRAU)
BTS RF Protocols Supported GSM 900
DCS 1800
Number of E1/T1 Ports per BSC 2 - 14
Number of BTSs per BSC 1 - 20
Number of TRXs per BSC 1 - 20, 1 - 30 in Release 3
PAGE 52 OF 58
<PAGE>
BTSs Supported interWAVE WAVEXpress/BTS
others supporting GSM Abis
interface (requires
verification testing with
interWAVE)
Mobile Stations Supported GSM/DCS-compliant mobile
station (Phase 1, 2 or 2+)
GSM/PCS Interfaces Supported A and Abis
Processors Distributed Motorola 68040
and 68360
Mobile Interfaces Supported GSM full-rate RF interface,
2400 bps- 9600 bps
transparent
data/FAX
Trunk Network Interfaces G.703-compliant. El, T1
planned
Power Requirements Power consumption: 150
watts, 110/220 volts 50-.60
Hz ac, -48 volts dc planned
Dimensions (h x w x d) 55 x 23 x 41 centimeters
(21.5 x 9 x 16 inches)
Weight 20 kg (44 lbs.)
Operating Environment Temperature: -10 DEG. to
45 DEG. C
Humidity:. 10% to 90%
noncondensing,
10% to 95%
noncondensing
(outdoor)
3. TurboWAVE BTS
SPECIFICATIONS
Cellular Standards Supported ETSI GSM Phase 2
Features Supported Base transceiver
station (BTS); GSM RF
management, data and fax,
short message service,
encryption, optional power
supply redundancy
Transmit RF Frequency GSM 935 - 960 MHz
DCS 1805- 1880 MHz
Receive RF Frequency GSM 890- 915 MHz
DCS 1710 - 1785 MHz
Antenna Power Up to 4.0 watts at antenna
port with 2 TRXs and 1
antenna
Up to 8.0 watts at antenna
port with 2 TRXs and 2
antenna
Up to 16.0 watts at antenna
port with 1 TRX and 1
antenna
Cell Size (Range) Up to 15 kilometers maximum
radius depending on
topography and environment
Number of TRXs per BTS 1 - 2
Channels per BTS 7- 14 simultaneous
Mobile Stations Supported GSM/DC-compliant mobile
station (Phase 1, 2 or 2+)
GSM/PCS Interfaces Supported Abis and Radio (Phase 2)
Processors Distributed Motorola 68040
and 68360
Mobile Interfaces Supported GSM full-rate RF interface,
2400 bps- 9600 bps
transparent
data/FAX
Trunk Network Interfaces G.703-compliant E1, T1
planned
Power Requirements Power consumption: 250
watts, 110/220 volts 50-60
Hz ac, -48 volts dc planned
Dimensions (h x w x d) 55 x 23 x 41 centimeters
(21.5 x 9 x 16 inches)
Weight 20 kg (44 lbs.)
Operating Environment Temperature: -10 to 45
DEG. C
Humidity:. 10% to 90%
noncondensing,
10% to 95%
noncondensing
(outdoor)
4. WAVEXchange
SPECIFICATIONS
PAGE 53 OF 58
<PAGE>
Applications GSM mobile networks,
wireless local loop, or
wireless PBX adjunct
Base Functionality Speech Services:
GSM900/DCS1800/PCS1900
(future)
Inter/lntra BSC handover,
Integral VLR/HLR per GSM
3.08 and GSM 9.02 MAP Call
management (GSM 4.08)
Mobility management (GSM
4.08)
- Ciphering,
identification,
location update,
identification, IMSI
attach/detach, TMSl
reallocation,
BSSMAP per GSM 8.08, both
connection/connectionless
Unified OMC, integrating
OMC-S/OMC-R applications
Call data records per GSM
12.05, ASCII formatted
Performance per GSM 12.04,
with proprietary extensions
Alarm/event management,
with proprietary extensions
Base Platform 9-slot VME backplane with
TDM bus (16 lines x 8Mbps)
IWP Module (68040 CPUI68360
Comm. Proc.)
- OMC connectivity via
Ethernet DB15 connector
- Craft Interface (RS-232c
9-pin); external alarms
(RJ45)
- Hard disk drive and
flash memory
Dual port El/T1 module
(68360 Comm. Proc.) planned
- Support for 14 E1 ports
per chassis
- Integral 64kbps time/
space switch"
- Available with BNC 75
omega or DB15 120 omega
connectors
- Echo cancellation/tones
available
- 1->N trunk redundancy
(future)
Redundant power supply
(optional)
Services Emergency calls
Call Barring (Operator
Determined - ODB), GSM 2.88
Call Forwarding
Unconditional (CFU - OD),
GSM 2.82 Intra WAVEXchange
FAX/data services, GSM
2.02/2.03
Performance Call processing
capabilities: 100 Erlangs
providing -8000 BHCA
Performance goals: per
GSM 3.05
Environmental Temperature: 0 DEG. C to
45 DEG. C
Humidity 0% to 95%,
noncondensing
5. Combo
SPECIFICATIONS
Applications GSM mobile networks,
wireless local loop, or
wireless PBX adjunct
Base Functionality Speech Services:
GSM900/DCS1800/PCS1900
(future)
Integral VLR/HLR per GSM
3.08 and GSM 9.02 MAP Call
management (GSM 4.08)
Mobility management (GSM
4.08)
- Ciphering,
identification,
location update,
identification, IMS1
attach/detach, TMSI
reallocation,
BSSMAP per GSM 8.08, both
connection/connectionless
Call data records per GSM
12.05, ASCII formatted
Performance per GSM 12.04,
with proprietary extensions
Alarm/event management,
with proprietary extensions
Features Supported GSM RF management, data and
fax, short message service,
encryption,
Transmit RF Frequency GSM 935- 960 MHz
DCS 1805 - 1880 MHz
Receive RF Frequency GSM 890- 915 MHz
DCS 1710- 1785 MHz
PAGE 54 OF 58
<PAGE>
Antenna Power Up to 16.0 watts at antenna
port with 1 TRX and 1
antenna
Cell Size (Range) Up to 15 kilometers maximum
radius depending on
topography and environment
Number of BTS per Combo 1 - 3 planned
Number of TRXs per Combo 1 - 2, 1 - 10 planned
(3TRX per BTS and 1TRX
in Combo)
Channels per Combo 7 - 14 simultaneous
Mobile Stations Supported GSM/DCS- compliant mobile
station (Phase 1, 2 or 2+)
Base Platform 9-slot VME backplane with
TDM bus (16 lines x 8Mbps)
IWP Module (68040 CPU/68360
Comm. Proc.)
- OMC connectivity via
Ethernet DB15 connector
- Craft Interface (RS-232c
9-pin); external alarms
(RJ45)
- Hard disk drive and
flash memory
Dual port E1/T1 module
(68360 Comm. Proc.) planned
- Support for 14 E1 ports
per chassis
- Integral 64kbps time/
space switch
- Available with BNC
75omega or DB15
120omega connectors
- Echo cancellation/tones
available
- 1->N trunk redundancy
(future)
Redundant power supply
(optional)
Services Emergency calls
Call Barring (Operator
Determined - ODB), GSM 2.88
Call Forwarding
Unconditional (CFU - OD),
GSM 2.82
GSM/PCS Interfaces Supported Abis and Radio (Phase 2)
Processors Distributed Motorola 68040
and 68360
Mobile Interfaces Supported GSM full-rate RF interface,
2400 bps - 9600 bps
transparent data/FAX
Trunk Network Interfaces G.703-compliant. El, T1
planned
Power Requirements Power consumption: 250
watts, 110/220 volts 50-60
Hz ac, -48 volts dc planned
Dimensions (h x w x d) 55 x 23 x 41 centimeters
(21.5 x 9 x 16 inches)
Weight 20 kg (44 lbs.)
Operating Environment Temperature: -10 DEG. to
45 DEG. C
Humidity 10% to 90%
noncondensing,
10% to 95%
noncondensing
(outdoor)
6. WAVEView OMC
APPLICATIONS
Configuration Management
- Region-wide configuration
database
- Modification of network
elements and network
parameters
- Remote download of
software to network
elements
- Audit functions that upload
current configuration of
network elements
- Region map that displays
the network elements and
connectivity
- Addition and deletion of
network elements (MSC, BSC,
and BTS)
- Full support of cell and
frequency configuration
management
- Region map displays current
network element states'
Fault Management
- Real-time monitoring of the
network for faults and
problems
- Visual indication of
problem areas using
detailed views
- Polling of the wireless
access network to determine
the status of
- the operations and
maintenance communication
links
- Maintenance of daily event
logs
- Tracking of active alarm
conditions
- Audible alarms based on
severity
PAGE 55 OF 58
<PAGE>
- Clearing and acknowledgment
of alarms
- Alarm seventy can be
altered
Performance Management
- Collects network
performance statistics
- Building of a knowledge
base of network resource
usage for strategic
business and network
planning decisions
- Use of performance data for
troubleshooting and
monitoring network
performance
Data Import and Export
- Integrates with existing
network management support
tools
- Import cell configuration
data from existing cell
planning tools
- Export of network
performance data and
statistics to cell
planning tools
- Periodic collection BSC/BTS
statistics into ASCII files
for export to external
tools
- Export of historical event
and alarm logs
Access Security Management
- Definition of user access
privileges settable by the
administrator
- Definition of different
classes of WAVEView users,
privileges, and passwords
- Two levels of security
control beyond normal UNIX
login security
- Password authorized use
of WAVEView
- User restrictions based
on domains and object
class access control
PAGE 56 OF 58
<PAGE>
DEVELOPMENT PLAN FOR BSS RELEASES
<TABLE>
<S> <C>
1 BSS Release 2.0 (Currently Shipping) 3. BSS Release 4.0
MAIN FEATURES ADDITIONAL FEATURES
- No cycling of MS power on handover - SMS Cell Broadcast
- MS Dynamic Power Control on - Handover on congestion with threshold
RxQual and RxLev - Force handover to second best cell
- Separate Settable HO Margins - DTX downlink (uplink by MS)
- MS fast Power Down - Call Trace
- Speed Sensitive microcell HO - Double BCCH allocation lists
- GSM 12.21 standard Abis interface - Call Queuing
- Racal BSS Testing Support - Idle Channel interference
- TRX Hot Swap measurement and notification
- Enh Network Perf Statistics Module - Very early assignment
Serial Number Id - Handover margins for each cell
- Non-Encrypted Software Release
- GSM Data Services
2. BSS Release 3.0 4. BSS Release 5.0
ADDITIONAL FEATURES ADDITIONAL FEATURES
- WAVEXpress BSC Capacity - New E1/T1 module for up to 8 BTS per BSC E1/T1 card
Increase - -16Kb switching
- -30 TRXs per BSC - Enhanced Full Rate Vocoder
- -15 BTSs per BSC - Cost Reduced TRX with
- Antenna Receive Diversity - -frequency hopping
- Dynamic Power Control - -forward and reflected
- Directed Retry (phase 1 and 2 power detection
mobiles) - Paging Group Reorganization
- 3 TRXs per WAVEXpress BTS - Adjustment of uplink/downlink volume
- TurboWAVE Integrated high power - Automatic E1/T1 module hardware occupancy detect
- -2-16 Watts - More flexible SDCCH Channel configuration
- -900 MHz and 1800 MHz - Dynamic Channel Allocation (DCA)
- WAVEXpress BTS Daisy Chain
- HDSL Modem (OEM Adjunct)
</TABLE>
Page 57 of 58
<PAGE>
DEVELOPMENT PLAN FOR NSS RELEASES
<TABLE>
<S><C>
1. NSS Release 2.0 (Currently Shipping) 3. NSS Release 4.0 (Calendar
MAIN FEATURES ADDITIONAL FEATURES
- Support (2) BSC; (5) BTS; (2) TRX each - Support (5) BSC (BSS 4.0 rules),
- 500 Subs @ 0.1 Erlang max 30TRX
- 'A' Interface to interWAVE BSC - 1,000 Subs @ 0.1 Erlang
- HLR/VLR Support - 2,000 Subs @ 0.05 Erlang
- Authentication - Combo Switeh/BSC/BTS
- Ciphering - Support for (2) TRX
- Emergency Call - 200 Subs @ 0.025Erlang
- ISDN PRI Trunks - integrated HLR
- Dial Plan (E. 164) - modular expansion
- DTMF / MF Tones - Private A-Link Multiplexer
- Call Detail Records (CDRs) (PALIM)
- Abbreviated Dial Plan - QSIG (Adjunct)
- MFCR2 Trunks - Call Forwarding Conditional
- Call Barring (Operator Determined) - Call Waiting
- Call Hold
- Call Transfer
2. NSS Release 3.0 - Trunk Group Management
- SMS (in investigation)
ADDITIONAL FEATURES - Voice Mail (in investigation)
- Integrated OMC-R-S-HLR - MAP for central HLR
- Call Forwarding Unconditional
- Data/Fax (intra WX)
- Callid (CLIR/CLIP) 4. NSS Release 5.0
- Echo Cancellation via external box ADDITIONAL FEATURES
- Performance Measurements - Support (5) BSC (BSS 5.0 rules),
max 60TRX
- 2,000 Subs @ 0.1 Erlang
- 5,000 Subs @ 0.04 Erlang
- Call Conference (multi-party)
- Multi-site WAVEXchange Networks
- 16 Kb switching
</TABLE>
Page 58 of 58
<PAGE>
AMENDMENT NO. 2 TO OEM AGREEMENT
This Amendment No. 2 (this "Amendment") to the Revised OEM Purchase Agreement
between the parties effective March 27. 1998 and previously amended by an
Amendment No. 1 effective April 29, 1998 (together the "Agreement") is made and
entered into this 21st day of April, 1999 by and between Northern Telecom
Limited, a company incorporated under the laws of Canada, and interWAVE
Communications International, a B. V. company incorporated under the laws of the
Netherlands.
The parties agree as follows:
1. The Agreement is amended by deleting Schedules 2, 9 and 10 and
replacing them with the attached Schedules.
2. Except as otherwise provided in this Amendment, all terms and
conditions of the Agreement remain in full force and effect.
3. This Amendment may be executed in a number of counterparts,
and all such counterparts taken together shall constitute one
and the same agreement.
IN WITNESS WHEREOF the parties have entered into this Amendment to the Agreement
the day and year first above written.
SIGNED BY
a duly authorized person on
behalf of Northern Telecom Limited
Signature }
-------------
Name }
-------------
Position }
-------------
Signature }
-------------
Name }
-------------
Position }
-------------
SIGNED BY
a duly authorized person on behalf of
interWAVE Communications International
Signature } /s/: xxxx
-------------
Name }Pricilla Lu
-------------
<PAGE>
Position }Chairman,
CEO, President
---------------
<PAGE>
SCHEDULE 2
1. PRICES AND PRODUCT DESCRIPTION
The prices detailed hereunder are firm and fixed for the calendar year
in which this Agreement commenced (the "Initial Period"). Sixty (60)
days prior to the expiration of the Initial Period, and each subsequent
twelve (12) month period the Parties shall review and agree upon the
prices that shall apply to Goods and Services for the next twelve (12)
month period. The prices listed below include warranty during the
Guarantee Period and technical support for 12 months.
The prices listed below are subject to amendments according to the
clauses below:
1.0.1 In the event that the market prices have substantially decreased, the
Purchaser may request good faith efforts from the Supplier to
re-negotiate prices accordingly. Such price reduction will become
effective for all following deliveries to the Purchaser.
1.0.2 The Purchaser will discuss with the Supplier any single opportunity for
the Supplier's. In the event that the single opportunity pricing is
granted to the Purchaser by the Supplier, it will not impact the
pricing at that time of other products.
1.0.3 For each of the calendar years, the Purchaser and Supplier will use
their best efforts to agree upon and execute an amendment to this
Agreement that sets forth the prices and volume discounts applicable
for such a calendar year. The Supplier guarantees a minimum of 5%
decrease of price for the Products from one calendar year to the next.
1.0.4 The Purchaser may agree to fund any cost reduction program with the
Supplier that provides an in year pay back to the Purchaser. The
benefit of the cost reduction will be shared equally between the
Purchaser and the Supplier and will be reflected in revised purchase
prices by the supplier from the time that the cost reduction is
realized in the product cost.
1.0.5 The Purchaser may agree to provide to the Supplier, where applicable,
opportunities to reduce costs by subcontracting to the Purchaser's
manufacturing facilities.
1.0.6 The Supplier agrees to provide the Purchaser with a monthly status on
their cost reduction programs in part with the ordering and forecast
review.
1.0.7 The Supplier represents to the Purchaser that the prices listed herein
for Goods and Services are no higher than those charged by the Supplier
to other similar parties who purchase similar goods for resale
(excluding exceptions for flexibility in markets and for the Customers
that the Purchaser is not pursuing, and other special circumstances on
an agreed upon individual basis). At the request of the Purchaser,
Supplier shall internally review its compliance with this requirement
on an annual calendar year basis and shall credit any overcharge to the
Purchaser in accordance with Schedule 1, Clause 24. In any event, the
Purchaser shall receive a minimum sixty-five (65)% discount off the
Supplier's then current list prices.
1.0.8 The Supplier shall provide a ten (10%) percent discount on Combos
ordered for installation into the "Corporate Market Applications" The
Supplier agrees to provide a discount on Base Stations for accounts and
bids made by the Purchaser prior to the signing of this amendment but
not going forward.
1.0.9 The supplier will provide the following discounts for 1999. These
discounts are not incremental to the ten (10%) percent discount on
Combos for "Corporate Market Applications"
1
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------- -----------------------------------------------
$0 to $7.0M 1998 prices (Net of credit)
- --------------------------------------- -----------------------------------------------
<S> <C>
$7.0M to $15.0M 8% discount
- --------------------------------------- -----------------------------------------------
$15.0M and over 12% discount including Combos
- --------------------------------------- -----------------------------------------------
</TABLE>
2
<PAGE>
1.1 Baseline Prices for Goods
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------- ------------------------------- -----------------------
DESCRIPTION OF GOODS PART NUMBER PRICE (US$)
- ------------------------------------------------------------------------- ------------------------------- -----------------------
<S> <C> <C>
WAVEXpress 1-TRX BTS (900MHz) M5120A $9,975
- ------------------------------------------------------------------------- ------------------------------- -----------------------
WAVEXpress 2-'TRX BTS (900MHz) M5220A $14,963
- ------------------------------------------------------------------------- ------------------------------- -----------------------
WAVEXpress 3-TRX BTS (900MHz) M5320A $22,444
- ------------------------------------------------------------------------- ------------------------------- -----------------------
WAVEXpress 1-TRX BTS (1800MHz) M5122 $9,975
- ------------------------------------------------------------------------- ------------------------------- -----------------------
WAVEXpress 2-TRX BTS (1800MHz) M5222 $14,963
- ------------------------------------------------------------------------- ------------------------------- -----------------------
WAVEXpress 3-TRX BTS (1800MHz) M5322 $22,444
- ------------------------------------------------------------------------- ------------------------------- -----------------------
WAVEXpress 1-TRX BTS (1900MHz) M5124 $9,975
- ------------------------------------------------------------------------- ------------------------------- -----------------------
WAVEXpress 2-TRX BTS (1900MHz) M5224 $14,963
- ------------------------------------------------------------------------- ------------------------------- -----------------------
WAVEXpress 3-TRX BTS (1900MHz) M5324 $22,444
- ------------------------------------------------------------------------- ------------------------------- -----------------------
TurboWAVE 4 Watt(900 MHz) M640154 $3,990
- ------------------------------------------------------------------------- ------------------------------- -----------------------
TurboWAVE 8 Watt(900 MHz) M640157 $3,990
- ------------------------------------------------------------------------- ------------------------------- -----------------------
- ------------------------------------------------------------------------- ------------------------------- -----------------------
TurboWAVE 4 Watt (1800 MHz) M640159 $3,990
- ------------------------------------------------------------------------- ------------------------------- -----------------------
TurboWAVE 8 Watt (1800 MHz) M640160 $3,990
- ------------------------------------------------------------------------- ------------------------------- -----------------------
- ------------------------------------------------------------------------- ------------------------------- -----------------------
BSPLUS 1-TRX 2W (900 MHz) tbd $27,360
- ------------------------------------------------------------------------- ------------------------------- -----------------------
BSPLUS 2-TRX 2W (900 MHz) tbd $34,865
- ------------------------------------------------------------------------- ------------------------------- -----------------------
BSPLUS 1-TRX 2W (1800 MHz) tbd $27,360
- ------------------------------------------------------------------------- ------------------------------- -----------------------
BSPLUS 2-TRX 2W (1800 MHz) tbd $34,865
- ------------------------------------------------------------------------- ------------------------------- -----------------------
BSPLUS 1-TRX 2W (1900 MHz) tbd $27,360
- ------------------------------------------------------------------------- ------------------------------- -----------------------
BSPLUS 2-TRX 2W (1900 MHz) tbd $34,865
- ------------------------------------------------------------------------- ------------------------------- -----------------------
- ------------------------------------------------------------------------- ------------------------------- -----------------------
WAVEXpress BSC-11 (2 E1) See Config Guide $14,060
- ------------------------------------------------------------------------- ------------------------------- -----------------------
WAVEXpress BSC-32 (5 E1) M5130 $23,608
- ------------------------------------------------------------------------- ------------------------------- -----------------------
WAVEXpress BSC-53 (8 E1) tbd $33,155
- ------------------------------------------------------------------------- ------------------------------- -----------------------
Combo 1-TRX (900 MHz) M5150A $13,618
- ------------------------------------------------------------------------- ------------------------------- -----------------------
Combo 2-TRX (900 MHz) M5152A $18,611
- ------------------------------------------------------------------------- ------------------------------- -----------------------
Combo 1-TRX (1800 MHz) M5152 $18,611
- ------------------------------------------------------------------------- ------------------------------- -----------------------
Combo 1-TRX (1800 MHz) M5252 $13,618
- ------------------------------------------------------------------------- ------------------------------- -----------------------
Combo 1-TRX (1900 MHz) M5154 $18,611
- ------------------------------------------------------------------------- ------------------------------- -----------------------
Combo 2-TRX (1900 MHz) M5254 $13,618
- ------------------------------------------------------------------------- ------------------------------- -----------------------
WAVEXchange NSS -11 (2 E1) See Config Guide $12,350
- ------------------------------------------------------------------------- ------------------------------- -----------------------
WAVEXchange NSS -32 (5 E1) M5060 $21,375
- ------------------------------------------------------------------------- ------------------------------- -----------------------
WAVEXchange NSS -53 (8 E1) tbd $30,400
- ------------------------------------------------------------------------- ------------------------------- -----------------------
WAVEView,OMC-Ultra 10 M640191 $22,487
- ------------------------------------------------------------------------- ------------------------------- -----------------------
- ------------------------------------------------------------------------- ------------------------------- -----------------------
Combo S/W - 1 TRX S500200N $6,983
- ------------------------------------------------------------------------- ------------------------------- -----------------------
Combo S/W - 2 TRX S500300N $12,487
- ------------------------------------------------------------------------- ------------------------------- -----------------------
WAVEXchange NSS S/W- Base S500400N $27,712
- ------------------------------------------------------------------------- ------------------------------- -----------------------
WAVEXchange NSS S/W- Base S500500N $3,325
- ------------------------------------------------------------------------- ------------------------------- -----------------------
WAVEView,OMC-200 S/W - Base S500600N $10,474
- ------------------------------------------------------------------------- ------------------------------- -----------------------
WAVEView,OMC-200 S/W - per TRX (not to exceed $70k/ OMC) S500700N
- ------------------------------------------------------------------------- ------------------------------- -----------------------
</TABLE>
3
<PAGE>
1.21.2 Prices for Software Release Upgrades
The fee for upgrading from Release 4.x to 5.x is as follows-
US per TRX for the BSS
US per TRX for the OSS
US per TRX for the NSS/Combo
1.3 PRICES FOR ENGINEERING SERVICES
EMERGENCY CALL OUT SERVICES *
<TABLE>
<CAPTION>
- ------------------------------ ----------------------- --------------------- ------------------------------ -----------------------
EMERGENCY CALL OUT STANDARD WEEKNIGHTS NIGHTS/WEEKENDS SUNDAYS/HOLIDAYS
- ------------------------------ ----------------------- --------------------- ------------------------------ -----------------------
($/HOUR) 8AM-5PM 5PM-11PM 11PM-8AM
- ------------------------------ ----------------------- --------------------- ------------------------------ -----------------------
<S> <C> <C> <C> <C>
- ------------------------------ ----------------------- --------------------- ------------------------------ -----------------------
Junior Engineer $90 $110 $125 $150
- ------------------------------ ----------------------- --------------------- ------------------------------ -----------------------
Engineer $110 $130 $150 $185
- ------------------------------ ----------------------- --------------------- ------------------------------ -----------------------
Sr. Engineer/Spec. $150 $180 $185 $250
- ------------------------------ ----------------------- --------------------- ------------------------------ -----------------------
Project Manager $190 $225 $250 $315
- ------------------------------ ----------------------- --------------------- ------------------------------ -----------------------
</TABLE>
*Rates do not include transportation, nor a Per Diem for
food and lodging, nor out-of-pocket expenses for personnel
rendering such services. Minimum 4 hour call out.
LEVEL 1 CALL-IN SUPPORT*
<TABLE>
<CAPTION>
- ------------------------------ ----------------------- --------------------- ------------------------------ -----------------------
CALL IN STANDARD WEEKNIGHTS NIGHTS/WEEKENDS SUNDAYS/HOLIDAYS
- ------------------------------ ----------------------- --------------------- ------------------------------ -----------------------
($/HOUR) 8AM-5PM 5PM-11PM 11PM-8AM
<S> <C> <C> <C> <C>
- ------------------------------ ----------------------- --------------------- ------------------------------ -----------------------
Sr. Engineer/Spec. $150 $180 $185 $250
- ------------------------------ ----------------------- --------------------- ------------------------------ -----------------------
Project Manager $190 $225 $250 $315
- ------------------------------ ----------------------- --------------------- ------------------------------ -----------------------
</TABLE>
*Purchaser shall reimburse Supplier for support provided
that is deemed not consistent with the responsibilities of
the Supplier for support. This shall include, but not be
limited to, supporting Level 1 type issues such as
configuration, installation and commissioning as well as
supporting non-Supplier provided equipment.
4
<PAGE>
1.4 PRICES FOR SPARES
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
PART NUMBER DESCRIPTION OF FIELD REPLACEABLE UNIT SPARES PRICE (US$)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
M340220 Clock, 13MHz $1,302
---------------------------------------------------------------------------------------------------------------------------
M340128 E1, Trunk, 120 Ohm for BTS $5,387
---------------------------------------------------------------------------------------------------------------------------
M340126 E1, Trunk, 120 Ohm for BSC or MSC $5,387
---------------------------------------------------------------------------------------------------------------------------
M340129 E1, Trunk, 75 Ohm for BTS $5,387
---------------------------------------------------------------------------------------------------------------------------
M340127 E1, Trunk, 75 Ohm for BTS or MSC $5,387
---------------------------------------------------------------------------------------------------------------------------
M640180 E1, Abis with 2 Traus, 120 Ohm for BSC $7,980
---------------------------------------------------------------------------------------------------------------------------
M640181 E1, Abis with 2 Traus, 75 Ohm for BSC $7,980
---------------------------------------------------------------------------------------------------------------------------
M640182 E1, Abis with 4 Traus, 120 Ohm for BSC $10,735
---------------------------------------------------------------------------------------------------------------------------
M640183 E1, Abis with 4 Traus, 75 Ohm for BSC $10,735
---------------------------------------------------------------------------------------------------------------------------
M640178 E1, PSTN w/ DSP, 120 Ohm for MSC $7,980
---------------------------------------------------------------------------------------------------------------------------
M640179 E1, PSTN w/ DSP, 75 Ohm for MSC $7,980
---------------------------------------------------------------------------------------------------------------------------
M340123 IWP W/O Hard disk $3,040
---------------------------------------------------------------------------------------------------------------------------
tbd IWP 64 MB, 810 w/HD $3,772
---------------------------------------------------------------------------------------------------------------------------
M640034 Power supply 350W, Hi24, 115v AC $1,302
---------------------------------------------------------------------------------------------------------------------------
M640035 Power supply 350W, Hi24, 230v AC $1,302
---------------------------------------------------------------------------------------------------------------------------
M640026 Power supply 350W, Hi24, -48V DC $1,302
---------------------------------------------------------------------------------------------------------------------------
M640027 Power Supply 50A, 115V AC $1,577
---------------------------------------------------------------------------------------------------------------------------
M640028 Power Supply 50A, 230V AC $1,577
---------------------------------------------------------------------------------------------------------------------------
M340103 RFD, 900 MHz $2,993
---------------------------------------------------------------------------------------------------------------------------
M340088 RFD, 1800 MHz $2,993
---------------------------------------------------------------------------------------------------------------------------
M340119 RFD, 1900 MHz $2,993
---------------------------------------------------------------------------------------------------------------------------
M640116 TRX 900 MHz $7,481
---------------------------------------------------------------------------------------------------------------------------
M640117 TRX 1800 MHz $7,481
---------------------------------------------------------------------------------------------------------------------------
M640145 TRX 1900 MHz $7,481
---------------------------------------------------------------------------------------------------------------------------
M640025 Fan, 12V Power Supply $428
---------------------------------------------------------------------------------------------------------------------------
M640021 Cable kit, full set, indoor $428
---------------------------------------------------------------------------------------------------------------------------
M640047 BTS Chassis $1,758
---------------------------------------------------------------------------------------------------------------------------
M640048 BSC Chassis $1,758i
---------------------------------------------------------------------------------------------------------------------------
M640173 Front Panel Blanks (4 pack) 70.00
---------------------------------------------------------------------------------------------------------------------------
M640055 Wall Mount Kit $214
---------------------------------------------------------------------------------------------------------------------------
M640050 Rack Mount kit 90' $219
---------------------------------------------------------------------------------------------------------------------------
M640065 Table Mount Kit $95
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
1.5 PRICES FOR POST GUARANTEE REPAIR SERVICE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Part Number Description of Field Replaceable Unit Repair Price (US$)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
M340220 Clock, 13MHz $600
- ----------------------------------------------------------------------------------------------------------------------------
M340014 E-l, Long Haul, 2 Port $1,900
- ----------------------------------------------------------------------------------------------------------------------------
M340098 E-1 with 2 TRAUS $3,200
- ----------------------------------------------------------------------------------------------------------------------------
M340121 IWP $1,300
- ----------------------------------------------------------------------------------------------------------------------------
M640034 Power supply 350W, Hi24, 115v AC $450
- ----------------------------------------------------------------------------------------------------------------------------
M640035 Power supply 350W, Hi24, 230v AC $450
- ----------------------------------------------------------------------------------------------------------------------------
M640026 Power supply 350W, Hi24, -48V DC $450
- ----------------------------------------------------------------------------------------------------------------------------
M640027 Power Supply 50A, 115V AC $500
- ----------------------------------------------------------------------------------------------------------------------------
M640028 Power Supply 50A, 230V AC $500
- ----------------------------------------------------------------------------------------------------------------------------
M340063 RF Distribution 900 MHz $350
- ----------------------------------------------------------------------------------------------------------------------------
M340088 RF Distribution 1800 MHz $350
- ----------------------------------------------------------------------------------------------------------------------------
M340119 RF Distribution 1900 MHz $350
- ----------------------------------------------------------------------------------------------------------------------------
M640116 TRX 900 MHz $2,500
- ----------------------------------------------------------------------------------------------------------------------------
M640117 TRX 1800 MHz $2,500
- ----------------------------------------------------------------------------------------------------------------------------
M640145 TRX 1900 MHz $2,500
- ----------------------------------------------------------------------------------------------------------------------------
M640025 Fan, 12V Power Supply N/A
- ----------------------------------------------------------------------------------------------------------------------------
M640021 Cable kit, full set, indoor N/A
- ----------------------------------------------------------------------------------------------------------------------------
M640048 WAVEXpress Chassis N/A
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
1.6 PRICES FOR TRAINING
Customer Training will be provided if available resources permit as it
is expected that Purchaser will train its own personnel and personnel
of its Customers.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
PRICE
SERIES COURSE DAYS (PER STUDENT)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
T100 GSM OVERVIEW 2 $1000USD
------------------------------------------------------------------------------------------------------------------
T300 OMC SYSTEM ADMINISTRATION 3 $1500USD
------------------------------------------------------------------------------------------------------------------
T400 OMC-RADIO NETWORK OPERATIONS 3 1500USD
------------------------------------------------------------------------------------------------------------------
T500 BSS OPERATIONS & MAINTENANCE 3 $1500USD
------------------------------------------------------------------------------------------------------------------
T600 BSS INSTALLATION & COMMISSIONING 1 $500USD
------------------------------------------------------------------------------------------------------------------
T700 NIB OPERATIONS 5 $2500USD
------------------------------------------------------------------------------------------------------------------
T800 OMC NETWORK OPERATIONS 5 $2500USD
------------------------------------------------------------------------------------------------------------------
T900 WXC SWITCH OPERATIONS & MAINTENANCE 5 $2500USD
------------------------------------------------------------------------------------------------------------------
T510 RELEASE 4 BSS DELTA 2 $1000USD
------------------------------------------------------------------------------------------------------------------
</TABLE>
See Supplier's Training Guide for further details.
6
<PAGE>
1.7 PRICES FOR DOCUMENTATION
A. Training Material
Includes Instructor and Student Guide
B. Documentation Cost
$52,500 Annual Fee. All documentation to be distributed on
electronic media.
C. Feature Guide
BSS, NSS, and OSS feature guides for each software release
D. "Nortelization" Cost
Where Nortelize means replace with interWAVE specific names,
the Nortel version of those names, the supplier shall agree to
"Nortelize", customer documentation as follows:
<TABLE>
<S> <C>
Initial Customization Setup Fee (NRE type) $US 30,000
For each "set" (defined as document version,
a,b,c,d etc.) $US 15,000
</TABLE>
Where the Supplier issues an unplanned increment to the documentation
-- for example, to correct errors of documentation, or to document
changed behavior of the system following patches -- the supplier shall
provide the "Nortelized" documentation update for that revision at no
incremental cost to Nortel Networks.
Each "set" of documents shall consist of the following documents for
each release:
Installation and Commissioning guides:
WAVEXpress/BTS
WAVEXpress/BSC
WAVEXchange
WAVEView/OMCR Setup & System Administration Guide
WAVEView/OMCR Operations and Maintenance Guide
Craft PC Guide
InterWAVE Parameter Dictionary
BSS Maintenance Guide
WAVEView System Administrator's Guide
BSS Network Implementation Guide
InterWAVE Glossary of Terms
The Purchaser shall provide a list or mapping of all of the items that
the Purchaser would like converted from the Supplier's terms to the
Purchaser's terms to "Nortelize" the documents.
7
<PAGE>
1.8 PRICES FOR GUARANTEE PERIOD EXTENSION
<TABLE>
<CAPTION>
---------------------- --------------------------------------- -------------------------------------------------------
STANDARD PERIOD OF EXTENSION
---------------------- --------------------------------------- -------------------------- ----------------------------
FIRST YEAR ONE YEAR TWO YEARS
---------------------- --------------------------------------- -------------------------- ----------------------------
<S> <C> <C> <C>
Equipment Return to Factory - No Charge of Price N/A
---------------------- --------------------------------------- -------------------------- ----------------------------
---------------------- --------------------------------------- -------------------------- ----------------------------
</TABLE>
1.9 PRODUCT DESCRIPTIONS
See Schedule 10
1.9.1 Notwithstanding Clause 1 above, the prices for individual
Purchase Orders once issued shall remain firm and fixed for
their duration, unless otherwise provided for by operation of
any other term of the Agreement.
2.0 PRICING OF ENHANCEMENTS
2.1 Where the Supplier enhances the Goods above and
beyond the requirements of the relevant
Specification, including the new features or
facilities, the Supplier shall state in writing the
effect such enhancement will have on the Goods and
what adjustment, if any, will be required to the
Agreement. The Supplier shall furnish such details in
a time scale agreed between the Parties.
2.2 Where the Supplier shows that an enhancement involves
a change in the price or lead times for the Goods,
the Supplier shall make best efforts as to the
reasonableness of the changes arising therefrom.
2.3 The Supplier shall demonstrate best faith efforts to
ensure that the price for enhancements does not
include any work that should be performed under any
other term of the Agreement or any Purchase Order.
This shall include, but not be restricted to,
enhancements in respect of operational support,
repair, build management and guarantee.
3.0 FORECASTING MECHANISM FOR GOODS
3.1 DELIVERIES IN 1999. Prior to acceptance by the
supplier of any Orders issued by the purchaser, the
Parties shall review the Orders on a case by case
basis for 1999 to mutually agree upon the monthly
Delivery Dates. The monthly forecast(s) for 1999 for
Products provided to the supplier other than those
forecasts specified as Orders are for informational
purposes only. The purchaser further agrees to
provide the supplier with the shortfall between firm
Orders and monthly/quaterly/annual commitments to
purchase. In the second month of the quarter, the
Purchaser shall place orders to meet the commitment
for the quarter.
8
<PAGE>
3.2 Deliveries in 2000. Prior to the first day of the
ninth month of 1999, the purchaser shall provide to
the supplier, a twelve (12) month forecast of the
quantities of Products required and the Delivers
Dates within each month for such Products commencing
in the first month of 2000 (the "Forecast"). This
first twelve (12) month Forecast shall include any
deliveries for Orders accepted by the purchaser in
1999, and by mutual agreement at the time of the
Order having a Delivery Date in 2000. Thereafter the
purchaser shall provide to the supplier, prior to the
first day of each month, an adjusted twelve (12)
month rolling Forecast setting forth the Delivery
Dates within each month and the unit quantities of
Products for such Delivery Dates that the purchaser
expects it will Order from the supplier commencing in
the first month of 2000.
3.3 With respect to Products forecasted for which the
purchaser has not issued Orders, the purchaser may
adjust the Forecast from one Forecast to the next
within the following limitations:
<TABLE>
<CAPTION>
FORECAST MONTH FORECAST ADJUSTMENT
-------------- -------------------
<S> <C>
Month 1-2 zero
Months 3-5 25%
Months 6-12 no limitation
</TABLE>
3.4 The purchaser shall make Reasonable Efforts to ensure
that the adjustments to the Forecasts pursuant to
Article 3.3 shall be no more onerous than the
adjustments the purchaser must bear in the normal
course of the Purchaser's operations.
3.5 The purchaser shall ensure that there are sufficient
Orders placed with the supplier in advance of the
Delivery Date to provide for the delivery within the
Maximum Delivery Period of all of the Products which
the purchaser forecasted to be delivered during the
first month of each Forecast in accordance with
Article 3.3. Except as set forth above, the purchaser
shall not be obligated to issues Orders based on
Forecasts except as it supports minimum quarterly
contractual commitments. For the purposes of this
Article 3, the purchaser shall in the normal course
place Orders through a central purchaser order point.
3.6 The supplier shall accept any Order issued by the
purchaser for Products for delivery within the
Maximum Delivery Period to the extent such Products
were within the most recent Forecast. If the
purchaser orders Products in excess of the number of
units contained in the Forecast, the supplier and
purchaser shall mutually agree on the Delivery Dates
of such Orders, but the supplier shall use Reasonable
Efforts to ensure that the Delivery Date for Products
not Forecasted does not exceed sixty (60) consecutive
days. All deliveries of Orders shall be FOB the
Shipping Location.
3.7 The Purchaser, wherever possible will provide monthly
a rolling 12 month forecast, broken down by country,
of their requirements as precise as possible of the
Goods to the Supplier within forty-five days of
execution of this amendment. The Purchaser shall use
best efforts to forecast at least the amounts set
forth in the Purchase Baseline in Schedule 9. The
Supplier will give the Purchaser an overview of their
position with respect to supporting compliance into
the country's market.
9
<PAGE>
SCHEDULE 9
4.0 PURCHASING BASELINE AND EXCLUSIVITIES
4.1 The Purchaser's Purchase Baseline is defined as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
USSM 1999 2000
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar Quarter Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Quarterly Revenue 1.3 2.5 2.7 3.5 5 7 8 10
Annual Revenue 10 31
Cumulative Revenue 10 41
-----------------------------------------------------------------------------------------------------
</TABLE>
4.2 The Purchase Baseline can be adjusted, by good faith
negotiations, if any material microcellular product milestones
as defined in the Development Plan are not met within 90 days
of the target date stated in Schedule 10. It is further agreed
that if the Supplier is unable to deliver "support for EFR
Ready Hardware in Release 4.5" the purchase baseline for 1999
can be reduced by $1 million in each of quarters 3 and 4.
Also, if the agreed upon subset of MAP E is not delivered in
Release 5 NSS, then the purchase baseline for 2000 can be
reduced by $1.25 million per quarter. Furthermore, if the
Supplier is unable to meet GPRS, ISUP, and Freq. Hopping for
Release 6 the purchase baseline may be reduced by $5.0 million
in the second half of the year 2000. These reductions shall
not change the conditions in clause 4.3 below.
4.2.1 Both companies agree that they will work toward
defining and developing solutions to features (such
as tromboning ) that are required to meet market
opportunities.
4.3 If the purchases by the Purchaser, during any quarter of 1999
or 2000 are less than those indicated in the Purchase Baseline
above, the Purchaser shall pay the Supplier, at the end of
such quarter, a sum equal to 38.1% of the Price of the
shortfall of Goods not purchased by the Purchaser ("Shortfall
Payment")
4.3.1 To the extent that the Purchaser makes up the
shortfall with excess in the following quarter (over
the purchase baseline for such following quarter),
the Supplier will credit the Purchaser for the
shortfall payment.
4.3.2 The Purchaser shall not be obligated to pay for any
shortfalls due to the Supplier's failure to deliver
Goods which meet mutually agreed acceptance criteria.
4.4 Reflecting the fact that the Purchaser will supply
substantial, valuable and proprietary technology, technical
information and know-how to the Supplier pursuant to the
Technical Information Agreement being entered into between the
parties, the Supplier shall be restricted from entering into
an OEM or distributor agreement with Nokia or Ericsson until
December 31, 1999 ("Limited Exclusivity"). After such time,
the Purchaser's Limited Exclusivity shall be terminated only
if the annual purchase of Goods by the Purchaser is less than
eighty (80%) percent of $50 million, $70 million and $95
million at the end of any of the calendar years 2000, 2001, or
2002, respectively. The purchases by the Purchaser in excess
of $10 million in the year 1999 can be counted towards
fulfilling the requirement to purchase 80% of $50 million in
the year 2000 to retain the Limited Exclusivity. Any overage
in subsequent years will be applied on the same basis. Nothing
in this Agreement shall be construed to prevent the Supplier
from developing other products, whether or not competing with
the Goods, for supply to Nokia or Ericsson or any other
purchaser, provided that the Supplier complies with all
provisions of this Agreement, the Technical Information
Agreement and the Patent License Agreement.
10
<PAGE>
4.4.1 If. however, the Purchaser's failure to meet an
eighty (80%) percent annual target is attributable
solely to the Supplier's delay in meeting a material
microcellular product milestone, or the Supplier's
delay in delivering goods which meet mutually agreed
acceptance criteria, the annual period for
determining achievement of the annual target shall be
extended for the length of such delay.
4.5 Product markets
4.5.1 The Supplier warrants that it has obtained the
necessary approvals, including but not limited to GSM
11.21 certification, CE Mark, and interconnect. These
approvals allow the goods to be sold into many
countries. For the countries where the incremental
requirements are limited to "paper filings" and not
substantive testing and development, the Supplier
agrees to support entry into those countries.
4.5.2 The Supplier and Purchaser further agree that it will
put in place a mechanism by which the two parties can
address the requirements needed for the countries
where the Supplier currently does not meet all of the
requirements to enter the countries.
4.5.3 The Supplier and Purchaser agree to use the framework
below to identify and classify the countries.
4.5.3a the products may be sold today without
additional regulatory modifications;
4.5.3b the product is being actively marketed, but
where incremental regulatory activities may
be required to sell;
4.5.3c the Purchaser intends to market ultimately,
and where incremental regulatory activities
may be required to sell;
4.5.3d The Purchaser does not plan to market the
products or where the Seller or Purchaser is
legally prohibited from selling the product.
The current view of the markets being addressed is summarized in the table
below:
<TABLE>
<CAPTION>
SECTION 4.5.3aCOUNTRIES SECTION 4.5.3b COUNTRIES SECTION 4.5.3c COUNTRIES SECTION 4.5.3d COUNTRIES
- ----------------------- ------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
Europe: All countries except Asia: All countries not Cuba
Europe: France, United Serbia specifically named
Kingdom, Luxembourg,
Netherlands, Ireland, Austria
Asia: Taiwan, Hong Kong, Asia: China, India, Philippines, Caribbean and Latin America: Iraq
Thailand Hong Kong, Taiwan All countries not specifically
named
Australia Iran
Americas: Canada, USA, Brazil, Japan
Mexico, French Guiana
Central African Republic, South Middle East and Africa: All Libya
Africa. Congo, Somalia countries, unless specifically
excluded
North Korea
11
<PAGE>
Serbia
South Korea
Sudan
Syria
</TABLE>
4.5.4 It is understood that the list of countries will change over
time. It is agreed that a more precise view of near term
requirements for new market entry will be provided as part of
the forecast procedure defined in Schedule 2 and regulatory
compliance procedures defined in Schedule 1 of this agreement.
12
<PAGE>
SCHEDULE 10
5.0 PRODUCT DESCRIPTIONS
EQUIPMENT
<TABLE>
<CAPTION>
<S> <C>
1. WAVEXpress BTS
SPECIFICATIONS
Cellular Standards Supported ETSI GSM Phase 2
Features Supported Base transceiver station (BTS); GSM RF management, data and
fax, short message service, antenna receive diversity, encryption,
optional power supply redundancy
Transmit RF Frequency GSM 935- 960 MHz
DCS 1805 - 1880 MHz
Receive RF Frequency GSM 890- 915 MHz
DCS1710 - 1785 MHz
Antenna Power Up to 2.0 watts at antenna port (may be extremely amplified
for greater transmit power)
Cell Size (Range) Up to 3 kilometers maximum radius depending on topography
and environment
Number of TRXs per BTS 1 - 3
Channels per BTS 7- 22 simultaneous
Mobile Stations Supported GSM/DCS-compliant mobile station (Phase 1, 2 or 2+)
GSM/PCS Interfaces Supported Abis and Radio (Phase 2)
Processors Distributed Motorola 68040 and 68360
Mobile Interfaces Supported GSM full-rate RF interface, 2400 bps -- 9600 bps transparent
data/FAX
Trunk Network Interfaces G.703-compliant. E1, T1 planned
Power Requirements Power consumption: 150 watts, 110/220 volts 50-60 Hz ac,
-48 volts dc planned
Dimensions (h x w x d) 55 x 23 x 41 centimeters (21.5 x 9 x 16 inches)
Weight 20 kg (44 lbs.)
Operating Environment Temperature: -10DEG. to 45DEG.C
Humidity: 10% to 90% noncondensing,
10% to 95% noncondensing (outdoor)
2. WAVEXpress BSC
SPECIFICATIONS
Cellular Standards Supported ETSI GSM Phase 2
Features Supported Base station controller (BSC); GSM RF power management,
data and fax, short message service, optional CPU and power
supply redundancy, optional local transcoding (TRAU)
BTS RF Protocols Supported GSM 900
DCS 1800
Number of E1/T1 Ports per BSC 2 - 14
Number of BTSs per BSC 1 - 20
13
<PAGE>
Number of TRXs per BSC 1 - 20, 1 - 30
BTSs Supported interWAVE WAVEXpress/BTS others supporting GSM Abis
interface (requires verification testing with interWAVE)
Mobile Stations Supported GSM/DCS-compliant mobile station (Phase 1, 2 or 2+)
GSM/PCS Interfaces Supported A and Abis
Processors Distributed Motorola 68040 and 68360
Mobile Interfaces Supported GSM full-rate RF interface, 2400 bps- 9600 bps transparent
data/FAX
Trunk Network Interfaces G.703-compliant. El, T1 planned
Power Requirements Power consumption: 150 watts, 110/220 volts 50-.60 Hz ac,
-48 volts dc planned
Dimensions (h x w x d) 55 x 23 x 41 centimeters (21.5 x 9 x 16 inches)
Weight 20 kg (44 lbs.)
Operating Environment Temperature: -10DEG. to 45DEG.C
Humidity:. 10% to 90% noncondensing,
10% to 95% noncondensing (outdoor)
3. TURBOWAVE BTS
SPECIFICATIONS
Cellular Standards Supported ETSI GSM Phase 2
Features Supported Base transceiver station (BTS); GSM RF management, data and
fax, short message service, encryption,
optional power supply redundancy
Transmit RF Frequency GSM 935 - 960 MHz
DCS 1805- 1880 MHz
Receive RF Frequency GSM 890- 915 MHz
DCS 1710 - 1785 MHz
Antenna Power Up to 4.0 watts at antenna port with 2 TRXs and 1 antenna
Up to 8.0 watts at antenna port with 2 TRXs and 2 antenna
Up to 16.0 watts at antenna port with 1 TRX and 1 antenna
Cell Size (Range) Up to 15 kilometers maximum radius depending on topography
and environment
Number of TRXs per BTS 1 - 2
Channels per BTS 7- 14 simultaneous
Mobile Stations Supported GSM/DC-compliant mobile station (Phase 1, 2 or 2+)
GSM/PCS Interfaces Supported Abis and Radio (Phase 2)
Processors Distributed Motorola 68040 and 68360
Mobile Interfaces Supported GSM full-rate RF interface, 2400 bps- 9600 bps transparent
data/FAX
Trunk Network Interfaces G.703-compliant E1, T1 planned
Power Requirements Power consumption: 250 watts, 110/220 volts 50-60 Hz ac,
-.48 volts dc planned
Dimensions (h x w x d) 55 x 23 x 41 centimeters
(21.5 x 9 x 16 inches)
Weight 20 kg (44 lbs.)
Operating Environment Temperature: -10 to 45DEG.C
Humidity:. 10% to 90% noncondensing,
10% to 95% noncondensing (outdoor)
14
<PAGE>
4. WAVEXCHANGE
SPECIFICATIONS
Applications GSM mobile networks, wireless local loop, or wireless PBX
adjunct
Base Functionality Speech Services: GSM900/DCS1800/PCS1900 (future)
Inter/lntra BSC handover,
Integral VLR/HLR per GSM 3.08 and GSM 9.02 MAP
Call management (GSM 4.08)
Mobility management (GSM 4.08)
- Ciphering, identification, location update, identification,
IMSI attach/detach, TMS1 reallocation,
BSSMAP per GSM 8.08, both connection/connectionless
Unified OMC, integrating OMC-S/OMC-R applications
Call data records per GSM 12.05, ASCII formatted
Performance per GSM 12.04, with proprietary extensions
Alarm/event management, with proprietary extensions
Base Platform 9-slot VME backplane with TDM bus (16 lines x 8Mbps)
IWP Module (68040 CPUI68360 Comm. Proc.)
- OMC connectivity via Ethernet DB15 connector
- Craft Interface (RS-232c 9-pin); external alarms (RJ45)
- Hard disk drive and flash memory
Dual port El/T1 module (68360 Comm. Proc.) planned
- Support for 14 E1 ports per chassis
- Integral 64kbps time/space switch"
- Available with BNC 75 omega or DB15 120 omega connectors
- Echo cancellation/tones available
- 1->N trunk redundancy (future)
Redundant power supply (optional)
Services Emergency calls
Call Barring (Operator Determined - ODB), GSM 2.88
Call Forwarding Unconditional (CFU - OD), GSM 2.82
Intra WAVEXchange FAX/data services, GSM 2.02/2.03
Performance Call processing capabilities: 100 Erlangs providing -8000 BHCA
Performance goals: per GSM 3.05
Environmental Temperature: 0DEG.C to 45DEG.C
Humidity 0% to 95%, noncondensing
5. Combo
SPECIFICATIONS
Applications GSM mobile networks, wireless local loop, or wireless PBX
adjunct
Base Functionality Speech Services: GSM900/DCS1800/PCS1900 (future)
Integral VLR/HLR per GSM 3.08 and GSM 9.02 MAP
Call management (GSM 4.08)
Mobility management (GSM 4.08)
- Ciphering, identification, location update, identification, IMSI
attach/detach, TMSI reallocation,
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
BSSMAP per GSM 8.08, both connection/connectionless
Call data records per GSM 12.05, ASCII formatted
Performance per GSM 12.04, with proprietary extensions
Alarm/event management, with proprietary extensions
Features Supported GSM RF management, data and fax, short message service,
encryption,
Transmit RF Frequency GSM 935- 960 MHz
DCS 1805 - 1880 MHz
Receive RF Frequency GSM 890- 915 MHz
DCS 1710- 1785 MHz
Antenna Power Up to 16.0 watts at antenna port with 1 TRX and 1 antenna
Cell Size (Range) Up to 15 kilometers maximum radius depending on topography
and environment
Number of BTS per Combo 1 - 3 planned
Number of TRXs per Combo 1 - 2, 1 - 10 planned (3TRX per BTS and 1TRX in Combo)
Channels per Combo 7 - 14 simultaneous
Mobile Stations Supported GSM/DCS- compliant mobile station (Phase 1, 2 or 2+)
Base Platform 9-slot VME backplane with TDM bus (16 lines x 8Mbps)
IWP Module (68040 CPU/68360 Comm. Proc.)
- OMC connectivity via Ethernet DB15 connector
- Craft Interface (RS-232c 9-pin); external alarms (RJ45)
- Hard disk drive and flash memory
Dual port E1/T1 module (68360 Comm. Proc.) planned
- Support for 14 E1 ports per chassis
- Integral 64kbps time/space switch
- Available with BNC 75omega or DB15 120omega connectors
- Echo cancellation/tones available
- 1->N trunk redundancy (future)
Redundant power supply (optional)
Services Emergency calls
Call Barring (Operator Determined - ODB), GSM 2.88
Call Forwarding Unconditional (CFU - OD), GSM 2.82
GSM/PCS Interfaces Supported Abis and Radio (Phase 2)
Processors Distributed Motorola 68040 and 68360
Mobile Interfaces Supported GSM full-rate RF interface, 2400 bps - 9600 bps transparent
data/FAX
Trunk Network Interfaces G.703-compliant. E1, T1 planned
Power Requirements Power consumption: 250 watts, 110/220 volts 50-60 Hz ac,
-48 volts dc planned
Dimensions (h x w x d) 55 x 23 x 41 centimeters (21.5 x 9 x 16 inches)
Weight 20 kg (44 lbs.)
Operating Environment Temperature: -10DEG. to 45DEG.C
Humidity 10% to 90% noncondensing,
10% to 95% noncondensing (outdoor)
6. WAVEView OMC
APPLICATIONS
Configuration Management
- Region-wide configuration database
- Modification of network elements and network parameters
- Remote download of software to network elements
16
<PAGE>
- Audit functions that upload current configuration of network elements
- Region map that displays the network elements and connectivity
- Addition and deletion of network elements (MSC, BSC, and BTS)
- Full support of cell and frequency configuration management
- Region map displays current network element states
Fault Management - Real-time monitoring of the network for faults and problems
- Visual indication of problem areas using detailed views
- Polling of the wireless access network to determine the status of
the operations and maintenance communication links
- Maintenance of daily event logs
- Tracking of active alarm conditions
- Audible alarms based on severity
- Clearing and acknowledgment of alarms
- Alarm seventy can be altered
Performance Management - Collects network performance statistics
- Building of a knowledge base of network resource usage for
strategic business and network planning decisions
- Use of performance data for troubleshooting and monitoring
network performance
Data Import and Export - Integrates with existing network management support tools
- Import cell configuration data from existing cell planning tools
- Export of network performance data and statistics to cell planning tools
- Periodic collection BSC/BTS statistics into ASCII files for export to
external tools
- Export of historical event and alarm logs
Access Security Management - Definition of user access privileges settable by the administrator
- Definition of different classes of WAVEView users, privileges, and passwords
- Two levels of security control beyond normal UNIX login security
* Password authorized use of WAVEView
* User restrictions based on domains and object class access control
</TABLE>
17
<PAGE>
DEVELOPMENT PLAN
RELEASE 4.5
SCHEDULE
interWAVE's Gate 5 date: August 31, 1999
interWAVE's GA date: October 3l, 1999
Beta software to Nortel: August 15, 1999
Nortel's VO start date: September 13, 1999
Nortel's Ramp Start date: October 15, 1999
RELEASE 4.5 NSS
R2 Country specific variants
MAP/D, per interWAVE Functional Specifications Roaming - 98-WX-2010,
MAP 98-WX-2000 and SS7 Enhancements for Roaming -
Intelligent Call Management, per interWAVE Functional
Specification 840165FS-00 Dated 3/16/99.
E164+Handling, per interWAVE Functional Specifications El64
99-WX-xxx dated 4/9/99 and + Key Handling for GSM Handset
International Access Prefix dated 3/31/99
RELEASE 4.5 BSS
Enhanced Full Rate Vocoder (EFR)-ready hardware
RELEASE 4.5 OSS
Support for R4.5 NSS & BSS Features.
RELEASE 5
SCHEDULE
interWAVE's Gate 5 date: November 30, 1999
interWAVE's GA date: March 17, 2000
Beta software to Nortel: November 15, 2000
Nortel's VO start date: January 17, 2000
Nortel's Ramp Start date: February 28, 2000
RELEASE 5 NSS
R2 and ISDN country specifics
AoC, AoCC, AoCI (CAI) for Prepaid
MAP E, Inter MSC HO*
Full implementation of EFR
American NSS and North American Combo with defined feature set
NSS Capacity Enhancement - 100E NSS
PBX connectivity, ISDN master
Purge VLR
Compliant GSM 12.04 CDR
E1/T1 hot swap
RELEASE 5 BSS
Full implementation of EFR
Static Uplink/downlink volume control
North American BSS, including ANSI BSC and 1900
MHz BTS with T1
E1/ T1 hot swap
RELEASE 5 OSS
OMC Off-site alarming (pager dial-up modem),
OMC audible alarm
Call Trace Debugging
Historical Alarm Browser
Improved Manageability of the Turbo
On Line Help
Dual NSS- BSS Actions
Support for R5 NSS & BSS Features
RELEASE 6
SCHEDULE
interWAVE's Gate 5 date: June 30, 2000
interWAVE's GA date: September 17, 2000
Beta software to Nortel: June 16, 2000
Nortel's VO start date: July 17, 2000
Nortel's Ramp Start date: August 28, 2000
RELEASE 6 NSS, BSS AND OSS
R2 and ISDN country specifics implementations
ETSI/ANSI ISUP, SSP
Support for Nortel GPRS system (SGSN/GGSN)
IWP Redundancy
Frequency Hopping
High Power Receiver Diversity
Forced Handover
MSC+BSC Combo
SoLSA (subset only for user restriction)
AuC, SMS and EIR support for standalone Networks
Release Link Trunk
Call Intercept
* - Specific requirements for MAP E shall be confirmed by both parties to
determine the actual parts of the specs to be included in the release.
<PAGE>
EXHIBIT 10.7
REDACTED
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
INTERWAVE COMMUNICATIONS B.V.
PURCHASE/RESALE AGREEMENT
This Agreement, effective as of February 27th, 1997, (the
"EFFECTIVE DATE"), is made by and between INTERWAVE Communications B.V., at
Emmaplein 5, 1075 AW Amsterdam, The Netherlands, with affiliated offices at
656 Bair Island Road, Suite 108, Redwood City CA 94063 ("INTERWAVE"), and
ADC Telecommunications, Inc., a Minnesota corporation with its principal
place of business at 4900 W. 78th St., Minneapolis, MN 55435 ("ADC").
RECITALS
Whereas, INTERWAVE develops, manufactures and distributes certain
wireless communications products, including the products set forth on
APPENDIX A hereto (the "Products"), and,
INTERWAVE and ADC desire that ADC act as a non-exclusive reseller of
the Products under the terms and conditions set forth below,
NOW, therefore, INTERWAVE and ADC agree as follows:
SECTION 1 AUTHORIZATION
(a) APPOINTMENT. Subject to the terms of this Agreement,
INTERWAVE appoints ADC, and ADC accepts such appointment, as a non-exclusive
reseller of the Products in and limited to the territory set forth in EXHIBIT
B (the "TERRITORY"). This Agreement applies only to those INTERWAVE products
which are listed in Appendix A as amended from time-to-time upon agreement
between the Parties and as herein provided.
(b) FORMAT. ADC may use or resell the Products as either
stand-alone products, or in combination with other products of ADC's choice
that meet the technical standards of the Products. INTERWAVE makes no
representation that the Products will be appropriate for combination with any
other product(s).
(c) NATURE OF AGREEMENT. To the extent that any Product
contains or consists of software, ADC's appointment only grants to ADC a
license to distribute and use such software Product as provided herein, and
does not transfer any right, title or interest to any such software Product
to ADC or ADC's customers. INTERWAVE will transfer title to Products to ADC
only to the extent that such Products consist of non-software items on the
terms specified herein. To the extent that such Products contain software,
such software (including firmware) will be licensed to ADC and its customers
on a right to use basis with all copyright, priority, or intellectual rights
remaining the property of INTERWAVE. Use of the terms "sell", "license",
"purchase", "license fees" and "price" will be interpreted in accordance with
this Section. INTERWAVE License Agreement is attached hereto as Exhibit F.
SECTION 2 PRICE
2.1 Prices for the INTERWAVE Products to be sold to ADC for resale
are based on market prices to end-users, and the discount schedule shown as
Appendix A to Exhibit "A" to this Agreement, as may be modified from time to
time. Initial ices are shown at Appendix B to Exhibit "A".
2.2 Additional Products will be introduced by INTERWAVE from time to
time during the course of this Agreement and such products will be priced and
offered for resale by ADC through periodic amendments to Exhibit A.
SECTION 3 AGREEMENT COMMENCEMENT DATE
3.1 For purposes of timely execution of several of the terms and
conditions hereof, the "Agreement Commencement Date" shall be that date on
which ADC and INTERWAVE agree that (i) the initial INTERWAVE product has been
<PAGE>
independently certified to be GSM compliant, AND (ii) that the initial
INTERWAVE product meets the jointly agreed product specifications and
acceptance criteria. Such specifications and criteria shall be agreed to
prior to May 1, 1997. Such specifications and acceptance criteria shall be
based on INTERWAVE's "Release 1.1" feature set.
SECTION 4 WARRANTY
4.1 Limited Warranty. INTERWAVE MAKES NO WARRANTIES OR
REPRESENTATIONS AS TO PERFORMANCE OF PRODUCTS OR AS TO SERVICE TO ADC OR TO
ANY OTHER PERSON. EXCEPT AS SET FORTH IN INTERWAVE'S LIMITED WARRANTY
ATTACHED HERETO AS EXHIBITS E AND F, INTERWAVE MAY PROVIDE A DIFFERENT
WARRANTY ON NEW PRODUCTS OR SERVICES ADDED TO APPENDIX A.
SECTION 5 OBLIGATIONS OF THE PARTIES
5.1 ADC OBLIGATIONS
5.1.1 COMPLIANCE WITH LAW. ADC will comply with all applicable
international, national, state, regional and local laws and regulations in
execution of this Agreement.
5.1.2 COMPLIANCE WITH U.S. EXPORT LAWS. ADC acknowledges that the
Products, including related documentation and other technical data
(collectively, "TECHNICAL DATA"), are subject to export controls imposed by
the U.S. Export Administration Act of 1979, as amended (the "Act"), and the
regulations promulgated thereunder ("BXA REGULATIONS") and by International
Traffic in Arms Regulations (ITAR). ADC will not export or re-export
(directly or indirectly) the Technical Data without complying with the Act
and the BXA Regulations. ADC certifies that: (a) neither the Technical Data
nor its direct product is intended to be used for any purposes prohibited by
the BXA regulations, including but not limited to nuclear proliferation, and
(b) unless ADC first obtains written permission to do so from the appropriate
U.S. governmental agencies or to any other country to which the U.S. has
prohibited shipment.
5.1.3 ADC shall not reverse assemble, reverse compile or reverse
engineer the Product hardware or software supplied by INTERWAVE in any way.
5.1.4 ADC will market INTERWAVE Product to selected cellular
operators in specified geographies as enumerated on Exhibit B with a
commitment to achieve a minimum of [***] in purchases form INTERWAVE
during the initial twenty-four (24) months following the Agreement
Commencement Date.. ADC will advance [***] on or before the
Agreement Commencement Date, for deposit on initial product purchases, to be
credited at the rate of [***] against purchases until the first [***]
[***] purchases are achieved.
5.1.5 ADC will provide a twelve (12) month rolling forecast to
INTERWAVE for planning purposes. The forecast will identify the quantity and
part number of INTERWAVE marketing modules required by ADC per month will be
updated on a monthly basis.
5.1.6 During the first twelve (12) months after the Agreement
Commencement Date, ADC will budget a minimum of $2.5 million ($3.5 million
run-rate by the end of such period) in internal ADC infrastructure investment
in 1997 in order to develop, market, and distribute the INTERWAVE Product.
5.1.7 ADC will make no warranty, guarantee or representation on
INTERWAVE's behalf. In the event that ADC makes unauthorized representations
or guarantees beyond those contained in Exhibit "E", and "F", ADC shall hold
harmless and indemnify INTERWAVE for any expenses, claims, damages or
liability of any nature whatsoever arising from or related to such
unauthorized representations or guarantees, including without limitation,
attorney's fees.
5.1.8 ADC will have end users of the Products ("End Users") execute
a software license agreement in the form attached hereto as Exhibit F ("the
Software License Agreement"). ADC may not negotiate the terms of the Software
License Agreement with any prospective End User, nor may it agree to any
conflicting, different, or additional terms from those set
*Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.
<PAGE>
forth in the Software License Agreement. Any such negotiations, if required,
shall be conducted exclusively by INTERWAVE in INTERWAVE's sole and absolute
discretion. In no event shall INTERWAVE be liable to ADC for the failure of a
prospective End User to enter into a Software License Agreement.
5.2 INTERWAVE OBLIGATIONS
5.2.1 INTERWAVE will provide its Products to ADC for resale to the
territory and support such sales, when requested. Such support may include
joint sales calls, training, systems engineering, and export compliance.
Charges for such support will be as mutually agreed, based on rates specified
in Exhibit "C" and "C-1" Service and Support
5.2.2 INTERWAVE, insofar as practical, will provide modifications
and/or enhancements to its Products requested by ADC as mutually agreed by
the Parties. For modifications or enhancements beyond the jointly agreed
specifications (Section 3.1) INTERWAVE will provide engineering resources (up
to a maximum of 24 man-months per calendar year) to perform custom
engineering to accommodate ADC requests for specific product features or
changes. Such engineering resources will be billed to ADC on an as-used basis
at the rate of $100 per hour. INTERWAVE will attempt to provide additional
resources to meet ADC's custom engineering needs on an as-requested basis. In
lieu of paying INTERWAVE for its engineering resources, in certain instances,
ADC may supply its own resources to perform certain custom engineering or
enhancement work.
5.2.3 INTERWAVE will provide ADC with most favored customer status
for discounts, deliveries and support in consideration for the commitments
and obligations described herein. Most favored customer status will apply to
contracts INTERWAVE enters into after the Agreement Commencement Date with
customers of like class, terms and commitments.
5.2.4 INTERWAVE will not compete directly with ADC in the sales of
the INTERWAVE Product as enhanced or modified pursuant to the Agreement to
the specified cellular system operators as described in Exhibit "B" unless:
1. Customer states that it will only do business directly
with the manufacturer, or,
2. Customer does not wish to do business directly with ADC, or
3. Customer is purchasing a private labeled or co-branded
product from an INTERWAVE OEM.
Should a conflict arise, INTERWAVE agrees to cooperate with ADC in
good faith to attempt to resolve the issue in ADC's behalf.
5.2.5 INTERWAVE will provide Products to ADC which comply with
availability dates and specifications as indicated in Exhibit A attached. All
such products will meet applicable FCC and UL requirements (or equivalent
requirements of corresponding international standards bodies).
5.2.6 INTERWAVE will grant ADC the right to assign or sub-license on
a non-exclusive basis to its Affiliates the marketing, distribution, and
other rights set forth herein, provided that ADC will give written notice to
INTERWAVE prior to such assignment or sub-license.
5.2.7 COMPLIANCE WITH LAW. INTERWAVE will comply with all applicable
international, national, state, regional and local laws in the execution of
the Agreement.
5.2.8 INTERWAVE will support warranty and post warranty repairs of
Product sold to ADC for five (5) years after the date last shipment of the
Product.
5.2.9 Following receipt of the $3 million advance deposit referred
to in Section 5.1.4, INTERWAVE will commence development of a PCS 1900
version of the INTERWAVE Products, with a target initial trial date of 10-12
months following commencement.
<PAGE>
SECTION 6 INSPECTIONS RECORDS AND REPORTING
6.1 REPORTS. Within thirty (30) days of the end of each calendar
quarter, ADC will provide to INTERWAVE, and INTERWAVE will provide to ADC, a
written point of sale report showing for the quarter ending each Company's
shipments of the Products by purchased dollar volume, location ordered, and
product type.
6.2 NOTIFICATION. ADC will: (i) notify INTERWAVE in writing of any
claim or proceeding involving the Products within ten (10) working days after
ADC learns of such claim or proceeding; (ii) report promptly to INTERWAVE all
claimed or suspected product defects. In the event of a suspected product
defect INTERWAVE will respond within five (5) days of notification with the
status of their analysis of the problem and if applicable a plan for
correction of the verified defect
6.3 RECORDS. ADC and INTERWAVE will maintain, for at least two (2)
years after termination of this Agreement, its records, contracts, and
accounts relating to distribution of the Products, and will permit
examination thereof by authorized representatives with the examined company's
approval, not more frequently than once in any twelve (12) month period. Such
approval will not be unreasonably withheld.
SECTION 7 MARKETING REVIEW
7.1 Representatives of both INTERWAVE and ADC shall meet promptly
after completion of the first three-month period of this Agreement, and at
least quarterly thereafter (while this Agreement remains in force) to review
INTERWAVE and ADC's sales, market strategies, and objectives, Product support
activities, promotion and advertising plans, and competition. Meeting
location shall be agreed upon for the mutual convenience of the parties.
SECTION 8 ADC DETERMINES ITS OWN PRICES AND LICENSE FEES
8.1 Although INTERWAVE may publish suggested wholesale or retail
prices, these are suggestions only and ADC will be entirely free to determine
the actual prices and license fees at which the Products will be sold or
licensed to its customers. INTERWAVE will provide ADC notice of pending
price changes in its list price catalog.
SECTION 9 ORDERS
9.1 All orders from ADC or its subsidiaries are subject to
acceptance and acknowledgment at INTERWAVE's Corporate office. INTERWAVE will
acknowledge ADC's order using INTERWAVE's Sales Order Acknowledgment form or
equivalent. This Agreement supersedes the terms of ADC's Purchase Order and
INTERWAVE Order Acknowledgement. Orders shall specify:
(a) equipment and options description (including item
numbers and part numbers if shown for that item in the price list);
(b) purchase price;
(c) tax status for each "ship to" location including
exemption certificate number if tax exempt;
(d) all ADC orders, including orders for customer trials,
must have firm shipment schedules, with shipment date:
(e) exact "ship to" and "invoice to" place of business.
9.2 All orders shall be sent to:
INTERWAVE Communications International, Ltd.
c/o INTERWAVE Communications, Inc.
656 Bair Island Road, Suite 108
<PAGE>
Redwood City, CA 95063
9.3 Delivery: approximately 60 days ARO providing such order volumes
are approximately as forecasted. INTERWAVE will attempt to satisfy short-term
orders requested by ADC as reasonably practical.
9.4 INTERWAVE may cancel all outstanding orders if ADC is not in
good standing or, at INTERWAVE's option, require C.O.D. payment for such
orders.
SECTION 10 TERMS AND CONDITIONS OF SALE
10.1 Terms of payment will be full payment within 30 days of
invoice. A two percent (2%) discount may be applied for net ten (10) day
payment Delivery will be FOB Seller's factory. In-transit insurance will be
acquired and invoiced to ADC unless specifically declined by ADC when the
order is placed. Shipments will be made to the place or places listed on
ADC's releases. ADC has a period of thirty (30) days following date of
receipt of the Product within which to notify INTERWAVE in writing of any
discrepancies in the shipment.
10.2 ADC shall be invoiced and agrees to pay for all transportation
charges, and all sales, use, excise, and any other taxes, except for those
based on INTERWAVE's income, duties, license fees, assessments and other
charges imposed by reason of or in connection with the purchase, sale,
transportation or delivery of any of the products hereunder received from
INTERWAVE. Delivery to a carrier F.O.B., INTERWAVE's place of business for
shipment to ADC or its nominee shall constitute delivery to ADC within the
meaning of this Agreement. Delivery to ADC's non-US based locations or
customers will be CIF Delivery Point, outside the USA.
10.3 Security Interest. INTERWAVE reserves and retains a security
interest in the Products and the proceeds thereof until payment in full has
been made by ADC.
SECTION 11 CANCELLATIONS AND RESCHEDULES
11.1 Shipments of standard products scheduled under this Agreement
may be canceled or rescheduled subject to the provisions and charges
specified in Exhibit "D".
SECTION 12 ROLE OF PARTIES: INDEPENDENT CONTRACTORS
12.1 The parties hereto expressly understand and agree that
INTERWAVE is in no manner associated or otherwise connected with the actual
performance of this Agreement on the part of ADC. ADC is an independent
contractor in the performance of each and every part of this Agreement, and
is solely and personally liable for all labor and expenses in connection
therewith and for any and all claims, liabilities, damages and debts of any
type whatsoever that may arise on account of ADC's activities, or those of
its employees or agents, or the performance of this Agreement. Either Party
will not have, and will not represent that it has, any power, right or
authority to bind the other Party, or to assume or create any obligation or
responsibility, express or implied, on behalf of the other Party or in the
other Party's name.
12.2 The parties hereto expressly agree that they will not solicit
or otherwise recruit employees of the other company for hire without the
express written consent of the current employer.
12.3 ADC agrees that it will not develop or deliver a product that
is competing with the INTERWAVE products during the term of this Agreement.
If ADC decides to develop or deliver such competing products upon termination
of the Agreement, it shall notify INTERWAVE at least 18 months in advance of
its first delivery.
SECTION 13 TRADEMARKS: TRADE NAMES, LOGOS, DESIGNATIONS AND COPYRIGHTS
13.1 USE DURING AGREEMENT Subject to Section 13.6 below, ADC is
authorized during the term of this Agreement by INTERWAVE to use the
trademarks, trade names, logos and designations INTERWAVE uses for INTERWAVE
Products (the "Marks") in connection with ADC's advertisement of INTERWAVE
Products. ADC further agrees not to use any
<PAGE>
INTERWAVE Mark in connection with any non-INTERWAVE Product.
13.2 COPYRIGHT AND TRADEMARK NOTICES. ADC will include on each
INTERWAVE Product that it distributes, and on all containers and storage
media therefore, all trademark, copyright and other notices of proprietary
rights included by INTERWAVE on such INTERWAVE Product ADC agrees not to
alter, erase, deface or overprint any such notice on anything provided by
INTERWAVE. ADC also will include the appropriate trademark notices when
referring to any INTERWAVE Product in advertising and promotional materials.
13.3 PROPRIETARY RIGHTS. ADC acknowledges that INTERWAVE owns and
retains all Marks and other proprietary rights in or associated with
INTERWAVE Products and agrees that it will not at any time during or after
this Agreement assert or clam any interest in or do anything that may
adversely affect the validity of any Mark or copyright belonging to or
licensed to INTERWAVE (including, without limitation any act which may
infringe or lead to the infringement of any of INTERWAVE' proprietary rights).
13.4 NO CONTINUING RIGHTS. Upon expiration or termination of this
Agreement, ADC will immediately cease use of all INTERWAVE Marks and will not
thereafter use, advertise or display any Mark which is similar to or
confusing with any Mark associated with any INTERWAVE Product.
13.5 OBLIGATION TO PROTECT. ADC agrees to use reasonable efforts to
protect INTERWAVE's proprietary marks and to cooperate in INTERWAVE' efforts
to protect its proprietary rights.
SECTION 14 PROPRIETARY INFORMATION: NONDISCLOSURE
14.1 The Parties have executed a Non-Disclosure Agreement ("NDA")
which is herein attached as Exhibit J. The term of the NDA is hereby modified
to coincide with the term of this Agreement. The NDA will apply to
information disclosed by the parties in connection this agreement. The
"purposes" for which such information may be used is hereby expanded to
include sales and marketing support.
14.2 Escrow. On the Agreement Commencement Date, and within ten (10)
days after each Product Release by INTERWAVE thereafter, and within ten (10)
days after INTERWAVE reduces to a tangible form any change to a Product or
any improvement thereto after the general release thereof, INTERWAVE will
deliver, at its sole expense, to an escrow agent acceptable to ADC, one copy
of all INTERWAVE manufacturing and test documentation and any other
information reasonably required to make, use, sell, import and market units
of such Products and improvements. INTERWAVE hereby acknowledges that ADC's
business could be severely harmed if such Products were no longer available
to ADC or its customers and, for the purpose of Title 11, United States Code,
if INTERWAVE hereafter files a petition or if a petition is filed against it
for relief under the U.S. Bankruptcy Code, ADC's continued sale, importation,
use and marketing of the Products are non-executory. If INTERWAVE (i) fails to
cure an event of default under this Agreement; or (ii) files or has filed
against it a voluntary or involuntary petition in bankruptcy; then ADC may
obtain, at no cost to ADC, the materials from the escrow agent regarding such
Products or improvements and INTERWAVE hereby grants to ADC, at no cost to
ADC, an irrevocable, transferable, worldwide, non-exclusive license thereto,
reasonably required to practice INTERWAVE intellectual property and to make,
use, sell, import and market units of such improvements or Products.
SECTION 15 TERM AND TERMINATION
15.1 This Agreement will remain in effect for four (4) years from
the date hereof. This Agreement may be canceled as herein set forth and may
be renewed or extended in writing by mutual agreement.
15.2 Either Party may cancel this Agreement in the event of any
material breach of the terms or conditions of this Agreement, or if there are
instituted by or against the Party, any proceedings in bankruptcy or under
insolvency laws or for reorganization, receivership or dissolution,
assignment for the benefit of creditors. A notice of breach and pending
cancellation must be provided by the breached party providing for 90 days for
the breach condition to be remedied.
15.3 Upon termination or cancellation of this Agreement, ADC, at its
option, may place a one-time end-of-life order for delivery within one
hundred and twenty (120) days of cancellation. INTERWAVE agrees to allow ADC
to purchase
<PAGE>
maintenance spares for support of installed customers under mutually
agreeable terms.
15.4 Neither party shall not be liable in any manner whatsoever on
account of termination or cancellation of this Agreement, except that
INTERWAVE shall return to ADC the unused balance of the advance described in
Section 5.1.4. The right of termination and cancellation is absolute and both
INTERWAVE and ADC have considered the possibility of expenditures necessary
in preparing for performance of this Agreement and the possible losses and
damage incident to each in the event of termination or cancellation.
15.5 No Damages For Termination or Expiration. NEITHER INTERWAVE NOR
ADC SHALL BE LIABLE TO THE OTHER FOR DAMAGES OR ANY KIND, INCLUDING
INCIDENTAL OR CONSEQUENTIAL DAMAGES, ON ACCOUNT OF THE TERMINATION OR
EXPIRATION OF THIS AGREEMENT IN ACCORDANCE WITH THIS SECTION. ADC WAIVES ANY
RIGHT IT MAY HAVE TO RECEIVE ANY COMPENSATION OR REPARATIONS ON TERMINATION
OR EXPIRATION OF THIS AGREEMENT UNDER THE LAW OF THE TERRITORY OR OTHERWISE,
OTHER THAN AS EXPRESSLY PROVIDED IN THIS AGREEMENT. [THE PARTIES ACKNOWLEDGE
THAT THIS SECTION HAS BEEN INCLUDED AS A MATERIAL INDUCEMENT FOR BOTH PARTIES
TO ENTER INTO THIS AGREEMENT AND THAT NEITHER PARTY WOULD NOT HAVE ENTERED
INTO THIS AGREEMENT BUT FOR THE LIMITATIONS OF LIABILITY AS SET FORTH HEREIN.]
SECTION 16 PATENT INFRINGEMENT AND INDEMNIFICATION
16.1 INTERWAVE shall defend, or at its option, settle and hold ADC (and its
subsidiaries, customers and end-users) harmless from any claim or proceeding
brought against ADC (and/or its subsidiaries, customers or end-users) to the
extent that it is based on an assertion that a Product furnished to ADC by
INTERWAVE including, without limitation, the use, sale or sub-licensing of
Product, infringes any patent, copyright, trademark, or trade secret of any
other property rights of any third party. Promptly after learning of any such
claim or proceeding, ADC shall notify INTERWAVE in writing thereof and shall
give INTERWAVE authority, information, and assistance to defend, compromise or
settle the claim. ADC hereby grants to INTERWAVE sole control of the defense
and all negotiations for the compromise or settlement of such claim or
proceeding. Should an injunction against the continued sale, use or
sublicensing the Product be issued, INTERWAVE shall, at its option, either
procure for ADC the right to continue sale, use or sublicensing of the
Product or replace or modify the Product so that it becomes non infringing by
functionally equivalent or refund to ADC the advance described in Section
5.1.4. INTERWAVE shall have no liability to the extent the alleged
infringement is the result of INTERWAVE, compliance with ADC custom
specifications or designs or its use in conjunction with other non-INTERWAVE
equipment
16.2 INTERWAVE agrees that it will indemnify and hold harmless ADC
against and from any and all claims, damages, and liability, including
expenses and reasonable attorney's fees, suffered by ADC resulting from
personal injury and/or tangible property damage to third parties, including
without limitation, ADC's employees, caused by the failure of the Products to
conform to specifications or defects in materials and workmanship of the
Products, or the negligent acts of INTERWAVE, arising out of the performance
under this Agreement or INTERWAVE's breach of this Agreement; provided,
however, that this obligation shall not cover any damage to the Products
themselves. ADC agrees that it will indemnify and hold harmless INTERWAVE
against and from any and all claims, damages and liability, including
expenses and reasonable attorney's fees, suffered by INTERWAVE resulting from
personal injury and/or tangible property damage to third parties, including
without limitation INTERWAVE's employees, caused by defects in components
supplied by ADC and incorporated into the Products, or the acts of ADC or
ADC's breach of this Agreement provided that such defects in such components
do not result from defects in the Products. In the event any claim covered by
this indemnity is asserted against either party, the other party shall
provided reasonable cooperation and assistance in the defense thereof and the
other party will grant the indemnifying party control over the defense of any
action.
16.4 INTERWAVE shall sell the Products to ADC without right of return
except as expressly provided in Exhibits E and F hereto.
SECTION 17 PRODUCT DISCONTINUANCE
17.1 INTERWAVE agrees to notify ADC at least six (6) months prior to
the discontinuance of any Products listed in Exhibit A of this Agreement New
Products that are introduced to replace a discontinued Product will be
functionally equivalent to the Product being replaced. INTERWAVE agrees to
provide ADC with the right to make an end of cycle buy for the Product
<PAGE>
being replaced, providing that such Product is delivered to ADC within
twelve (12) months of Product discontinuance. INTERWAVE will provide repair
services for such discontinued Products for a period of five (5) years
providing that the component parts required remain commercially available.
17.2 In the event INTERWAVE decides to discontinue the manufacture
of the Products, INTERWAVE will provide ADC with the notification described
in the preceding subsection and will negotiate in good faith with ADC for a
mutually agreeable manufacturing license agreement which may include royalty
payments, a subcontract manufacturing agreement or an outright purchase of
the Product. The sum of material plus labor and overhead plus license fee
shall not exceed the current purchase price of finished product from
INTERWAVE as a result of good faith discussions. Additionally, the License
will be non-exclusive and INTERWAVE would retain ownership to all
intellectual property rights associated with its manufacturing process.
SECTION 18 ASSIGNMENTS
18.1 This Agreement may not be assigned or transferred by either
Party without the other Party's written consent, executed by an authorized
official of both Parties, however, ADC may, without being obligated to obtain
INTERWAVE's consent prior thereto, assign this Agreement to any entity which
is at least thirty percent (30%) owned by ADC.
SECTION 19 WAIVER
19.1 A waiver by the parties of any term or condition of this
Agreement or breach whether expressed or implied, in any one instance, shall
not be construed as consent to be a waiver of any other different or
subsequent breach thereof.
SECTION 20 PUBLICITY RELATED TO AGREEMENT
20.1 ADC shall obtain the prior written approval of INTERWAVE as to
the issue, content, and timing or news releases, articles, brochures,
advertisements, prepared speeches, or other informational releases
("Releases") relating to the Agreement to be issued by ADC or any of its
employees, agents, subsidiaries or affiliates.
20.2 INTERWAVE shall obtain the prior written approval of ADC as to
the issue, content, and timing or news releases, articles, brochures,
advertisements, prepared speeches, or other informational releases
("Releases") relating to the Agreement to be issued by INTERWAVE or any of
its employees, agents, subsidiaries or affiliates.
SECTION 21 NOTICE
21.1 All notices or communications of any kind made or required to
be given pursuant to this Agreement shall be in writing and delivered by
personal service to an officer of the other party or sent by telegraph or by
first class mail, postage prepaid. Notice shall be considered given when
delivered in person or when deposited in the United States mail. Notices
shall be addressed as follows unless either party gives notice to the other
party of a change of address:
<TABLE>
<CAPTION>
To INTERWAVE: To ADC:
<S> <C>
INTERWAVE Communications, B.V.
c/o INTERWAVE Communications, Inc. ADC Telecommunications, Inc.
656 Bair Island Road, Suite 108 4900 West 78th Street
Redwood City, CA 94063 Minneapolis, MN 55420
ATTN: Contract Administration ATTN: Contracts Manager, MS76 Phone: (415) 482-
2100 Phone: (612) 946-3091
Fax: (415) 261-6220 Fax: (612) 946-3250
cc: General Counsel
Fax: (612) 946-3209
</TABLE>
<PAGE>
SECTION 22 APPLICABLE LAW
22.1 This Agreement shall be construed in accordance with the laws of
the State of California.
<PAGE>
SECTION 23 EXCUSABLE DELAYS
23.1 While INTERWAVE shall use its best efforts to fill orders
placed by ADC hereunder with reasonable promptness, it shall not be liable
for delays or non-delivery or non-delivery of any such orders for any reason
beyond its control. However, ADC with most favored customer status, will be
given highest priority. See Exhibit D hereto for specific charges relating to
cancellation or rescheduling of orders.
SECTION 24 DISPUTES
24.1 Any dispute, controversy, claim or question arising out of or
relating to this Agreement, or breach thereof which cannot be settled,
agreement of the parties may be settled by appropriate legal proceedings,
including arbitration, and judgment upon the award rendered may be entered by
any court having jurisdiction thereof.
SECTION 25 COMPLETE AGREEMENT
25.1 This Agreement together with Exhibits "A" (including Appendix A
and B thereof), "B", "C", "D", "E", "F", "G", "H", "I", and "J" and any
Addendum thereto, supersedes and cancels any previous understanding or
Agreements between the parties relating to the subject material hereof. It
expresses the complete and final understanding with respect to the subject
matter hereof and may not be changed in any way except by an instrument in
writing by both parties. No representations or statements of any kind made by
any representative of INTERWAVE nor any notice or instruction from ADC
received subsequent to the commencement date of this Agreement including
supplementary information contained in a confirming purchase order which
are not stated herein shall be binding on the Parties.
SECTION 26 SEVERABILITY
26.1 If any term, provision, covenant or condition of this Agreement
is held by a court of competent jurisdiction to be invalid or unenforceable,
the remainder of the provision shall remain in full force and effect and
shall not be affected, repaired or invalidated.
SECTION 27 FORCE MAJEURE
27.1 Nonperformance of either party shall be excused to the extent
that performance is rendered impossible by strike, fire, flood, governmental
acts or orders or restrictions, failure of suppliers, or any other reason
where failure to perform is beyond the reasonable control of and is not
caused by the negligence of the nonperforming party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
initialed Exhibits "A" (including Appendix A thereto), "B", "C", "D", "E",
"F", "G", "H", "I", and "J", as of the day and year first above written and
said date shall be deemed the effective date of this Agreement.
ADC TELECOMMUNICATIONS, INC.:
By: /s/ [ILLEGIBLE]
Title: Vice President, Business Development
INTERWAVE COMMUNICATIONS B.V.
By: /s/ [ILLEGIBLE]
Title: Sr. Vice President, CFO
<PAGE>
EXHIBIT A
PRODUCTS AND PRICING
LIST PRICES
<TABLE>
- ------------------------------------------------------------------------------------------------------------
<S> <C>
WAVEXPRESS/BTS 1.0 (INCLUDES 1 ABIS INTERFACE)
(1) TRX [***] or
(1) 1800 TRX [***]
Additional 900 TRX [***] or
Additional 1800 TRX [***]
Additional Power Supply [***]
Additional Software Feature Releases: [***] of
product cost depending on feature content
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
WAVEXPRESS/BSC 1.0 (STAR CONFIGURATION ONLY)
(2) A, (2) Abis Interface [***]
Additional A-int Trunk module [***]
Additional Abis interface trunk card
- with 32 channel TRAU capacity [***]
- with 64 channel TRAU capacity [***]
Additional Power Supply [***]
BTS Management Software [***] TRX
Additional Software Feature Release: [***] of
product cost depending on feature content
- ------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
WAVEXPRESS OUTDOOR ENCLOSURE
Environmental Cabinet [***]
Celware Filter Kit, Outdoor [***]
Heat Exchanger, Outdoor [***]
UPS, Outdoor [***]
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
WAVEXCHANGE SWITCH 1.0 [INCLUDES (1) A & (1) A/ABIS INTERFACE)
(1) 2-port E1/switch [***]
module
Additional CPU module [***]
Additional 2-port E1/switch module [***]
Integrated BSC [***]
- -------------------------------------------------------------------------------------------------------------
*Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.
<PAGE>
- -------------------------------------------------------------------------------------------------------------
Subscriber management [***]
HLR/VLR
Up to 500 subscribers [***]
501 - 1,000 subscribers [***]
AUC [***]
Call data records
Up to 500 subscribers [***]
501 - 1,000 subscribers [***]
Radio Channel Control [***] per Tr Channel
Integrated TRAU [***] per DSP module
Echo [***] per DSP module
Cancellation
Additional Power Supply [***]
Additional Software Feature Releases: [***] of
Product cost depending on feature content
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
WAVEVIEW OMC-R (UNIX/MOTIF)
OMC UNIX platform server workstation [***]
(SPARC 20 WS, E1 interface, & Oracle DB) [***]
OMC UNIX SPARC 4 client workstation [***]
WAVEView OMC-R Server Software [***]
WAVEView OMC-R Client Software [***] per copy
X-terminal client license per copy [***] per copy
TRX Management [***] per TRX
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
WAVEVIEW OMC-S
OMC UNIX platform workstation [***]
WAVEView OMC-S Server Software [***]
WAVEView OMC-S Client Software [***]
Radio channel management [***] per voice channel
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
CRAFT INTERFACE PC
Craft Hardware and Software [***]
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
MICROXPRESS/BTS
Base System (900 MHz) [***] or
Base System (1800/1900 MHz) [***]
Optional Wall Mount Kit [***]
Optional Pole Mount Kit [***]
Addit'l Software Feature Releases:
12% - 15% of product cost
- -------------------------------------------------------------------------------------------------------------
*Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.
<PAGE>
depending on feature content
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
DOCUMENTATION
WAVEXpress/BTS Installation Guide [***]
WAVEXpress/BSC Installation Guide [***]
WAVEXpress/BS+ Installation Guide [***]
WAVEView UNIX Installation Guide [***]
WAVEView UNIX Operator's Manual [***]
Craft Interface Operators Manual
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
INSTALLATION (ONE-TIME EXPENDITURE)
of hardware price
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
HARDWARE SUPPORT (YEARLY)
5x8x8 [***] of total hardware cost
5x8x4 [***] of total hardware cost
7x24x4 [***] of total hardware cost
7x2472 [***] of total hardware cost
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
SOFTWARE SUPPORT (YEARLY)
[***] of total hardware cost
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
TRAINING (OFFERED REGIONALLY)
Custom quote
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See Exhibit C-1 for Service and Support Pricing
*Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.
<PAGE>
APPENDIX A TO EXHIBIT A
DISCOUNT SCHEDULE BASED ON VOLUME ($ MILLIONS)
<TABLE>
<CAPTION>
ANNUAL PURCHASE COMMITMENT: $0-10 $10-20 20-40 $40+
----- ------ ----- ----
Discount from "Market" Price
Years after Agreement Commencement Date:
- ----------------------------------------
<S> <C> <C> <C> <C>
First [***] [***] [***] [***]
Second [***] [***] [***] [***]
Third and beyond [***] [***] [***] [***]
</TABLE>
"Market Price" means: the end user price recorded by IWC and ADC for their
respective end-user (operator) sales accounts, by geographic region (Europe,
Asia-Pacific and North America.).
Average sales over the preceding three months will be used to determine the
"market" price.
Pricing will be reviewed and modified as necessary on a quarterly basis.. In
cases where special circumstances dictate a greater than normal discount from
list for an end-user (such as when an operator elects to make an equity
investment in conjunction with his product purchase arrangement) those
transactions will be excluded from the calculation of "average"; likewise if
ADC has a special case requiring an usual discount, then INTERWAVE will
cooperate and share the pain in terms of margin impact.
Depending on market price erosion over time, INTERWAVE and ADC reserves the
right to re-negotiate the ADC discount.
* Certain information on this page has been omitted and filed separately
with the SEC. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE>
APPENDIX B TO EXHIBIT "A"
INITIAL MARKET PRICES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
<S> <C>
WAVEXPRESS/BTS 1.0 (INCLUDES 1 ABIS INTERFACE)
(1) TRX [***] or
(1) 1800 TRX [***]
Additional 900 TRX [***] or
Additional 1800 TRX [***]
Additional Power Supply [***]
Additional Software Feature Releases: [***] of
product cost depending on feature content
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
WAVEXPRESS/BSC 1.0 (STAR CONFIGURATION ONLY)
(1) A, (1) Abis Interface [***]
Additional A-int Trunk module [***]
Additional Abis interface trunk card
- with 32 channel TRAU capacity [***]
- with 64 channel TRAU capacity [***]
Additional Power Supply [***]
BTS Management Software 50 TRX
Additional Software Feature Releases: of
product cost depending on feature content
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
WAVEXPRESS OUTDOOR ENCLOSURE
Environmental Cabinet [***]
Celwave Filter Kit, Outdoor [***]
Heat Exchanger, Outdoor [***]
UPS, Outdoor [***]
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
WAVEVIEW OMC-R (UNIX/MOTIF)
WAVEVIEW OMC-R Server Software [***]
WAVEVIEW OMC-R Client Software [***] per copy
X-terminal client license per copy [***] per copy
TRX Management [***] per TRX
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
CRAFT INTERFACE PC
Craft Hardware and Software [***]
- -------------------------------------------------------------------------------------------------
</TABLE>
* Certain information on this page has been omitted and filed separately
with the SEC. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
<S> <C>
MICROXPRESS/BTS
Base System (900 MHz) [*****] or
Base System (1800/1900 MHz) [*****]
Optional Wall Mount Kit [*****]
Optional Pole Mount Kit [*****]
Addit'l Software Feature Releases:
12% - 15% of product cost
depending on feature content
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
DOCUMENTATION
WAVEXpress/BTS Installation Guide [***]
WAVEXpress/BSC Installation Guide [***]
WAVEXpress/BS+ Installation Guide [***]
WAVEView UNIX Installation Guide [***]
WAVEView UNIX Operator's Manual [***]
Craft Interface Operators Manual
- -------------------------------------------------------------------------------------------------
</TABLE>
Note: Spares are typically quoted at ** of the system configuration
Support and Training are separately quoted depending on the operator
requirements
* Certain information on this page has been omitted and filed separately
with the SEC. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE>
EXHIBIT B
TERRITORY AND ACCOUNTS
The following accounts shall be specifically targeted by ADC, and INTERWAVE will
not compete with ADC at such accounts so long as a minimum of $4 million is
purchased during the first two years of this Agreement, and a minimum of $2
million per year are purchased thereafter by each account:
Geography Account
- ------------ -------
Europe 3 AirTouch affiliates (to be named by ADC and agreed
by INTERWAVE by 5/1/97 - Such agreement not to be unreasonably
withheld)
Telecom Italia Mobile (TIM)
Australia OPTUS
Vodaphone
India Usha Martin (Calcutta)
1 additional operator to be named
China Beijing Unicom
Malaysia Binariang
US & Canada 3 Operators (to be
named by ADC and agreed
by INTERWAVE by 5/1/97 - such agreement not to be
unreasonably withheld)
ADC will have the non-exclusive rights to market the Product worldwide
subject to the terms and conditions set forth herein.
ADC agrees, however, that the following named accounts are the purview
of INTERWAVE or prior distribution relationships, and shall not be available for
ADC distribution unless expressly agreed in writing by INTERWAVE:
UK Orange
Hong Kong Hutchison Telecom
Thailand TAC/UCOM
Philippines Globe Telecom
Singapore Singapore Telecom (and affiliates)
Australia Telstra
China Ministry of Post and Telecommunications (MPT)
and its affiliates;
France France Telecom
Buoygues
South Africa MTN (DiData)
<PAGE>
EXHIBIT C
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
TRAINING AND CONSULTING PRICE SCHEDULE
TRAINING
INTERWAVE offers installation and maintenance training at its
headquarters in Redwood City, California and at its location in Bracknell,
England, and in Wanchai, Hong Kong.
TRAINING CHARGES AT INTERWAVE SITE:
$400 per student per day during scheduled classes Includes course
material
Students pay all travel and living expenses Class size is
limited to eight (8) students, maximum
INITIAL TRAINING
INTERWAVE will provide 60 person days (minimum 6 persons per class),
free of charge at INTERWAVE's facilities to ADC, for purposes of
training ADC employees. If training is held at ADC facilities, trainer
travel expenses and equipment transportation costs as incurred will
be invoiced.
COURSE MATERIAL
ADC may reproduce INTERWAVE's documentation to develop ADC's own training
program for ADC employees and ADC's customers. ADC will accept full
responsibility for any errors or omission in reproducing such information.
Documentation will be provided electronically to participating students.
CONSULTING SERVICES
- ON-SITE CONSULTING
INTERWAVE personnel available at $1,500 per day, plus reasonable travel
and living expenses.
- SYSTEMS ENGINEERING/SALES SUPPORT
INTERWAVE personnel available at $1,500 per day, plus reasonable travel
and living expenses.
<PAGE>
EXHIBIT C-1*
SERVICE AND SUPPORT PRICING
<TABLE>
<CAPTION>
A. INSTALLATION & COMMISSIONING
- ------------------------------- RECOMMENDED PRICE PER UNIT
PRODUCT TYPE LIST PRICE PRICE % OF LIST PRICE
<S> <C> <C> <C>
WAVExpress BTS 1 Radio [***] [***] [***]
WAVExpress BTS 2 Radios
Micro BTS [***] [***] [***]
BSC [***] [***] [***]
OMC-R [***] [***] [***]
<CAPTION>
B. TELEPHONE SUPPORT AND SOFTWARE UPDATES LIST PRICE PRICE PER % OF LIST
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
WAVExpress BTS 1 Radio [***] [***] [***]
WAVExpress BTS 2 Radios
Micro BTS [***] [***] [***]
BSC [***] [***] [***]
OMC-R [***] [***] [***]
<CAPTION>
C. FULL MAINTENANCE SUPPORT* LIST PRICE 9-5 COVERAGE % LIST 16 7/24/02
HR.
<S> <C> <C> <C> <C> <C> <C>
WAVExpress BTS 1 Radio [***] [***] [***] [***] [***] [***]
WAVExpress BTS 2 Radios [***] [***] [***] [***] [***] [***]
Micro BTS [***] [***] [***] [***] [***] [***]
BSC [***] [***] [***] [***] [***] [***]
OMC-R* [***] [***] [***] [***] [***] [***]
* Spares Not included Add 3%
<CAPTION>
D. EMERGENCY CALL OUT** STANDARD WEEKNIGHTS NIGHTS/WEEKENDS SUNDAYS/HOLIDAYS
<S> <C> <C> <C> <C> <C>
Junior Engr. [***] [***] [***] [***]
Engineer [***] [***] [***] [***]
Sr. Engineer/Specialist [***] [***] [***] [***]
Project Manager [***] [***] [***] [***]
**Based Upon Local Labor Rates - All Prices in U.S. Dollars Per Hour, Minimum 4 Hour Call Out
<CAPTION>
E. REPAIR
PRICING
Model # Description List Price Repair Price
<S> <C> <C> <C>
M340014 E-1, Long Haul, 2 Port, 120 Ohm [***] [***]
M340033 E-1, Long Haul, 2 Port, 75 Ohm [***] [***]
M640025 Fan, 12V Pwr Sply
M640012 Fan, 12V. Cards [***] [***]
M340012 IWP [***] [***]
M340039 IWP, 250 meg HD [***] [***]
M4022 MicroXpress DCS 1800 [***] [***]
M40200 MicroXpress GSM 900 [***] [***]
</TABLE>
* Certain information on this page has been omitted and filed separately
with the SEC. Confidential treatement has been requested with respect
to the omitted portions.
<PAGE>
<TABLE>
<S> <C> <C> <C>
M640034 Power Supply, 350W, Hi24, 115V AC [***] [***]
M640027 Power Supply, 50A, 115V AC [***] [***]
M640015 Power Supply, 250W, 115V AC [***] [***]
M640014 Power Supply, 250W, 230V AC [***] [***]
M640035 Power Supply, 350W, Hi24, 230V AC [***] [***]
M640026 Power Supply, 350W, -48V DC [***] [***]
M640032 Power Supply, 350W, 1800MHz, 115/230V [***] [***]
AC
M640033 Power Supply, 350W, Hi24, 48V DC [***] [***]
M640028 Power Supply, 50A, 230V AC [***] [***]
M340015 RF Distribution 1800 MHz Hi Band [***] [***]
M340065 RF Distribution 1800 MHz Lo Band [***] [***]
M340010 RF Distribution 900 MHz [***] [***]
M340046 T-1, DB15 [***] [***]
M340018 Trau module [***] [***]
M340074 TRX 1800 MHz Hi Band [***] [***]
M340075 TRX 1800 MHz Lo Band
M340030 TRX 900 MHz
M640047 WAVEXpress Chassis
</TABLE>
* The parties agree that these prices will be adjusted thru time as list and
market prices for the product change.
* Certain information on this page has been omitted and filed separately
with the SEC. Confidential treatement has been requested with respect
to the omitted portions.
<PAGE>
EXHIBIT D
CANCELLATIONS AND RESCHEDULES
1. Cancellation policy and restocking fee applies to order cancellation
other than orders specifically for those circumstances as described in
Section 5.2.4.
a) l-less than 15 days prior to shipment 20% of item list price
b) 15-30 days prior to shipment 15% "
c) 30-45 days prior to shipment 10% "
d) Over 45 days prior to shipment 5% "
Above restocking charges apply to standard product. Cancellations with
respect to non-standard (i.e. customized) products will bear a
settlement charge equal to fifty percent (50%) of the agreed purchase
price and/or license fee for the customized portion of the canceled
products.
2. Reschedule Delivery of Products:
(Note: Delivery of any Product may only be rescheduled once)
<TABLE>
<CAPTION>
Number of days prior to delivery Maximum % of purchase order Maximum number of days
that notice of rescheduling is that can be rescheduled Customer can delay delivery
received by INTERWAVE
- -------------------------------- --------------------------- ---------------------------
<S> <C> <C>
120 or more no restriction no restriction
91 - 120 100% up to 120 days
61 - 90 50% up to 90 days
31 - 60 50% up to 60 days
0 - 30 0% none
</TABLE>
<PAGE>
EXHIBIT E
HARDWARE WARRANTY
1. WARRANTY PERIOD. Subject to the terms of this Agreement, Seller
warrants to Distributor that for a period of one (1) year from the date of
Distributor's shipment of the Products to its' customer, each Product (other
than the Software, to which the separate warranty in Exhibit C shall apply) will
conform in all material respects to Sellers written specifications for the
Product and will be free from defects in materials and workmanship, provided
that installation is commenced within forty-five (45) days after the date of
shipment by Seller. The warmth, period shall be reduced by one day for each day
complete installation is delayed beyond sixty (60)days after the date of
shipment. Seller's sole obligation under this warranty is limited to repairing
or replacing, at Seller's option, at a Seller-designated location, any
non-Software Products or parts thereof that Seller determines do not conform to
this warranty.
2. OBLIGATION TO NOTIFY. Distributor shall promptly notify Seller in
writing of any alleged non-conformities or defects in the Products and
specifically describe the problem. Seller shall have no obligations under this
warranty with respect to any non-conformity or defect unless Seller receives
notice and a description of such non-conformity or defect no later than five (5)
business days after the expiration of the warranty period. Upon receipt of such
notice, Seller shall (i) instruct Distributor as to the element or elements of
the Products that Distributor shall return to Seller and (ii) designate Seller's
location to which such element(s) shall be shipped.
3. SHIPMENT UNDER WARRANTY. Warranty service and repair and parts
replacement will be performed at a Seller location designated by Seller. In
performing warranty service, Seller will furnish parts on an exchange basis and
the replaced parts will become the property of Seller Charges for shipping
Products or Product elements to Seller are the responsibility of Distributor and
shall be prepaid by Distributor. If Products or Product elements are determined
by Seller to be non-conforming or defective, Seller shall be responsible for the
cost of shipping both the non-conforming or defective Product or Product element
to Seller and shipping the repairing or replaced Product or Product element to
Distributor. If such Products or Product elements are determined by Seller not
to be non-conforming or defective, Distributor shall bear all costs of such
return.
4. PACKAGING. Distributor agrees to request and use the shipping
containers designated and provided by Seller and to ship the Products and
Products elements in the manner prescribed by Seller. Except for loss or damage
caused by Seller's gross negligence, Distributor relieves Seller of
responsibility for and shall indemnify Seller against liability howsoever
arising from all risks of loss or damage to the Products and Product elements
during the period such Products and Product elements are in transit to and from
a Seller location or are in the possession of Seller at such location.
5. WARRANTY EXCLUSION. The warranties provided by Seller under this
Agreement do not include:
(a) performance of preventive maintenance;
(b) repair of damage or delays in service caused by: failure to provide
an installation environment, ,use of the Products for other than the purposes
for which they were designed, accident, neglect, disaster, damage incurred in
transit, alterations to the Products or other work on the Products not permitted
or not performed as specified by Seller or other damage not arising under normal
operating conditions; or
THE FOREGOING WARRANTIES APPLY ONLY THE DISTRIBUTOR AND ITS CUSTOMERS AND ARE
IN LIEU OF ALL OTHER WARRANTIES, CONDITIONS OR OTHER TERMS, EXPRESS, IMPLIED
OR STATUTORY ALL OF WHICH ARE EXPRESSLY EXCLUDED, INCLUDING WITHOUT
LIMITATION IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. THE REMEDIES SPECIFIED IN THIS SECTION ARE DISTRIBUTOR'S SOLE AND
EXCLUSIVE REMEDIES FOR BREACH OF THE WARRANTIES SET OUT IN THIS SECTION.
<PAGE>
EXHIBIT F
SOFTWARE LICENSE AGREEMENT
(END USER)
This Software License Agreement ("Agreement") is made and entered into as of
the__ day of, ___________, (Execution Date), between the parties, INTERWAVE
Communications BV. a company incorporated under the laws of the Netherlands,
(herein referred to as "LICENSOR") and _______________, a corporation of
_______________, with offices at __________________________ hereinafter
"LICENSEE ").
RECITALS
WHEREAS, LICENSOR is a manufacturer and supplier of telecommunications
equipment and related Software Products and has developed certain software,
know-how and secret and confidential information relating thereto;
WHEREAS, LICENSEE desires to use LICENSOR's Software Products for use
with equipment approved by LICENSOR,
NOW, THEREFORE, in consideration of the covenants, terms and conditions
hereinafter set forth, the parties agree as follows:
1. DEFINITIONS
1.1 "Software Product" means the computer programs identified
by Software Product name in Schedule A, together with all related documentation,
updates and releases. LICENSOR may amend Schedule A from time to time by issuing
new price lists, to delete discontinued Software Products, to add new Software
Products, or to otherwise change Schedule A.
1.2 "Single Machine Use" means use of a Software Product only
on a single Designated Machine.
1.3 "Update" means any corrections or modifications, issued by
LICENSOR for a Software Product and identified by LICENSOR as an "Update" in
accordance with LICENSOR's procedure for software identification.
1.4 "Release" means any new releases or new versions issued by
LICENSOR for a Software Product and identified by LICENSOR as a "Release" in
accordance with LICENSOR's procedure for software identification.
1.5 "Designated Machine" means a machine marketed directly by
LICENSOR or indirectly by others with the approval of LICENSOR and on which the
Software Products are identified for use.
1.7 "Designated Site" means the building location housing a
Designated Machine connected in a LICENSEE's Network.
2. SOFTWARE LICENSE
LICENSOR hereby grants to LICENSEE a personal non-exclusive,
non-transferable (except as provided in Section 3.2) license for the Single
Machine Use of Software Products for which the single machine use fee has been
paid for LICENSEE's own internal business purposes.
3. SOFTWARE RESTRICTIONS AND LIMITATIONS
3.1 This Agreement, the Software Products and any licenses and
rights granted hereunder may not be sold, leased, assigned, sublicensed or
otherwise transferred, in whole or in part, by LICENSEE except as provided in
Section 3.2 below.
<PAGE>
3.2 LICENSEE may relocate any Designated Machine, provided
LICENSEE promptly informs LICENSOR in writing of the subsequent location. If
such location is outside the country in for which the original license was
granted, the LICENSEE must obtain approval from the LICENSOR and the relevant
U.S. Government Export Agency. regarding such relocation.
3.3 LICENSEE may make and maintain a single backup copy of a
Software Product during the term of this Agreement, provided that LICENSEE shall
reproduce all copyright, trademark, confidential or other proprietary notices
appearing thereon or contained therein.
3.4 LICENSEE shall not disassemble, de-compile or reverse engineer
any Software Product in any form or manner and, except as provided in Section
3.3, LICENSEE shall not duplicate any Software Product. Interface information
necessary to achieve interoperability with the Software Product is available
upon written request to LICENSOR and payment of any then current administration
fee.
3.5 LICENSEE shall hold the Software Products in confidence and
shall not disclose the Software Products to any person other than employees of
LICENSEE for purposes specifically related to LICENSEE's (as applicable)
licensed use of the Software Products. Licensee shall take appropriate steps by
instruction, agreement, or otherwise to prevent unauthorized disclosure by its
officers, agents or employees.
4. SOFTWARE FEES AND PAYMENT
4.1 Software Products delivered to LICENSEE by LICENSOR become
licensed under this Agreement when the applicable license fee has been paid.
LICENSOR reserves the right to change its fees for Software Products.
4.2 Payments under this agreement are due within thirty(30) days
after the date of the relevant invoice. LICENSOR may charge interest on any
invoices not paid within this time at the rate of 1 1/2% per month until payment
in full has been made or the highest rate permitted by law, whichever is the
lower.
5. SOFTWARE WARRANTY
5.1 LICENSOR warrants that Software Products licensed under this
Agreement will perform in all material respects in accordance with the
then-current published documentation for a period of twelve(12) months from the
date of shipment, hereinafter referred to as "Warranty Period."
5.2 During the Warranty Period, LICENSOR shall take all reasonable
steps without charge to correct errors or defects in any Software Product and
any corrections for errors or defects may, at LICENSOR's election, be provided
to LICENSEE directly and/or incorporated in subsequent Updates from LICENSOR.
This claim, 5.2 shall constitute LICENSOR's sole obligation and LICENSEE'S sole
remedy for breach of the warranty in Clause 5.1.
5.3 Any modifications or alteration of a Software Product without
the approval of LICENSOR shall void LICENSOR's obligations under this Section 5
unless and until the Software Product is returned to its unaltered state.
5.4 LICENSOR does not warrant that the Software Products will
operate in accordance with the published documentation in the combinations which
may be selected for use by LICENSEE, or will meet LICENSEE's requirements.
LICENSOR does not warrant that the operation of the Software Products will be
uninterrupted or error free, or that all Software Product errors will be
corrected.
5.6 THE WARRANTIES SET FORTH IN THIS SECTION 5 CONSTITUTE THE ONLY
WARRANTIES WITH RESPECT TO ANY SOFTWARE PRODUCT. THEY ARE IN LIEU OF ALL OTHER
WARRANTIES, CONDITIONS OR OTHER TERMS, WRITTEN OR ORAL, STATUTORY, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTY OF MERCHANTABILITY AND THE
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH ARE EXPRESSLY
EXCLUDED.
6. INTELLECTUAL PROPERTY RIGHTS AND AUDIT
<PAGE>
6.1 The Software Products are protected by copyright, trade secret
and other rights. Except for the limited rights set out in clause 2, LICENSEE is
receiving no title or other interest in the Software Products all of which shall
remain vested in LICENSOR.
6.2 Subject to ten days prior written notice LICENSEE shall permit
the LICENSOR, or its authorized representatives access to any machine where the
software is stored, for the purpose of enabling LICENSOR to audit the LICENSEE's
use of the Software Product. LICENSEE shall, at not cost to LICENSOR provide
forthwith such assistance as LICENSOR may reasonably require to enable LICENSOR
or its authorized representatives to audit LICENSEE's use of the Software.
6.3 LICENSOR or is authorized representative shall not in any
circumstance be liable for any disruption to the business of the LICENSEE or for
any losses or costs, caused by or arising out of the audit.
7. INFRINGEMENT
7.1 LICENSOR will defend, at its own expense, any suit or
proceeding against LICENSEE based on a claim the Software constitutes an
infringement of any copyright or other intellectual property right subsisting in
(fill in jurisdiction in which equipment shall be used)provided that:
7.1.1 LICENSOR shall be notified promptly in writing by LICENSEE
of any notice or threat of such claim;
7.1.2 LICENSOR shall have the sole control of the defense of any
action of such claim and all negotiations for settlement or
compromise; and
7.1.3. LICENSOR shall allow it's name to be used in proceedings if
necessary and provide all reasonable assistance in defending any
action.
7.2 LICENSOR will pay all damages and costs (including reasonable
legal costs) awarded against LICENSEE as a result of any action
for infringement.
7.3 REMEDIES FOR INFRINGEMENT. If in any such suit or proceeding
LICENSEE's continued use of any item of Software Products is enjoined, or if by
reason of any claim or potential claim of infringement LICENSOR deems it
advisable to do so, LICENSOR may, at its option and expense, (i) procure for
LICENSEE the right to continue using such Software Products, (ii) modify or
replace such Software Products with non-infringing Software Products, provided
that such modification does not materially adversely affect performance or (iii)
remove such Software Products and grant LICENSEE a credit based upon the
remaining beneficial use of the Software Product and its depreciated value. If
infringement is alleged prior to completion of deliveries of the Software
Products, LICENSOR may decline to make further shipments without being in
breach of this Agreement.
7.4 NON-STANDARD SOFTWARE PRODUCTS OR USES. LICENSOR shall not be
obligated to defend any suit or proceeding, or otherwise take any action, or be
liable for any costs or damages, if the infringement arises out of (i)
compliance with LICENSEE's instructions or specifications or any marking or
branding applied at the request of LICENSEE, (ii) modification of Software
Products other than by LICENSOR or not in accordance with LICENSOR's written
instructions, (iii)use of Software Products for other than the purposes for
which they were designed or (iv) use of other than LICENSOR's most recent
release of the Software Product.
8 LIMITATIONS OF LIABILITY
LICENSOR SHALL IN NO EVENT HAVE OBLIGATIONS OR LIABILITIES TO LICENSEE OR ANY
OTHER PERSON IN CONTRACT TORT OR OTHERWISE, FOR DAMAGED TANGIBLE PROPERTY,
CONSEQUENTIAL LOSS OR DAMAGE, HOWSOEVER ARISING. THIS SHALL INCLUDE WITHOUT
LIMITATION, LOSS OF PROFITS, LOSS OF USE, LOSS OF DATA, LOSS OF OPPORTUNITY, OR
INCIDENTAL, INDIRECT, SPECIAL DAMAGES, EVEN IF LICENSOR KNEW,
<PAGE>
SHOULD HAVE KNOWN OR HAS BEEN ADVISED OF THE POSSIBILITY THEREOF. THIS EXCLUSION
OF LIABILITY SHALL APPLY TO ANY LOSS OR DAMAGE ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT, ANY OBLIGATION HEREUNDER, OR THE SALE, DELIVERY, USE,
REPAIR OR PERFORMANCE OF THE SOFTWARE OR ANY FAILURE OR DELAY IN CONNECTION WITH
ANY OF THE FOREGOING.
LICENSOR'S LIABILITY UNDER OR FOR BREACH OF THIS AGREEMENT SHALL IN NO EVENT
EXCEED THE PURCHASE/LICENSE PRICE FOR THE SOFTWARE PRODUCTS LICENSED HEREUNDER.
IN NO EVENT SHALL LICENSOR BE LIABLE FOR COSTS OF PROCUREMENT OF SUBSTITUTE
GOODS. NOTHING IN THIS AGREEMENT SHALL LIMIT LICENSOR'S LIABILITY FOR DEATH OR
PERSONAL INJURY RESULTING FROM LICENSOR'S NEGLIGENCE.
9 TERM AND TERMINATION
9.1 This agreement shall commence on (the effective date) and
shall continue indefinitely until terminated by either party, in accordance with
this clause 9.
9.2 LICENSOR may terminate this agreement forthwith at any time by
written notice if the LICENSEE: commits an irremediable breach of this
Agreement, persistently repeat a remediable breach or commits any remediable
breach and fails to remedy it within thirty (30) days after receipt of notice of
the breach: or becomes insolvent, bankrupt, or has a receiver, manager,
administrative receiver or similar officer appointed over the whole or any part
of its assets; or has a change of ownership, management or control. LICENSOR
shall not be liable to LICENSEE for any loss or damage however caused, resulting
from termination of this Agreement. In the event of termination for breach, all
rights and license granted hereunder shall forthwith terminate and the LICENSEE
shall immediately cease using and destroy all copies of the LICENSOR's Software.
9.3 LICENSEE shall not be relieved of its obligation of
confidentiality upon termination of this Agreement.
10. GENERAL
10.1 This Agreement is governed by English Law and the parties
submit to the exclusive jurisdiction of the English courts. This Agreement
constitutes the entire agreement and understanding between the parties and
supersedes all prior negotiations, representations, or agreements, whether
written or oral.
10.2 This Agreement may be amended only by a written instrument
signed by a duly authorized representative of the party to be bound.
10.3 Failure by either party at any time to require performance by
the other party or to claim breach of any provision of this Agreement shall not
be construed as affecting any subsequent breach or the right to require
performance with respect thereto or to claim a breach with respect thereto.
10.4
IF ANY PART OF THIS AGREEMENT SHALL BE INVALID OR UNENFORCEABLE, SUCH INVALIDITY
OR UNENFORCEABILITY SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF THE
REMAINING TERMS AND CONDITIONS
<PAGE>
EXHIBIT G
PRODUCT CHANGE NOTICES
INTERWAVE may, at any time, make changes to the Products or modify the
drawings and specifications relating thereto, or substitute Products of later
design to fill an order (hereinafter referred to as "Product Change"),
provided that any such Product Change, under normal and proper use, does not
affect form, fit or function of the Products or the interchangeability of the
Products with other Products, and that INTERWAVE notifies ADC in writing
thereof as soon as practicable. In the event any Product Change affects form,
fit or function of the Products, INTERWAVE shall notify ADC in writing
thereof prior to any planned change, except Class D Changes - non Customer
Affecting. In the event ADC may reject the planned change and so notifies
INTERWAVE within ten (10) days and INTERWAVE fails to reach agreement
thereon, ADC shall have the right to terminate any and all orders, in whole
or in part, for the Products affected by such change. Notwithstanding any
notice requirement above to the contrary, INTERWAVE shall immediately notify
ADC when it determines that a Class A Product Change (as defined hereinafter)
shall be made. INTERWAVE shall be authorized to make Class A Product changes
as soon as practical.
Notwithstanding any notice requirements to the contrary elsewhere in this
Agreement, all Class A Product Change Notices shall be provided, at no
charge, and forwarded in accordance with section titled "Notices". Product
Change Notices shall contain all the information set forth in Notices. If
INTERWAVE cancels a Product Change Notice, INTERWAVE must provide
notification in accordance with clause title "Notices" hereto and state the
reason for cancellation and what action, if any, is to be taken in locations
where the change may already have been implemented.
INTERWAVE shall determine the classification per the requirements of Bellcore
Technical Requirement Document TR-OPT-000209 of any proposed Product Change.
If ADC disagrees with any classification assigned by INTERWAVE, ADC shall
have the right to challenge such classification, and INTERWAVE shall, in good
faith, re-evaluate its classification. In the event that ADC and INTERWAVE
fail to reach agreement on any such classification, then ADC shall have the
right to terminate any or all Orders, in whole or in part, for Products
affected by such Product Change without penalty or obligation of any kind.
CLASS A PRODUCT CHANGE
Class A Product Changes are changes required to correct a Product deficiency
(e.g., safety or fire hazard, electrically or mechanically inoperative,
unsatisfactory operation, design defects. Product does not operate as
documented). Class A Product Changes require immediate action by INTERWAVE to
correct all affected Products, whether in the hands of INTERWAVE or ADC or
their customers including spare Products. In some cases, however, it may be
necessary to make a change to only a limited number of a particular type or
Product. (This occurs when it is necessary to correct a condition that occurs
only in certain Product combinations or with the use of certain options).
Such conditions shall be described in the Product Change Notice.
INTERWAVE shall, no later than thirty (30) days from the date of the
notification of a Class A Product Change, provide a schedule, acceptable to
ADC for promptly implementing, at INTERWAVE' expense, such changes with
respect to Products in ADC or their customer's possession. Such
implementation shall include the deinstallation, if necessary, of existing
Products and the engineering and installation of replacement or modified
Products or any additional materials.
<PAGE>
NOTICES
INTERWAVE shall furnish monthly status reports to ADC for all Class A Product
Changes of which INTERWAVE has notified ADC. This report shall contain the
following information:
- Product Change Notice Number
- Identity of the Products
- Model or part number and issue
- Date Product Change Notice issued
- Product ship date
- Installation or application responsibility
- Locations at which change is to be made (to be supplied by
ADC)
- Date completed, by location - Changes on hold at any location
CLASS B PRODUCT CHANGE
Class B Product Changes are changes made to incorporate improvements in
design resulting in better operation, improved testing, better maintenance,
longer life, service improvements, cost reductions, addition of essential
features, and the like.
All Products shipped to ADC after the effective date of any Class B Product
Change shall incorporate such change. Any Products shipped to ADC prior to
such date may be modified by ADC at its option and expense.
No Class B changes shall effect interoperability of the product
CLASS D PRODUCT CHANGE
Class D Product Changes are design improvements, component changes, new
features, or other minor improvements not sufficiently significant as to
require a Class B classification. Class D Product Changes are also used when
a change is required to facilitate manufacture or to effect a cost reduction
not sufficiently important to justify a Class B classification.
No Class D changes shall effect the interoperability of the product
INTERWAVE shall furnish in accordance with the "Notices" Section a quarterly
report listing all Product Change Notices released during the previous twelve
(12) months. This report will contain the following information: (a) Product
Change Notice Number, (b) Issue Date of Change, (c) Drawing Number, (d)
Change Classification, and (e) Modification Expiration Date. INTERWAVE will
provide ADC a copy of all change notices as soon as they become available.
<PAGE>
EXHIBIT H
SUPPORT AND UPGRADE POLICY
1. This policy describes the responsibilities of INTERWAVE and ADC with
respect to hardware and software upgrades that are required to resolve
demonstrated problems with the equipment. These are known as "problem
fix upgrades". Hardware and software upgrades whose purpose is to
enhance the functionality of the equipment ("feature upgrades") are
quoted by INTERWAVE on a case-by-base basis and are not covered by this
policy.
2. For software problems that are reported by ADC, verified and/or
recreated by INTERWAVE and which are fixed on a subsequent revision of
software, INTERWAVE shall provide to ADC two (2) master copies of the
software revision that incorporates the fix. The software will be
accompanied by a completed "Engineering Change Request (Software)" form
which, among other information, states the severity of the problem
("Class of Change") and a non-binding recommendation to ADC on the
handling of the change in the field ("Field Effectivity Status"). The
decision on the deployment, if any, of the software fix to one or more
end-users in the field is the responsibility of ADC and all costs
associated with that deployment will be borne entirely by ADC. This
paragraph describes the totality of INTERWAVE' responsibilities which
are limited to the provision of the two master sets of software and of
the accompanying Engineering Change Request (ECR) notification.
3. For hardware problems that are reported by ADC, verified and/or
recreated by INTERWAVE and which are fixed by a hardware modification to
the card, module or subsystem, INTERWAVE shall provide to ADC a
completed "Engineering Change Request (Hardware)" form which, among
other information, states the severity of the problem ("Class of
Change"). The Class of Change defines INTERWAVE' responsibilities with
regard to the performance of the hardware upgrade to units that are
already installed in the field.
a. If the assigned Class of Change is "A", then INTERWAVE will perform
the required hardware upgrade to effected units at no charge.
b. If the assigned Class of Change is "AC" or "AR", then INTERWAVE will
perform the required hardware upgrade to effected units at no charge
if ADC so requests in writing within thirty (30) days of receipt of
the associated ECR.
c. If the assigned Class of Change is "B" or "D", then INTERWAVE will
not upgrade any installed units at no charge. At ADC's request,
INTERWAVE will quote such upgrades on a case-by-case basis.
In all instances where the Class of Change obligates INTERWAVE to
perform no-charge hardware upgrades. ADC shall request and receive a
Return Authorization and shall promptly return all parts requiring the
upgrade, freight prepaid to INTERWAVE' Service Department INTERWAVE
shall have twenty (20) business days to perform the upgrade and return
the part, freight prepaid, to ADC.
4. For enhancements or new feature upgrades, ADC may send the Product to be
upgraded freight prepaid to INTERWAVE' Service Department. ADC must
issue a purchase order for the upgrade cost as specified in INTERWAVE'
then current upgrade price list. A Return Authorization must be included
with the Product sent to INTERWAVE. The upgraded Product will be
returned to ADC within twenty (20) business days.
5. Advance Replacement Service. If necessary, ADC may request an advance
replacement exchange for the unit to be upgraded for those cases in
which ADC can not wait the standard return period. ADC may arrange for
this service as follows:
<PAGE>
- Secure a Return Authorization for the Product to
be exchanged.
- Issue a purchase order for the Product required
at INTERWAVE' then current list price plus the
cost of the upgrade and a $750 exchange service
fee.
- Upon receipt of the proper purchase order.
INTERWAVE will ship to ADC an upgraded product
for exchange. Upon receipt of the Product ADC
should immediately return the exchanged Product
in the same container.
- Upon receipt of the returned Product INTERWAVE
will issue a credit against ADCs purchase order
for the list price of the returned Product
If the exchanged Product is not returned within thirty (30) days ADC will be
invoiced for the Product shipped at the list price and ADC agrees to pay said
invoice due upon receipt
<PAGE>
CLASS OF CHANGE DEFINITIONS
CLASS A CHANGES
A. Changes which are (1) needed to correct (a) conditions which result in safety
hazards, or (b) conditions which result in non-compliance with federal
registration or radiation requirements or other federal, state or local safety
regulations or UL requirements; and (2) judged by Customer severe enough to have
to be made to all hardware in process, in stock or installed.
CLASS AC CHANGES
Changes which are (I) needed to correct (a) inoperative electrical
or mechanical conditions, or unsatisfactory maintenance or operating
conditions, or (b) conditions which result in safety hazards, where
the conditions in (a) or (b) are caused by circuit combinations or
options which exist only on certain hardware; (2) needed to
compensate for marginal (worse circuit) cases where the inoperative
or unsatisfactory conditions exist on certain hardware and cannot be
associated with specific circuit combinations or options. Such
changes shall be made on Products in process and if requested by
Buyer on Products in stock or returned to an authorized repair
center.
CLASS AR CHANGES
Changes which are needed to correct unsatisfactory electrical,
mechanical or operating conditions, which may be allowed to exist on
a temporary basis. Such changes shall be made to Products in
process, except that in some cases, if Customer gives written
consent, Products may be shipped for a period of time specified by
Customer without incorporating the change at that time to Products
in process. If Customer requests that such changes be made to
Products in stock or already installed, supplier shall make such
changes.
CLASS B - CHANGES
Changes which are sufficiently important to require their application to
Products being manufactured (as soon as reasonably possible) and/or which may
also be recommended for application to existing stock and installations in
the field. Examples of this class of changes may include, but are not limited
to:
a) Providing new features that directly affect Product operability.
b) Providing design improvements which result in better service
capabilities, longer life or improved operability margins.
c) Providing changes in design which result in important cost
savings to Customer.
CLASS BU CHANGES
For conditions of a mandatory nature, for example, the fulfillment
of future federal registration or future compatibility requirement
or for conditions of sufficient importance to be intended for
universal application. Such changes would only be required of
Products in process.
CLASS D CHANGES- NON-CUSTOMER AFFECTING
D. Other changes not sufficiently important to justify application to
Products being manufactured within any specified time frame and not
sufficiently important to recommend for application to existing stock and
installations in the field.
<PAGE>
EXHIBIT I
DIAGNOSTIC SUPPORT SERVICES
I. INTERWAVE' RESPONSIBILITIES
INTERWAVE will provide at prevailing rates either via annual service
agreement or time and materials, to ADC the following support
services to ADC during the term of this Agreement, except that
during the warranty period, such support services shall be free of
charge.
A. Dial-in Diagnostics:
INTERWAVE shall provide, during its principal period of
service (PPS), a dial-in diagnostic service which will
allow INTERWAVE technical support engineers remote dial-in
access to an End User node in order to perform on-line
diagnostics and problem determination. Problem
determination and resolution will be performed with ADC not
the End User. INTERWAVE will make every reasonable effort
to respond to service requests promptly.
B. Network Emergency Assistance:
1. A "Network Emergency" shall be defined as the failure
of a previously operating INTERWAVE Product which
renders the Product inoperable.
2. INTERWAVE will provide access to INTERWAVE technical
support engineers via a telephone "Hot Line" to assist
ADC with Network Emergencies twenty-four (24) hours a
day, seven (7) days a week.
3. INTERWAVE reserves the right to invoice ADC at the time
and material rates then in effect, for support services
requested by ADC outside the PPS which is determined not
to be a Network Emergency.
C. "Principal Period of Support" ("PPS") means the period of 8
am. to 5 p.m. Pacific Time, Monday through Friday,
excluding INTERWAVE observed holidays.
D. Problem Resolution
For each network emergency, INTERWAVE will assign a systems
engineer to follow through and report status to ADC until
such time as the problem is resolved.
II. RESPONSIBILITIES OF ADC
A. ADC Support Staff:
1. ADC shall maintain a technically competent staff
sufficiently trained to provide direct support of
INTERWAVE Products to the End User. At least one ADC
technical support representative must attend INTERWAVE'
training program prior to the date of any support
services request
2. ADC shall designate in writing (by name, title, address
and phone number) to INTERWAVE a primary technical
support representative.
(i) the ADC support representative shall be the
primary contact with INTERWAVE for all support
services provided hereunder.
<PAGE>
(ii) ADC may designate in writing to INTERWAVE up to
two (2) alternate technical support
representatives who will be authorized to place
support calls with INTERWAVE.
(iii)ADC agrees that only the primary or alternate
technical support representatives will request
support services provided hereunder and that such
representatives will be knowledgeable in the
support of the Products.
(iv) ADC may change primary and alternate technical
support representative(s) by issuing written
notice to INTERWAVE.
B. When use of the INTERWAVE dial-in diagnostics capability is
requested by ADC and/or determined by INTERWAVE to be necessary:
1. ADC shall insure that a telephone line is available to be
attached to the integral modem on the End User node.
2. ADC shall obtain from the End User and be responsible for
all necessary authorizations for remote access by
INTERWAVE to the End User node.
3. ADC agrees that during any such remote access INTERWAVE
shall at all times be acting as an agent for ADC.
C. ADC shall use system support provided hereunder only in support
of its End Users and any internal Products used by ADC.
III. GENERAL PROVISIONS
All INTERWAVE test and diagnostic software and documentation, whether on
ADC's site, accessible by
remote inquiry or incorporated into the Products, shall be and remain
the confidential and proprietary property of INTERWAVE.
<PAGE>
AMENDMENT #1 TO
PURCHASE/RESALE AGREEMENT
DATED FEBRUARY 27, 1997
1) MODIFICATION TO RECITALS AND SECTION 1 (AUTHORIZATION)
"RECITALS
Whereas, INTERWAVE develops, manufactures and distributes certain
wireless communications products, including the products set forth on APPENDIX A
hereto (the "Products"), and,
INTERWAVE and ADC desire that each act as a non-exclusive reseller of
the other company's Products under the terms and conditions set forth below,
except for the areas identified in Exhibit B which define an exclusive
arrangement for the sale of InterWave produced equipment,
NOW, therefore, INTERWAVE and ADC agree as follows:
SECTION 1 AUTHORIZATION
(a) APPOINTMENT. Subject to the terms of this Agreement,
INTERWAVE appoints ADC, and ADC accepts such appointment, as a non-exclusive
reseller of the InterWave Products except for the territories as set forth in
EXHIBIT B (the "TERRITORY"). This Agreement applies only to those INTERWAVE
products which are listed in Appendix A as amended from time-to-time upon
agreement between the Parties and as herein provided. In addition, subject to
the terms of this Agreement, ADC appoints InterWave, and InterWave accepts such
appointment, as a non-exclusive reseller of certain ADC Products as identified
in Exhibit A for InterWave territories as set forth in EXHIBIT B (the
"TERRITORY").
(b) FORMAT. ADC and InterWave may use or resell the other
party's Products as either stand-alone products, or in combination with other
products of their choice that meet the technical standards of the Products. ADC
and INTERWAVE makes no representation that the other company's Products will be
appropriate for combination with any other product(s)."
2) MODIFY SECTION 2 (PRICE) AS FOLLOWS:
"SECTION 2 PRICE
2.1 Prices for the INTERWAVE Products to be sold to ADC for resale are
based on market prices to end-users, and the discount schedule shown as Appendix
A to Exhibit "A" to this Agreement, as may be modified from time to time.
Initial prices are shown at Appendix B to Exhibit "A". Prices for the ADC
Products sold by INTERWAVE are shown as Appendix C to Exhibit "A"; these ADC
products are to be sold by INTERWAVE according to the terms in Appendix C to
Exhibit A".
2.2 Additional Products will be introduced by ADC and/or INTERWAVE from
time to time during the course of this Agreement and such products will be
priced and offered for resale by the other company through periodic amendments
to Exhibit A."
1
<PAGE>
3) MODIFY SECTION 3 (AGREEMENT COMMENCEMENT DATE) AS FOLLOWS:
"SECTION 3 AGREEMENT COMMENCEMENT DATE
3.1 For purposes of timely execution of several of the terms and
conditions hereof, the "Agreement Commencement Date" shall be that date on which
ADC and INTERWAVE agree that (i) the initial INTERWAVE product has been
independently certified to be GSM compliant (11.21 compliant), AND (ii) that the
initial INTERWAVE product meets the jointly agreed ADC product specifications
and acceptance criteria which are contained in Appendix D of Exhibit A. Such
specifications and acceptance criteria shall be initially based on INTERWAVE's
Release 3.0 (previously noted as Release 1.1) feature set. Modifications may be
necessary to comply with the product specifications and acceptance criteria in
Appendix D of Exhibit A and shall be concluded by Release 5.0. In order to
establish the "Agreement Commencement Date", the GSM compliant product (11.21
compliant and Release 3.0) shall be available to ADC and applicable agencies for
certification activities no later than October 31, 1997 in order to allow
production and shipment by INTERWAVE of compliant equipment by end of year,
1997. Provided these conditions are met, the "Agreement Commencement Date" shall
be established on November 1, 1997.
4) MODIFY SECTION 5.1.4 (ADC OBLIGATIONS) AS FOLLOWS:
"5.1.4 ADC will market INTERWAVE Product to various cellular
operators with exclusivity to operators in specified geographies as
enumerated on Exhibit B with a commitment to achieve a minimum of [***] in
purchases from INTERWAVE during the first 12 months following the Agreement
Commencement Date. In the second 12 months following the Agreement
Commencement Date, ADC has a non-binding forecast to an additional [***] in
purchases from INTERWAVE. ADC has advanced [***] in cash to INTERWAVE in
April, 1997; these funds will be used to purchase INTERWAVE assets and
demonstration systems in the ADC exclusive countries shown in Exhibit B. Any
portion of the [***] not used for asset transfer will be credited towards the
[***] in purchases during the first 12 months following the Agreement
Commencement Date.
5) ADD NEW SECTION 5.1.4.1 (PERFORM REGULAR CONTRACT MAINTENANCE)
"5.1.4.1 ADC and INTERWAVE will perform regular maintenance on the
Agreement (i.e.; quarterly) to reflect any required modifications (e.g.; in
conjunction with material changes in INTERWAVE's equity ownership)."
6) DELETE SECTION 5.1.6 (ADC OBLIGATIONS)
7) MODIFY SECTION 5.2.2 (INTERWAVE OBLIGATIONS) AS FOLLOWS:
"5.2.2 INTERWAVE, insofar as practical, will provide modifications
and/or enhancements to its Products requested by ADC as mutually agreed by the
Parties. For modifications or enhancements beyond the jointly agreed
specifications (Section 3.1) INTERWAVE will provide engineering resources (up to
a maximum of 24 man-months per calendar year) to perform custom engineering to
accommodate ADC requests for specific product features or changes. Such
engineering resources will be billed to ADC on an as-used basis at the rate of
$100 per hour. INTERWAVE will attempt to provide additional resources to meet
ADC's custom engineering needs on an as-requested basis. In lieu of paying
INTERWAVE for its engineering resources, in certain instances, ADC may supply
its own resources to perform certain custom engineering or enhancement work. In
turn, INTERWAVE may request engineering resources from ADC
2
* Certain information on this page has been omitted and filed separately
with the SEC. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE>
in aiding the design, development and testing of the INTERWAVE
specified product which will be billed to INTERWAVE on an as-used basis at the
raze of $100 per hour plus any additional expenses that are required to
interface with INTERWAVE's design team."
8) MODIFY SECTION 5.2.4 (INTERWAVE OBLIGATIONS) AS FOLLOWS:
5.2.4 INTERWAVE will not compete directly with ADC in the sales of the
INTERWAVE Product as enhanced or modified pursuant to the Agreement to the
specified geographical areas and cellular system operators as described in
Exhibit "B" unless:
1. Customer states that it will only do business directly
with INTERWAVE, or,
2. Customer does not wish to do business directly with ADC, or
3. Customer is purchasing a private labeled or co-branded
product from an INTERWAVE OEM.
Should a conflict arise, INTERWAVE agrees to cooperate with ADC in good
faith to attempt to resolve the issue in ADC's behalf. Additionally, INTERWAVE
shall obtain ADC's approval prior to the consummation of any OEM relationship
that INTERWAVE wishes to enter into other than this Agreement; this approval
shall not be unreasonably withheld."
9) MODIFY SECTION 5.2.9 (INTERWAVE OBLIGATIONS) AS FOLLOWS:
"5.2.9 Following receipt of the initial [***] advance deposit
referred to in Section 5.1.4, INTERWAVE will commence development of a PCS 1900
version of the INTERWAVE Products, with a target initial customer trial (beta
release) date no later than April 30, 1998; this beta release will fully support
the requirements outlined in Appendix E of Exhibit A. Additionally, INTERWAVE
will support an initial customer alpha trial for PCS 1900 no later than
February, 1998 with a minimum commitment of six (6) 1900 Transceiver (TRX) cards
for the WAVEXpress base station."
10) MODIFY SECTION 7 (MARKETING REVIEW) AS FOLLOWS:
"SECTION 7 MARKETING AND TECHNICAL REVIEW
7.1 Representatives of both INTERWAVE and ADC shall meet promptly after
completion of the first three-month period of this Agreement, and at least
quarterly thereafter (while this Agreement remains in force) to review INTERWAVE
and ADC's sales, market strategies, and objectives, product support activities,
promotion and advertising plans, and competition. Meeting location shall be
agreed upon for the mutual convenience of the parties.
7.2 Representatives of both INTERWAVE and ADC shall meet on a regular
basis (i.e.; monthly program review) to review product development and
operations support activities in order to develop and manage the specification
of new requirements and/or necessary corrections for existing products. Meeting
location and logistics shall be agreed upon for the mutual convenience of the
parties."
11) MODIFY, AS FOLLOWS, SECTION 13 (TRADEMARKS: TRADE NAMES, LOGOS,
DESIGNATIONS, AND COPYRIGHTS) TO INCLUDE SECTION 13.6 (NEW):
"13.6 INTERWAVE agrees to allow ADC to add the ADC
logo/branding information, markings and identification information (e.g.; bar
codes) that are not in conflict with the other items in Section 13."
3
* Certain information on this page has been omitted and filed separately
with the SEC. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE>
The forecast will be updated Quarterly starting in 4Q97. All deliveries made
prior to Release 5.0 will be upgraded to Release 5.0 software at ADC's
request at no additional charge.
Any Forecast stated on behalf of ADC is non-binding on the part of ADC nor
would any forecasted products and services not taken result in any additional
billings, obligations or legal recourse if ADC does not accept, achieve or
take shipment of this Forecast.
SECTION IV CALL OFF ORDERS
The initial call off order will be issued for the first 20 systems
as shown in Section III. This call off order will be issued by September
26, 1997. Subsequently, call off orders will be issued two quarters in
advance beginning in 2Q98 for delivery in 4Q98.
SECTION V SPECIAL PAYMENT TERMS
Payment terms are as specified in the Purchase/Resale Agreement
with the exception of the first 10 systems shipping in calendar year 1997.
Full payment on these 10 systems will be within 75 day from the interWAVE
invoice date.
SECTION VI TERMS AND CONDITIONS
All terms and conditions not specifically covered in this
Frame Contract will be as stated in the Purchase/Resale Agreement in
existence on the date of the shipment
ADC Telecommunications, Inc. interWAVE Communications
International, Ltd.
By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
----------------------------- --------------------------
Title: SENIOR VICE PRESIDENT Title: Sr VP CFO
-------------------------- -----------------------
Date: Date: 10/14/97
--------------------------- ------------------------
4
<PAGE>
APPENDIX A TO EXHIBIT A
DISCOUNT SCHEDULE BASED ON VOLUME ($ MILLIONS)
<TABLE>
<S> <C> <C> <C> <C>
ANNUAL PURCHASE COMMITMENT: $0-10 $10-20 20-40 $40+
----- ------ ----- ----
</TABLE>
Discount from "Market" Price
YEARS AFTER AGREEMENT COMMENCEMENT DATE (NOTE 1):
<TABLE>
<S> <C> <C> <C> <C>
First [***] [***] [***] [***]
Second [***] [***] [***] [***]
Third and beyond [***] [***] [***] [***]
</TABLE>
"Market Price" means: the end user price recorded by IWC and ADC for their
respective end-user (operator) sales accounts, by geographic region (Europe,
Asia-Pacific and North America.).
Average sales over the preceding three months will be used to determine the
"market" price.
Pricing will be reviewed and modified as necessary on a quarterly basis..
In cases where special circumstances dictate a greater than normal discount from
list for an end-user (such as when an operator elects to make an equity
investment in conjunction with his product purchase arrangement) those
transactions will be excluded from the calculation of "average"; likewise if ADC
has a special case requiring an usual discount, then INTERWAVE will cooperate
and share the pain in terms of margin impact.
Depending on market price erosion over time, INTERWAVE and ADC reserves the
right to re-negotiate the ADC discount.
Note:
1. In conjunction with a commitment purchase agreement between ADC and
INTERWAVE, ADC shall receive an additional [xxx] off of the
discounted price for the first and second year of the purchase
agreement. For example, the first year discount for purchases
between $ 0 - 10 M is now [xxx] rather than [xxx].
* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE>
APPENDIX B TO EXHIBIT "A"
INITIAL MARKET PRICES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
WAVEXPRESS/BTS - 900 MHz (INCLUDES 1 ABIS
INTERFACE)
<S> <C> <C> <C>
(1) TRX [***] or
(1) 1800 TRX [***] or
(1) 1900 TRX [***]
Additional 900 TRX [***] or
Additional 1800 TRX [***] or
Additional 1900 TRX [***]
Additional Power Supply [***]
Additional Software Feature Releases: 15% of product cost
depending on feature content
- --------------- ------------------------------------------------------------------ ---------------- ---------------------------
- -------------------------------------------------------------------------------------------------------------------------------
WAVEXPRESS/BSC
(2) A, (2) Abis Interface [***]
module
Additional A-int Trunk module [***]
Additional Abis interface trunk card
- with 32 channel TRAU capacity [***]
- with 64 channel TRAU capacity [***]
Additional Power Supply [***]
BTS Management Software [***] per TRX
Additional Software Feature Releases:
product cost depending on feature content 1[***]% of
- --------------- ----------------------------------------------------------------------------------- ---------------------------
- -------------------------------------------------------------------------------------------------------------------------------
WAVEXPRESS OUTDOOR ENCLOSURE
Environmental Cabinet [***]
Celwave Filter Kit, Outdoor [***]
Heat Exchanger, Outdoor [***]
UPS, Outdoor [***]
- --------------- ------------------------------------------------------------------ ---------------- ---------------------------
- -------------------------------------------------------------------------------------------------------------------------------
WAVEVIEW OMC-R (UNIX/MOTIF)
WAVEView OMC-R Server Software [***]
WAVEView OMC-R Client Software [***] per copy
X-terminal client license per copy [***] per copy
TRX Management [***] per TRX
- --------------- ------------------------------------------------------------------ ---------------- ---------------------------
- -------------------------------------------------------------------------------------------------------------------------------
CRAFT INTERFACE PC
Craft Hardware and Software [***]
- --------------- ------------------------------------------------------------------ ---------------- ---------------------------
</TABLE>
*Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.
<PAGE>
APPENDIX B TO EXHIBIT "A"
INITIAL MARKET PRICES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MICROXPRESS/BTS
Base System (900 MHz) [***] or
Base System (1899/190 MHz) [***]
Optional Wall Mount Kit [***]
Optional Pole Mount Kit [***]
Addit'l Software Feature Releases:
12%-15% of product cost
depending on feature content
- --------------- ------------------------------------------------------------------ ---------------- ---------------------------
- -------------------------------------------------------------------------------------------------------------------------------
DOCUMENTATION
WAVEXpress/BTS Installation Guide [***]
WAVEXpress/BSC Installation Guide [***]
WAVEXpress/BS+ Installation Guide [***]
WAVEView UNIX Installation Guide [***]
WAVEView UNIX Operator's Manual [***]
Craft Interface Operators Manual [***]
- --------------- ------------------------------------------------------------------ ---------------- ---------------------------
</TABLE>
*Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.
<PAGE>
APPENDIX B TO EXHIBIT "A"
INITIAL MARKET PRICES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
WAVEXCHANGE SWITCH 1.0 [INCLUDES (1) PTSN & (1)A/ABIS INTERFACE
MODULES)
(1) 2-port E1/switch module [***]
Additional CPU module [***]
Additional 2-port E1 A-interface trunk module [***]
Additional 2-port E1 PSTN interface trunk module [***]
- with 32 channel Echo capacity [***]
- with 65 channel Echo capacity [***]
Additional 2-port E1/switch module [***]
Integrated BSC [***]
Subscriber management [***]
HLR/VLR
Up to 500 subscribers [***]
501 - 1,000 subscribers [***]
AUC [***]
Call data records
Up to 500 subscribers [***]
501 - 1,000 subscribers [***]
Radio Channel Control [***] per Tr Channel
Integrated TRAU [***] per DSP module
Echo Cancellation [***] per DSP module
Additional Power Supply [***]
Additional Software Feature Releases:
product cost depending on feature content [*****]% of
- ------------- ------------------------------------------------------------------------- ---------------------------
- -------------------------------------------------------------------------------------------------------------------
WAVEVIEW OMC-S
WAVEView OMC-S Server Software [*****]
WAVEView OMC-S Client Software [*****]
Radio channel management [*****] per voice channel
- ------------- ---------------------------------------------------------- -------------- ---------------------------
</TABLE>
NOTE: SPARES ARE TYPICALLY QUOTED AT 5% OF THE SYSTEM CONFIGURATION
SUPPORT AND TRAINING ARE SEPARATELY QUOTED DEPENDING ON THE OPERATOR
REQUIREMENTS
*Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.
8
<PAGE>
APPENDIX C TO EXHIBIT "A"
LIMITED DISTRIBUTION AGREEMENT
& PRICING FOR ADC PRODUCTS
ADC CityRFx - Distributed Antenna System
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
MODEL DESCRIPTION LIMITED DISTRIBUTOR
PRICE/UNIT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
900 MHZ GSM
- ---------------------------------------------------------------------------------------------------------
CFXB-900AA BEX, 60 vac [***]
- ---------------------------------------------------------------------------------------------------------
CFXB-900AD BEX, 28 vdc [***]
- ---------------------------------------------------------------------------------------------------------
CFXM-900AA MEX, 60 vac [***]
- ---------------------------------------------------------------------------------------------------------
CFXM-900AD MEX, 28 vdc [***]
- ---------------------------------------------------------------------------------------------------------
CFXI-900FA In-line MEX;60vac [***]
- ---------------------------------------------------------------------------------------------------------
CFXI-900FD In-line MEX;28vdc [***]
- ---------------------------------------------------------------------------------------------------------
1800 MHZ PCN
- ---------------------------------------------------------------------------------------------------------
All PCN MEX Units, 60 vac [***]
- ---------------------------------------------------------------------------------------------------------
All PCN BEX Units, 60 vac [***]
- ---------------------------------------------------------------------------------------------------------
1900 MHZ PCS
- ---------------------------------------------------------------------------------------------------------
CFXM-190AA A-block EMEX, 60 vac [***]
- ---------------------------------------------------------------------------------------------------------
CFXM-190BA B-block EMEX, 60 vac [***]
- ---------------------------------------------------------------------------------------------------------
CFXM-190CA C-block EMEX, 60 vac [***]
- ---------------------------------------------------------------------------------------------------------
CFXM-190DA D-block EMEX, 60 vac [***]
- ---------------------------------------------------------------------------------------------------------
CFXM-190EA E-block EMEX, 60 vac [***]
- ---------------------------------------------------------------------------------------------------------
CFXM-190FA F-block EMEX, 60 vac [***]
- ---------------------------------------------------------------------------------------------------------
CFXB-190XA 1900 MHz BEX, 60 vac [***]
- ---------------------------------------------------------------------------------------------------------
CFXI-190XA 1900 MHz IMEX, 60 vac [***]
- ---------------------------------------------------------------------------------------------------------
ACCESSORIES
- ---------------------------------------------------------------------------------------------------------
01-61985001 3 dB In-line Attenuator, pwr passing [***]
- ---------------------------------------------------------------------------------------------------------
01-61986001 6 dB In-line Attenuator, pwr passing [***]
- ---------------------------------------------------------------------------------------------------------
01-61987001 10 dB In-line Attenuator, pwr passing [***]
- ---------------------------------------------------------------------------------------------------------
01-61988001 20 dB In-line Attenuator, pwr passing [***]
- ---------------------------------------------------------------------------------------------------------
01-61989001 75 ohm "F"-male Termination [***]
- ---------------------------------------------------------------------------------------------------------
01-61982001 8 dB Directional Coupler [***]
- ---------------------------------------------------------------------------------------------------------
01-61983001 12 dB Directional Coupler [***]
- ---------------------------------------------------------------------------------------------------------
01-61984001 16 dB Directional Coupler [***]
- ---------------------------------------------------------------------------------------------------------
01-61980001 2-Way Splitter, pwr passing [***]
- ---------------------------------------------------------------------------------------------------------
01-61981001 3-Way Splitter, pwr passing [***]
- ---------------------------------------------------------------------------------------------------------
CFXP4060A Pwr Transformer, 120 vac In/60 vac Out [***]
- ---------------------------------------------------------------------------------------------------------
CFXP-4028A Pwr Supply, 120 vac In/28 vdc Out Quote [***]
- ---------------------------------------------------------------------------------------------------------
01-619-78001 RG-6 Plenum Cable Quote [***]
- ---------------------------------------------------------------------------------------------------------
01-61979001 "F" Male Crimp Connector for RG-6 Quote [***]
- ---------------------------------------------------------------------------------------------------------
PE4508 "N" Male Crimp Connector for RG-6 Quote [***]
- ---------------------------------------------------------------------------------------------------------
01-61978101 RG-11 Plenum Coaxial Cable Quote [***]
- ---------------------------------------------------------------------------------------------------------
01-61979101 F-11 Connector for RG-11 Quote [***]
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* ALL PRICES SHOWN ARE $USD; F.O.B. HILLSBORO, OR
*Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the
omitted portions.
9
<PAGE>
APPENDIX C TO EXHIBIT "A"
LIMITED DISTRIBUTION AGREEMENT
& PRICING FOR ADC PRODUCTS
ADC CityLink - F1/F2 Repeater
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
MODEL DESCRIPTION LIMITED
DISTRIBUTOR
PRICE/UNIT
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
CLRA-1112AW CityLink 1900; A-block; 1 Ch; 1.25 MHz BW: AC Pwr [***]
- ---------------------------------------------------------------------------------------------------
CLRB-1112AW CityLink 1900; B-block; 1 Ch; 1.25 MHz BW: AC Pwr [***]
- ---------------------------------------------------------------------------------------------------
CLRA1212AW CityLink 1900; A-block; 2 Ch; 1.25 MHz BW: AC Pwr [***]
- ---------------------------------------------------------------------------------------------------
CLRB1212AW CityLink 1900; B-block; 2 Ch; 1.25 MHz BW: AC Pwr [***]
- ---------------------------------------------------------------------------------------------------
TBD Field Kit; Add Second CDMA Channel [***]
- ---------------------------------------------------------------------------------------------------
TBD Spare Kit; Replaces Fwd and Rev Link Modules [***]
- ---------------------------------------------------------------------------------------------------
</TABLE>
* ALL PRICES SHOWN ARE $USD; F.O.B. HILLSBORO, OR
INTERWAVE and ADC agree to negotiate in good faith terms and conditions which
shall cover the products listed in this Appendix C. Such negotiations shall be
completed no later than October 31, 1997
*Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the
omitted portions.
10
<PAGE>
APPENDIX D TO EXHIBIT "A"
INTERWAVE SPECIFICATIONS AND AVAILABILITY DATES
BSS PRODUCT PLAN
RELEASE 1.0
RELEASED
--------
CONTENT FROZEN
- - 1-10 TRX per BSC
- - 1-10 BSC per BSC
- - No cycling of MS Power
- - MS Dynamic Power Control on
RxQual and RxLev
- - Separate Settable HO Margins
- - Settable handover priorities
- - MS Fast Power Down
- - Speed Sensitive microcell HO
- - MX Daisy Chain (up to 4)
- - 12.21 std Abis Interface to BTS
- - Racal BSS Testing Support
- - TRX Hot Swap
- - Enh Network Perf Statistics
- - Nodule Serial Number ID
- - BSS Increased Capacity
RELEASE 2.0
GENERAL RELEASE
---------------
DEC 97
------
CONTENT FROZEN
- - Quality Updates (PRs Bug Fix)
- - Non-Encrypted Software Release
- - IWP MMU Support
- - BSS Eng Guidelines / Cap. Rules
- - BTS Standalone Diagnostics
- - Radio Compatibility / Support
- - GSM Data Services
- - .nm File Cleanup
- - Intelligent Software Upgrades
- - MicroXpress Battery Backup
RELEASE 3.0
GENERAL RELEASE
---------------
1Q98
CONTENT FREEZE: SEP 97
- - DCS1800 Full Band Radio (WE/MX & GSM900 Radios (WE)
-11.21 Compliant Prod Units
-Temp Comp (-40DEG.C to 55DEG.C)
-2w (33dBm) at Antenna Port
- - Environmentally Hardened MX
-Temp Comp (-40DEG.C to 55DEG.C
-Humidity, Solar, Rain, Dust
- - Antenna Receive Diversity
- - Dynamic Power Control
- - Directed Retry (phase 1 and phase 2 mobiles)
- - WE 3 TRX BTS support
- - WE Integrated high Power TRX
-2-10 Watts
-1800/900 Frequencies
- - External high power masthead
-WX/MX
-900/1800 Frequencies
- - OMC Support
- - Quality Improvements
11
<PAGE>
APPENDIX D TO EXHIBIT "A"
INTERWAVE SPECIFICATIONS AND AVAILABILITY DATES
BSS PRODUCT PLAN (CON'T)
RELEASE 4.0
GENERAL RELEASE
---------------
2Q98
CONTENT FREEZE: OCT 97
- - 1 to 20 TRX per BSC
- - 1 to 20 BTS per BSC
- - Lathrop `A' WE Enclosure
- - Cell Broadcast
- - Idle Chan Intf Msmt & Notif
- - HO on congestion w/ threshold
- - Force HO to second best cell
- - DTX downlink (uplink by MS)
- - Call Trace
- - T1 Support 900/1800 (WE BSC/BTS Adjunct)
- - Underlay test and HO test
- - Handover margins for each cell
- - OMC support
- - Quality Improvements (PRs)
- - Double BCCH Allocation
- - Very Early Assignment
- - Call Queuing
RELEASE 5.0
GENERAL RELEASE
---------------
4Q98
CONTENT FREEZE: 1Q98
- - 1 to 20 TRX per BSC
- - 1 to 20 BTS per BSC
- - A5/2 Encryption
- - Paging Group Reorganization
- - Windows based Craft PC (should be R4)
- - Adj of uplink/downlink volume (should be R4)
- - CRC4 support to get performance data on E1/T1 trunk
- - Improved diagnostics (off-line, E1, IWP, RFD, Clock Module)
- - OMC Support
- - Quality Improvements
- - SW Download / N-2 support
- - MX 900 (Compliant Radio)
- - MX2-TRX (New TRX - 1800)
-Frequency Hopping
- -
RELEASE 5.0 (CON'T)
GENERAL RELEASE
---------------
4Q98
CONTENT FREEZE: 1Q98
PCS1900
- - PCS1900 Radio (WE/MX)
-N.A Compliant prod Units
-Temp Comp (-40DEG.C to 55DEG.C)
-2w (33dBm) at Antenna Port
-Operation over full 1900 Band
- - Enhanced Full Rate Vocoder
- - Integrated T1 Support (MX / WE)
- - ANSI SS7 / Protocol Stack Support
- - Mu-law support
- - Call Processing modifications
- - IMP Microcellullar Algorithms
- - 3 Digit MNC support
- - E911 Services (Cell-id)
12
<PAGE>
APPENDIX D TO EXHIBIT "A"
INTERWAVE SPECIFICATIONS AND AVAILABILITY DATES
BSS PRODUCT PLAN (CON'T)
RELEASE 6.0
GENERAL RELEASE
- ---------------
2Q99
CONTENT FREEZE: 2Q98
- - Next Generation BTS
- - Dynamic Channel Alloc (DCA)
- - MX 2-TRX (New TRX - GSM900 and PCS1900
- - Enh. Overload / Congestion Control
- - Improved Threshold Alarms (include changes, rate of changes, link
balance)
- - 14.4 Kbps Data
- - OMC Support
- - Quality Improvements
13
<PAGE>
APPENDIX D TO EXHIBIT "A"
INTERWAVE SPECIFICATIONS AND AVAILABILITY DATES
OMC PRODUCT PLAN
<TABLE>
<CAPTION>
RELEASE 1.0 RELEASE 2.0 RELEASE 3.0
RELEASED GENERAL RELEASE GENERAL RELEASE
4Q97 1Q98
CONTENT FROZEN CONTENT FROZEN CONTENT FREEZE: SEP 97
<S> <C> <C>
- - Object to Alarm Link - BSS 2.0 Support - BSS 3.0 Support
- - Lost Alarm / Event Report Rec. - .nm File Cleanup - Manageability Improvements
- - Audible Alarm - Display of Vector Map - Quality Improvements
- - Multiple Alarm Windows - Most Current Sun Machines - Migration to TCSI OSP 4.0.5
- - E1, TRX & TRX Ch Diagnostics - System Configuration - Upgrade to Latest Oracle 7
- - Export of Perf Statistics - BSC R1.0 to R2.0 DB Conv. - DB Conversion Utilities
- - Batch Audit - Quality Improvements
- - Display BSC Software version OMC-S
- - Cell Plan Import and Export OMC-S - Support of OMC-R base Enhancements
- - BTS / Cell Creation Templates - WAVEXchange Release 2.0 - Integrated OMC-R-S-HLR
- - NMI Password Support - Basic System Admin Support - Performance Mgmt
- - PC Client support
- - On-line help support
- - MicroXpress / BTS Support
- - Mgt of Daisy Chain Config.
OMC-S
- - General Admin via NMI
</TABLE>
14
<PAGE>
APPENDIX D TO EXHIBIT "A"
INTERWAVE SPECIFICATIONS AND AVAILABILITY DATES
OMC PRODUCT PLAN (CON'T)
<TABLE>
<CAPTION>
RELEASE 4.0 RELEASE 5.0 RELEASE 6.0
GENERAL RELEASE GENERAL RELEASE GENERAL RELEASE
2Q98 4Q98 2Q99
CONTENT FREEZE: OCT 97 CONTENT FREEZE: 1Q98 CONTENT FREEZE: 3Q98
<S> <C> <C>
- - Quality Improvements - Quality Improvements - Quality Improvements
- - Performance Improvements - Performance Improvements - Performance Improvements
- - DB Conversion Utilities - DB Conversion Utilities - DB Conversion Utilities
- - Disk Redundancy
OMC-R OMC-R
OMC-R - BSS 5.0 Support - BSS 6.0 Support
- - BSS 4.0 Support - PCS1900 Support - Interfaces to managers of managers
- - Alarm Mgmt (e.g. FTP Alarms) - GUI Redesign - Peer to peer OMC comm
- - Enhances E1 Mgmt - PC Client Support - Quality Improvements
- - Enhanced Map Mgmt - Multi CAI Support
- - Enhanced SW Download for BSS - Enhanced Alarm Management OMC-S
- - Support for Mgmt Interfaces - OMC Perf Assessment - Support of OMC-R base Enhancements
- - Access Management - Increased Capacity -
Enhanced Performance Meas.
- - GUI Enhancements - High Availability Platform
- - Comm Module Re-design - Process management
- - Software Management - TRAU - Select EFR
- - Configuration Mgt Re-design - 3 Digit MNC
- - OMC Sync w/BSS DB - T1 I/F on OMC Server
- - Cell Mgmt Re-design - T1 Mgt.
- - Template Mgt
- - Help system Re-design OMC-S
- Support of OMC-R base
OMC-S Enhancements
- - Support of OMC-R base - Enhanced Alarm Mgmt
Enhancement - Enhanced Translation
- - Integral OMC-S Combo Server Management
- - Ext. Translations - Support of Service Management
- - Enhanced Performance Meas. - Centralized HLR
- - Software Release Mgmt.
- - Enhanced CDR Mgmt
</TABLE>
15
<PAGE>
APPENDIX D TO EXHIBIT "A"
INTERWAVE SPECIFICATIONS AND AVAILABILITY DATES
SWITCH PRODUCT PLAN
<TABLE>
<CAPTION>
RELEASE 1.0 RELEASE 2.0 RELEASE 3.0
GENERAL RELEASE GENERAL RELEASE GENERAL RELEASE
- --------------- --------------- ---------------
3Q97 4Q97 1Q98
<S> <C> <C>
CONTENT FROZEN CONTENT FROZEN CONTENT FROZEN**
- - Support BSS / OSS Release 1.0 - Support BSS / OSS Release 1.0 - Support BSS / OSS Release 1.0
- - Support for GSM900/DCS1800 Basic OMC-S -
- - (2) BSC; (10) BTS; (20) TRX total - Abbr. Dial Plan (
- - 500 subs @ 0.1E - MFCR2 Trunks - Integrated OMC-R-S-HLR
- - `A' Interface to iWV BSC - DTMF / MF Tones - Data / Fax (intra WX)
- - HLR / VLR Support - Call Barring (Operator Determined) - Caller ID
- - Authentication - Call Forwarding Unconditional -
- - Ciphering - Echo Cancellation
- - Emergency Call - Performance Measurements
- - NMI Based Switch Admin - Trunk Group Management
- - ISDN PRI Trunks - Engineering Guidelines
- - Dial Plan (E.164 psuedo)
- - DTMF Tones
- - Call Detail Records (CDR)
</TABLE>
16
<PAGE>
APPENDIX D TO EXHIBIT "A"
INTERWAVE SPECIFICATIONS AND AVAILABILITY DATES
SWITCH PRODUCT PLAN (CON'T)
<TABLE>
<CAPTION>
RELEASE 4.0 RELEASE 5.0 RELEASE 6.0
GENERAL RELEASE GENERAL RELEASE GENERAL RELEASE
2Q98 4Q98 2Q99
CONTENT FREEZE: OCT 97 CONTENT FREEZE: 1Q98 CONTENT FREEZE: 3Q98
<S> <C> <C>
- - Support BSS / OSS Release 4.0 - Support BSS / OSS Release 5.0 - Support BSS / OSS Release 6.0
- - Support (5) BSC (BSS 4.0 rules) for - Support (5) BSC (BSS 5.0 rules) for - Support (10) BSC (BSS 6.0 rules) for
a maximum of (60) TRX a maximum of (60) TRX a maximum of (60) TRX
- - 2000 Subs @ 0.1E - Basic PCS 1900 System - 5000 Subs @ 0.1E
- - Combo Switch/BSC/BTS/HLR - Centralized HLR - QSIG (Integrated)
- Support for (2) TRX - T1 Trunk support/PRI (NI1) - Fax / Data (PSTN IWF)
- up to 200 subs @ .025E - Multi-party - Short Message Service (SMS)
- Modular expansion - Call Waiting - serves up to (10) WX
- - Recorded Announcement - Hold - max 25,000 subs
- - Call Forwarding Conditional - IWV MAP (WX Networks) - scalable (entry to max)
- - Private A-Link Multiplex (PALIM) - Quality Improvement - MAP (v2)
- - MFCR2 Country Variants - Redundancy
- - QSIG (Adjunct) - CPU
- - Quality Improvement - Hard Disk Drove
- GSM Phase 2+ ASCl
- GSM 2.68 / 3.68 VGCS
- GSM 2.69 / 3.69 VBS
- Broadcast Calls
- Group Calls
- Priority & Pre-emption
- Quality improvement
</TABLE>
17
<PAGE>
APPENDIX D TO EXHIBIT "A"
INTERWAVE SPECIFICATIONS AND AVAILABILITY DATES
INTERWAVE FEATURE DEFICIENCIES
The following deficiencies as of September 22, 1997, have been identified by ADC
Wireless as necessary requirements for the targeted ADC customer base. INTERWAVE
will commit to the development of features that close these deficiencies by R5.
<TABLE>
<CAPTION>
BSS SUPPORTED
--- ---------
<S> <C> <C>
1. Support of data or fax below 9.6Kbit/s, R2 (Fund Spec to be provided)
2. Support for dual band 900/1800 MHz operation. R5
3. Support for drop/insert on Abis for wavexpress. R3 (no bypass)
4. Support for Cell Broadcast (may be an issue with some operators) R 4.0
5. Enhanced Wavexpress Outdoor Design R3?
6. Support for frequency hopping. R5.0
7. Integrated battery backup on indoor Wavexpress. ??
8. Support for sectored BTS. R3 or R4
9. Microcell handover algorithm. R5
10. Remote transcoder option. R5?
11. Kill/Restart individual processor without dropping existing calls R5??
12. Alternate speech/fax support. ??
<CAPTION>
OMC
---
1. Limited help on OMC, no context sensitive help. R4.0 (fixed)
2. Change site names etc. without deleting/recreating a site on OMC. R2.0
3. Performance Management on OMC R5?
4. Q3 interface from OMC to high level NMS ??
5. OMC on HP Server Platform R4?
6. OMC on PC Client R5
</TABLE>
(NOTE: PART FUNCTIONALITY IS DESIRED ON R4; FEATURE IS ON THE R5 RELEASE PLAN)
18
<PAGE>
APPENDIX E TO EXHIBIT "A"
PCS 1900 BSS HIGH LEVEL MARKET REQUIREMENTS
1. GENERAL
The purpose of this paper is to define the high level market requirements for an
initial release of PCS 1900 BSS equipment. The PCS 1900 equipment (hardware and
software) shall in general have the same functionality as the corresponding DCS
1800 products at the same time. As such this paper describes only the
differences required for the PCS 1900 BSS products.
2. 1900 MHZ FREQUENCY BAND
The PCS 1900 BSS shall use the 1900 MHz frequency band, namely 1850 to 1910 MHz
for uplink, MS to BTS and 1930 to 1990 MHz for downlink, BTS to MS, channel
numbers 512 to 812 inclusive. All equipment shall operate over the full
frequency band and be compliant and tested to JTC PCS Air interface
Specification, PN3389.
The transmitter shall meet the FCC Code of Federal Regulations, volume 47,
section 24.238. titled - `emission limits' which defines the performance at the
band edge.
3. TRANSCODING
The system shall support the GSM/JTC approved Enhanced Full Rate (EFR) vocoder
as well as the standard Full Rate (FR) vocoder. Both coders will be required to
operate for any TRX and TRAU timeslot at any time and shall allow handover from
FR to EFR and vice versa.
The design shall (if possible) enable a software upgrade to support another
speech coder at a later date.
Due to the T1 interface only supporting 24 64 kbit/s timeslots less DSP/TRAU
boards may be needed on the T1 board for the Abis interface at the BSC.
4. T1 INTERFACE
The interface between BTS and BSC (Abis interface) and between BSC and MSC (A
interface) shall be 1.544 Mbit/s T1 format. This shall be compliant with ITU T
G.703, ANSI T1.403-1995 and all other appropriate standards.
The interface shall be configurable to support standard super frame (SF) or
extended super frame (ESF) formats, and shall use B8ZS line coding for 64 kbit/s
clear channel capability. The line build out shall be automatically set based on
the level received from the transmission network.
All the ESF CSU/DSU functions shall be supported. This includes local and remote
loopbacks and all performance measurement statistics.
Synchronization to the T1 incoming signal needs consideration due to the
extensive use of SONET networks for delivery of T1 services which may cause
disruptions after pointer alignment changes.
5. A INTERFACE
The A interface signaling shall use ANSI based protocol stack (MTP and SCCP) for
connection of the BSC to a MSC.
Voice traffic on the A interface shall use mu-law encoding.
6. 3 DIGIT MNC
The PCS 1900 BSS shall support the use of both a 2 or 3 digit MNC.
19
<PAGE>
7. ENVIRONMENTAL
Full NEBS (GR 63) compliance will be required for any equipment that may be
placed in any of the AT+T or RBOC central office sites. Special attention should
be made to the burn, brush fire and seismic tests and lightning protection on T1
lines for all equipment and seismic tests for indoor equipment. The bullet
proofing is not required but any outdoor equipment should be tested to verify
what can be achieved.
Outdoor equipment shall meet TA-NWT-487 but for an operating ambient temperature
of -30 to +45 degC plus a solar load of 1120 W/sq.M..
All equipment shall also meet all national and other local standards in the
U.S. and Canada.
8. OMC-R
All workstations shall use the US country kit.
The OMC-R server shall use a T1 interface (as per section 4) to a MSC or BSC for
communication with the BSS.
The OMC-R shall provide full support of all the above functionality changes.
9. CRAFT
The craft interface shall provide full support of all the above changes.
10. QUALIFICATION
- FCC part 15, part 47 and part 68
- UL
- JTC, PN 3389
- Bellcore GR 63 NEBS, GR1089 and TA-NWT-487
- Health and safety
- CSA
- Environmental, EMC etc.
11. LABELING
The equipment shall comply with all national and local labeling requirements in
the U.S. and Canada.
12. WAIVERS
The following are areas of waivers that may be acceptable if the fully compliant
solution is overly complex, expensive or will take too long to develop.
- If the full band solution is overly complex or expensive to implement
it may be acceptable to change this so that two versions of the RF
distribution card in the Wavexpress exist creating a split band. The
target frequency coverage for the two version shall be:
High Band Uplink - 1864 to 1910 MHz Downlink- 1944 to 1990 MHz
Low Band: Uplink - 1850 to 1896 MHz Downlink- 1930 to 1976 MHz
- 2 TRX Wavexpress instead of 3 TRX?
20
<PAGE>
EXHIBIT B
TERRITORY AND ACCOUNTS
The following countries and accounts shall be specifically targeted by ADC and
lnterWave for a two year period (ending on September 30, 1999) under an
exclusive right to market and sell arrangement for the InterWave products which
are identified in Exhibit A.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ADC EXCLUSIVE INTERWAVE EXCLUSIVE
- ---------------------------------------------------- --------------------------------------------------------------
<S> <C>
China Asean (Thailand, Vietnam, Malaysia, Philippines,
United Kingdom Indonesia, Singapore)
France (except for France Telecom) Taiwan
Italy Hong Kong
Germany Myanmar
Spain India
Optus in Australia Pakistan
Australia (except Optus)
Saudi Arabia
Syria
Egypt
Algeria
Yemen
Jordan
France Telecom in France
</TABLE>
ADC will have for a period of 3 months starting October 1, 1997 to identify to
InterWave other areas of exclusivity for inclusion in this document. For all
other areas, ADC will have the non-exclusive rights to market the Product
worldwide subject to the terms and conditions set forth herein.
21
<PAGE>
AMENDMENT NO. 2 TO PURCHASE/RE-SALE AGREEMENT
This AMENDMENT NO. 2 TO PURCHASE/RESALE AGREEMENT (the
"Amendment") is made and entered into this ___ day of March, 1998, by and
between interWAVE Communications B.V., a company organized under the laws
of The Netherlands ("interWAVE"), and ADC Telecommunications, Inc., a Minnesota
corporation ("ADC").
RECITALS
A. The parties hereto are party to that certain Purchase/Resale Agreement dated
February 27, 1997, as amended by that certain Amendment # 1 dated October 14,
1997 (the "Amendment"), and as supplemented by that certain Frame Contract dated
October 14, 1997 (the "Frame Contract") (collectively referred to as the
"Agreement").
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants, representations, warranties, conditions and agreements herein
contained, the parties hereto hereby agree as follows:
1) MODIFY SECTION 5.2.4 OF AMENDMENT NO. 1 AS FOLLOWS:
Remove the phrase "Additionally, INTERWAVE shall obtain ADC's approval prior to
the consummation of any OEM relationship that INTERWAVE wishes to enter into
other than this Agreement; this approval shall not be unreasonably withheld."
And replace with "Additionally, INTERWAVE shall notify ADC prior to the
consummation of any OEM relationship that INTERWAVE wishes to enter into other
than this Agreement. This notice will be provided thirty (30) days in advance of
any public announcement of INTERWAVE entering into an OEM relationship"
2) Modify section 13.6 by adding the following:
"ADC will be allowed to badge the INTERWAVE products with ADC's logo in place
of the INTERWAVE logo. Should ADC elect to exercise this option, ADC will
notify INTERWAVE thirty (30) days prior to shipment of such product."
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
day and year first above written.
interWAVE Communications B.V. ADC Telecommunications, Inc.
By: /s/ By: /s/
--------------------------------- --------------------------------
Title: Chairman, CEO & President Title: Senior Vice President
------------------------------ -----------------------------
Date: 3/30/98 Date: 3/30/98
------------------------------ -----------------------------
<PAGE>
AMENDMENT NO. 3 TO PURCHASE/RESALE AGREEMENT
This AMENDMENT NO. 3 TO PURCHASE/RESALE AGREEMENT (the "Amendment") is
made and entered into this 4th day of September, 1998, by and between interWAVE
Communications B.V., a company organized under the laws of The Netherlands
("interWAVE"), and ADC Telecommunications, Inc., a Minnesota corporation
("ADC").
RECITALS
A. The parties hereto are party to that certain Purchase/Resale
Agreement dated February 27, 1997, as amended by that certain Amendment # 1
dated October 14, 1997 ("Amendment No. 1"), as supplemented by that certain
Frame Contract dated October 14, 1997 ("Frame Contract"), and amended by that
certain Amendment No. 2 dated March 30, 1998 ("Amendment No. 2") (collectively
referred to as the "Agreement").
B. The parties now desire to amend the Agreement to revise certain
terms and conditions thereof.
C. Unless specifically defined herein, all capitalized terms shall have
the meanings ascribed to them in the Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements herein contained, and for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:
1. AMENDMENT TO SECTION 1 (c). Section 1 (c) of the Agreement is hereby
deleted in its entirety and replaced with new Sections 1 (c), (d), (e), (f), (g)
and (h) as follows:
"(c) NATURE OF AGREEMENT. The Products delivered by INTERWAVE
that are covered by this Agreement include both hardware components (the
"Hardware") and computer software (the "Software"). Hardware and Software
hereinafter shall be referred to collectively as Products, although it is
understood ADC is not purchasing the Software, but instead is being granted the
right to use (and further sublicense the use of) the Software in accordance with
the terms and subject to the conditions set forth below. ADC shall not obtain
title to, or any proprietary rights in, such Software, except as expressly
provided below. ADC shall comply strictly with all restrictions on the use of
the Software licensed by INTERWAVE to ADC hereunder and shall require such
compliance by ADC's customers. It is hereby acknowledged and agreed that the
Software and features thereof constitute either the copyrighted property of
INTERWAVE or the proprietary trade secret information of INTERWAVE, or both.
-1-
<PAGE>
(d) GRANT OF LICENSE. INTERWAVE hereby grants to ADC, subject
to the performance by ADC of its obligations under this Agreement, a
non-exclusive, non-transferable world-wide license to:
(i) copy the Software onto Read Only Memory chips
("ROMs") or onto diskettes/CDs solely for the purposes of incorporating the
Software into Products, or for supplying such diskettes/CDs to ADC's resellers
or customers in conjunction with sales of Products; and
(ii) make such copies of the Software as are
reasonably necessary for the purpose of back-up and support.
(e) OBLIGATIONS OF INTERWAVE. As soon as practicable
hereafter, INTERWAVE shall deliver to ADC one master copy of the Software by
such means as INTERWAVE shall reasonably prescribe or as the parties shall
agree, so that ADC may copy the Software as permitted by the license granted
under Section 1 (d) above. At ADC's request, INTERWAVE shall provide ADC with
technical support and advice regarding integration of the Software into the
Products as agreed from time to time, at INTERWAVE's then-current rates and upon
INTERWAVE's then-current terms for providing the same.
(f) LIMITATIONS ON LICENSE.
(i) The Software is licensed for use only on Products
supplied by INTERWAVE, and ADC shall not remove any pre-loaded Software or
attempt to execute the Software on any hardware other than the Hardware
purchased by ADC hereunder, with the sole exception of the OMC Software, which
INTERWAVE acknowledges may be run on workstations procured directly from the
vendor so long as such Software and work-stations are run in the overall
INTERWAVE environment. Except as expressly authorized herein, ADC may not copy
the Software or the human-readable features thereof for any purpose without
INTERWAVE's prior written consent.
(ii) ADC shall not attempt to decompile,
reverse-engineer or otherwise disassemble the Software. Information necessary to
achieve interoperability of the Software with independently created computer
programs is available on written request to INTERWAVE and payment to INTERWAVE
of a reasonable fee.
(iii) In no event shall ADC license or deliver to any
customer or third person any source code for the Software, in whole or in part,
without the prior written consent of INTERWAVE. If a customer of ADC insists on
licensing the underlying source code for interoperability and/or maintenance
purposes, ADC shall notify INTERWAVE thereof, and INTERWAVE will consider in
good faith licensing the source code to the Software directly to such customer
on such terms and conditions as INTERWAVE deems appropriate.
(g) RIGHT TO SUBLICENSE. ADC may sublicense the Software to
any subsequent purchaser or ADC reseller of the Products in the Territory for
use solely in connection with the
-2-
<PAGE>
Products; provided that: (i) each ADC customer executes an End-User License
Agreement containing terms at least as protective of the licensor as those
contained in Exhibit F attached hereto (the "End-User License"), provided that
INTERWAVE acknowledges that ADC may add to and or modify the terms of the
End-User License so long as the foregoing requirement is met; and (ii) INTERWAVE
is given a copy of the End-User License entered into with each ADC customer
promptly following its execution or any subsequent amendment thereto.
(h) ADC'S OBLIGATIONS. During the term of this Agreement ADC
shall:
(i) use commercially reasonably efforts to enforce
against all resellers or customers that obtain the Products from ADC the
provisions of the End-User License that affect proprietary or confidentiality
rights of INTERWAVE or its licensors in the Products; and
(ii) inform INTERWAVE, immediately upon becoming
aware of the same, of any breach by resellers or end users of the terms of the
End-User License and take, at INTERWAVE's expense, such reasonable steps as
INTERWAVE shall request and otherwise assist INTERWAVE in enforcing the terms of
the End-User License, including, where appropriate, availing itself of actions
for seizure or injunctive relief. If ADC fails to take these steps in a timely
and adequate manner, INTERWAVE or its licensors may take them in its own or
ADC's name."
2. AMENDMENT TO EXHIBIT F. From and after the date hereof, Exhibit F to
the Agreement is hereby deleted in its entirety and replaced with a new Exhibit
F in the form attached hereto.
3. AMENDMENT TO SECTION 4.1. Section 4.1 is hereby deleted in its
entirety and replaced with the following:
"4.1 LIMITED WARRANTY. INTERWAVE hereby warrants to ADC that the
Software will perform in all material respects in accordance with the
then-current published documentation for a period of twelve (12) months from the
date of shipment to ADC's customer (hereinafter referred to as the "Warranty
Period"). During the Warranty Period, INTERWAVE shall take all reasonable steps
without charge to correct errors or defects in any Software and any corrections
for errors or defects shall be provided to ADC directly and/or incorporated in
subsequent updates to the Software from INTERWAVE. Such corrections may be used
and distributed by ADC as permitted by Section 1 of this Agreement. INTERWAVE
MAKES NO WARRANTS OR REPRESENTATIONS AS TO PERFORMANCE OF PRODUCTS OR AS TO
SERVICE TO ADC OR TO ANY OTHER PERSON, EXCEPT AS SET FORTH IN THIS SECTION 4.1
AND IN INTERWAVE'S LIMITED WARRANTY ATTACHED HERETO AS EXHIBIT E. INTERWAVE MAY
PROVIDE A DIFFERENT WARRANTY ON NEW PRODUCTS OR SERVICES ADDED TO APPENDIX A."
4. NEW SECTION 4.2. A new Section 4.2 is hereby added to the Agreement
as follows:
-3-
<PAGE>
"4.2 NO CONSEQUENTIAL DAMAGES. UNDER NO CIRCUMSTANCES SHALL INTERWAVE
OR ITS AFFILIATES BE LIABLE FOR ANY CONSEQUENTIAL, INDIRECT, SPECIAL, PUNITIVE,
OR INCIDENTAL DAMAGES, WHETHER FORESEEABLE OR UNFORESEEABLE, BASED ON CLAIMS OF
ADC OR ITS CUSTOMERS (INCLUDING, BUT NOT LIMITED TO, CLAIMS FOR LOSS OF DATA,
GOODWILL, PROFITS, USE OF MONEY OR USE OF THE PRODUCTS, INTERRUPTION IN USE OR A
VAILABILITY OF DATA, STOPPAGE OF OTHER WORK OR IMPAIRMENT OF OTHER ASSETS),
ARISING OUT OF BREACH OR FAILURE OF EXPRESS OR IMPLIED WARRANTY, BREACH OF
CONTRACT, MISREPRESENTATION, NEGLIGENCE, STRICT LIABILITY IN TORT OR OTHERWISE,
EXCEPT ONLY IN THE CASE OF DEATH OR PERSONAL INJURY WHERE AND TO THE EXTENT THAT
APPLICABLE LAW REQUIRES SUCH LIABILITY. IN NO EVENT SHALL THE AGGREGATE
LIABILITY WHICH INTERWAVE AND ITS AFFILIATES MAY INCUR IN ANY ACTION OR
PROCEEDING EXCEED THE TOTAL AMOUNT ACTUALLY PAID TO INTERWAVE BY ADC FOR THE
SPECIFIC PRODUCT THAT DIRECTLY CAUSED THE DAMAGE."
5. DELETION OF SECTION 5.1.8. Section 5.1.8 is hereby deleted in its
entirety.
6. DELETION OF SECTION 12.3. Section 12.3 is hereby deleted in its
entirety.
7. Amendment of Section 18.1. Section 18.1 of the Agreement is hereby
deleted in its entirety and replaced with a new Section 18.1 as follows:
"This Agreement may not be assigned or transferred by either party
without the other party's written consent, which consent must be executed by an
authorized official of such party."
8. AMENDMENT TO SECTION 25. The first sentence of Section 25 of the
Agreement is hereby deleted in its entirety and replaced with the following
sentence:
"This Agreement together with Exhibits "A" (including Appendix
A, B and D thereof), "B" (as amended by Amendment No. 2), "C," "D," "E," "F,"
"G," "H," "I," and "J" and any addendum thereto, as amended by Amendment No. 1,
Amendment No. 2 and Amendment No. 3, and as supplemented by the Frame Contract,
supersedes and cancels any previous understanding or Agreements between the
parties relating to the subject matter hereof."
9. CONTINUED EFFECT OF AGREEMENT. All provisions of the Agreement,
except as expressly modified by this Amendment, shall remain in full force and
effect and are hereby reaffirmed by the parties. In the event of any conflict
between the Agreement and this Amendment, the provisions of this Amendment shall
govern and control.
10. ENTIRE AGREEMENTS, AMENDMENTS. This Amendment and the Agreement
contain the entire understanding of the parties with regard to the subject
matter contained herein or therein and supersede all prior agreements or
understanding between or among any of the
-4-
<PAGE>
Partners with respect thereto. This Amendment shall not be amended, modified or
supplemented except by a written instrument signed by an authorized
representative of each of the parties hereto.
11. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of California.
12. EXECUTION IN COUNTERPARTS. This Amendment may be executed in one or
more counterparts, each of which shall be considered an original instrument, but
all of which shall be considered one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
interWAVE Communications B.V. ADC Telecommunications, Inc.
By: By: /s/ John Baker
-------------------------------- --------------------------------
Name: Name: John Baker
------------------------------ ------------------------------
Title: Title: Sr. Vice President
----------------------------- -----------------------------
-5-
<PAGE>
EXHIBIT "F"
MANDATORY TERMS OF END-USER LICENSE AGREEMENT
ADC hereby grants to Customer, and Customer hereby accepts from ADC, an
indefinite, non-exclusive and non-transferable right to use the software
described in Section 1 below (the "Software") on the hardware described in
Section 2 below (the "Hardware"), subject to the terms and conditions specified
below (the "License").
1. SOFTWARE
"Software" means (i) the machine-readable object code version of the computer
programs described in the Product Schedule, whether embedded on disc, tape or
other media (the "Programs"); (ii) the user manuals and documentation for the
Programs that are provided to the Customer (the "Documentation"); (iii) the
fixes, customizations or revisions of the Programs or Documentation that are
provided to Customer (the "Enhancements"); and (iv) any copy of the Programs,
Documentation or Enhancements. Nothing in this License shall entitle Customer to
receive the source code of the Programs or Enhancements, in whole or in part.
2. HARDWARE
"Hardware" means the hardware equipment configuration identified in the
Product Schedule on which the Software is first installed or for which it is
first provided. Customer may use the Programs and Enhancements only on the
Hardware while it possesses and operates the Hardware. Any other use or
transfer of the Programs or Enhancements requires ADC's prior approval, which
may be subject to additional charges.
3. USE
Customer may use the Software only in and for Customer's own internal purposes
and business operations. Customer shall not permit any other person to use the
Software, whether on a timesharing, remote entry or other multiple user
arrangement. Customer may not copy any of the Documentation except for internal
use. Customer may copy the Programs and Enhancements solely for archival and
back-up purposes. Customer shall reproduce all confidentiality and proprietary
notices on each of these copies and maintain an accurate record of the location
of each copy the Programs or Enhancements. Customer may not otherwise copy,
translate, modify, adapt, decompile, disassemble or reverse engineer the
Software, except as and to the extent specifically permitted under applicable
law.
4. CONFIDENTIALITY
Customer acknowledges that the Software embodies confidential and proprietary
information developed or acquired by or licensed to interWAVE Communications
International, B.V., a company organized under the laws of The Netherlands
("interWAVE"). Customer shall take all reasonable precautions necessary to
safeguard the confidentiality of the Software, including (i)
-6-
<PAGE>
those taken by Customer to protect Customer's own confidential information and
(ii) those which ADC may reasonably request from time to time. Customer shall
not allow the removal or defacement of any confidentiality or proprietary notice
placed on the Software. If an unauthorized use or disclosure occurs, Customer
shall immediately notify ADC and take, at Customer's expense, all steps which
may be available to recover the Software and to prevent their subsequent
unauthorized use or dissemination. Customer shall have no confidentiality
obligation with respect to any portion of the Software that (i) Customer
independently developed before receiving the Software from ADC, (ii) Customer
lawfully obtained from a third party under no confidentiality obligation or
(iii) became available to the public other than as a result of an act or
omission by Customer or any of its employees or consultants.
5. OWNERSHIP
All patents, copyrights, trademarks, service marks, trade secrets and other
proprietary rights in or related to the Software are and shall remain the
exclusive property of ADC or its licensors, whether or not specifically
recognized or perfected under local applicable law. Customer shall not take any
action that jeopardizes ADC's or its licensors' proprietary rights or acquire
any right in the Software, except the limited use rights specified in this
License. ADC or its licensors shall own all rights in any copy, translation,
modification or adaptation of, or derivative work based on, the Software.
Customer shall obtain, at ADC's request, the execution of any instrument that
may be appropriate to assign these rights to ADC or its licensors or perfect
these rights in ADC's or its licensor's name.
6. INFRINGEMENT
If an action is brought against Customer claiming that the Software supplied by
ADC infringes a patent, copyright, trade secret or trade mark within the country
of installation (the "Territory"), ADC shall defend Customer, but only if: (i)
Customer notifies ADC promptly upon learning that the claim might be asserted;
(ii) ADC has sole control over the defense of the claim and any negotiation for
its settlement or compromise; and (iii) Customer takes no action that, in ADC's
reasonable judgment, is contrary to ADC's interest. If a claim described in this
Section may be or has been asserted, Customer shall permit ADC or its licensors,
at ADC's option, to: (i) procure the right to continue using the Software; (ii)
replace or modify the Software to eliminate the infringement while providing
functionally equivalent performance; or (iii) accept the return of the Software
and refund to Customer the amount actually paid to ADC for such Software, less
depreciation based on a 5-year straight-line depreciation schedule. ADC shall
have no indemnity obligation to Customer under this Section if the infringement
claim results from: (i) a correction or modification of the Software not
provided by ADC; (ii) the failure to promptly install an Enhancement; or (iii)
the combination of the Software with other items not provided by ADC.
7. DISCLAIMER
Customer acknowledges that the warranties, conditions, guarantees or
representations granted with respect to the Software, if any, are or shall be
binding only on ADC. EXCEPT AS EXPRESSLY PROVIDED HEREIN, NEITHER ADC NOR ITS
LICENSORS GRANT
-7-
<PAGE>
CUSTOMER ANY WARRANTY, GUARANTEE, CONDITION OR REPRESENTATION WITH RESPECT TO
THE SOFTWARE, AND ADC AND ITS LICENSORS DISCLAIM ALL IMPLIED WARRANTIES,
INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR PARTICULAR PURPOSE. Any claim for breach of warranty, guarantee,
condition or representation, whether express or implied, may be brought solely
against ADC, except only as and to the extent otherwise specifically permitted
under applicable law, despite the foregoing disclaimer.
8. EXCLUSION AND LIMITATION
UNDER NO CIRCUMSTANCES SHALL ADC OR ITS LICENSORS BE LIABLE FOR ANY
CONSEQUENTIAL, INDIRECT, SPECIAL, PUNITIVE OR INCIDENTAL DAMAGES OR LOST
PROFITS, WHETHER FORESEEABLE OR UNFORESEEABLE, BASED ON CUSTOMER'S CLAIMS OR
THOSE OF ITS CUSTOMERS (INCLUDING, BUT NOT LIMITED TO, CLAIMS FOR LOSS OF DATA,
GOODWILL, USE OF MONEY OR USE OF THE PRODUCTS, INTERRUPTION IN USE OR
AVAILABILITY OF DATA, STOPPAGE OF OTHER WORK OR IMPAIRMENT OF OTHER ASSETS),
ARISING OUT OF BREACH OR FAILURE OF EXPRESS OR IMPLIED WARRANTY, BREACH OF
CONTRACT, MISREPRESENTATION, NEGLIGENCE, STRICT LIABILITY IN TORT OR OTHERWISE.
IN NO EVENT SHALL THE AGGREGATE LIABILITY WHICH ADC OR ITS LICENSORS MAY INCUR
IN ANY ACTION OR PROCEEDING EXCEED THE TOTAL AMOUNT ACTUALLY PAID BY CUSTOMER
FOR THE SPECIFIC ITEM THAT DIRECTLY CAUSED THE DAMAGE. THIS SECTION SHALL NOT
APPLY ONLY WHEN AND TO THE EXTENT THAT APPLICABLE LAW SPECIFICALLY REQUIRES
LIABILITY, DESPITE THE FOREGOING EXCLUSION AND LIMITATION.
9. TERMINATION
ADC may terminate this License, upon reasonable notice and without judicial or
administrative resolution, if (i) Customer or any of its employees or
consultants breach any term or condition hereof, (ii) Customer permanently
discontinues the use of the Software, or (iii) Customer becomes insolvent or
enters into bankruptcy, suspension of payments, moratorium, reorganization or
any other proceeding that relates to insolvency or protection of creditors'
rights. Upon the termination of this License for any reason, all rights granted
to Customer hereunder shall cease, and Customer shall promptly: (i) purge the
Programs and Enhancements from the Hardware and all of Customer's other computer
systems, storage media and other files; (ii) destroy the Software and all copies
thereof; and (iii) deliver to ADC an affidavit which certifies that Customer
have complied with these termination obligations. The provisions of Sections 4,
5, 7, 8 and 10 shall survive the termination of this License.
10. U.S. EXPORT RESTRICTIONS
Customer acknowledges that the Software and all related technical data are
subject to export controls under the U.S. Export Administration Regulations.
Customer may not re-export or disclose the Software or any related technical
data, or any direct product thereof, unless
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<PAGE>
Customer has obtained an appropriate authorization from ADC, its licensors and
the U.S. Commerce Department.
11. INSPECTION
During the term of this License, ADC or its designees may, upon prior notice to
Customer, inspect the files, computer processors, equipment and facilities of
Customer during normal working hours to verify Customer's compliance with this
License. While conducting such inspection, ADC or its designees shall be
entitled to copy any item that Customer may possess in violation of this
License.
12. BENEFICIARIES
The provisions of this License are intended to inure to the benefit of ADC, its
licensors and their related persons. If Customer breaches any of these
provisions, ADC and its licensors shall be entitled to enforce this License
directly against Customer, whether in ADC's or its licensors' own names.
Customer acknowledges that ADC executes the document setting forth this License
as principal on its own behalf and, exclusively to accept or otherwise perfect
its licensors' rights against Customer, as agent on behalf of such licensors.
13. ASSIGNMENT
Customer shall not assign, delegate or otherwise transfer this License or any of
its rights or obligations hereunder, in whole or in part, without ADC's prior
approval. ADC may in its sole discretion assign, delegate or otherwise transfer
this License or an of its rights or obligations hereunder, in whole or in part,
without Customer's prior approval.
14. DISPUTE RESOLUTION
Either party may, without inconsistency with this Agreement, seek from a court
of competent jurisdiction any interim or provisional relief that may be
necessary to protect the rights or property of that party, pending the
establishment of the arbitral tribunal or pending the arbitral tribunal's
determination of the merits of the controversy.
15. MISCELLANEOUS
Any waiver or modification of this License shall not be effective unless
executed in writing and signed by ADC. This License shall bind Customer's
successors-in-interest. If any provision of this License is held to be
unenforceable, in whole or in part, such holding shall not affect the validity
of the other provisions of this License, unless ADC in good faith deems the
unenforceable provision to be essential, in which case ADC may terminate this
License effective immediately upon notice to Customer. No failure or delay on
the part of ADC to exercise any right or remedy specified herein shall be
construed as a waiver of such right or remedy. This License constitutes the
complete and entire statement of all conditions and representations with respect
to its subject matter and supersedes all prior writings or understandings.
-9-
<PAGE>
EXHIBIT 10.8
<PAGE>
ASSIGNMENT AGREEMENT AND CONSENT TO ASSIGNMENT
THIS ASSIGNMENT AGREEMENT AND CONSENT TO ASSIGNMENT, effective as of
the Effective Date (as defined herein), is by and among ADC Telecommunications,
Inc., a Minnesota corporation with its principal place of business at 12501
Whitewater Drive, Minnetonka, MN 55345 ("ADC"), INTERWAVE Communications B.V., a
company incorporated in the Netherlands with offices at Emmeplein 5, 1075 AW
Amsterdam, The Netherlands ("INTERWAVE") and MicroCellular Systems, Ltd., a UK
corporation with its principal place of business at Centenial Court, No. Wing,
First Floor, Suite G, Easthampstead Road, Bracknell, Berkshire, England RG12 1YQ
("MicroCellular").
ADC, for itself and for all its predecessors, successors, assigns and
beneficiaries, does hereby sell, transfer, convey, assign and deliver unto
MicroCellular, MicroCellular's successors and assigns, all of ADC's rights,
liabilities, responsibilities, obligations, benefits and interests in, under and
to that certain Purchase/Resale Agreement between ADC and INTERWAVE dated
February 27, 1997, including all amendments and modifications, except Exhibit B
(collectively, the "Contract"). ADC and MicroCellular acknowledge and agree that
Exhibit B, granting certain exclusive sales territories, is specifically
excluded from this assignment and MicroCellular shall have no right to exercise
or enforce the provisions contained therein. The sale, transfer, conveyance,
assignment and delivery of the Contract by ADC to MicroCellular shall be
effective when, and not until, INTERWAVE has consented to same in writing below.
MicroCellular hereby assumes and agrees to promptly perform, pay and
discharge in full, without recourse, the Contract; provided, however, that such
assumption and agreement by MicroCellular shall be effective when, and not
until, INTERWAVE has consented to same in writing below. MicroCellular agrees to
defend, indemnify and hold harmless ADC, its directors. officers, subcontractors
and employees against any and all claims, actions, damages, liabilities or
expenses, including reasonable attorney's fees and other legal costs, caused by
the negligent or willful acts or omissions of, or breach of this Assignment
Agreement, by MicroCellular, or its employees or subcontractors.
The above is agreed to and accepted this 13 day of May , 1999
(the "Effective Date").
INTERWAVE COMMUNICATIONS, B.V
By: /s/
--------------------------
Its:
--------------------------
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INTERWAVE having consented to the transactions described above, ADC and
MicroCellular have caused this Agreement to be duly executed effective as of the
Effective Date.
ADC TELECOMMUNICATIONS, INC. MICROCELLULAR SYSTEMS, LTD.
By: /s/ By: /s/
------------------------ ------------------------
Its: Vice President Its: Managing Director
------------------------ ------------------------
<PAGE>
EXHIBIT 10.9
<PAGE>
FINAL: 9/4/98
PRODUCT DEVELOPMENT SERVICES AGREEMENT
This PRODUCT DEVELOPMENT AND SERVICES AGREEMENT ("AGREEMENT") is made
effective as of Sept. 4, 1998, by and between interWAVE Communications
International Limited, a company organized under the laws of Bermuda
(INTERWAVE"), and ADC Telecommunications, Inc., a Minnesota corporation ("ADC").
RECITALS
A. interWAVE and ADC are parties to that certain Purchase/Resale
Agreement dated effective as of February 27, 1997, as amended by that certain
Amendment #1 dated October 14, 1997 ("Amendment No. 1"), as supplemented by that
certain Frame Contract dated October 14, 1997 ("Frame Contract"), and amended by
that certain Amendment No. 2 dated March 30, 1998 ("Amendment No. 2")
(collectively referred to as the "PURCHASE/RESALE AGREEMENT") under which ADC is
a reseller of interWAVE products.
B. interWAVE desires to obtain the services of ADC to assist in
developing the PCS 1900 version of the BSC Software and BTS Radio Subsystems
(the "GSM 1900 PRODUCT"), according to the Market Requirements Document attached
hereto as EXHIBIT A (the "REQUIREMENTS"), as well as certain other systems test
and documentation services (collectively, the "SERVICES," as defined in more
detail below), and ADC is willing to provide the Services, subject to the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, representations and warranties contained in this Agreement, interWAVE
and ADC agree as follows:
1. APPOINTMENT & SERVICES
(a) APPOINTMENT AND ACCEPTANCE.
InterWAVE hereby retains ADC to provide the development and
other services set forth below (individually and collectively, the
"SERVICES"), and ADC hereby accepts such appointment on the terms and
conditions contained herein.
(b) DEVELOPMENT OF THE GSM 1900 PRODUCT.
ADC will use all commercially reasonable efforts to develop
the Production Release of the GSM 1900 Product ("COMPLETION") for
worldwide commercialization in accordance with the Requirements and the
stages of development activities and timelines set forth on the
attached EXHIBIT B (the "DEVELOPMENT PROGRAM"). Exhibit B is intended
only as a general description of the parties' expectations with respect
to the
<PAGE>
goals and estimated development costs and timelines with respect to the
GSM 1900 Product, and the specific details of the Development Program,
including the Requirements, may be modified by written agreement of the
parties, which modifications shall be made in good faith to accurately
reflect the actual costs and timeframe for development of the GSM 1900
Product.
(c) SYSTEMS TESTING.
Upon request by interWAVE, ADC shall perform systems
integration level testing in respect of certain interWAVE products.
(d) PRODUCT DOCUMENTATION.
Upon request by interWAVE, ADC shall assist interWAVE in the
preparation of certain product guides, end-user application guides and
other product documentation in respect of certain interWAVE products.
(e) EXPENSES; COOPERATION.
ADC, at its sole cost and expense, will furnish the supplies
and research, engineering and other personnel reasonably necessary to
perform such Services, including in connection with the development of
the GSM 1900 Product for commercialization, interWAVE will fully
cooperate with ADC, at interWAVE's sole expense, in developing the GSM
1900 Product, including, without limitation, providing the necessary
technical and administrative personnel reasonably requested by ADC to
assist in the development efforts and to permit ADC personnel to
utilize interWAVE facilities to the extent reasonably necessary for the
development of the GSM 1900 Product for commercialization.
(f) STANDARD OF CARE.
In performing the Services hereunder, ADC hereby warrants to
interWAVE that it will perform all Services in a professional and
timely manner and substantially in accordance with the standards and
practices of care, skill and diligence customarily observed by similar
companies under similar circumstances at the time they are rendered.
(g) COMPENSATION.
As compensation for ADC's performing the Services hereunder,
interWAVE shall pay to ADC a development fee comprised of the
components set forth below.
(1) In consideration for the performance by ADC of development
Services relating to the GSM 1900 Product, ADC shall be entitled to
receive a development fee equal to $100 per hour; provided, however,
that the aggregate cost of the Services
<PAGE>
provided in connection with the development of the GSM 1900 Product
through and including February 1999 shall not exceed, in the aggregate,
$1,785,100 (including any costs already incurred to date). [After the
initial term of this Agreement, such rates may be increased on [ninety
(90)] days written notice by an amount not to exceed (i) the percentage
increase in the Consumers Price Index - All Urban Markets, for the
relevant period, or (ii) [five percent (5%)], whichever is greater.]
(2) In consideration for the performance by ADC of systems
integration level testing Services, interWAVE shall pay to ADC a
service fee of $100 per hour.
(3) In consideration for the performance by ADC of product
documentation Services, interWAVE shall pay to ADC a documentation fee
of $65 per hour.
Attached hereto as EXHIBIT C is a schedule showing all costs incurred
for Services already performed, as well as all projected costs of
Services to be performed through Completion.
(h) INVOICES; PAYMENT.
(1) ADC shall invoice interWAVE for all Services performed on
a quarterly basis. Such invoices shall include such documentation
reasonably required to substantiate the fees and expenses so invoiced.
Except as set forth in Section 1(i) below, all invoices shall be
payable within [thirty (30)] calendar days of the invoice date. All
amounts not paid by interWAVE within the payment period shall bear an
additional charge of [one and one-half percent (1.5%)] per month until
paid.]
(2) The parties hereby acknowledge and agree that through and
including July 31, 1998, ADC has already performed Services having a
value of [$1,089,900], [$755,500] of which relate to the development of
the GSM 1900 Product, [$290,200] of which relate to systems integration
level testing services, and [$44,200] of which relate to product
documentation services, all as reflected in EXHIBIT C.
(i) EQUITY IN LIEU OF CASH.
In lieu of paying cash for ADC's Services, interWAVE may, in
its sole discretion, elect to make payment to ADC in the form of the
issuance of shares of interWAVE's [Preferred Convertible Stock] (the
"Shares") at a valuation of [$7.00] per share.. The valuation of the
Shares to be issued to ADC may be adjusted on a quarterly basis, upon
the mutual agreement of ADC and interWAVE. [At the time that any
invoice is due hereunder, interWAVE may provide ADC with written notice
of its election to convert all or part of such invoice into Shares.
Each year [on June 30 and December 31] interWAVE shall issue to ADC
such number of Shares having a value equal to the aggregate amount of
any invoices so convened.] Concurrent with each such issuance, ADC
agrees to execute and deliver to interWAVE any documentation that
interWAVE reasonably requests in connection therewith, including
interWAVE's
<PAGE>
standard investment letter. [ADC shall also be entitled to
registration rights in respect of any Shares issued as described in
EXHIBIT D hereto.]
(j) DISCLAIMER OF WARRANTIES.
EXCEPT AS SET FORTH IN SECTIONS 1(B) and 1(F), THE GSM 1900
PRODUCT AND ALL OTHER MATERIALS AND INFORMATION DELIVERED TO INTERWAVE
AS A RESULT OF THIS AGREEMENT OR ADC's SERVICES PROVIDED HEREUNDER ARE
PROVIDED "AS IS," WITH NO WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, THE WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT, AS WELL AS ANY
WARRANTIES ALLEGED TO HAVE ARISEN FROM CUSTOM, USAGE OR PAST DEALINGS
BETWEEN THE PARTIES. Without limiting the generality of the foregoing,
ADC does not guarantee the design, performance, compatibility or use of
the GSM 1900 Product.
2. GRANT OF DISTRIBUTION RIGHTS
(a) GRANT OF DISTRIBUTION RIGHTS IN ACCORDANCE WITH THE PURCHASE/
RESALE AGREEMENT.
Upon completion of the development of the GSM 1900 Product,
the parties shall amend the Purchase/Resale Agreement to include the
GSM 1900 Product as a "Product" for all purposes therein and in
accordance with the terms and subject to the conditions contained
therein; provided, however, that ADC's right to resell the GSM 1900
Product shall be on a non-exclusive basis throughout the world. In
connection therewith, upon completion of the development of the GSM
1900 Product, the parties shall agree in good faith upon the price for
the GSM 1900 Product and shall amend Schedule 2.1.1. of the
Purchase/Resale Agreement accordingly.
3. OWNERSHIP OF INTELLECTUAL PROPERTY RIGHTS
(a) OWNERSHIP OF INTELLECTUAL PROPERTY RIGHTS ACQUIRED PRIOR TO
THIS AGREEMENT.
Each party acknowledges that, unless specifically otherwise
set forth in this Agreement, the other party will continue to have the
exclusive rights to all Intellectual Property Rights (as hereinafter
defined) that such party owned prior to the execution of this
Agreement. "INTELLECTUAL PROPERTY RIGHTS" means all proprietary rights
and information, including, without limitation, all patents, patent
applications, divisions, continuations and continuations-in-part,
ideas, conceptions and inventions (whether or not patentable, reduced
to practice or made the subject of a pending patent application),
copyrights, copyrighted or copyrightable works and trademarks (whether
or not registered), drawings, designs, mask works or registrations
thereof, semi-conductor topography rights, know-how, trade secrets,
manufacturing and production processes
<PAGE>
and techniques, research and development information and other
confidential technical information, as well as all rights in and to
computer programs, data files and software.
(b) INTERWAVE INTELLECTUAL PROPERTY RIGHTS.
The parties acknowledge and agree that all work-product
derived from the Services performed by ADC hereunder (the "WORK
PRODUCT"), including, without limitation, the GSM 1900 Product, the
systems integration level test results and all product guides, end-user
application guides and other product documentation prepared by ADC,
shall be considered to be a "work made for hire" and that such
work-product and the Intellectual Property Rights embodied therein are
and shall become the sole and exclusive property of interWAVE. If and
to the extent that interWAVE does not originally acquire full legal
ownership to the Work Product, ADC shall and hereby does assign to
interWAVE ADC's entire right, title and interest therein. ADC shall
not, and it shall cause its affiliates not to, seek any copyright,
patent, or other protection for the Work Product, and interWAVE shall
have the sole right to seek copyright, patent and other protection for
such Work Product. At interWAVE's reasonable request and expense, ADC
shall take, and shall cause its affiliates to take, all actions
requested by interWAVE in order to protect and perfect its rights in
and to the Work Product in the United States and throughout the world.
4. CONFIDENTIALITY
(a) CONFIDENTIALITY AND USE OF SUPPLIED INFORMATION.
All proprietary information, data, know-how, designs,
drawings, specifications, test and research results, market studies,
price or cost information, supplier or customer lists, regulatory files
to the extent they are not public information by law and other similar
materials (collectively, "CONFIDENTIAL INFORMATION") supplied to one
party (the "RECIPIENT") by the other party (the "DELIVERER") in
connection with this Agreement (whether before or after the date
hereof) will be treated as trade secrets and held in confidence. The
Recipient will use Confidential Information of the Deliverer only in a
manner consistent with this Agreement and may not (i) disclose any
Confidential Information that relates to trade secrets, know-how,
designs, drawings, specifications or other technology-based information
received from the Deliverer to any third party during the term of this
Agreement or for a period of seven (7) years from the date of
disclosure, whichever is longer, without the written permission of the
Deliverer; or (ii) disclose any Confidential Information that is
financial in nature or other nontechnical Confidential Information
received from the Deliverer to any third party during the term of this
Agreement or a period of two (2) years from the date of disclosure,
whichever is longer, without the written permission of the Deliverer.
<PAGE>
(b) COMMUNICATION OF CONFIDENTIAL INFORMATION.
Confidential Information may be communicated orally, visually,
in writing or in any other recorded or tangible form. Data and
information shall be considered to be Confidential Information (i) if
Disclosing Party, orally or in writing, has advised Recipient of their
confidential nature; (ii) if, due to their character or nature, a
reasonable person in a like position and under like circumstances as
Recipient would treat them as confidential; or (iii) if Disclosing
Party has marked them as such; provided, however, that failure to mark
any of the Confidential Information as confidential shall not affect
its status as part of the Confidential Information under the terms and
conditions of this Agreement.
(c) LIMITATIONS ON RESTRICTIONS.
Confidential Information will not include information which:
(1) was already lawfully in the possession of the Recipient
through independent means at the time of disclosure thereof;
(2) is or later becomes part of the public domain through no
fault of the Recipient;
(3) is lawfully received from a third party having no
obligations of confidentiality to the Deliverer;
(4) is independently developed by the Recipient or its agents
or employees who did not receive or have access to the Confidential
Information;
(5) is required to be disclosed by order of a governmental
agency or by a court of competent jurisdiction; provided, the Recipient
contemplating such a disclosure will give reasonable notice thereof to
the Deliverer and will render such cooperation (at the Deliverer's
expense) as is reasonably requested to limit or mitigate such
disclosure of the Deliverer's Confidential Information; or
(6) is required to be disclosed to a regulatory authority for
the purpose of obtaining necessary approvals, consents or licenses for
the GSM 1900 Product;
provided that in each of the foregoing exceptions the burden of proof
that any information does not constitute Confidential Information shall
be on the Recipient.
(d) CONFIDENTIALITY OF AGREEMENT.
Subject to Section 4(c) above, the terms of this Agreement
will be kept confidential and not disclosed to any third party without
the prior written consent of the
<PAGE>
other party; provided, however, that each party hereby consents to the
other party's disclosure of such information:
(1) on a confidential basis to the disclosing party's
professional advisors;
(2) any proceeding brought by one of the parties hereto
against the other party for the enforcement of this Agreement or
seeking remedy for the breach or violation of this Agreement; or
(3) such disclosures as the disclosing party reasonably deems
necessary in order for such party to comply with applicable laws or
regulations or the rules of any stock exchange or trading system on
which such parties' stock is listed or regularly traded.
(e) NON-SOLICITATION OF EMPLOYEES.
Each of interWAVE and ADC, on behalf of itself and its
Affiliates, agrees not to employ or engage any employee of the other
which was involved on the Development Project during the term hereof
and for one (1) year from Completion without obtaining the prior
written approval of the other party.
(f) PRESS RELEASES.
No press release or other written or oral statement to the
public in connection with or alluding to work performed under this
Agreement or the relationship between the parties which has any direct
or indirect reference to interWAVE or ADC will be made by either party
unless the party intending to make such press release or statement
first provides the other party an opportunity to review and comment on
such press release or statement. After such a press release or other
public statement has been made, the substantive contents of such press
release or other public statement may be repeated by either party in
subsequent press releases or public statements.
(g) SPECIFIC PERFORMANCE.
Each of interWAVE and ADC acknowledges and agrees that money
damages may not be an adequate remedy for any material breach of this
Section 4 by a party. Accordingly, in such event the non-breaching
party will be entitled to the remedies of specific performance and/or
injunctive relief to enforce or prevent any violations of any of the
provisions of this Section 4 from any court of law or equity of
competent jurisdiction. Such remedies will be in addition to and not
exclusive of any other remedies available to the non-breaching party
under the terms of this Agreement at law or in equity.
<PAGE>
5. TERM AND TERMINATION
(a) TERM.
The term of this Agreement as it relates to the development of
the GSM 1900 Product shall commence on the date hereof and, unless
modified by mutual agreement by the parties or terminated pursuant to
the terms of this Section 5, will continue until Completion.
(b) TERMINATION OF DEVELOPMENT PROGRAM FOR FAILURE TO COMPLETE.
In the event that GSM 1900 Product is not fully developed
within 5 months of the date hereof, then the parties shall meet and
discuss in good faith further necessary revision to the Development
Program. If the parties are unable to agree on the required
modifications to the goals and estimated development costs and
timelines with respect to the GSM 1900 Product, then either party may,
by providing the other party with thirty (30) days advance written
notice, terminate the Development Program.
(c) TERMINATION WITHOUT CAUSE/CANCELLATION OF SERVICES.
THE ABOVE NOTWITHSTANDING, EITHER PARTY MAY TERMINATE THIS
AGREEMENT OR CANCEL A SPECIFIC SERVICE AT ANY TIME AND FOR ANY REASON,
WITH OR WITHOUT CAUSE, UPON THE GIVING OF [NINETY (90)] DAYS ADVANCE
WRITTEN NOTICE TO THE OTHER PARTY. If one or more specific Service(s)
are canceled, ADC shall no longer be obligated to perform such
Service(s) and interWAVE shall no longer be obligated to pay ADC the
fee attributable to such canceled Service(s) from and after the
effective date of such cancellation, but shall remain obligated to pay
for all Services performed prior to such date.
(d) TERMINATION OF DEVELOPMENT PROGRAM FOR MATERIAL BREACH.
Either party may terminate the Development Program, in whole
or in part, immediately by written notice to the other party on the
occurrence of any of the following events:
(1) any material breach or default by the other party,
provided that the non-breaching party shall have notified the breaching
party in writing specifying the nature of the breach or default and
within sixty (60) days after the breaching party's receipt of such
notice, such breach or default has not been remedied or the parties
have not agreed to a plan for curing the breach or default; or
(2) if the other party is adjudicated a bankrupt, becomes
insolvent, admits in writing its insolvency or inability to pay its
debts or perform its obligations as they mature, or has a receiver of
its assets or property appointed because of insolvency,
<PAGE>
makes a general assignment for the benefit of creditors, institutes
any proceeding for the reorganization of its affairs, or if any such
proceeding is instituted against such other party and not dismissed
with prejudice within sixty (60) days.
(e) RETURN OF MATERIALS UPON TERMINATION.
Upon termination of this Agreement for any reason, ADC shall
furnish to interWAVE all completed deliverables, work in process,
incomplete work and other material embodying such work performed in
connection with the provision of the Services under this Agreement.
(f) SURVIVAL OF CERTAIN RIGHTS AND OBLIGATIONS.
On termination or expiration of this Agreement, each party
shall immediately return to the other party all Confidential
Information of the other party in its possession, and interWAVE shall
fulfill its obligation to provide payment to ADC pursuant to Section
1(c) above for all costs incurred by ADC up to and including the date
of termination. In addition, notwithstanding anything in this Agreement
to the contrary, Sections 1(g), 1(h), 1(i), 1(j), 2, 3, 4, 6, 7 and 8
shall survive termination of this Agreement, however caused, and shall
continue thereafter in full force and effect
6. REPRESENTATIONS AND WARRANTIES
(a) REPRESENTATIONS AND WARRANTIES OF ADC.
ADC hereby represents and warrants to interWAVE that as of the
date hereof:
(1) ADC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Minnesota, and has the
requisite corporate power and authority to perform its obligations
under this Agreement.
(2) Neither the execution or delivery of, nor the performance
of or compliance with, this Agreement, nor the consummation of the
transactions contemplated hereby will, with or without the giving of
notice or passage of time, result in any breach of, or constitute a
default under, or result in the imposition of any lien or encumbrance
upon any asset or property of ADC pursuant to any agreement or other
instrument to which ADC is a party or by which it or any of its
properties, assets or rights is bound or affected. ADC is not subject
to any restrictions which would prohibit it from entering into or
performing its obligations under this Agreement.
(3) This Agreement has been duly authorized by all necessary
corporate action on behalf of ADC, has been duly executed and delivered
by authorized officers of ADC, and is a valid and binding agreement on
the part of ADC that is enforceable against ADC in accordance with its
terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization or other similar law
<PAGE>
affecting the enforcement of creditors rights generally and to judicial
limitations on the enforcement of the remedy of specific performance
and other equitable remedies.
(4) No representation or warranty in this Agreement contains
any untrue statement of a material fact or omits or will omit to state
any material fact required to be stated herein or therein or necessary
to make the statements herein not misleading.
(b) REPRESENTATIONS AND WARRANTIES OF INTERWAVE.
interWAVE hereby represents and warrants to ADC that as of the
date hereof:
(1) interWAVE is a corporation duly organized,
validly existing and in good standing under the laws of Bermuda, and
has the requisite corporate power and authority to perform its
obligations under this Agreement.
(2) Neither the execution or delivery of, nor the
performance of or compliance with, this Agreement, nor the consummation
of the transactions contemplated hereby will, with or without the
giving of notice or passage of time, result in any breach of, or
constitute a default under, or result in the imposition of any lien or
encumbrance upon any asset or property of interWAVE pursuant to, any
agreement or other instrument to which interWAVE is a party or by which
it or any of its properties, assets or rights is bound or affected.
interWAVE is not subject to any restrictions which would prohibit it
from entering into or performing its obligations under this Agreement.
(3) This Agreement has been duly authorized by all
necessary corporate action on behalf of interWAVE, has been duly
executed and delivered by authorized officers of interWAVE, and is a
valid and binding agreement on the part of interWAVE that is
enforceable against interWAVE in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar law affecting the
enforcement of creditors' rights generally and to judicial limitations
on the enforcement of the remedy of specific performance and other
equitable remedies.
(4) No representation or warranty in this Agreement
contains any untrue statement of a material fact or omits or will omit
to state any material fact required to be stated herein or therein or
necessary to make the statements herein not misleading.
7. LIMITATION OF LIABILITY
IN NO EVENT SHALL EITHER PARTY HAVE ANY LIABILITY HEREUNDER
FOR ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR ECONOMIC LOSSES
OR DAMAGES, REGARDLESS OF THE LEGAL THEORY UNDER WHICH ANY OTHER PARTY
INCURS SUCH
<PAGE>
DAMAGES. THIS LIMITATION OF LIABILITY SHALL APPLY EVEN IF THE PARTY
SHALL HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH POTENTIAL LOSS OR
DAMAGE BY ANY OTHER PARTY. [IN NO EVENT SHALL THE LIABILITY OF ADC
ARISING IN CONNECTION WITH ANY SERVICES PROVIDED HEREUNDER EXCEED THE
ACTUAL AMOUNT PAID BY INTERWAVE TO ADC FOR SERVICES INVOLVED IN SUCH
CLAIM.]
8. MISCELLANEOUS
(a) DISCUSSION AND NON-BINDING MEDIATION.
Except for injunctive relief contemplated by Section 4(g) of
this Agreement, ADC and interWAVE will each use its good faith efforts
to resolve any dispute between them promptly and amicably and without
resort to any legal process, if feasible within forty-five (45) days of
receipt of a written notice by one party to the other party of the
existence of such dispute. Within thirty (30) days of receipt of such
notice, one (1) officer of each of interWAVE and ADC will promptly meet
in good faith to discuss such dispute. If such officers are unable to
resolve such dispute through negotiation within forty-five (45) days
after the receipt of the initial notice of dispute, then, unless the
parties otherwise mutually agree, the dispute will be submitted to
non-bonding mediation in Minneapolis, Minnesota, in accordance with the
Commercial Mediation Rules of the American Arbitration Association, as
modified herein. The parties will jointly appoint a mutually acceptable
independent mediator, seeking assistance in such regard from the
American Arbitration Association or another mutually agreed-upon
organization if they have been unable to agree upon such appointment
within 20 days from the conclusion of the negotiation period. The
parties agree to participate in good faith in the mediation and
negotiations related thereto for a period of 30 days following the
appointment of a mediator. If the parties are not successful in
resolving the dispute through the mediation by the end of such 30-day
period, then the dispute will be resolved through binding arbitration
pursuant to Section 7(b).
(b) ARBITRATION.
Except for injunctive relief contemplated by Section 4(f) of
this Agreement, any dispute or claim arising out of or relating to this
Agreement or the validity, interpretation, enforceability or breach of
this Agreement, which is not settled pursuant to Section 7(a), will be
settled by binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in
effect, as amended by the following:
(1) The Arbitral tribunal will be composed of three
arbitrators. Each party will appoint one arbitrator and the two
arbitrators so appointed will appoint the Chairman of the Arbitral
Tribunal. Failing the appointment of the arbitrator, or the Chairman
within 30 days, the Board of Arbitration of the American Arbitration
Association will appoint such arbitrator.
<PAGE>
(2) All arbitration proceedings will be conducted in the
English language and the proceeding will be located in the County of
Santa Clara, California.
(c) INJUNCTIVE RELIEF.
It is expressly agreed among the parties hereto that monetary
damages would be inadequate to compensate a party hereto for any breach
by any other party of its covenants and agreements in Sections 3 and 4
hereof. Accordingly, the parties agree and acknowledge that any such
violation or threatened violation will cause irreparable injury to the
other and that, in addition to any other remedies which may be
available, such party will be entitled to injunctive relief against the
threatened breach of Sections 3 and 4 hereof or the continuation of any
such breach without the necessity of proving actual damages and may
seek to specifically enforce the terms thereof.
(d) APPLICABLE LAW.
This Agreement will be governed by and construed and enforced
in accordance with the laws of the State of California, excluding its
choice-of-laws or conflicts-of-law rules. Subject to the duties of the
parties to mediate and arbitrate certain disputes under Sections 7(a)
and (b) above, interWAVE and ADC hereby consent to the exclusive
jurisdiction of the state and federal courts of competent jurisdiction
sitting in the State of California. interWAVE and ADC each hereby
consent to service of process in the State of California.
(e) RELATIONSHIP.
This Agreement does not make either party the employee, agent
or legal representative of the other for any purpose whatsoever.
Neither party is granted any right or authority to assume or to create
any obligation or responsibility, express or implied, on behalf of or
in the name of the other party. In fulfilling its obligations pursuant
to this Agreement each party will be acting as an independent
contractor.
(f) ASSIGNMENT.
Neither party may assign or otherwise transfer its rights and
obligations under this Agreement without the prior written consent of
the other party, and any attempted assignment in violation of the
foregoing shall be null and void.
(g) NOTICES.
Notice permitted or required to be given under this Agreement
will be deemed sufficient if given in writing by facsimile, commercial
air delivery service or by registered or certified air mail, postage
prepaid, return receipt requested, addressed to the respective
addresses of the parties set forth below or at such other address as
the
<PAGE>
respective parties may designate by like notice from time to time.
Notices so given will be effective upon the earlier of: (i) receipt
by the party to which notice is given (which, in the instance of a
facsimile, will be deemed to have occurred at the time that the
machine transmitting the facsimile verifies a successful
transmission of the facsimile); (ii) on the fifth business day
following the date such notice was deposited in the mail; or (iii)
on the second business day following the date such notice was
delivered to a commercial air delivery service. Notices will be
given as follows:
If to interWAVE: interWAVE Communications International Limited
656 Bair Island Road, Suite 108
Redwood City, CA 94063
Attn.: Priscilla M. Lu, Ph.D.
Fax: (650) 261-6220
If to ADC: ADC Telecommunications, Inc.
12501 Whitewater Drive
Minneapolis, MN 55343
Attn.: General Counsel
Fax: (612) 946-3209
(h) ENTIRE AGREEMENT.
This Agreement, including the exhibits and schedules attached
hereto and incorporated as an integral part of this Agreement,
constitutes the entire agreement of the parties with respect to the
subject matter hereof, and supersedes all previous proposals, oral or
written, and all negotiations, conversations or discussions heretofore
had between the parties related to this agreement.
(i) AMENDMENT.
This Agreement will not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, other than
by written amendment signed by the parties hereto, except as expressly
provided in this Agreement.
(j) SEVERABILITY.
In the event that any of the terms of this Agreement are in
conflict with any rule of law or statutory provision or otherwise
unenforceable under the laws or regulations of any government or
subdivision thereof, such terms will be deemed stricken from this
Agreement, but such invalidity or unenforceability will not invalidate
any of the other terms of this Agreement and this Agreement will
continue in force, unless the invalidity or unenforceability of any
such provisions of this Agreement substantially violates, comprises an
integral part of or is otherwise inseparable from the remainder of this
Agreement.
<PAGE>
(k) COUNTERPARTS.
This Agreement may be executed counterparts, and each such
counterpart will be deemed an original hereof.
(l) WAIVER.
No failure by either party to take any action or assert any
right hereunder will be deemed to be a waiver of such right in the
event of the continuation or repetition of the circumstances giving
rise to such right.
(m) FORCE MAJEURE.
In the event that a delay or failure of a party to comply with
any obligation set forth in this Agreement is caused by Force Majeure,
that obligation (other than the obligation to pay money when due and
owing) will be suspended during the continuance of the Force Majeure
condition. For purposes of this Agreement, "FORCE MAJEURE" means any
event beyond the reasonable control of the parties, including, without
limitation, fire, flood, storm, riot, strike, epidemic, war (declared
or undeclared), embargo and governmental action and decree. A party
whose performance is suspended hereunder will give prompt written
notice of any event of Force Majeure and such party's best reasonable
estimate of when such event will abate. If an event of Force Majeure
continues unabated for more than six (6) months, either party will be
entitled to treat such event as a material breach of this Agreement and
may terminate this Agreement in accordance with Article 5 above.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
interWAVE Communications ADC Telecommunications, Inc.
International Limited
By: /s/ Priscilla M. Lu By: /s/ J.M. Baker
----------------------------------- ---------------------------------
Name: Priscilla M. Lu Name: J.M. Baker
----------------------------------- ---------------------------------
Title: Chairman, CEO & President Title: SNR Vice President
----------------------------------- ---------------------------------
<PAGE>
EXHIBIT 10.10
[LETTERHEAD] Priscilla M. Lu
CEO & Chairman
August 6, 1999
Ian Sugarbroad
Dear Ian
On behalf of interWAVE Communications, Inc. (a U.S. subsidiary of interWAVE
Communications International Ltd.), I am pleased to invite you to join the
Company as President and COO, initially reporting to Priscilla Lu, CEO &
Chairman, effective September 1, 1999. During the transition period between
now and September 1, you shall remain an employee of Nortel, seconded to
interWAVE while interWAVE completes its latest round of financing.
The President & COO position is exempt, which means that there is no
overtime-premium pay. You shall oversee engineering, manufacturing, service
support, marketing and sales. Your focus will be overall responsibilities for
the operations of the Company and timely delivery of interWAVE's product to
market, with P&L responsibilities for all of the organizations. The CFO,
Strategic Business Development and finance organization will report directly
to the CEO.
1. COMPENSATION: The Company will pay you a salary of US$9,615.38
biweekly in accordance with the Company's standard payroll policies.
This yields an annual salary of US$250,000.00 per year. Your salary will
begin as of the effective date of employment. The first and last
payment by the Company to you will be adjusted, if necessary, to
reflect a commencement or termination date other than the first or last
working day of a pay period.
OTHER COMPENSATION: A quarterly incentive bonus of US$10,000.00 per
quarter for each of the next four quarters beginning in August 1999.
Each quarter's bonus is payable on meeting revenue and expense targets
per the Annual Operating Plan. Should one quarter's revenue and expense
targets not be met but the AOP yearly targets be met or surpassed in
total aggregate then an incentive of $10,000.00 will be paid. In total, a
total incentive of $50,000.00 is achievable over the next four quarters
if all targets are met.
In the event of termination of employment:
a. Within one year of employment with cause, the Company will pay the
remaining unpaid balance from date of hire of one year of base
salary.
b. Between twelve and eighteen months of employment without cause, the
Company will pay six months of base salary.
c. At any time if employment is terminated with cause, the Company will
pay no more than three months of base salary.
CHANGE OF CONTROL: In the event of a Change of control (as defined
below) of the corporation where employee is Involuntarily Terminated (as
defined below), then the Company shall pay one year of base salary in
effect at the time of termination and accelerate one year of stock
vesting (75,000 shares) or the amount outstanding to be vested if the
amount to be vested is less than 75,000 shares. "Change of Control"
shall mean a merger or acquisition of the Parent company by any other
corporation or
<PAGE>
corporation or a sale of all or substantially all of the assets of the
corporation, in which transaction the corporation's shareholders
immediately prior to such transaction own immediately after such
transaction less than 50% of the equity securities of the surviving
corporation or its parent. "Involuntary Termination" shall mean without
employee's express written consent, a significant reduction of
employee's duties, position or responsibilities relative to employee's
duties, position or responsibilities in effect immediately prior to the
Change of Control, or employee's removal from such position, duties and
responsibilities.
2. BENEFITS: You will be entitled during the term of your employment to
the Company's standard three (3) weeks vacations per year. The Company
offers health, dental, vision and life insurance plans.
Other benefits:
The Company will reimburse temporary housing costs for up to six months
of temporary housing from the date of hire for a maximum of
US$20,000.00. In addition, the Company will reimburse a car allowance of
up to US$1,000.00 a month for a maximum of six months. Such
reimbursements shall be in accordance with Company policies and IRS
regulations regarding reimbursements and reporting of taxable income.
3. STOCK OPTION: Subject to action by the Board of Directors of inverWAVE
Communications International Ltd. (the Company's parent corporation,
hereafter defined as "inverWAVE") and in compliance with applicable
State, Federal and Foreign Securities laws, interWAVE will grant to you
an option to purchase 300,000 shares of interWAVE's Common Stock
pursuant to interWAVE's 1994 Incentive Stock Plan (the "Plan"), a copy
of which is attached. The exercise price of the option will be the fair
market value of the interWAVE's Common Stock on the date of grant. The
option will vest over four years with 1/4 of the shares subject to the
option vesting one year from the effective date of your employment and
1/48 of the shares vesting at the end of each full month thereafter
until all shares are vested, subject to all provisions of the Plan and
your continued employment with the Company.
ADDITIONAL STOCK INCENTIVES: A quarterly incentive bonus of 10,000
shares of stock will be granted upon meeting revenue and expense targets
per the Annual Operation Plan. Should the annual yearly targets be met
in aggregate for that year then an additional 10,000 shares will be
granted. In total, an incentive of 50,000 shares is achievable in each
of the first four years from date of hire. Each grant option shall be
subject to the provisions of interWAVE's 1994 Incentive Stock Plan. Each
grant of 10,000 shares will be immediately and entirely vested upon
achievement of each quarter's revenue and expense targets.
4. AT-WILL EMPLOYMENT: You should be aware that your employment with the
Company is for no specified period and constitutes "at-will" employment.
As a result, you are free to terminate your employment at anytime, for
any reason or for no reason. Similarly, the Company is free to terminate
your employment or demote, promote, transfer or change compensation,
benefits, duties or location or work at any time, for any reason or for
no reason. In the event of termination of your employment, you will not
be entitled to any payments, benefits, damages, awards or compensation
other than as may otherwise be available in accordance with the
Company's established employee plans and policies at the time of
termination.
5. PROPRIETARY INFORMATION AGREEMENT: As a condition of accepting this
offer of employment, you will be required to complete, sign and return
the Employment and Proprietary Information Agreement attached hereto
with this offer letter.
6. IMMIGRATION LAWS: For purposes of Federal Immigration Laws, you will be
required to provide to the Company documentary evidence of your identity
and eligibility for employment in the United States. Such documentation
must be provided within 3 business days from the first effective date of
hire, or your employment relationship with the Company may be terminated.
7. GENERAL: This offer letter, the Employment and Proprietary Information
Agreement and the agreement(s) representing stock options granted to you
under the Plan, when signed by you, set forth the terms of your
employment with the Company and supersede any and all prior
representations and agreements, whether written or oral. You should also
be aware that if a dispute arises during the course of your employment,
it will be resolved through arbitration. This agreement can only be
amended in a
<PAGE>
writing signed by you and an officer of the Company. Any waiver of a
right under this agreement must be in writing. This agreement will be
governed by California law.
If the foregoing terms are agreeable, please indicate your acceptance by
signing the enclosed copy of this letter in the space provided below and
returning it to me, along with your completed and signed Employment and
Proprietary Information Agreement. This offer will remain open through August
30, 1999.
If you have further questions or areas requiring clarification, please feel
free to call. I look forward to hearing from you soon.
We look forward to you joining the Company.
Sincerely, Accepted
/s/ PRISCILLA M. LU /s/ I. SUGARBROAD
------------------------------
Priscilla M. Lu Name
CEO & Chairman
8/6/99
------------------------------
Date
9/1/99
------------------------------
Start Date
<PAGE>
EXHIBIT 10.11
INTERWAVE COMMUNICATIONS, INC.
....PROVIDING MICROCELLULAR WIRELESS NETWORK SOLUTIONS PRISCILLA M. LU
656 Bair Island Rd. Suite 108, Redwood City, Ca, 94063 President & CEO
650-482-2100 650-261-6220 [fax]
June 19, 1999
Thomas W. Hubbs
1205 San Mateo Drive
Menlo Park, CA 94025
Dear Tom,
On behalf of interWAVE Communications, Inc. (a U.S. subsidiary of interWAVE
Communications International Ltd.), I am pleased to invite you to join the
Company as Executive Vice President and CFO, reporting to Priscilla Lu,
President & CEO. This position is considered exempt, which means that you are
not eligible for overtime premium pay. Your responsibilities will include all
strategic business development activities, alliances and overall financial
oversight for the Company, its subsidiaries and business entities.
1. COMPENSATION: The Company will pay you a salary of US $ 10,000.00
biweekly in accordance with the Company's standard payroll policies.
This yields an annual salary of US$260,000.00 per year. Your salary will
begin as of the effective date of employment. The first and last payment
by the Company to you will be adjusted, if necessary, to reflect a
commencement or termination date other than the first or last working
day of a pay period.
Other compensation: You will be eligible for a bonus incentive plan
beginning FY2000 for the next two fiscal years which will provide for a
bonus of up to 30% of the base salary of that fiscal year upon
achievement of the Company Annual Operating Plan (AOP) and corporate
objectives as approved by the Board of Directors. Payment of the bonus
will be upon agreement and approval of meeting the AOP and corporate
objectives per quarter; determined by established financial practices
and metrics. Payment may also be elected to be paid at the end of the
fiscal year as agreed by yourself and the CEO.
2. BENEFITS: You will be entitled during the term of your employment to
the Company's standard three (3) weeks vacations per year. The Company
offers health, dental, vision and life insurance plans.
Other benefits:
Change of Control: In the event of a Change of Control (as defined
below) of the corporation where employee is Involuntarily Terminated (as
defined below), then the Company shall pay one year of base salary in
effect at the time of termination and accelerate fifty percent (50%) of
all unvested shares both Non-qualified (NQ) and Incentive Stock Option
(ISO). "Change of Control" shall mean a merger or reorganization of the
Parent with or into any other corporation or corporations or a sale of
all or substantially all of the assets of the corporation, in which
transaction the corporation's shareholders immediately prior to such
transaction own immediately after such transaction less than 50% of the
equity securities of the surviving corporation or its parent.
"Involuntary Termination" shall mean without employee's express written
consent, a significant reduction of employee's duties, position or
responsibilities relative to employee's duties, position or
responsibilities in effect immediately prior to the Change of Control,
or employee's removal from such position, duties and responsibilities.
<PAGE>
Other considerations:
The Company recognizes your obligations as a Board Member of other
corporations and will make necessary and reasonable accommodations for
your attendance of meetings and other board member obligations.
The Company will refer to December 18, 1995 as your date of hire for
considerations of seniority such as vacation accruals, seniority,
corporate relations etc. as may be appropriate. These considerations to
be mutually agreed upon by yourself and the CEO.
3. STOCK OPTION: Subject to action by the Board of Directors of interWAVE
Communications International Ltd. (the Company's parent corporation,
hereafter defined as "interWAVE") and in compliance with applicable
State, Federal and Foreign Securities laws, interWAVE will grant to you
an option to purchase 100,000 shares of interWAVE's Common Stock
pursuant to interWAVE'S 1994 Incentive Stock Plan (the "Plan"), a copy
of which is attached. The exercise price of the option will be the fair
market value of the interWAVE's Common Stock on the date of grant. The
option will vest over four years with 1/48 of the shares vesting at the
end of each full month from hire date thereafter until all shares are
vested, subject to all provisions of the Plan and your continued
employment with the Company with the exception as specified in Section
3, Other Benefits.
4. AT-WILL EMPLOYMENT: You should be aware that your employment with the
Company is for no specified period and constitutes "at-will" employment.
As a result, you are free to terminate your employment at anytime, for
any reason or for no reason. Similarly, the Company is free to terminate
your employment or demote, promote, transfer or change compensation,
benefits, duties or location or work at any time, for any reason or for
no reason. In the event of termination of your employment, you will not
be entitled to any payments, benefits, damages, awards or compensation
other than as may otherwise be available in accordance with the
Company's established employee plans and policies at the time of
termination.
5. PROPRIETARY INFORMATION AGREEMENT: As a condition of accepting this
offer of employment, you will be required to complete, sign and return
the Employment and Proprietary Information Agreement attached hereto
with this offer letter.
6. IMMIGRATION LAWS: For purposes of Federal Immigration Laws, you will be
required to provide to the Company documentary evidence of your identity
and eligibility for employment in the United States. Such documentation
must be provided within 3 business days from the first effective date of
hire, or your employment relationship with the Company may be terminated.
7. GENERAL: This offer letter, the Employment and Proprietary Information
Agreement and the agreement(s) representing stock options granted to you
under the Plan, when signed by you, set forth the terms of your
employment with the Company and supersede any and all prior
representations and agreements, whether written or oral. You should also
be aware that if a dispute arises during the course of your employment,
it will be resolved through arbitration. This agreement can only be
amended in a writing signed by you and an officer of the Company. Any
waiver of a right under this agreement must be in writing. This
agreement will be governed by California law.
If the foregoing terms are agreeable, please indicate your acceptance by
signing the enclosed copy of this letter in the space provided below and
returning it to me, along with your completed and signed Employment and
Proprietary Information Agreement. This offer will remain open through June
30, 1999.
<PAGE>
If you have further questions or areas requiring clarification, please feel
free to call. I look forward to hearing from you soon.
We look forward to you joining the Company.
Sincerely, Accepted:
/s/ Priscilla M. Lu
Priscilla M. Lu /s/ Thomas Hubbs
President & CEO -------------------------------
Name
7-1-99
-------------------------------
Date
7-1-99
-------------------------------
Start Date
<PAGE>
EXHIBIT 10.13
SIXTH AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Sixth Amended and Restated Registration Rights Agreement
("Agreement") is entered into as of ____________ 1999 by and between Interwave
Communications International Ltd., a Bermuda corporation (the "Company") and the
Investors holding shares of the Company's Preferred Stock listed on the attached
Investor signature pages (the "Investors").
RECITALS
WHEREAS the Company and certain of the Investors have entered into a
Fifth Amended and Restated Registration Rights Agreement dated August 30, 1999
(the "Prior Rights Agreement");
WHEREAS the Company and the Investors desire to amend and restate the
Registration Rights Agreement to, among other things, provide the holders of
Series I1 Preferred Stock with the rights as Investors set forth herein;
NOW, THEREFORE, the Registration Rights Agreement is hereby amended and
restated as follows (with such amendment and restatement to be effective upon
execution of this Agreement by the Company and the holders of a majority of the
outstanding shares of Preferred Stock):
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
1.1 "AFFILIATE" shall mean, with respect to any Person, any
Person directly or indirectly controlling, controlled by or under direct or
indirect common control with such other Person.
1.2 "COMMISSION" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
1.3 "CONVERSION STOCK" shall mean the shares of Common Stock
issuable upon conversion of the Company's Series A, Series A1, Series B, Series
B1, Series C, Series C1, Series D, Series D1, Series E, Series E1, Series F,
Series F1, Series G, Series G1, Series H, Series H1 or Series I1 Preferred
Stock.
1.4 "HOLDER" shall mean the Investors holding Registrable
Securities or securities convertible into Registrable Securities and any person
holding such securities to whom the rights under this Agreement have been
transferred in accordance with Section 3.9 hereof.
1.5 "INITIATING HOLDERS" shall mean any Holder or Holders who
in the aggregate hold at least 50% of the Registrable Securities.
1.6 "INVESTOR" shall mean a purchaser of (i) Series A, Series
A1, Series B, Series B1, Series C, Series C1, Series D, Series D1, Series E,
Series E1, Series F, Series F1, Series H, Series H1 or Series I1 Preferred Stock
of the Company pursuant to a Preferred Stock Purchase Agreement entered into by
the Company and such Investor and (ii) Series G or Series G1 Preferred
<PAGE>
Stock of the Company pursuant to a Preferred Stock and Warrant Purchase
Agreement or Warrant issued pursuant thereto entered into by the Company and
such Investor.
1.7 "PREFERRED STOCK" means the Company's Series A, Series A1,
Series B, Series B1, Series C, Series C1, Series D, Series D1, Series E, Series
E1, Series F, Series F1, Series G, Series G1, Series H, Series H1 or Series I1
Preferred Stock.
1.8 "REGISTRABLE SECURITIES" means (i) the Conversion Stock,
(ii) 100,000 shares of Common Stock issued or issuable to Mayfield VII and/or
Mayfield Associates Fund II pursuant to option agreements under the Company's
1994 Stock Plan (the "Mayfield Shares"), (iii) Common Stock issuable upon
exercise of Common Stock Warrants issued pursuant to the Company's Loan and
Warrant Agreement dated March 3, 1999 (the "Loan Shares"), (iv) Common Stock
issuable upon exercise of a Common Stock Warrant to purchase 24,000 shares of
Common Stock issued to Nortel Networks Corporation in March 1999, (v) Common
Stock issuable upon exercise of a Common Stock Warrant issued to Intasys
Corporation (vi) Common Stock issuable upon exercise of a Common Stock Warrant
issued to MediaTel Capital ( (v) and (vi) are collectively refered to as the
"Warrant Shares") and (vii) any Common Stock of the Company issued or issuable
with respect to, or in exchange for or in replacement of the Conversion Stock,
the Mayfield Shares, the Loan Shares, the Warrant Shares or other securities
convertible into or exercisable for Preferred Stock upon any stock split, stock
dividend, recapitalization, or similar event, provided, however, that shares of
Common Stock or other securities shall cease to be Registrable Securities when:
(a) a registration statement with respect to the sale of
such securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement;
(b) all of such securities held by any person and his,
her or its Affiliates may be distributed to the public pursuant to Rule 144 (or
any successor provision) under the Securities Act in any three (3) month period
unless the aggregate Fair Market Value of such securities at the start of such
three (3) month period is greater than the lesser of (i) Ten Million Dollars
($10,000,000) or (ii) five percent (5%) of the Fair Market Value of all shares
of Common Stock outstanding at the start of such three (3) month period; or
(c) such securities shall have ceased to be outstanding.
1.9 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.
1.10 "REGISTRATION EXPENSES" shall mean all expenses, except as
otherwise stated below, incurred by the Company in complying with Sections 3.1,
3.2 and 3.3 hereof, including, without limitation, all registration,
qualification and filing fees, stock exchange, NASDAQ or NASD registration,
listing and filing fees, messenger and delivery expenses, transfer taxes,
expenses and disbursements of underwriters customarily paid by the Company in
connection with a registration (excluding underwriters fees and underwriting
discounts and commissions), accounting expenses, printing expenses, escrow
fees, fees and disbursements of counsel for the Company, blue sky fees
-2-
<PAGE>
and expenses, the expense of any special audits or "cold comfort" letters
required by incident to or required by any such registration, the fees and
expenses of one counsel for the selling Holders selected by them, and the
compensation of regular employees of the Company which shall be paid in any
event by the Company, but excluding underwriters fees and underwriting
discounts and commissions with respect to the Registrable Securities being
issued.
1.11 "RESTRICTED SECURITIES" shall mean the securities of the
Company required to bear the legend set forth in Section 2.2 hereof.
1.12 "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.
1.13 "SELLING EXPENSES" shall mean all underwriting discounts,
selling commissions and stock transfer taxes if any, applicable to the
securities registered by the Holders.
2. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; COMPLIANCE WITH
SECURITIES ACT.
2.1 RESTRICTIONS ON TRANSFERABILITY. The Preferred Stock and
the Conversion Stock shall not be sold, assigned, transferred or pledged except
upon the conditions specified in this Section 2, 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 Stock or the Conversion Stock held by the Investors to agree to take
and hold such securities subject to the provisions and upon the conditions
specified in this Section 2.
2.2 RESTRICTIVE LEGEND. Each certificate representing (i) the
Preferred Stock, (ii) the Conversion Stock and (iii) any other securities issued
in respect of the Preferred Stock or the Conversion Stock upon any stock split,
stock dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted by the provisions of Section 2.3 below) be stamped
or otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH
SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS
THE TRANSFER IS IN ACCORDANCE WITH REGULATION S, RULE 144 OR SIMILAR RULE OR
UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT
STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF THE AGREEMENT COVERING
THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT
NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
CORPORATION.
-3-
<PAGE>
The Investors and Holders consent to the Company making a notation on its
records and giving instructions to any transfer agent of the Preferred Stock or
the Conversion Stock in order to implement the restrictions on transfer
established in this Section 2.
2.3 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 2.3. Prior to any
proposed sale, assignment, transfer or pledge of any Restricted Securities
(other than (i) a transfer not involving a change in beneficial ownership, or
(ii) in transactions involving the distribution without consideration of
Restricted Securities by the Investors to any of its partners, or retired
partners, or to the estate of any of its partners or retired partners, (iii) a
transfer to an affiliated fund, partnership or company, which is not a
competitor of the Company, subject to compliance with applicable securities
laws, (iv) transfers in compliance with Regulation S or Rule 144, so long as the
Company is furnished with satisfactory evidence of compliance with such Rule or
(v) any transfer by Nortel to any of its subsidiaries or to BCE, Inc. or any of
its subsidiaries), 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. Each certificate evidencing the Restricted
Securities transferred as above provided shall bear, except if such transfer is
made pursuant to Rule 144 or Regulation S, the appropriate restrictive legend
set forth in Section 2.2 above, except that such certificate shall not bear such
restrictive legend if in the opinion of counsel for such holder and in the
reasonable opinion of the Company such legend is not required in order to
establish compliance with any provision of the Securities Act.
2.4 REMOVAL OF RESTRICTIONS ON TRANSFER OF SECURITIES. Any
legend referred to in Section 2.2 hereof stamped on a certificate evidencing
(i) the Preferred Stock, (ii) the Conversion Stock or (iii) any other securities
issued in respect of the Preferred Stock or the Conversion Stock upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar event
and the stock transfer instructions and record notations with respect to such
security shall be removed and the Company shall issue a certificate without such
legend to the holder of such security if (x) such security is registered under
the Securities Act, (y) such holder provides the Company with an opinion of
counsel (which may be counsel for the Company) reasonably acceptable to the
Company to the effect that a public sale or transfer of such security may be
made without registration under the Securities Act or (z) such holder provides
the Company with reasonable assurances, which may, at the option of the Company,
include an opinion of counsel satisfactory to the Company, that such security
can be sold pursuant to Regulation S or Rule 144, including Section (k) of
Rule 144, under the Securities Act.
-4-
<PAGE>
3. REGISTRATION RIGHTS.
3.1 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. In case the Company shall
receive from: (x) the Initiating Holders holding at least forty percent (40%)
of the Registrable Securities or (y) Nortel a written request that the Company
effect any registration, qualification or compliance with respect to shares of
Registrable Securities with an expected aggregate offering price to the public
of at least $5,000,000 (such a request from Nortel is hereinafter a "Nortel
Demand"), the Company will:
(i) within ten days after the receipt by the
Company of such notice, give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(ii) as soon as practicable, and in any event
within ninety (90) days of the receipt of such request, use its best efforts to
have declared or ordered effective such registration, qualification or
compliance (including, without limitation, 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 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 any such registration, qualification or compliance pursuant to
this Section 3.1:
(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) December
31, 1998, or (ii) six (6) months after the effective date of the first
registration statement for a public offering of securities of the Company (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan or a Rule 145 transaction);
(3) During the period starting with the
date sixty (60) days prior to the Company's estimated date of filing of, and
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 the
Company's first registered public offering of its stock in which case the period
shall end on the date
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six (6) months following the effective date), provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective;
(4) After the Company has effected two
such registrations with respect to the Holders of a majority of the Registrable
Securities and one such registration with respect to a Nortel Demand pursuant to
this Section 3.1(a), and such registrations have been declared or ordered
effective; provided, however that in the event that any legal restriction or
prohibition shall result in the inability of the Holders participating in a
registration pursuant to this Section 3.1(a) to sell at least 75% of the
Registrable Securities included in such registration within 180 days of the
effectiveness thereof, then the Holders shall be entitled to demand an
additional registration pursuant to this Section 3.1(a);
(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 3.1 shall be deferred for a
period not to exceed 90 days from the date of receipt of written request from
the Initiating Holders; provided, however, that the Company shall not exercise
such right more than twice in any twelve (12) month period. If the Company
shall so postpone the filing of a registration statement, Initiating Holders
shall have the right to withdraw the request for registration by giving written
notice to the Company within 20 days after receipt of the certificate of
postponement and, in the event of such withdrawal, such request shall not be
counted toward the number of requested registrations under this Agreement.
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 3.1 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 3.1(a)(i). In such event, the right of any Holder to
registration pursuant to Section 3.1 shall be conditioned upon such Holder's
participation in the underwriting arrangements required by this Section 3.1, and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent requested shall be limited to the extent provided herein.
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 of recognized national standing
selected for such underwriting by the Company and reasonably acceptable to a
majority of the Holders proposing to distribute their securities through such
underwriting. Notwithstanding any other provision of this Section 3.1, 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
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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 registration statement or in
such other manner as shall be agreed to by the Company and all Holders of the
Registrable Securities proposed to be included in such registration.
Notwithstanding the foregoing, the number of shares of Registrable Securities
requested by Nortel to be included in an underwriting pursuant to a Nortel
Demand shall not be reduced unless all other securities are first entirely
excluded from such underwriting. 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 Holder 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 180 days after the effective date
of such registration (in the case of the Company's initial public offering) or
90 days after the effective date of such registration (in the case of any other
registration), or such other shorter period of time as the underwriters may
require.
(c) Nortel shall have the right to withdraw its
Registrable Securities from an underwriting undertaken pursuant to a Nortel
Demand if it disapproves of the terms of the underwriting by providing written
notice to the Company and the managing underwriter. In the event of such
withdrawal, such request shall not be counted as a Nortel Demand under this
Section 3.1 provided that Nortel reimburses the Company for all Registration
Expenses incurred in connection with such underwriting.
(d) A registration requested pursuant to this
Section 3.1 shall not be deemed to have been effected (i) unless a registration
statement with respect thereto has become effective and has been kept
continuously effective for a period of at least ninety (90) days (or such
shorter period which shall terminate when all the Registrable Securities covered
by such registration statement have been sold pursuant thereto), (ii) if, after
it has become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason not attributable to Initiating Holders and has
not thereafter become effective, or (iii) if the conditions to closing specified
in the underwriting agreement, if any, entered into in connection with such
registration are not satisfied or waived, other than by reason of a failure on
the part of Initiating Holders.
3.2 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, (ii) a
registration relating solely to a Rule 145 transaction, (iii) a registration
relating to the initial underwritten public offering of the Company's securities
pursuant to a registration statement filed
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under the Securities Act; provided, however, that if in the Company's
discretion it elects to permit the sale of securities by selling stockholders
in its initial public offering, the Company shall notify holders of
Registrable Securities in accordance with this Section 3.2 and shall include
securities requested to be registered in such offering by Holders of
Registrable Securities prior to including securities for the accounts of
persons other than Holders of Registrable Securities; or (iv) a registration
pursuant to Section 3.1 hereof, 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 therein, all the Registrable Securities specified in a written request
or requests, made within 20 days after receipt of such written notice from the
Company, by any Holder.
(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 3.2(a)(i). In such event the right of any
Holder to registration pursuant to Section 3.2 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) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 3.2, 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 and other securities to be distributed through such
underwriting, but in no event shall the amount of securities of any selling
Holder included in the offering be reduced below twenty-five percent (25%) of
the Registrable Securities to be sold in the registration; provided, that if in
the Company's discretion it elects to permit the sale of securities by selling
stockholders in its initial public offering, the Company may reduce the
percentage of such initial public offering allocated to each selling Holder to
less than twenty-five percent (25%) of the Registrable Securities sought to be
included in such registration by such Holder. The Company shall so advise all
Holders distributing their securities through such underwriting of such
limitation and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
Holders in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders at the time of filing the
registration statement. To facilitate the allocation of shares in accordance
with the above provisions, the Company may round the number of shares allocated
to any Holder to the nearest 100 shares. If any Holder disapproves of the terms
of any such underwriting, such Holder 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 90 days after the
effective date of the registration statement relating thereto, or such other
shorter period of time as the underwriters may require.
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 3.2 prior to the effectiveness
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of such registration whether or not any Holder has elected to include
securities in such registration. The Registration Expenses of such withdrawn
registration shall be borne by the Company in accordance with Section 3.4
hereof.
3.3 REGISTRATION ON FORM S-3.
(a) If any Holder or Holders of in excess of one
percent (1%) of the Registrable Securities request that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3), or
any similar short-term registration statement, for a public offering of
Registrable Securities, the reasonably anticipated aggregate price to the
public of which, net of underwriting discounts and commissions, would exceed
$1,000,000 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 on
such form for the offering and to cause such Registrable Securities to be
qualified in such jurisdictions as the Holder or Holders may reasonably
request; provided, however, that the Company shall not be required to effect
more than four registrations pursuant to this Section 3.3 or more than one
such registration in any twelve (12) month period. After the Company's first
public offering of its securities, the Company will use its best efforts to
qualify for Form S-3 registration or a similar short-form registration. The
provisions of Sections 3.1(b) and 3.2(a) shall be applicable to each
registration initiated under this Section 3.3. The number of registrations
which may be requested by the Holders under this Section 3.3 shall not exceed
four (4).
(b) Notwithstanding the foregoing, the Company shall not
be obligated to take any action pursuant to this Section 3.3: (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) if
the Company, within ten (10) days of the receipt of the request of the
Initiating Holders, gives notice of its bona fide intention to effect the filing
of a registration statement with the Commission within ninety (90) days of
receipt of such request (other than with respect to a registration statement
relating to a Rule 145 transaction, or an offering solely to employees);
(iii) during the period starting with the date ninety (90) days prior to the
Company's estimated date of filing of, and 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 relating
solely to a Rule 145 transaction or relating solely to employee benefit plans)
provided that the Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective; or (iv) 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 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 period not to exceed 90 days from the receipt of the request to
file such registration by such Holder; provided, however, that the Company shall
not exercise such right more than twice in any twelve (12) month period. If the
Company shall so postpone the filing of a registration statement, such
requesting Holder or Holders under this Section 3.3 shall have the right to
withdraw the request for registration by giving written notice to the Company
within 20 days after receipt of the certificate of postponement and, in the
event of such
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withdrawal, such request shall not be counted toward the number of requested
registrations under this Section 3.3.
3.4 EXPENSES OF REGISTRATION. All Registration Expenses
incurred in connection with registrations pursuant to Sections 3.1, 3.2 and 3.3
shall be borne by the Company. All Selling Expenses relating to securities
registered on behalf of a Holder shall be borne by such Holder.
3.5 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 3,
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 eighteen
months or until the distribution described in the Registration Statement has
been completed (provided, however, that before filing such registration
statement, the Company shall furnish such registration statement (including all
exhibits, which may be furnished in redacted form if the Company is requesting
confidential treatment with respect to any such exhibits) to each Holder
participating in the registration, each such Holder's counsel, and each
underwriter, if any, participating in the offering of the Registrable Securities
and its counsel);
(b) Notify each Holder of the Commission's request for
any amendment to or supplement of the registration statement and the prospectus
used in connection with such registration statement, and prepare and file with
the Commission such amendments and supplements to such registration statement
and prospectus as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement (provided, however, that before filing such amendment or
supplement thereto, the Company shall furnish such documents (including all
exhibits, which may be furnished in redacted form if the Company is requesting
confidential treatment with respect to any such exhibits) to each Holder
participating in the registration, each such Holder's counsel, and each
underwriter, if any, participating in the offering of the Registrable Securities
and its counsel).
(c) 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 and each amendment and
supplement thereto (in each case including all exhibits), preliminary
prospectus, final prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public offering of such
securities.
(d) Furnish, at the request of any Holder requesting
registration of Registrable Securities, on the date that Registrable Securities
are delivered to the underwriters for sale in connection with a registration
pursuant to this Agreement, if such securities are being sold through
underwriters, or if such securities are not being sold through underwriters, on
the date that the registration statement with respect to such securities becomes
effective, a copy of (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable
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Securities and (ii), to the extent permitted by SFAS 72 or other applicable
accounting pronouncements, a letter dated such date, from the independent
auditors of the Company, in form and substance as is customarily given by
independent auditors to underwriters in an underwritten public offering
addressed to the underwriters, if any and to the Holders requesting
registration of Registrable Securities.
(e) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(f) Deliver promptly to counsel to each Holder and each
underwriter, if any, participating in the offering of the Registrable
Securities, copies of all correspondence between the Commission and the Company,
its counsel or auditors and all memoranda relating to discussions with the
Commission or its staff with respect to such registration statement.
(g) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering (provided
that the Holders shall also enter into and perform their obligations under such
an agreement if the Holders have requested the inclusion of any Registrable
Securities in such offering (subject to Section 3.16).
(h) Make available its employees and personnel and
otherwise provide reasonable assistance to the underwriters (taking into account
the needs of the Company's businesses) in their marketing of Registrable
Securities.
(i) Cause all such Registrable Securities registered
pursuant to this Agreement to be listed on each securities exchange or national
market system on which similar securities issued by the Company are then listed
or traded.
(j) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant to such registration statement and a
CUSIP number for all such Registrable Securities, in each case not later than
the effective date of such registration.
(k) Use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve (12) months, but not more than eighteen (18) months,
beginning with the first month after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act.
(l) Promptly notify each Holder and each managing
underwriter, if any, participating in the offering of the securities covered
by such registration statement (i) when such registration statement, any
pre-effective amendment, the prospectus or any prospectus supplement related
thereto or post-effective amendment to such registration statement has been
filed, and, with respect to such registration statement or any post-effective
amendment, when the same has become
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effective; (ii) of any request by the Commission for amendments or
supplements to such registration statement or the prospectus related thereto
or for additional information; (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of such registration statement or the
initiation of any proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of any of the Registrable Securities for sale under the
securities or blue sky laws of any jurisdiction or the initiation of any
proceeding for such purpose; (v) at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon discovery
that, or upon the happening of any event as a result of which, the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, in the light of the circumstances under which they were made, and
in the case of this clause (v), at the request of any Holder, promptly
prepare and furnish to it, each of the other Holders and each managing
underwriter, if any, participating in the offering of the Registrable
Securities a reasonable number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that, as thereafter delivered to
the purchasers of such securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made.
3.6 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its
officers, directors, partners and legal counsel, 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 3, 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 the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law 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, directors,
partners, and legal counsel 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.
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(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, officers, and legal counsel, 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 Holder, each of its officers, directors, partners
and legal counsel 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, or any violation by the Holder of the Securities Act, the Exchange
Act or any state securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any state securities law applicable to the
Holder in connection with any such registration, qualification or compliance,
and the Holder 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.
Notwithstanding the foregoing, the liability of each Holder under this
subsection (b) shall be limited in an amount equal to the proceeds to such
Holder of Registrable Securities sold pursuant to such registration statement,
prospectus, offering circular or other document as contemplated herein, unless
such liability resulted from willful misconduct by such Holder. A Holder will
not be required to enter into any agreement or undertaking in connection with
any registration under this Section 3 providing for any indemnification or
contribution on the part of such Holder greater than the Holder's obligations
under this Section 3.6(b).
(c) Each party entitled to indemnification under this
Section 3.6 (the "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 3 unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action and provided further, that the Indemnifying Party shall not
assume the defense for matters as to which there is a conflict of interest or
separate and different defenses but shall bear the expense of such defense
nevertheless. 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
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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.
(d) If the indemnification provided for in this Section
3.6 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission. If the allocation provided in this subsection (d) is not
permitted by applicable law, the Indemnifying Party, in lieu of indemnifying the
Indemnified Party hereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, liability, claim, damage or
expense in such proportion as shall be appropriate to reflect not only the
relative fault but also the relative benefits received by the Indemnifying Party
and Indemnified Party from the offering of the securities covered by such
registration statement as well as any other relevant equitable considerations.
The parties hereto agree that it would not be just and equitable if
contributions pursuant to this subsection (d) were to be determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. In addition, no person shall be obligated to
contribute hereunder any amounts in payment for any settlement of any action or
claim effected without such person's consent, which consent shall not be
unreasonably withheld. Notwithstanding anything in this subsection (d) to the
contrary, no Indemnifying Party (other than the Company) shall be required to
contribute any amount in excess of the net proceeds received by such party from
the sale of Registrable Securities in the offering to which the losses,
liabilities, claims, damages or expenses of the Indemnified Party relate.
3.7 CERTAIN RIGHTS OF HOLDER IF NAMED IN A REGISTRATION
STATEMENT. If any statement contained in a registration statement under the
Securities Act or in any filing under the state securities laws of any
jurisdiction refers to a Holder by name or otherwise as the holder of any
securities of the Company, then such Holder shall have the right to require
(i) the insertion therein of language, in form and substance satisfactory to
such Holder, to the effect that the holding by the Investor of such securities
does not necessarily make such Holder a "controlling person" of the Company
within the meaning of the Securities Act and is not to be construed as a
recommendation by such Holder of the investment quality of the Company's debt or
equity securities covered thereby and that such holding does not imply that such
Holder will assist in meeting any future financial requirements of the Company
or (ii) in the event that such reference to a Holder by name or otherwise is
not, in the reasonable judgment of such Holder as advised by its counsel,
required by the
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<PAGE>
Securities Act or any of the rules and regulations promulgated thereunder, or
any state securities laws of any jurisdiction, the deletion of the reference
to such Holder.
3.8 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 3.
3.9 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:
(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.
(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);
(c) So long as a Holder owns any Restricted Securities,
furnish to the Holder 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 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 a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.
3.10 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register securities granted Holders under Sections 3.1, 3.2 and 3.3
and the benefits of the other provisions of this Agreement may be assigned to a
transferee or assignee in connection with any transfer or assignment of
Registrable Securities by a Holder of not less than 100,000 shares of
Registrable Securities, or to any transferee or assignee who is a constituent
partner of a Holder or the estate of such constituent partner, provided that
such transfer may otherwise be effected in accordance with applicable securities
laws.
3.11 STANDOFF AGREEMENT. Each Holder agrees, so long as such
Holder holds at least one percent (1%) of the Company's outstanding voting
equity securities, in connection with the Company's initial public offering of
the Company's securities, upon request of the Company or the underwriters
managing any underwritten offering of the Company's securities, not to sell,
make any
-15-
<PAGE>
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 underwriters; provided, that the officers and
directors of the Company who own stock of the Company also agree to such
restrictions. The Company hereby agrees that, if it shall have received a
request for registration pursuant to Section 3.1 or 3.3 hereof, and if such
request for registration shall not have been withdrawn or abandoned, the
Company shall not effect any public or private offer, sale or other
distribution of its securities or effect any registration of any of its
equity securities under the Securities Act (subject to the provisions of
Sections 3.1 and 3.3 hereof) (other than a registration on Form S-8 or any
successor or similar form which is then in effect), whether or not for sale
for its own account, until a period of ninety (90) days (or such shorter
period as the Holders of a majority of the Registrable Securities included in
such requested registration shall agree) shall have elapsed from the
effective date of such requested registration (and the Company shall so
provide in any registration rights agreements hereafter entered into with
respect to any of its securities).
3.12 RULE 144A INFORMATION. Whenever the Company receives a
request for the following information from Initiating Holders on or after
December 31, 1998, then the Company shall within 60 days after the date of such
request provide the information required in Rule 144A(d)(4) to such Initiating
Holders and any person or persons designated by the Initiating Holders as a
prospective buyer in a transaction pursuant to Rule 144A. The Company's
obligations pursuant to this Section 3.12 shall extend to any person who
acquires shares of the Company's Preferred Stock and/or Conversion Stock as a
result of a transaction pursuant to Rule 144A.
3.13 TERMINATION OF REGISTRATION RIGHTS. The rights granted
under this Section 3 shall terminate on the fifth anniversary of the closing of
the first firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act covering the offer and sale of
Common Stock at an aggregate offering price of not less than $25,000,000 and, in
the case of (i) the Series G Preferred Stock or Series G1 Preferred Stock at a
price to the public in such offering greater than or equal to $7.00 per share
and (ii) in the case of the Series H Preferred Stock or Series H1 Preferred
Stock at a price to public in such offering greater than or equal to $4.00 per
share.
3.14 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of a majority of the outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company which would allow such holder or prospective
holder (a) to include such securities in any registration filed under Section
3.1 or Section 3.2 hereof, unless under the terms of such agreement, such holder
or prospective holder may include such securities in any such registration only
to the extent that the inclusion of his securities will not reduce the amount of
the Registrable Securities of the Holders which is included or (b) to make a
demand registration which could result in such registration statement being
declared effective prior to the earlier of either of the dates set forth in
subsection 3.2(a) or within one hundred twenty (120) days of the effective date
of any registration effected pursuant to Section 3.1.
-16-
<PAGE>
3.15 GRANT OF ADDITIONAL REGISTRATION RIGHTS. The Company may,
with the approval of its board of directors and subject to compliance with
Section 3.13 above, grant the registration rights set forth herein to a
subsequent purchaser of securities of the Company, provided that such purchaser
agrees to execute this agreement as a party hereto and, by so doing, agrees to
be bound by the provisions hereof.
3.16 UNDERWRITING AGREEMENTS. If any Holder is a party to any
underwriting agreement in connection with any underwritten offering hereunder,
such Holder may require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the benefit
of such underwriters shall also be made to and for the benefit the Holders
participating in the offering and that any or all of the conditions precedent to
the obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of such Holders. No holder shall be
required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or agreements
regarding the Holder, such Holder's ownership of and title to the Registrable
Securities, such Holder's intended method of distribution and any other
representations required by law, and any liability of such Holder to any
underwriter or other person under such underwriting agreement shall be limited
to the extent set forth in Section 3.6(b).
3.17 PREPARATION; REASONABLE INVESTIGATION. In connection with
the preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company will give each Holder, its
underwriters, if any, and their respective counsel and accountants the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and, to the
extent practicable, each amendment thereof or supplement thereto, and give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and employees and the independent
public accountants who have certified its financial statements as shall be
necessary, in the opinion of such Holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
3.18 NO INCONSISTENT AGREEMENTS. The Company will not, on or
after the date of this Agreement, enter into any agreement with respect to its
securities which is inconsistent with the rights granted to each Holder in this
Agreement or otherwise conflicts with the provisions hereof. The Company has
not previously entered into any agreement with respect to its securities
granting any registration rights to any person other than the registration
rights granted pursuant to this Agreement. The rights granted to the holders of
Registrable Securities hereunder do not in any way conflict with and are not
inconsistent with any other agreements to which the Company is a party or by
which it is bound.
4. GENERAL PROVISIONS.
4.1 AMENDMENT AND WAIVER. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders
of a majority of the shares of the Common Stock issued or issuable upon
conversion of
-17-
<PAGE>
the Preferred Stock. Any amendment or waiver effected in accordance with
this Section 4.1 shall be binding upon each Holder of Registerable Securities
each future holder of all such securities and the Company.
4.2 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California.
4.3 CHOICE OF FORUM. All actions and proceedings to enforce,
or which arise in connection with or relate to, this Agreement shall be brought
and litigated exclusively in the United States District Court, Northern District
of California (or, in the event such court does not have jurisdiction, the
courts of the State of California located in such district), unless such actions
or proceedings are required to be brought in another court to obtain subject
matter jurisdiction over the matter in controversy. In any such actions or
proceedings, service of process may be made upon the other parties hereto by
registered or certified mail, return receipt requested, to its address indicated
herein, which service shall be deemed effective 10 days after mailing. Each of
the parties hereto (i) consents to the jurisdiction of such court or courts and
to service of process by registered or certified mail, as provided above, or by
any other manner provided by the law of the State of California and the rules of
such courts and (ii) waives any right it may have to asset the doctrine of forum
non conveniens, to assert that it is not subject to the jurisdiction of such
courts or to object to venue to the extent any proceeding is brought in
accordance with this Section.
4.4 WAIVER OF TRIAL BY JURY. THE COMPANY AND THE INVESTORS
WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION UNDER THIS AGREEMENT ARISING
OUT OF THE TRANSACTION CONTEMPLATED HEREBY OR THEREBY, REGARDLESS OF WHICH PARTY
INITIATES SUCH ACTION OR ACTIONS.
4.5 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided, the provisions of this Agreement shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors, and administrators of
the parties.
4.6 SEVERABILITY. In case any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be unenforceable,
this Agreement shall continue in full force and effect without said provision;
provided, however, that no such severability shall be effective if it materially
changes the economic benefit of this Agreement to any party.
4.7 NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery or upon deposit with the United States Post Office, by
first class mail, postage prepaid, addressed: (a) if to the Investors, at the
Investors' address as set forth on the signature page, or at such other address
as the Investors shall have furnished to the Company in writing, (b) if to the
Company, at its current address or at such other address as the Company shall
have furnished to the Investors in writing and (c) if to a subsequent Holder, to
the address such Subsequent Holder shall have furnished to the Company in
writing.
4.8 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which is an original, and all of which together shall
constitute one instrument.
-18-
<PAGE>
4.9 ATTORNEY'S FEES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-19-
<PAGE>
IN WITNESS WHEREOF, the Company and Investors have executed this Sixth
Amended and Restated Registration Rights Agreement on the date first above
written.
"COMPANY"
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
a Bermuda corporation
By: ________________________________________________
Title (if appropriate) _____________________________
Address ____________________________________________
____________________________________________
____________________________________________
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
SIGNATURE PAGE TO
SIXTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the Company and Investors have executed this Sixth
Amended and Restated Registration Rights Agreement on the date first above
written.
"INVESTORS"
MAYFIELD VII
a California Limited Partnership
2800 Sand Hill Road
Menlo Park, CA 94025
Attn: Kevin Fong
By Mayfield Management Partners,
a California limited partnership, its
General Partner
By: ________________________________________________
Title (if appropriate) _____________________________
Address ____________________________________________
____________________________________________
____________________________________________
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
SIGNATURE PAGE TO
SIXTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the Company and Investors have executed this Sixth
Amended and Restated Registration Rights Agreement on the date first above
written.
"INVESTORS"
MAYFIELD ASSOCIATES FUND II
a California Limited Partnership
2800 Sand Hill Road
Menlo Park, CA 94025
Attn: Kevin Fong
By: ________________________________________________
Title (if appropriate) _____________________________
Address ____________________________________________
____________________________________________
____________________________________________
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
SIGNATURE PAGE TO
FIFTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the Company and Investors have executed this Sixth
Amended and Restated Registration Rights Agreement on the date first above
written.
"INVESTORS"
EXCELlink
6th Floor King Fook Building
30-32 Des Voeux Road Central
Hong Kong,
China
Attn: Kenneth Yeung
By: ________________________________________________
Title (if appropriate) _____________________________
Address ____________________________________________
____________________________________________
____________________________________________
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
SIGNATURE PAGE TO
FIFTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the Company and Investors have executed this Sixth
Amended and Restated Registration Rights Agreement on the date first above
written.
"INVESTORS"
MAINWELL CORPORATION
32 Nassim Hill
#04-38 Nassim Mansion
1025 Singapore
C/O James Loh
By: ________________________________________________
Title (if appropriate) _____________________________
Address ____________________________________________
____________________________________________
____________________________________________
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
SIGNATURE PAGE TO
FIFTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the Company and Investors have executed this Sixth
Amended and Restated Registration Rights Agreement on the date first above
written.
"INVESTORS"
SASSON INTERNATIONAL HOLDING, INC.
130 Rose Orchard Way
San Jose, CA 95134
Attn: Dr. Andrew Wang
By: ________________________________________________
Title (if appropriate) _____________________________
Address ____________________________________________
____________________________________________
____________________________________________
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
SIGNATURE PAGE TO
FIFTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the Company and Investors have executed this Sixth
Amended and Restated Registration Rights Agreement on the date first above
written.
"INVESTORS"
MORGAN STANELEY VENTURE CAPITAL FUND II, LP
3000 Sand Hill Road
Building 4, Suite 250
Menlo Park, CA 94205
Attn: W. Harding
By Morgan Stanley Venture Partners II L.P.,
Its General Partner
By Morgan Stanley Venture Capital II, Inc.,
Managing General Partner
By: ________________________________________________
Title (if appropriate) _____________________________
Address ____________________________________________
____________________________________________
____________________________________________
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
SIGNATURE PAGE TO
FIFTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the Company and Investors have executed this Sixth
Amended and Restated Registration Rights Agreement on the date first above
written.
"INVESTORS"
MORGAN STANELEY VENTURE CAPITAL FUND II, CV
3000 Sand Hill Road
Building 4, Suite 250
Menlo Park, CA 94205
Attn: W. Harding
By Morgan Stanley Venture Partners II L.P.,
Its General Partner
By Morgan Stanley Venture Capital II, Inc.,
Managing General Partner
By: ________________________________________________
Title (if appropriate) _____________________________
Address ____________________________________________
____________________________________________
____________________________________________
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
SIGNATURE PAGE TO
FIFTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the Company and Investors have executed this Sixth
Amended and Restated Registration Rights Agreement on the date first above
written.
"INVESTORS"
TSANG AND ASSOCIATES
Goldman Sachs
37th Floor
Asia Pacific Finance Tower
Citibank Plaza, 3 Garden Road
Hong Kong
Attn: Moses Tsang
By: ________________________________________________
Title (if appropriate) _____________________________
Address ____________________________________________
____________________________________________
____________________________________________
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
SIGNATURE PAGE TO
FIFTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the Company and Investors have executed this Sixth
Amended and Restated Registration Rights Agreement on the date first above
written.
"INVESTORS"
MKT HOLDINGS LIMITED LLC
728 Pacific Ave.
Suite 501
San Francisco, CA 94133
C/O Dr. Michael Choy
By: ________________________________________________
Title (if appropriate) _____________________________
Address ____________________________________________
____________________________________________
____________________________________________
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
SIGNATURE PAGE TO
FIFTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the Company and Investors have executed this Sixth
Amended and Restated Registration Rights Agreement on the date first above
written.
"INVESTORS"
NORTEL NETWORKS CORPORATION
8200 Dixie Road
Suite 100
Brampton, Ontario L6T5P6
Attn: ______________
By: ________________________________________________
Title (if appropriate) _____________________________
By: ________________________________________________
Title (if appropriate) _____________________________
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
SIGNATURE PAGE TO
FIFTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the Company and Investors have executed this Sixth
Amended and Restated Registration Rights Agreement on the date first above
written.
"INVESTORS"
HOLODECK LIMITED
C/O 22nd Floor
Hutchison House
10 Harcourt Road
Central Hong Kong
Hong Kong
Attn: Susan Chow
By: ________________________________________________
Title (if appropriate) _____________________________
Address ____________________________________________
____________________________________________
____________________________________________
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
SIGNATURE PAGE TO
FIFTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the Company and Investors have executed this Sixth
Amended and Restated Registration Rights Agreement on the date first above
written.
"INVESTORS"
UCOM INTERNATIONAL COMPANY LIMITED
499 Benchachinda Bldg.
16th Floor, Tower A
Vibhaud, Rangsit Road
Chatuchak, Bangkok
Thailand 10900
Attn: Sumeth Amornjaruchit
By: ________________________________________________
Title (if appropriate) _____________________________
Address ____________________________________________
____________________________________________
____________________________________________
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
SIGNATURE PAGE TO
FIFTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the Company and Investors have executed this Sixth
Amended and Restated Registration Rights Agreement on the date first above
written.
"INVESTORS"
INTASYS CORPORATION
By: ________________________________________________
Title (if appropriate) _____________________________
Address ____________________________________________
____________________________________________
____________________________________________
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
SIGNATURE PAGE TO
FIFTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the Company and Investors have executed this Sixth
Amended and Restated Registration Rights Agreement on the date first above
written.
"INVESTORS"
MEDIATEL CAPITAL
By: ________________________________________________
Title (if appropriate) _____________________________
Address ____________________________________________
____________________________________________
____________________________________________
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
SIGNATURE PAGE TO
FIFTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the Company and Investors have executed this Sixth
Amended and Restated Registration Rights Agreement on the date first above
written.
"INVESTORS"
ALCATEL USA, INC.
By: ________________________________________________
Title (if appropriate) _____________________________
Address ____________________________________________
____________________________________________
____________________________________________
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
SIGNATURE PAGE TO
SIXTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT 10.14
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH A
VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF. THE SECURITIES
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN SPECIFIC LIMITED CIRCUMSTANCES, AN
OPINION OF COUNSEL FOR THE HOLDER, CONCURRED IN BY COUNSEL FOR THE COMPANY THAT
SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
STOCK PURCHASE WARRANT
TO PURCHASE SHARES OF COMMON STOCK OF
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
THIS CERTIFIES that, for value received, Intasys Corporation (the
"Investor"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or prior to the close of business, Pacific
Time, on the Expiration Date, but not thereafter, to subscribe for and
purchase, from INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD., a Bermuda
corporation (the "Company"), 715,000 shares of Common Stock.
The purchase price for one share of Company Common Stock under this
Warrant shall equal $1.00 per share.
The Expiration Date shall mean the first to occur of (i) the date which
is three (3) years after the date hereof or (ii) the date of closing of the
Company's initial firm commitment underwritten public offering completed
pursuant to an registration statement filed with and declared effective by the
U.S. Securities and Exchange Commission.
The purchase price and the number of shares for which the Warrant is
exercisable shall be subject to adjustment as provided herein. The class and
series of shares of capital stock of the Company issuable upon exercise of this
Warrant is also subject to adjustment pursuant to Section 10 hereof.
1. TITLE OF WARRANT. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company,
referred to in Section 2 hereof, by the holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant together with the Assignment
Form annexed hereto properly endorsed.
1
<PAGE>
2. EXERCISE OF WARRANT.
(a) The purchase rights represented by this Warrant are
exercisable by the registered holder hereof, in whole or in part, at any time
before the close of business, Pacific Time, on the Expiration Date, by the
surrender of this Warrant and the Subscription Form annexed hereto duly executed
at the principal executive office of the Company (or such other office or agency
of the Company as it may designate by notice in writing to the registered holder
hereof at the address of such holder appearing on the books of the Company), and
upon payment of the purchase price of the shares thereby purchased (by cash or
by check or bank draft payable to the order of the Company or by cancellation of
indebtedness of the Company to the holder hereof, if any, at the time of
exercise in an amount equal to the purchase price of the shares thereby
purchased); whereupon the holder of this Warrant shall be entitled to receive a
certificate for the number of shares of Common Stock so purchased. The Company
agrees that if at the time of the surrender of this Warrant and purchase the
holder hereof shall be entitled to exercise this Warrant, the shares so
purchased shall be and be deemed to be issued to such holder as the record owner
of such shares as of the close of business on the date on which this Warrant
shall have been exercised as aforesaid.
(b) In lieu of the cash payment set forth in paragraph 2(a)
above, the Holder shall have the right ("Conversion Right") to convert this
Warrant in its entirety (without payment of any kind) into that number of shares
of Common Stock equal to the quotient obtained by dividing the Net Value (as
defined below) of the shares issuable upon exercise of this Warrant by the Fair
Market Value (as defined below) of one share of Common Stock. As used herein,
(A) the Net Value of the Shares means the aggregate Fair Market Value of the
shares of Common Stock subject to this Warrant minus the aggregate purchase
price; and (B) the Fair Market Value of one share of Common Stock means:
(i) if the exercise occurs at a time during which the
Company's Common Stock is traded on a national securities exchange or on the
Nasdaq National Market, the Fair Market Value of one share of Common Stock means
the average last reported or closing sale price for the Company's Common Stock
on such exchange or market for the three trading days ending one business day
before the exercise of this Warrant;
(ii) if the exercise is in connection with a merger, sale
of assets or other reorganization transaction as described in Section 10(a)
below, the Fair Market Value of one share of Common Stock means the value
received by the holders of the Company's Common Stock pursuant to such Merger
Transaction; and
(iii) in all other cases, the Fair Market Value of one
share of Common Stock shall be determined in good faith by the Company's Board
of Directors.
2
<PAGE>
(c) Certificates for shares purchased hereunder shall be
delivered to the holder hereof within a reasonable time after the date on which
this Warrant shall have been exercised as aforesaid. The Company covenants that
all shares of Common Stock which may be issued upon the exercise of rights
represented by this Warrant will, upon exercise of the rights represented by
this Warrant, be fully paid and nonassessable and free from all taxes, liens and
charges in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).
3. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon the exercise
of this Warrant, an amount equal to such fraction multiplied by the then current
price at which each share may be purchased hereunder shall be paid in cash to
the holder of this Warrant.
4. CHARGES, TAXES AND EXPENSES. Issuance of certificates for shares
of Common Stock upon the exercise of this Warrant shall be made without charge
to the holder hereof for any issue or transfer tax or other incidental expense
in respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; PROVIDED, HOWEVER, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof; and PROVIDED FURTHER, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
5. NO RIGHTS AS SHAREHOLDERS. This Warrant does not entitle the
holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise thereof.
6. REGISTRATION RIGHTS. All Common Stock issuable upon exercise of
this Warrant shall be "Registrable Securities" or such other definition of
securities entitled to registration rights pursuant to that certain Fifth
Amended and Restated Registration Rights Agreement, and are entitled, subject to
the terms and conditions of that agreement, to all registration rights granted
to holders of Registrable Securities thereunder.
7. EXCHANGE AND REGISTRY OF WARRANT. This Warrant is exchangeable,
upon the surrender hereof by the registered holder at the above-mentioned office
or agency of the Company, for a new Warrant of like tenor and dated as of such
exchange.
The Company shall maintain at the above-mentioned office or agency
a registry showing the name and address of the registered holder of this
Warrant. This Warrant may be surrendered for exchange, transfer or exercise, in
accordance with its
3
<PAGE>
terms, at such office or agency of the Company, and the Company shall be
entitled to rely in all respects, prior to written notice to the contrary,
upon such registry.
8. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. Upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation,
in lieu of this Warrant.
9. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a legal holiday.
10. MERGER, RECLASSIFICATION, ETC.
(a) MERGER, SALE OF ASSETS, ETC. If at any time the Company
proposes to merge with or into any other corporation, effect a reorganization,
or sell or convey all or substantially all of its assets to any other entity,
then the surviving entity shall be obligated to assume the obligations of this
Warrant and it shall be exercisable for the number of shares of stock or other
securities or property which the holder of this Warrant would have received in
the transaction if the holder had exercised the Warrant immediately prior to the
consummation of the transaction. The exercise price shall, in such event, be
proportionately adjusted based on the exchange ratio for shares of the Company's
Common Stock in such transaction.
(b) RECLASSIFICATION, ETC. If the Company at any time shall,
by subdivision, combination or reclassification of securities or otherwise,
change any of the securities to which purchase rights under this Warrant exist
into the same or a different number of securities of any class or classes, this
Warrant shall thereafter be to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities which were subject to the purchase rights under this Warrant
immediately prior to such subdivision, combination, reclassification or other
change. If shares of the Company's Common Stock are subdivided or combined into
a greater or smaller number of shares of Common Stock, the purchase price under
this Warrant shall be proportionately reduced in case of subdivision of shares
or proportionately increased in the case of combination of shares, in both cases
by the ratio which the total number of shares of Common Stock to be outstanding
immediately after such event bears to the total number of shares of Common Stock
outstanding immediately prior to such event.
(c) CASH DISTRIBUTIONS. No adjustment on account of cash
dividends or interest on the Company's Common Stock or other securities
purchasable hereunder will be made to the purchase price under this Warrant.
4
<PAGE>
(d) OTHER DISTRIBUTIONS. If the Company at any time makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive any distribution payable in securities of the Company, then and in each
such event provision shall be made so that the Holder hereof shall receive upon
exercise of the Warrant, in addition to the number of shares of Common Stock
issuable upon exercise of this Warrant, the amount of securities of the Company
which such Holder would have received had this Warrant been exercised on the
date of such event and had such Holder thereafter, during the period from the
date of such event to and including the date of exercise, retained such
securities receivable by such Holder as aforesaid during such period, subject to
all other adjustments called for such period under this Section 10 with respect
to the rights of the Holder.
(d) AUTHORIZED SHARES. The Company covenants that, through the
period the Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of any purchase rights under this Warrant.
The Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of the
Company's Common Stock upon the exercise of the purchase rights under this
Warrant.
11. MISCELLANEOUS.
(a) ISSUE DATE. The provisions of this Warrant shall be
construed and shall be given effect in all respect as if it had been issued and
delivered by the Company on the date hereof. This Warrant shall be binding upon
any successors or assigns of the Company. This Warrant shall constitute a
contract under the laws of the State of California and for all purposes shall be
construed in accordance with and governed by the laws of said state.
(b) RESTRICTIONS. The holder hereof acknowledges that the
Common Stock acquired upon the exercise of this Warrant may have restrictions
upon its resale imposed by state and federal securities laws.
(c) WAIVERS AND AMENDMENTS. This Warrant may be amended or
modified, and any provision hereof may be waived, only with the written consent
of the Company and the Holder hereof.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
5
<PAGE>
IN WITNESS WHEREOF, INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. has
caused this Warrant to be executed by its officers thereunto duly authorized.
Dated: August ____, 1999
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
By: ______________________________
Title: ______________________________
6
<PAGE>
NOTICE OF EXERCISE
To: INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
(1) The undersigned hereby elects to purchase ____________ shares of
Common Stock of INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price in full, together with all applicable transfer taxes, if any.
(2) Please issue a certificate of certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
_______________________________________________
(Name)
_______________________________________________
_______________________________________________
(Address)
(3) The undersigned represents that the aforesaid shares of Common
Stock are being acquired for the account of the undersigned for investment and
not with a view to, or for resale in connection with, the distribution thereof
and that the undersigned has no present intention of distributing or reselling
such shares.
__________________________ __________________________________________
(Date) (Signature)
7
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
________________________________________________________________________
(Please Print)
whose address is:
___________________________
___________________________
Dated: _____________________, 19____.
Holder's Signature: _______________________________
Holder's Address: _________________________________
___________________________________________________
Signature Guaranteed:_____________________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
8
<PAGE>
EXHIBIT 10.15
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH A
VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF. THE SECURITIES
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN SPECIFIC LIMITED CIRCUMSTANCES, AN
OPINION OF COUNSEL FOR THE HOLDER, CONCURRED IN BY COUNSEL FOR THE COMPANY THAT
SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
STOCK PURCHASE WARRANT
TO PURCHASE SHARES OF COMMON STOCK OF
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
THIS CERTIFIES that, for value received, MediaTel Capital (the
"Investor"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or prior to the close of business, Pacific
Time, on the Expiration Date, but not thereafter, to subscribe for and
purchase, from INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD., a Bermuda
corporation (the "Company"), 100,000 shares of Common Stock.
The purchase price for one share of Company Common Stock under this
Warrant shall equal $1.00 per share.
The Expiration Date shall mean the first to occur of (i) the date which
is three (3) years after the date hereof or (ii) the date of closing of the
Company's initial firm commitment underwritten public offering completed
pursuant to an registration statement filed with and declared effective by the
U.S. Securities and Exchange Commission.
The purchase price and the number of shares for which the Warrant is
exercisable shall be subject to adjustment as provided herein. The class and
series of shares of capital stock of the Company issuable upon exercise of this
Warrant is also subject to adjustment pursuant to Section 10 hereof.
1. TITLE OF WARRANT. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company,
referred to in Section 2 hereof, by the holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant together with the Assignment
Form annexed hereto properly endorsed.
1
<PAGE>
2. EXERCISE OF WARRANT.
(a) The purchase rights represented by this Warrant are
exercisable by the registered holder hereof, in whole or in part, at any time
before the close of business, Pacific Time, on the Expiration Date, by the
surrender of this Warrant and the Subscription Form annexed hereto duly executed
at the principal executive office of the Company (or such other office or agency
of the Company as it may designate by notice in writing to the registered holder
hereof at the address of such holder appearing on the books of the Company), and
upon payment of the purchase price of the shares thereby purchased (by cash or
by check or bank draft payable to the order of the Company or by cancellation of
indebtedness of the Company to the holder hereof, if any, at the time of
exercise in an amount equal to the purchase price of the shares thereby
purchased); whereupon the holder of this Warrant shall be entitled to receive a
certificate for the number of shares of Common Stock so purchased. The Company
agrees that if at the time of the surrender of this Warrant and purchase the
holder hereof shall be entitled to exercise this Warrant, the shares so
purchased shall be and be deemed to be issued to such holder as the record owner
of such shares as of the close of business on the date on which this Warrant
shall have been exercised as aforesaid.
(b) In lieu of the cash payment set forth in paragraph 2(a)
above, the Holder shall have the right ("Conversion Right") to convert this
Warrant in its entirety (without payment of any kind) into that number of shares
of Common Stock equal to the quotient obtained by dividing the Net Value (as
defined below) of the shares issuable upon exercise of this Warrant by the Fair
Market Value (as defined below) of one share of Common Stock. As used herein,
(A) the Net Value of the Shares means the aggregate Fair Market Value of the
shares of Common Stock subject to this Warrant minus the aggregate purchase
price; and (B) the Fair Market Value of one share of Common Stock means:
(i) if the exercise occurs at a time during which the
Company's Common Stock is traded on a national securities exchange or on the
Nasdaq National Market, the Fair Market Value of one share of Common Stock means
the average last reported or closing sale price for the Company's Common Stock
on such exchange or market for the three trading days ending one business day
before the exercise of this Warrant;
(ii) if the exercise is in connection with a merger, sale
of assets or other reorganization transaction as described in Section 10(a)
below, the Fair Market Value of one share of Common Stock means the value
received by the holders of the Company's Common Stock pursuant to such Merger
Transaction; and
(iii) in all other cases, the Fair Market Value of one
share of Common Stock shall be determined in good faith by the Company's Board
of Directors.
2
<PAGE>
(c) Certificates for shares purchased hereunder shall be
delivered to the holder hereof within a reasonable time after the date on which
this Warrant shall have been exercised as aforesaid. The Company covenants that
all shares of Common Stock which may be issued upon the exercise of rights
represented by this Warrant will, upon exercise of the rights represented by
this Warrant, be fully paid and nonassessable and free from all taxes, liens and
charges in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).
3. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon the exercise
of this Warrant, an amount equal to such fraction multiplied by the then current
price at which each share may be purchased hereunder shall be paid in cash to
the holder of this Warrant.
4. CHARGES, TAXES AND EXPENSES. Issuance of certificates for shares
of Common Stock upon the exercise of this Warrant shall be made without charge
to the holder hereof for any issue or transfer tax or other incidental expense
in respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; PROVIDED, HOWEVER, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof; and PROVIDED FURTHER, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
5. NO RIGHTS AS SHAREHOLDERS. This Warrant does not entitle the
holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise thereof.
6. REGISTRATION RIGHTS. All Common Stock issuable upon exercise of
this Warrant shall be "Registrable Securities" or such other definition of
securities entitled to registration rights pursuant to that certain Fifth
Amended and Restated Registration Rights Agreement, and are entitled, subject to
the terms and conditions of that agreement, to all registration rights granted
to holders of Registrable Securities thereunder.
7. EXCHANGE AND REGISTRY OF WARRANT. This Warrant is exchangeable,
upon the surrender hereof by the registered holder at the above-mentioned office
or agency of the Company, for a new Warrant of like tenor and dated as of such
exchange.
The Company shall maintain at the above-mentioned office or agency
a registry showing the name and address of the registered holder of this
Warrant. This Warrant may be surrendered for exchange, transfer or exercise, in
accordance with its
3
<PAGE>
terms, at such office or agency of the Company, and the Company shall be
entitled to rely in all respects, prior to written notice to the contrary,
upon such registry.
8. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. Upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation,
in lieu of this Warrant.
9. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a legal holiday.
10. MERGER, RECLASSIFICATION, ETC.
(a) MERGER, SALE OF ASSETS, ETC. If at any time the Company
proposes to merge with or into any other corporation, effect a reorganization,
or sell or convey all or substantially all of its assets to any other entity,
then the surviving entity shall be obligated to assume the obligations of this
Warrant and it shall be exercisable for the number of shares of stock or other
securities or property which the holder of this Warrant would have received in
the transaction if the holder had exercised the Warrant immediately prior to the
consummation of the transaction. The exercise price shall, in such event, be
proportionately adjusted based on the exchange ratio for shares of the Company's
Common Stock in such transaction.
(b) RECLASSIFICATION, ETC. If the Company at any time shall,
by subdivision, combination or reclassification of securities or otherwise,
change any of the securities to which purchase rights under this Warrant exist
into the same or a different number of securities of any class or classes, this
Warrant shall thereafter be to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities which were subject to the purchase rights under this Warrant
immediately prior to such subdivision, combination, reclassification or other
change. If shares of the Company's Common Stock are subdivided or combined into
a greater or smaller number of shares of Common Stock, the purchase price under
this Warrant shall be proportionately reduced in case of subdivision of shares
or proportionately increased in the case of combination of shares, in both cases
by the ratio which the total number of shares of Common Stock to be outstanding
immediately after such event bears to the total number of shares of Common Stock
outstanding immediately prior to such event.
(c) CASH DISTRIBUTIONS. No adjustment on account of cash
dividends or interest on the Company's Common Stock or other securities
purchasable hereunder will be made to the purchase price under this Warrant.
4
<PAGE>
(d) OTHER DISTRIBUTIONS. If the Company at any time makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive any distribution payable in securities of the Company, then and in each
such event provision shall be made so that the Holder hereof shall receive upon
exercise of the Warrant, in addition to the number of shares of Common Stock
issuable upon exercise of this Warrant, the amount of securities of the Company
which such Holder would have received had this Warrant been exercised on the
date of such event and had such Holder thereafter, during the period from the
date of such event to and including the date of exercise, retained such
securities receivable by such Holder as aforesaid during such period, subject to
all other adjustments called for such period under this Section 10 with respect
to the rights of the Holder.
(d) AUTHORIZED SHARES. The Company covenants that, through the
period the Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of any purchase rights under this Warrant.
The Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of the
Company's Common Stock upon the exercise of the purchase rights under this
Warrant.
11. MISCELLANEOUS.
(a) ISSUE DATE. The provisions of this Warrant shall be
construed and shall be given effect in all respect as if it had been issued and
delivered by the Company on the date hereof. This Warrant shall be binding upon
any successors or assigns of the Company. This Warrant shall constitute a
contract under the laws of the State of California and for all purposes shall be
construed in accordance with and governed by the laws of said state.
(b) RESTRICTIONS. The holder hereof acknowledges that the
Common Stock acquired upon the exercise of this Warrant may have restrictions
upon its resale imposed by state and federal securities laws.
(c) WAIVERS AND AMENDMENTS. This Warrant may be amended or
modified, and any provision hereof may be waived, only with the written consent
of the Company and the Holder hereof.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
5
<PAGE>
IN WITNESS WHEREOF, INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. has
caused this Warrant to be executed by its officers thereunto duly authorized.
Dated: September ____, 1999
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
By: ______________________________
Title: ______________________________
6
<PAGE>
NOTICE OF EXERCISE
To: INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
(1) The undersigned hereby elects to purchase ____________ shares of
Common Stock of INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price in full, together with all applicable transfer taxes, if any.
(2) Please issue a certificate of certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
_______________________________________________
(Name)
_______________________________________________
_______________________________________________
(Address)
(3) The undersigned represents that the aforesaid shares of Common
Stock are being acquired for the account of the undersigned for investment and
not with a view to, or for resale in connection with, the distribution thereof
and that the undersigned has no present intention of distributing or reselling
such shares.
__________________________ __________________________________________
(Date) (Signature)
7
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
________________________________________________________________________
(Please Print)
whose address is:
___________________________
___________________________
Dated: _____________________, 19____.
Holder's Signature: _______________________________
Holder's Address: _________________________________
___________________________________________________
Signature Guaranteed:_____________________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
8
<PAGE>
EXHIBIT 10.16
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH A
VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF. THE SECURITIES
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN SPECIFIC LIMITED CIRCUMSTANCES, AN
OPINION OF COUNSEL FOR THE HOLDER, CONCURRED IN BY COUNSEL FOR THE COMPANY THAT
SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
STOCK PURCHASE WARRANT
TO PURCHASE SHARES OF COMMON STOCK OF
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
THIS CERTIFIES that, for value received, Northern Telecom Limited (the
"Investor"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or prior to the earlier of (i) the close
of business on the date three (3) years after the date hereof or (ii) the date
of closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act, covering the offer
and sale of Common Stock at an aggregate offering price of not less than
$25,000,000 and at a price to public in such offering that is greater than or
equal to $4.00 per share (based on the Company's capital stock as currently
constituted and subject to future proportionate adjustment for stock splits,
dividends, combinations and the like (the "Termination Date"), but not
thereafter, to subscribe for and purchase, from INTERWAVE COMMUNICATIONS
INTERNATIONAL, LTD., a Bermuda corporation (the "Company"), twenty-four thousand
(24,000) shares of Common Stock of the Company.
The purchase price for one share of Company Common Stock under this
Warrant shall equal $1.15 per share. This Warrant shall be deemed to be a
Warrant as defined in the Series G Preferred Stock and Warrant Purchase
Agreement between the Company and the Investor dated as of March 16, 1998, as
amended March 3, 1999.
The purchase price and the number of shares for which the Warrant is
exercisable shall be subject to adjustment as provided herein. The class and
series of shares of capital stock of the Company issuable upon exercise of this
Warrant is also subject to adjustment pursuant to Section 9 hereof.
1. TITLE OF WARRANT. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company,
referred to in Section 2 hereof, by the holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant together with the Assignment
Form annexed hereto properly endorsed.
<PAGE>
2. EXERCISE OF WARRANT.
(a) The purchase rights represented by this Warrant are
exercisable by the registered holder hereof, in whole or in part, at any time
before the close of business on the Termination Date, by the surrender of this
Warrant and the Subscription Form annexed hereto duly executed at the principal
executive office of the Company (or such other office or agency of the Company
as it may designate by notice in writing to the registered holder hereof at the
address of such holder appearing on the books of the Company), and upon payment
of the purchase price of the shares thereby purchased (by cash or by check or
bank draft payable to the order of the Company or by cancellation of
indebtedness of the Company to the holder hereof, if any, at the time of
exercise in an amount equal to the purchase price of the shares thereby
purchased); whereupon the holder of this Warrant shall be entitled to receive a
certificate for the number of shares of Common Stock so purchased. The Company
agrees that if at the time of the surrender of this Warrant and purchase the
holder hereof shall be entitled to exercise this Warrant, the shares so
purchased shall be and be deemed to be issued to such holder as the record owner
of such shares as of the close of business on the date on which this Warrant
shall have been exercised as aforesaid.
(b) In lieu of the cash payment set forth in paragraph 2(a)
above, the Holder shall have the right ("Conversion Right") to convert this
Warrant in its entirety (without payment of any kind) into that number of shares
of Common Stock equal to the quotient obtained by dividing the Net Value (as
defined below) of the shares issuable upon exercise of this Warrant by the Fair
Market Value (as defined below) of one share of Common Stock. As used herein,
(A) the Net Value of the Shares means the aggregate Fair Market Value of the
shares of Common Stock subject to this Warrant minus the aggregate purchase
price; and (B) the Fair Market Value of one share of Common Stock means:
(i) if the exercise occurs at a time during which the
Company's Common Stock is traded on a national securities exchange or on the
Nasdaq National Market, the Fair Market Value of one share of Common Stock means
the average last reported or closing sale price for the Company's Common Stock
on such exchange or market for the three trading days ending one business day
before the exercise of this Warrant;
(ii) if the exercise is in connection with a merger, sale
of assets or other reorganization transaction as described in Section 9(a)
below, the Fair Market Value of one share of Common Stock means the value
received by the holders of the Company's Common Stock pursuant to such Merger
Transaction; and
(iii) in all other cases, the Fair Market Value of one
share of Common Stock shall be determined in good faith by the Company's Board
of Directors.
(c) Certificates for shares purchased hereunder shall be
delivered to the holder hereof within a reasonable time after the date on which
this Warrant shall have been exercised as aforesaid. The Company covenants that
all shares of Common Stock which may be issued upon the
2
<PAGE>
exercise of rights represented by this Warrant will, upon exercise of the
rights represented by this Warrant, be fully paid and nonassessable and free
from all taxes, liens and charges in respect of the issue thereof (other than
taxes in respect of any transfer occurring contemporaneously with such issue).
3. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon the exercise
of this Warrant, an amount equal to such fraction multiplied by the then current
price at which each share may be purchased hereunder shall be paid in cash to
the holder of this Warrant.
4. CHARGES, TAXES AND EXPENSES. Issuance of certificates for shares
of Common Stock upon the exercise of this Warrant shall be made without charge
to the holder hereof for any issue or transfer tax or other incidental expense
in respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; PROVIDED, HOWEVER, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof; and PROVIDED FURTHER, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
5. NO RIGHTS AS SHAREHOLDERS. This Warrant does not entitle the
holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise thereof.
6. EXCHANGE AND REGISTRY OF WARRANT. This Warrant is exchangeable,
upon the surrender hereof by the registered holder at the above-mentioned office
or agency of the Company, for a new Warrant of like tenor and dated as of such
exchange.
The Company shall maintain at the above-mentioned office or agency
a registry showing the name and address of the registered holder of this
Warrant. This Warrant may be surrendered for exchange, transfer or exercise, in
accordance with its terms, at such office or agency of the Company, and the
Company shall be entitled to rely in all respects, prior to written notice to
the contrary, upon such registry.
7. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. Upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation,
in lieu of this Warrant.
3
<PAGE>
8. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a legal holiday.
9. MERGER, RECLASSIFICATION, ETC.
(a) MERGER, SALE OF ASSETS, ETC. If at any time the Company
proposes to merge with or into any other corporation, effect a reorganization,
or sell or convey all or substantially all of its assets to any other entity,
then the surviving entity shall be obligated to assume the obligations of this
Warrant and it shall be exercisable for the number of shares of stock or other
securities or property which the holder of this Warrant would have received in
the transaction if the holder had exercised the Warrant immediately prior to the
consummation of the transaction. The exercise price shall, in such event, be
proportionately adjusted based on the exchange ratio for shares of the Company's
Common Stock in such transaction.
(b) RECLASSIFICATION, ETC. If the Company at any time shall,
by subdivision, combination or reclassification of securities or otherwise,
change any of the securities to which purchase rights under this Warrant exist
into the same or a different number of securities of any class or classes, this
Warrant shall thereafter be to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities which were subject to the purchase rights under this Warrant
immediately prior to such subdivision, combination, reclassification or other
change. If shares of the Company's Common Stock are subdivided or combined into
a greater or smaller number of shares of Common Stock, the purchase price under
this Warrant shall be proportionately reduced in case of subdivision of shares
or proportionately increased in the case of combination of shares, in both cases
by the ratio which the total number of shares of Common Stock to be outstanding
immediately after such event bears to the total number of shares of Common Stock
outstanding immediately prior to such event.
(c) CASH DISTRIBUTIONS. No adjustment on account of cash
dividends or interest on the Company's Common Stock or other securities
purchasable hereunder will be made to the purchase price under this Warrant.
(d) OTHER DISTRIBUTIONS. If the Company at any time makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive any distribution payable in securities of the Company, then and in each
such event provision shall be made so that the Holder hereof shall receive upon
exercise of the Warrant, in addition to the number of shares of Common Stock
issuable upon exercise of this Warrant, the amount of securities of the Company
which such Holder would have received had this Warrant been exercised on the
date of such event and had such Holder thereafter, during the period from the
date of such event to and including the date of exercise, retained such
securities receivable by such Holder as aforesaid during such period, subject to
all other adjustments called for such period under this Section 9 with respect
to the rights of the Holder.
4
<PAGE>
(d) AUTHORIZED SHARES. The Company covenants that, through the
period the Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of any purchase rights under this Warrant.
The Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of the
Company's Common Stock upon the exercise of the purchase rights under this
Warrant.
10. MISCELLANEOUS.
(a) ISSUE DATE. The provisions of this Warrant shall be
construed and shall be given effect in all respect as if it had been issued and
delivered by the Company on the date hereof. This Warrant shall be binding upon
any successors or assigns of the Company. This Warrant shall constitute a
contract under the laws of the State of California and for all purposes shall be
construed in accordance with and governed by the laws of said state.
(b) RESTRICTIONS. The holder hereof acknowledges that the
Common Stock acquired upon the exercise of this Warrant may have restrictions
upon its resale imposed by state and federal securities laws.
(c) AMENDMENTS. This Warrant may be amended only with the
written consent of the Company and the Holder hereof.
5
<PAGE>
IN WITNESS WHEREOF, INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. has
caused this Warrant to be executed by its officers thereunto duly authorized.
Dated: April 22, 1999
INTERWAVE COMMUNICATIONS
INTERNATIONAL, LTD.
By: ______________________________
Title: ______________________________
6
<PAGE>
NOTICE OF EXERCISE
To: INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
(1) The undersigned hereby elects to purchase ____________ shares of
Common Stock of INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price in full, together with all applicable transfer taxes, if any.
(2) Please issue a certificate of certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
_______________________________________________
(Name)
_______________________________________________
_______________________________________________
(Address)
(3) The undersigned represents that the aforesaid shares of Common
Stock are being acquired for the account of the undersigned for investment and
not with a view to, or for resale in connection with, the distribution thereof
and that the undersigned has no present intention of distributing or reselling
such shares.
__________________________ __________________________________________
(Date) (Signature)
7
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
______________________________________________________________________________
(Please Print)
whose address is______________________________________________________________
(Please Print)
______________________________________________________________________________
Dated:_____________________, 19____.
Holder's Signature:________________________
Holder's Address:__________________________
___________________________________________
Signature Guaranteed:_________________________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
8
<PAGE>
EXHIBIT 10.18
March 16, 1998
TECHNICAL INFORMATION AGREEMENT
Revision 11
Northern Telecom Limited
interWAVE
<PAGE>
INDEX
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
1 DEFINITIONS 2
2 TECHNICAL INFORMATION GRANT 3
3 PATENT GRANT 4
4 SOFTWARE GRANT 4
5 FURNISHING OF TECHNICAL INFORMATION 6
6 TECHNICAL ASSISTANCE AND TESTING SERVICES 6
7 OTHER ASSISTANCE 9
8 CONFIDENTIAL INFORMATION 10
9 GRANT BACK LICENSE 12
10 DEVELOPMENT AGREEMENT 12
11 LIABILITY 15
12 FORCE MAJEURE 16
13 REGISTRATION 17
14 DURATION 17
15 TERMINATION 17
16 DISPUTE RESOLUTION 18
17 NOTICES 19
18 ASSIGNMENT 19
19 GENERAL 21
SCHEDULE A - SUPPORT INFORMATION 24
SCHEDULE B - NORTEL LAB COSTS 27
SCHEDULE C - TEST BED SPECIFICATIONS 28
SCHEDULE D - PARTIAL TERMINATION REFUND 29
</TABLE>
<PAGE>
TECHNICAL INFORMATION AGREEMENT
MEMORANDUM OF AGREEMENT made and entered into on the _______ day of
_____________, 1998
BY AND BETWEEN:
NORTHERN TELECOM LIMITED, a corporation duly incorporated under the
laws of Canada, having its executive offices at 8200 Dixie Road,
Brampton, Ontario, Canada, on behalf of itself and its Subsidiaries,
(hereinafter called "NORTEL")
AND:
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD., a Bermuda corporation
having its offices at c/o Codan Services Ltd. Clarendon House, Church
Street, Hamilton, HM CX, Bermuda,
(hereinafter called "INTERWAVE")
WHEREAS Nortel manufactures and markets, globally, certain mobile and
fixed wireless telecommunications systems;
WHEREAS interWAVE has developed a low-capacity microcellular system
("MICROCELLULAR PUBLIC RADIO SYSTEM") which is based on the Global System for
Mobility standards and which utilizes microcellular infrastructure products
("MICROCELLULAR INFRASTRUCTURE PRODUCTS");
WHEREAS Nortel desires to be interWAVE's preferred channel to market for
the Microcellular Public Radio System on a global basis and is prepared to
participate, financially and otherwise, in its evolution;
WHEREAS interWAVE recognizes the benefits of being associated with a
global company of Nortel's stature and is prepared to accept Nortel's funding
and participation in the evolution of the Microcellular Public Radio System;
WHEREAS both Parties anticipate that they may wish to collaborate in the
development of future products and
WHEREAS interWAVE has provided economic consideration via the Shareholder
Agreement in the amount of US$3.5 million.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH THAT, IN CONSIDERATION OF THE
SHAREHOLDER AGREEMENT AND THE ORIGINAL EQUIPMENT MANUFACTURING (OEM)
AGREEMENT EXECUTED CONCURRENTLY HEREWITH AND THE MUTUAL PROMISES HEREINAFTER
SET FORTH, THE PARTIES AGREE AS FOLLOWS:
Page 1 of 29
<PAGE>
ARTICLE I
DEFINITIONS
1.1. As used herein, unless otherwise defined:
a) "AFFILIATE" shall mean a corporation or company which a Party hereto
effectively controls, directly or indirectly, other than a Subsidiary,
through the ownership or control of shares in the corporation or
company; in the case of Nortel, "Affiliate" shall include the parent
company Northern Telecom Limited, and Northern Telecom Inc., and any
corporation which the parent corporation controls directly or indirectly
through the ownership or control of shares or securities in such other
corporation or otherwise;
b) "EFFECTIVE DATE" shall mean the date of any governmental approvals
required to carry out this Agreement or in the event no such approvals
are necessary, the date first set forth above;
c) "INTERWAVE PRODUCTS" shall mean the Microcellular Infrastructure
Products as manufactured by or on behalf of interWAVE that complies
with the Global System for Mobility standards;
d) "MICROCELLULAR INFRASTRUCTURE PRODUCTS" shall have the meaning ascribed
to it in the Patent License Agreement among Northern Telecom Limited,
Nortel Matra Cellular SCA, and interWAVE, executed concurrently with
the execution of this Agreement.
e) "MICROCELLULAR PUBLIC RADIO SYSTEM" shall have the meaning ascribed to
it in the Patent License Agreement among Northern Telecom Limited,
Nortel Matra Cellular SCA, and interWAVE, executed concurrently with
the execution of this Agreement.
f) "OEM AGREEMENT" shall mean the ORIGINAL EQUIPMENT MANUFACTURING (OEM)
AGREEMENT executed concurrently herewith; "PATENT LICENSE" shall mean
the PATENT LICENSE AGREEMENT executed concurrently herewith;
g) "PRODUCT SOFTWARE" shall mean the compiled, assembled or otherwise
processed version of Support Software that constitutes, in whole or in
part, the software that executes in, and controls the normal
functionality of, interWAVE Products;
h) "SUPPORT INFORMATION" or "TECHNICAL INFORMATION" shall mean that
information related to the functionality, performance, testing and
interfaces of Nortel's products with which the Microcellular
Infrastructure Products must be capable of interworking, and similar
information related to other Nortel Products, all as set forth in
Schedule "A" attached hereto and forming a part hereof, as from time to
time amended by the Parties, to the extent available in accordance with
Article 5 ("Furnishing of Technical Information") hereof;
i) "SUPPORT SOFTWARE" shall mean the software, if any, contained in the
Support Information; and
j) "SUBSIDIARY" shall mean a corporation or company in which a Party
hereto effectively owns or controls, and continues to own or control,
directly or indirectly, more than fifty percent (50%) of the voting
stock or shares.
Page 2 of 29
<PAGE>
ARTICLE 2
TECHNICAL INFORMATION GRANT
2.1 SUPPORT INFORMATION: Nortel, to the extent of its legal right so to do,
hereby grants to interWAVE, as of the Effective Date, subject to the
terms and conditions of this Agreement, personal, non-transferable,
non-assignable except under the terms set forth in Article 18.1,
indivisible, non-exclusive rights:
(a) to use and modify Support Information supplied hereunder solely
to develop, manufacture and test interWAVE Products; and
(b) to sell interWAVE Products based on or incorporating Support
Information to its customers worldwide.
2.2 PROCUREMENT SPECIFICATIONS: The aforesaid rights shall include:
(a) the right to communicate relevant procurement specifications
related to Support Information to suppliers in all countries of
the world reasonably necessary for, and solely for, the
procurement by interWAVE of commercially available materials,
parts, components and assemblies for use in the manufacture
and/or installation of interWAVE Products; and
(b) the right to communicate to customers purchasing or leasing
interWAVE Products such portions of Support Information as are
reasonably needed by such customers for operating and maintaining
interWAVE Products;
provided, however, the recipients of Support Information shall be
advised by interWAVE, in writing at the time of or before such
communication, that proprietary information is being communicated and
that such information is to be kept confidential and not used except as
permitted hereunder, and provided further, that such recipients have
contractually agreed, in writing, prior to such disclosure, to respect
such confidentiality obligations.
ARTICLE 3
[INTENTIONALLY BLANK]
ARTICLE 4
SOFTWARE GRANT
4.1 INTEGRATION: Notwithstanding Article 2 ("Technical Information Grant")
hereof, in the event Support Information includes Support Software,
interWAVE's rights in respect of Support Software shall be as set out
below in this Article 4 ("Software Grant").
4.2 GRANT: Nortel, to the extent of its legal right so to do, hereby grants
to interWAVE, as of the Effective Date, subject to the terms and
conditions of this Agreement, personal, non-transferable,
non-assignable, indivisible, non-exclusive rights:
4.3 (a) to modify and use Support Software to develop and produce Product
Software for use solely in interWAVE Products; and
Page 3 of 29
<PAGE>
(b) to sublicense the Product Software solely for the purpose of
operating and maintaining interWAVE Products used, leased or sold by
interWAVE pursuant to this Agreement.
4.3. LIMITED LICENSE RIGHTS: Nothing contained herein shall transfer, or be
deemed to transfer, or contemplate the transfer of, any rights in or to
Support Software other than those rights specifically granted herein and,
in particular but without restricting the generality of the foregoing,
Nortel does not in any way transfer any right, title or interest in or to
Support Software, or derivatives thereof or any element constituting a
portion thereof, to interWAVE or its sublicensees, other than the limited
rights granted herein.
4.4. FIRMWARE MARKING: In respect of Product Software residing in
non-reprogrammable memory devices forming an integral part of interWAVE
Products (commonly referred to as "firmware"), interWAVE shall, having
regard to the laws of the country(ies) in which such interWAVE Product is
intended to be sold, affix to such devices a copyright notice and/or such
other notice in accordance with prudent procedure to assist in the
prohibition of the reproduction, decompilation or the like of, and to
ensure the continuation of Nortel's proprietary rights in, the Support
Software.
4.5. NON-FIRMWARE SUBLICENSING: In respect of Product Software that resides
other than in non-reprogrammable memory devices forming an integral part
of the interWAVE Product (commonly referred to as "firmware"), interWAVE's
right to furnish Product Software to its sublicensees shall be subject to
the prior or concurrent entering into of an enforceable sublicense
agreement between interWAVE and each sublicensee containing the following
provisions:
(a) sublicensee shall acquire no right, title or interest in or to
Product Software other than the right to use Product Software for
the operation and maintenance of interWAVE Products and such use
shall be limited to specific individual central processing units
bearing a specific serial number and having a specific location;
(b) sublicensee shall hold Product Software in confidence for Nortel and
interWAVE and shall not, at any time, without the prior written
consent of Nortel and interWAVE, use or reproduce Product Software
except as expressly permitted hereunder or divulge Product Software
to any person other than employees of sublicensee with a need to
know; and
(c) the right to use Product Software shall be in accordance with the
laws applicable in the country in which the relevant instance of
interWAVE Product is sold but so as not to affect, but to preserve,
the proprietary and confidential nature of Product Software and any
patent, copyright, or other rights of Nortel, its Subsidiaries and
Affiliates applicable to Support Software.
4.6. SUBLICENSE ENFORCEMENT: interWAVE shall negotiate, execute, administer and
monitor each of Product Software sublicense agreements to ensure
compliance with all of the relevant provisions of this Agreement. In the
event a Sublicensee is in default under its sublicense agreement,
interWAVE shall so advise Nortel in writing, promptly, and exercise as
soon as reasonably possible such rights and recourses as it may have in
the circumstances with particular emphasis on preserving the proprietary
and confidential nature of Support Software and any patent, copyright or
other rights of Nortel, its Subsidiaries or Affiliates, applicable to
Support Software.
Page 4 of 29
<PAGE>
4.7. USE BY INTERWAVE: In the event interWAVE uses interWAVE Products for its
own purposes other than for matters associated with the exercise of this
Agreement (such matters including, by way of example, captive offices for
developing, testing and demonstrating interWAVE Products, or training, as
contemplated herein) interWAVE's use of the related Product Software shall
be subject to the provisions hereunder applicable to its sublicensees
therefor.
4.8. THIRD PARTY SOFTWARE: In the event use of Support Software or Product
Software derived therefrom requires the presence or associated execution
of software proprietary to a third party, interWAVE, solely, shall be
responsible for acquiring the necessary rights to such third party
software and shall bear all the costs associated therewith.
4.9. COPYRIGHT NOTICES, USE BY GOVERNMENT: interWAVE shall not remove or
destroy any copyright or restricted rights notices affixed by Nortel to
any original media containing Support Software or Documentation. All
interWAVE Products incorporating Product Software or portions thereof
distributed to the U.S. Government shall contain required "Restricted
Rights" notices substantially as follows: "Use, duplication or disclosure
by the U.S. government is subject to restrictions as set forth in DFARS
252.227-7013(c)(i)-(ii); FAR 52.227-19; and FAR 52.227-14, Alternate III,
as applicable (including any subsequent clauses) or any other applicable
Federal government regulations." Any copies of Product Software or
Documentation distributed by interWAVE shall either be labeled in the same
manner as on the original media or in a manner substantially similar to
the following:
-C- Copyright "YEAR" interWAVE and its licensors.
All Rights Reserved.
ARTICLE 5
FURNISHING OF TECHNICAL INFORMATION
5.1. SUPPORT INFORMATION: Nortel shall, to the extent of its legal right so to
do, furnish to interWAVE Support Information, in the form then being
used in Nortel's facilities at Richardson, Texas; Guyancourt, France; and
Ottawa, Canada in its day to day operations. An initial listing of said
Support Information is attached hereto as Schedule A. Further Support
Information provided by Nortel shall be treated as such provided the
parties execute by written amendment a revised Schedule A; in the absence
of such written amendment, such information shall be treated as
Confidential Information. Except with respect to the information in
Schedule A, Nortel shall not be obligated to develop or produce any new
or unavailable Support Information to perform its obligations under this
Agreement.
5.2. TIMETABLE: Nortel shall commence the supply of Support Information as soon
as reasonably possible following execution hereof.
5.3. DELIVERY: Technical Information shall be deemed delivered upon delivery to
interWAVE, care of the common carrier designated by interWAVE, at Nortel's
facility from which such information is furnished.
5.4. NORTEL NETWORK ACCESS: interWAVE acknowledges that it shall not acquire
under this Agreement any rights to access systems, databases, applications
or services resident or based on, or constituting a portion of, the
various mainframe computer systems and local area and wide-area network
facilities (including, without limitation, workstations
Page 5 of 29
<PAGE>
and personal computers connected thereto) operated by Nortel and
its Subsidiaries or Affiliates. In the event the Parties jointly
determine that such access is appropriate, they shall enter into a
separate written agreement in respect thereof.
ARTICLE 6
TECHNICAL ASSISTANCE AND TESTING SERVICES
6.1. PRODUCTS TO BE TESTED, TESTING FACILITIES: interWAVE shall delvier
to Nortel interWAVE Products, specified in a written product
schedule, along with interWAVE-developed testing, interconnecting,
or other equipment or items deemed necessary by Nortel and
interWAVE ("Ancillary Equipment") to enable Nortel and interWAVE
to perform Testing Services hereunder. interWAVE shall deliver the
interWAVE Products and Ancillary Equipment to Nortel and Nortel
shall use its best efforts to schedule the tests of the interWAVE
Products in accordance with dates set forth in a written timetable
schedule, provided (a) said product schedule and said timetable
schedules are provided not less than ninety (90) days in advance of
the times set forth for Testing; and (b) time is not of the essence
with respect to the performance of Testing by Nortel. Notwithstanding
interWAVE's failure to provide said ninety (90) days notice, Nortel
will make good-faith efforts to perform Testing Services in
accordance with the written schedules proposed. To facilitate
Nortel's efforts to make its testing facilities available, interWAVE
shall provide, on a quarterly basis, a written schedule showing new
product release dates and projected testing facility needs for the
following twelve months.
6.2 TECHNICAL REPRESENTATIVES: interWAVE and Nortel shall each supply
to the other the name of a technical representative through whom
all communications relating to the Testing shall be made
(respectively "interWAVE's Technical Representative" and "Nortel's
Technical Representative"). interWAVE's Technical Representative
shall provide such assistance as Nortel may require in order to set
up and adjust the interWAVE Products and Ancillary Equipment to
enable Testing of the interWAVE Products to determine its
inter-operability with Nortel's GSM Products. interWAVE's Technical
Representative shall be informed of the time, location and identity
of the Testing and shall attend the Testing and witness all aspect
thereof. In the event interWAVE's Technical Representative or
another interWAVE employee designated by interWAVE is unavailable
or otherwise fails to attend, Nortel shall at its option either
perform, postpone or cancel the Testing.
6.3 INFORMATION TO BE PROVIDED BY INTERWAVE: interWAVE shall supply to
Nortel technical and operating descriptions of the interWAVE
Products as may be required by Nortel to facilitate the performance
of Testing Services, including, without limitation the following (to
be hereinafter referred to as "interWAVE SUPPORT INFORMATION"):
(a) a general description of the interWAVE Products including
its interaction with the telephone network;
(b) full details of all physical interconnections required by
the interWAVE Products in all modes of operation;
(c) full details of the methods required to allow Nortel to
provide normal and appropriate input signals to the
interWAVE Products during the Testing;
Page 6 of 29
<PAGE>
(d) a completed questionnaire, said questionnaire supplied by
Nortel at least two (2) weeks prior to the date the
Testing is scheduled to begin;
(e) any information derived by interWAVE from prior
certification tests involving the interWAVE Products or
from the operation of the interWAVE Products which would
relate to the Testing of the interWAVE Products; and
(f) interWAVE system test scripts and interWAVE test
specifications.
6.4. TESTING SERVICES: The Testing Services shall consist of "Initial
Testing" and "Retesting". Nortel shall provide Testing Services
(i.e., Initial Testing followed by Retesting) at a frequency of
three (3) times per year. The duration of said Testing Services
shall be not more than two weeks of Initial Testing and not more
than one week of Retesting. As well, Nortel shall schedule an
additional two (2) weeks of Initial Testing for the first Initial
Testing period and an additional one (1) week of Initial Testing
for the second Initial Testing period, and Nortel shall use
reasonable efforts to accommodate interWAVE's schedule in connection
therewith.
6.5. INITIAL TESTING: The "INITIAL TESTING" shall consist of a test
suite as Nortel and interWAVE jointly determine and specify in
writing to be appropriate with respect to interWAVE Products. The
Testing Services will be based upon the Support Information
specified in Schedule A and the interWAVE Support Information. The
Initial Testing shall determine the compliance of the interWAVE
Products with the Specifications in Schedule A and the interWAVE
Support Information. The Initial Testing will not determine the
causes of any noncompliance with said Specifications and interWAVE
Support Information.
6.6. RETESTING: Upon receipt of a written request from interWAVE, and in
accordance with a retesting schedule as shall be mutually agreed
upon by the parties, Nortel shall provide interWAVE a subset of the
above-referenced Initial Testing for the purpose of retesting
("RETESTING") any interWAVE Products which has been modified by
interWAVE in order to correct issues which may have been discovered
during Initial Testing; PROVIDED, however, that such access shall
be provided to interWAVE only one time per Testing Services cycle,
for a period not to exceed one week of time.
6.7. ADDITIONAL TESTING: For Testing Services in excess of the stated
frequency or duration of the Initial Testing and Retesting, Nortel
may, at its option, following written notification to interWAVE,
invoice interWAVE at Nortel's then-existing fully loaded costs (a
schedule of Nortel's current fully loaded costs for Lab Services,
which may be changed by Nortel from time to time in its sole
discretion, is attached hereto as Schedule B). Nortel shall invoice
interWAVE for such fees plus any taxes or like fees or charges
which may be assessed against, or otherwise payable by, Nortel for
Nortel's performance, except for any such tax, fee, or charge on
Nortel's net income. interWAVE shall pay Nortel such fees within
thirty (30) days of receipt of such invoice.
6.8. COMMUNICATION AND DISCLOSURE OF RESULTS: Nortel shall promptly
communicate the results of all Testing Services and any "Retesting"
performed hereunder to interWAVE. interWAVE shall be entitled to
disclose such results and the non-proprietary test methods,
provided that interWAVE shall not include any reference to Nortel
or include any information that would identify Nortel without
Nortel's written consent. Nortel may, with interWAVE's written
permission, provide such results to Nortel's customers, subject to
such restrictions as the Parties deem to be appropriate regarding
further disclosure by such customers of the results.
Page 7 of 29
<PAGE>
6.9. OTHER FACILITIES: Nortel shall make available to interWAVE two
cubicles of office space for use by interWAVE personnel, furnished with
basic office furniture; provided that interWAVE shall provide any
necessary computing equipment and test equipment it should choose to
maintain at said office.
ARTICLE 7
OTHER ASSISTANCE
7.1. MOBILE SWITCHING CENTER: The Parties acknowledge that the testing of
the interWAVE Products and Developed Products may require access to the
Nortel Mobile Switching Center ("MSC") to facilitate base station
subsystem ("BSS") testing. interWAVE shall be accorded three (3) days
use of the Nortel MSC per calendar quarter, usages in excess of this
amount to be provided at Nortel's then-existing fully loaded cost (see
Schedule B for Nortel's current "MSC Access Cost"). When interWAVE
requires access to the Nortel MSC, it shall advise Nortel at the earliest
opportunity (providing not less than thirty (30) days notice) and Nortel
shall use reasonable endeavors to make such facilities available at the
requested times. Notwithstanding interWAVE's failure to provide said
thirty (30) days notice, Nortel will make good-faith efforts to provide
access at the requested times.
7.2. GSM COMPONENT PURCHASES: To the extent of its legal right to do so,
Nortel will use reasonable efforts to make available, through its
existing GSM Component suppliers, the prices, terms and conditions
associated with the provision of GSM Components for products of the
type covered by the ORIGINAL EQUIPMENT MANUFACTURING (OEM) AGREEMENT
executed concurrently herewith. interWAVE shall communicate to Nortel
on a quarterly basis its projected 12-month forecast of requirements
for such GSM Components so that these requirements can be
incorporated by Nortel into its purchasing negotiations with its GSM
Component suppliers. In the case where Nortel can obtain lower costs
from an alternate GSM Component supplier for one or more GSM
Components, interWAVE shall consider using said GSM Component
supplier for the supply of said GSM Components.
7.3. TEST BED: interWAVE shall develop a test bed at Redwood City,
California to facilitate Nortel's testing of the hardware and
software necessary to support the ORIGINAL EQUIPMENT MANUFACTURING
(OEM) AGREEMENT and to facilitate such other purposes to which the
parties have mutually agreed. The Test Bed shall meet the
specifications attached hereto in Schedule C. interWAVE shall invoice
Nortel for a fixed amount of $320,370.00U.S. according to the terms of
Section 9.1.1 ("Price and Payment") of Schedule 1 of the ORIGINAL
EQUIPMENT MANUFACTURING (OEM) AGREEMENT for the creation and ongoing
maintenance of the Test Bed.
7.4. ACCESS: The parties agree that, when Nortel is not utilizing the Test
Bed, it may be utilized by interWAVE; therefore, access to and use of
the Test Bed shall be governed by written schedule, said schedule to be
maintained by interWAVE so as to avoid conflicting needs therefor, said
schedule further maintained so as to give Nortel absolute priority of
use on three (3) days notice and preferential priority of use on one
(1) days notice.
ARTICLE 8
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CONFIDENTIAL INFORMATION
8.1. CONFIDENTIAL INFORMATION: Each of the parties recognizes and agrees
that the unauthorized use or disclosure of the other party's
confidential or proprietary information relating to such party's
business, plans, technology, and products ("Confidential Information")
would cause irreparable injury to the disclosing party for which it
would have no adequate remedy at law, and that an actual or threatened
breach of this section shall entitle the disclosing party to obtain
immediate injunctive relief prohibiting such breach, in addition to any
other rights and remedies available to it. If Confidential Information
is disclosed orally, the disclosing party shall notify the receiving
party of the confidential nature of the Confidential Information at the
time of disclosure and such Confidential Information shall be reduced
to writing, marked as confidential and delivered to the receiving party
within thirty (30) days after oral disclosure.
8.2. TECHNICAL INFORMATION CONSTITUTES CONFIDENTIAL INFORMATION: interWAVE
acknowledges that Technical Information furnished by Nortel pursuant
hereto, or information communicated to or acquired by interWAVE as a
consequence of the provision of technical assistance pursuant hereto,
is Confidential Information as defined above and is and shall continue
to be the exclusive property of Nortel. interWAVE shall hold
Confidential Information in confidence for Nortel and only make use of,
or disclose, it as permitted by this Agreement.
8.3. PROTECTION OF CONFIDENTIAL INFORMATION: For the period during and for
three (3) years following the last day of the term all Confidential
Information shall be subject to the following:
(a) The recipient shall restrict disclosure of the Confidential
Information to only those of recipient's employees and
contractors who (1) have a legal or contractual obligation to
maintain the information in confidence according to this
Article; and to those who (2) have a "need to know" (i.e.
employees and contractors that require the Confidential
Information to perform their responsibilities in connection with
this Agreement). The recipient shall not disclose Confidential
Information to any other person or entity without the prior
written consent of the disclosing party;
(b) The recipient shall use the Confidential Information only for
the purposes of performing under this Agreement;
(c) The recipient shall advise those employees or contractors who
access the Confidential Information of their obligations with
respect thereto;
(d) The recipient shall copy the Confidential Information only as
necessary for those employees or contractors who are entitled
to receive it and ensure that all confidentiality notices are
reproduced in full on such copies; and
(e) The recipient shall return all copies of such Confidential
Information to the disclosing party at the disclosing party's
request.
(f) If any Confidential Information is required to be disclosed in
response to a valid order of the court or lawful request of a
government agency, the recipient shall first notify the
disclosing party of the order or request and permit the
disclosing party to seek an appropriate protective order.
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(g) interWAVE shall not make or have made or permit to be made any
copies or translations of Confidential Information, except those
copies or translations which are necessary to the use hereunder by
interWAVE, and all such copies or translations shall, upon
reproduction by interWAVE, contain the same proprietary and
confidentiality notices or legends as appear on Confidential
Information.
8.1. EXCLUSIONS: The confidentiality obligations set forth in this Section 8
will not apply to any Confidential Information that:
(a) becomes known to the general public without fault or breach on the
part of the receiving party;
(b) the receiving party obtains from a third party without breach of a
nondisclosure obligation and without restriction on disclosure;
(c) is furnished to a third party by the disclosing party without a
similar restriction on such third party's rights;
(d) can by written records be shown to have been known by the receiving
party at the time of disclosure; or
(e) the receiving party can demonstrate to the reasonable satisfaction
of the disclosing party was developed independently by employees or
contractors of the receiving party who had no access to
Confidential Information directly related to such independent
development.
8.1. NONDISCLOSURE OF TERMS: Neither party shall publicly disclose any
information regarding the terms and conditions contained herein without
having received prior approval, in writing, from the other party.
ARTICLE 9
GRANT BACK LICENSE
9.1. IMPROVEMENTS: If interWAVE makes any improvements, developments,
inventions, changes or innovations directly related to the Technical
Information (hereinafter called "Improvements"), and interWAVE files for
a patent covering such Improvements, then:
(a) if interWAVE files for and obtains, or otherwise acquires, any patent
thereon in any country, interWAVE shall grant to Nortel a personal,
non-exclusive, non-transferable, Sublicensable (as defined below),
royalty-free full term license to make, have made, use, lease and
sell products and software under any such patents, to the extent
such patents directly relate to Improvements; or
(b) if interWAVE intends to file such patent application(s) only in
certain countries, interWAVE shall, within such time as will enable
Nortel conveniently to make timely patent applications in such
countries, provide Nortel, at its request, with all signature and
documents necessary for filling applications for an obtaining such
patent or patents in such countries wherein interWAVE does not
intend, but in which Nortel may elect, to apply for patents covering
any such patentable subject matter, provided Nortel shall file such
patent applications at its own expense (but with such assistance as
interWAVE may properly give) and interWAVE shall be
Page 10 of 29
<PAGE>
granted, a non-exclusive, free, unrestricted full term license (with
the right to grant sublicenses) for such patents.
9.2. For the purposes of section 9.1, "Sublicensable" shall mean sublicensable
to:
(a) any joint venture, partnership, corporation or other entity in
which Nortel owns or controls, directly or indirectly, twenty (20%)
percent or more of the shares or other mechanism of control or
influence by way of contractual or other legally enforceable
rights; and/or
(b) any entity that acquires, directly or indirectly, any Nortel
business or portion thereof whose products are covered by such
patent.
ARTICLE 10
DEVELOPMENT AGREEMENT
10.1. DEVELOPMENT INFORMATION: From time to time the Parties may agree that
interWAVE, Nortel, or the Parties jointly, shall undertake the
development of products utilizing information of a design or other
technical nature other than Support Information made available to
interWAVE by Nortel (hereinafter termed "Development Information"). The
Parties acknowledge that the following items will receive priority
consideration as projects to be undertaken under the Development
Agreement:
(a) Cost effective MAP interface for rural systems using low cost
transmission and signalling;
(b) Integration of interWAVE OMC with Nortel OMC;
(c) Integration of interWAVE system with Nortel M1 PBX including
delivery of features to GSM users; and
(d) Interface interWAVE MSC with Nortel IWF.
10.2. DEVELOPMENT AGREEMENT: With respect to such development, the Parties
agree as follows:
(a) TIMELY EXECUTED DEVELOPMENT AGREEMENT: Joint development of
products utilizing Development Information shall take place only
pursuant to a written Development Agreement between the Parties,
SAID DEVELOPMENT AGREEMENT TO BE NEGOTIATED AND EXECUTED BY THE
PARTIES NOT LATER THAN THE FIRST BUSINESS DAY FOLLOWING THE
SIXTIETH (60) DAY AFTER THE EFFECTIVE DATE OF THIS AGREEMENT;
(b) PROJECT ADDENDA: The Development Agreement shall anticipate the
performance of development activity on a project-by-project basis,
with the details associated with a particular Project contained
within one or more Project Addenda attached thereto;
(c) CONTENTS OF PROJECT ADDENDA: The Project Addenda shall specifically
contain (1) a Project Title; (2) a Project Summary; (3) a Work Plan
containing a Description and Specification of Deliverables, the
Acceptance Criteria therefor;
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the Delivery Dates for said Deliverables; (4) Descriptions of
any required Reports; (5) Pricing / Payment Terms; (6) Termination
conditions; and (7) Project Management contacts. The Project
Addenda may or may not contain provisions with respect to
Intellectual Property issues; however, if the Project Addenda
does contain Intellectual Property provisions, and these
provisions cannot be interpreted consistently with the
Development Agreement, then the Intellectual Property
provisions of the Project Addenda shall control.
(d) CONTENTS OF DEVELOPMENT AGREEMENT: The Development Agreement
shall specifically contain (1) Definitions of important terms;
(2) provisions governing the Working Relationship (e.g.,
Provision of Deliverables, Delivery Dates, Acceptance Tests,
Change Requests, Notices and Contacts); (3) provisions governing
the handling of Confidential Information; (4) provisions
governing the Intellectual Property rights of the Parties in
the event any Project Addenda are silent upon the subject of
Intellectual Property; (5) provisions governing the provision
of necessary technical support and training; (6) appropriate
representations, warranties, limitations of liability and duties
to indemnify; and (7) conditions upon which the Development
Agreement will terminate; PROVIDED, however, that the provisions
of said Development Agreement with respect to, INTER ALIA,
intellectual property rights may always be modified by the
Parties on a project-by-project basis in the project-based
Addenda attached thereto.
10.3. IPR IN THE ABSENCE OF A TIMELY EXECUTED DEVELOPMENT AGREEMENT: In the
event the Parties have not negotiated and executed the Development
Agreement by the said first business day following the sixtieth (60th)
day after the Effective Date of this Agreement, the ownership of the
intellectual property rights arising from such development shall be as
follows:
(a) if one Party contributes all material monetary funding and
material human resources for any development activity, such Party
shall, subject to the provisions of section 9.1 hereof, own all
right, title and interest in and to any intellectual property
rights arising from such development.
(b) if each Party has contributed material monetary funding or
material human resources for any development activity, all
intellectual property rights arising from such development, save
for patents, shall be jointly owned with each Party having the
right to exploit such intellectual property, including sublicensing
thereof, at its sole discretion without reference to the other
Party; in the event of a patentable invention, the Parties shall
agree as to which of the Parties is to take ownership of any
patents which may issue (disputes to be resolved according to the
provisions of Article 16 ("Dispute Resolution")). The Party taking
ownership may file applications for such patents file such patents,
subject to the following:
i. where the Party having ownership of the patents elects to
file for any patent thereon in any country, that Party shall
grant to the other Party a non-exclusive, free, unrestricted,
full term license (with the right to grant sub-licenses
thereunder) to make, have made, use, lease and sell under any
such patents; and
ii. the Party not having ownership of the Patents may file for
patents thereon in countries not filed in by the Party having
ownership; in such case, the Party having ownership shall,
within such time as will enable
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<PAGE>
the other Party conveniently to make timely patent applications
in such countries, provide the other Party, at its request,
with all signatures and documents necessary for filing
applications for and obtaining such patent or patents in such
countries, provided that the other Party shall file such patent
applications at its own expense (but with such assistance as
the Party having ownership may properly give) and the Party
having ownership shall be granted, if it so requests, a
non-exclusive, free, unrestricted, full term license (with the
right to grant sublicenses) for such patents.
ARTICLE 11
LIABILITY
11.1. DISCLAIMER REGARDING TECHNICAL INFORMATION AND TECHNICAL ASSISTANCE:
Nortel makes no representations in respect of Technical Information or
technical assistance furnished pursuant hereto, but shall furnish such in
good faith to the best of its knowledge and ability. Without restricting
the generality of the foregoing, there are no representations, warranties
or implied conditions as to merchantability or fitness for a particular
purpose, or as to whether or not the use of Technical Information or
technical assistance supplied hereunder will infringe any patent or any
other rights (including intellectual property rights) of any other
person.
11.2. INDEMNIFICATION REGARDING TECHNICAL INFORMATION AND TECHNICAL
ASSISTANCE: Except as set forth in section 11.5, interWAVE shall
indemnify and hold Nortel harmless from any and all claims for damages,
losses, expenses or costs (including counsel fees and expenses) arising
out of the furnishing or receipt of any Technical Information or
technical assistance pursuant hereto and hereby waives any claims that it
might have or might pretend to have against Nortel, its employees and
agents, as well as those of its Subsidiaries and Affiliates for or
arising from the provision of Technical Information or technical
assistance.
11.3. LIABILITY FOR DAMAGE TO INTERWAVE PRODUCTS AND ANCILLARY EQUIPMENT:
Liability for damage to, or loss of, the interWAVE Products and Ancillary
Equipment during shipment and while on Nortel's premises, shall remain
with interWAVE, unless such loss or damage is occasioned by the fault or
negligence of Nortel, its agents or employees.
11.4. DISCLAIMER AND INDEMNITY REGARDING TESTING SERVICES. NORTEL MAKES NO
REPRESENTATIONS WITH RESPECT TO ANY TESTING SERVICES PERFORMED HEREUNDER
OR ANY INFORMATION (INCLUDING TEST RESULTS) OR ANY TECHNICAL ASSISTANCE,
ADVICE OR CONSULTATION FURNISHED IN CONNECTION WITH THIS AGREEMENT.
WITHOUT RESTRICTING THE GENERALITY OF THE FOREGOING, NORTEL MAKES NO
WARRANTIES, CONDITIONS, OR REPRESENTATIONS, WRITTEN OR ORAL, STATUTORY,
EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. EXCEPT FOR BREACH
OF THE COVENANTS OF ARTICLE 8 ("CONFIDENTIAL INFORMATION"), NEITHER
NORTEL, NOR ANY DIRECT OR INDIRECT SUBSIDIARY, AFFILIATE, EMPLOYEE OR
AGENT OF NORTEL SHALL BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OF ANY NATURE WHATSOEVER FOR ANY BREACH OF THIS
AGREEMENT, FOR ANY DISCLOSURE OF THE RESULTS OF THE TESTING SERVICES AS
PERMITTED BY SECTION 6 ("TECHNICAL
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<PAGE>
ASSISTANCE AND TESTING SERVICES"), WHETHER ARISING IN CONTRACT, TORT, OR
OTHERWISE. IN NO EVENT WILL NORTEL'S, OR ITS SUBSIDIARY'S, AFFILIATE'S,
EMPLOYEE'S OR AGENT'S LIABILITY IN CONNECTION WITH THIS AGREEMENT,
WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE, EXCEED THE COST OF THE
TESTING SERVICES PROVIDED HEREUNDER. interWAVE SHALL INDEMNIFY AND HOLD
NORTEL, ITS DIRECT OR INDIRECT SUBSIDIARIES, AFFILIATES, EMPLOYEES AND
AGENTS, HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS OR SUITS BROUGHT
BY ANY THIRD PARTIES IN RESPECT OF ANY SUCH TESTING SERVICES,
DISCLOSURE OF THE RESULTS OF SUCH TESTING SERVICES AS PERMITTED BY
SECTION 6, INFORMATION, TECHNICAL ASSISTANCE, ADVICE, OR CONSULTATION,
EXCEPT WHERE SUCH ACTIONS OR SUITS ARE ATTRIBUTABLE TO THE NEGLIGENCE
OF NORTEL AND ARE FOR DIRECT DAMAGES DUE TO PERSONAL INJURY OR TANGIBLE
PROPERTY DAMAGE WHICH OCCURS (A) AT NORTEL'S PREMISES WHERE TESTING
SERVICES TAKES PLACE AND (B) DURING THE PERFORMANCE OF THE TESTING
SERVICES.
11.5. Each party (the "Indemnifying Party") shall indemnify and save
harmless the other party (the "Indemnified Party") from any liability
or claim (including, without limitation, the costs and reasonable
attorney's fees in connection therewith) that may be made by a third
party for injury, including death, to persons or damages to property
arising directly out of the Indemnifying Party's negligent acts or
omissions in connection with such Indemnifying Party's performance of
its obligations or exercise of its rights under this Agreement
provided that the Indemnified Party has no contributory fault in
connection with such liability or claim.
ARTICLE 12
FORCE MAJEURE
12.1. If the performance of a party of any of its obligations pursuant to
this Agreement is prevented, restricted, or interfered with by any
circumstances beyond the reasonable control of that party, including
without limitation, (a) fire, explosion, epidemic, hailstorm,
hurricane, lightning, tornado, cyclone, flood, or other act of nature,
(b) unavailability of supplies or sources of energy, power failure or
breakdown of machinery, (c) war, revolution, civil commotion, acts of
public enemies, blockade, or embargo, (d) any law, order, proclamation,
regulation, ordinance, demand, or requirement of any government or any
subdivision, authority or representative of any government, or (e)
labor difficulties, including, without limitation, strikes, slowdowns,
picketing or boycotts, then the party whose performance has been
prevented, restricted, or interfered with shall be excused from such
performance on a day-to-day basis to the extent of such prevention,
restriction, or interference; provided such party shall use its best
efforts to avoid or remove such causes of non-performance and shall
proceed to perform with dispatch whenever such causes are removed or
cease. In the event Nortel is unable to perform the Testing in
accordance with Nortel's schedule as a result of any non-performance by
interWAVE which is excused pursuant to this Section, Nortel shall be
entitled to reschedule such Testing as Nortel determines to be
appropriate.
ARTICLE 13
REGISTRATION
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13.1 Any approval of this Agreement by the Government of Bermuda, or any
other government, or any officer or agent thereof, which is required
to enable interWAVE to perform this Agreement shall be secured in
writing by interWAVE who shall supply the same, or a true copy
thereof, to Nortel within ninety (90) days of the date of execution
of this Agreement.
ARTICLE 14
DURATION
14.1. This Agreement shall commence on the date of its execution and
terminate (save with the exception of the survivorship provisions)
upon termination of the OEM Agreement, unless earlier terminated as
hereinafter set forth, provided that upon termination, the parties
agree to negotiate in good faith the extension of those portions of
this Agreement relevant to interWAVE's ongoing support obligations
to Nortel including any obligations arising under the ORIGINAL
EQUIPMENT MANUFACTURING (OEM) AGREEMENT.
ARTICLE 15
TERMINATION
15.1. BREACH: In the event either Party shall be in breach of, or fail to
perform one or more of its material obligations under, this Agreement,
the other Party may, by notice to the Party in default, require the
remedy of the breach or the performance of the obligation and, if the
Party so notified fails to remedy such breach or perform such
obligation within ninety (90) days of the forwarding of a notice so to
do, the other Party may, by notice, terminate this Agreement.
15.2. UNENFORCEABILITY: In the event of an enforceable decision or
directive declaring invalid an essential part of this Agreement,
without which this Agreement would not have been entered into, this
Agreement may, at the option of either Party, be terminated upon the
giving of notice to the other Party. Save as before set forth, in
the event that any term, clause, provision or condition of this
Agreement shall be similarly adjudged invalid for any reason
whatsoever, such invalidity shall not affect the validity or
operation of any other term, clause, provision or condition and such
invalid term, clause, provision or condition shall be deemed to have
been deleted from this Agreement.
15.3. INSOLVENCY: In the event interWAVE commits any act of bankruptcy, or
compounds with its creditors; or a petition or receiving order in
bankruptcy is presented or made against interWAVE; or a petition for
an administration order is presented in relation to interWAVE; or a
resolution or petition to wind up interWAVE (other than for a legal
reconstruction, reorganization or amalgamation) or a receiver or
administrative receiver is appointed; and such act or petition is not
cured, dismissed, or withdrawn within sixty (60) days thereafter; or
interWAVE ceases to carry on business, Nortel may, without any delay,
by notice, terminate this Agreement. Any licenses and rights granted
under this Agreement by interWAVE to and through Nortel are, for
purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of
"intellectual property" within the meaning of Section 101 of the
Bankruptcy Code. Upon the commencement of a bankruptcy proceeding
involving interWAVE, Nortel shall be entitled to retain and may fully
exercise all rights and elections available under the Bankruptcy Code.
15.4. GOVERNMENTAL APPROVALS: In the event this Agreement does not receive
all requisite approvals of any Government or governmental agency or
officer within the period
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stipulated in Article 13 ('Registration") hereof, this Agreement may, at
the option of either Party, be terminated upon notice to the other
Party, but such termination shall not affect any undertakings of
confidentiality or non-use provided in this Agreement.
15.5. PRODUCT SOFTWARE: Notwithstanding anything else contained herein, in
the event this Agreement is terminated, each sublicensee of Product
Software shall continue to have the right to use Product Software
provided:
(a) such sublicensee is not in default under its written sublicense
agreement with interWAVE; and
(b) such sublicense agreement is not inconsistent with the terms of
this Agreement.
15.6. SURVIVAL: The provisions of Article 2 (Technical Information Grant),
Article 4 (Software Grant), Article 8 ("Confidential Information")
related to confidentiality and non-use, the provisions of Article 9
("Grant Back License"), the provisions of Article 10 ("Development
Agreements"), and the provisions of Article 11 ("Liability") shall
survive the termination of this Agreement. Upon any termination of
this Agreement, interWAVE shall, at Nortel's expense, ship the Test Bed
to a location in the continental United States as designated by Nortel.
ARTICLE 16
DISPUTE RESOLUTION
16.1. In the event the Parties are unable to amicably settle disputes between
them, and unless the Parties mutually elect to pursue an alternative
dispute procedure, whether binding or non-binding, all actions or
proceedings to enforce, or which arise in connection with or relate to,
this Agreement, any of the agreements in the form of Exhibits hereto or
any of the transactions contemplated hereby or thereby shall be brought
and litigated exclusively in the United States District Court, Northern
District of California (or, in the event such court does not have
jurisdiction, the courts of the State of California located in such
district), unless such actions or proceedings are required to be
brought in another court to obtain subject matter jurisdiction over the
matter in controversy. In any such actions or proceedings, service of
process may be made upon the other Party hereto by registered or
certified mail, return receipt requested, to its address indicated
herein, which service shall be deemed effective 10 days after mailing.
Each of the Parties hereto (i) consents to the jurisdiction of such
court or courts and to service of process by registered or certified
mail, as provided above, or by any other manner provided by the laws of
the State of California and the rules of such courts and (ii) waives
any right it may have to assert the doctrine of FORUM NON CONVENIENS,
to assert that it is not subject to the jurisdiction of such courts or
to object to venue to the extent any action or proceeding is brought in
accordance with this sub-clause.
16.2 WAIVER OF TRIAL BY JURY. INTERWAVE AND NORTEL WAIVE THE RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING UNDER THIS AGREEMENT OR ANY
ACTION OR PROCEEDING ARISING OUT OF THE TRANSACTIONS CONTEMPLATED
HEREBY, REGARDLESS OF WHICH PARTY INITIATES ANY SUCH ACTION OR
PROCEEDING.
ARTICLE 17
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NOTICES
17.1. FORM OF NOTICE: Any and all notices or other information to be given by
one of the Parties to the other shall be in writing and shall be deemed
sufficiently given when forwarded by prepaid, registered or certified
first class air mail or by telegram, telex, facsimile transmission or
hand delivery to the other Party at the following address:
(a) if to Nortel: Northern Telecom Limited
8200 Dixie Road, Suite 100
Brampton, Ontario
Canada L6T 5P6
Attention: Secretary
(b) if to interWAVE: interWAVE Communications International
656 Bair Island Road
Redwood City, CA 94063
Attention: Chief Financial Officer
and such notices shall be deemed to have been received fifteen (15)
business days after mailing if forwarded by mail, and the following
business day if forwarded by telegram, telex, facsimile transmission or
hand.
17.2. CHANGE OF ADDRESS: The aforementioned address of either Party may be
changed at any time by giving fifteen (15) business days prior notice
to the other Party in accordance with the foregoing.
17.3. BEST EFFORTS: In the event of a generally-prevailing labor dispute or
other situation which will delay or impede the giving of notice by any
such means, in either the country of origin or of destination, the
notice shall be given by such specified mode as will be most reliable
and expeditious and least affected by such dispute or situation.
ARTICLE 18
ASSIGNMENT
18.1. ASSIGNMENT: This Agreement shall not be assigned or transferred by
either Party, whether by way of merger, amalgamation, consolidation,
reorganization, assignment, transfer, operation of law or otherwise,
except with the written consent of the other or as otherwise provided
pursuant to this Article.
18.2. Notwithstanding section 18.1, nothing herein shall prevent interWAVE
from asssigning this Agreement, in its entirety, including all of its
rights hereunder, to any person (the "Assignee"):
(a) to whom interWAVE transfers substantially all of its assets; or
(b) with whom interWAVE merges, amalgamates, consolidates or
reorganizes and who thereby becomes the successor to the
business of interWAVE;
provided that:
(a) if such Assignee is a Competitor of Nortel (as defined below)
the provisions of section 18.4 below shall apply; and
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(b) the financial condition of such Assignee as of the date of
such assignment shall be not substantially worse than the
financial condition of interWAVE as of the Effective Date of
this Agreement; and
(c) such Assignee agrees in writing to Nortel (the
"Acknowledgment") that it has assumed all obligations of
interWAVE hereunder and shall be bound by the terms and
conditions of this Agreement.
18.3. For the purpose of this section a "Competitor of Nortel" means any
person with whom Nortel competes and which has greater than two
(2%) percent market share in the wireless telecommunications
infrastructure products market. Notwithstanding the foregoing, a
person shall not be deemed to be a Competitor of Nortel simply by
virtue of any competition arising solely from its acquisition of
the business of interWAVE. Nortel shall, from time to time, upon
request from interWAVE, and in consultation with interWAVE, provide
interWAVE with a current list of Competitors of Nortel and
interWAVE shall be entitled to rely on such list for the purposes
of section 18.2 until the later of: (i) one hundred and eighty
(180) days from the date of issue by Nortel; or (ii) the date on
which a new list is received by interWAVE.
18.4. If the Assignee is a Competitor of Nortel, then within thirty (30)
days of Nortel's receipt of the Acknowledgment, Nortel shall be
entitled, at its option effective upon written notice to
interWAVE, to terminate the following provisions of this Agreement
(a "Partial Termination"): "Furnishing of Technical Information"
(Article 5), "Technical Assistance and Testing Services" (Article
6), "Mobile Switching Centre" (Section 7.1), GSM Component
Purchases (Section 7.2), and "Access" (Section 7.4) and to
terminate any Development Agreement made between the parties as
contemplated by Article 10. In the event:
(a) of a Partial Termination; or
(b) that this Agreement is terminated by interWAVE as a result
of a breach hereunder by Nortel; or,
(c) that this Agreement is terminated as a result of a breach
by Nortel under the OEM Agreement causing a termination of
the OEM Agreement; or
(d) that this Agreement is terminated by Nortel pursuant to the
provisions of section 15.2 hereof (Unenforceability),
Nortel shall refund to interWAVE, in either $US dollars or interWAVE shares
at Nortel's option, an amount calculated in accordance with the provisions of
Schedule D. Notwithstanding the foregoing, Nortel shall pay the refund in
cash if the Fair Market Value (defined in accordance with the principles
articulated in Section 3.4(d)(iv)(d) of interWAVE's By-Laws) of one share of
interWAVE Series G Preferred Stock (a "Share") is less than six dollars and
six cents United States dollars ($U.S.6.06) per share.
18.5. Notwithstanding section 18.1, this Agreement may be assigned by
Nortel to any of its Subsidiaries or Affiliates upon notice to
interWAVE.
18.6. Notwithstanding any assignment, the Parties hereto shall remain
liable for their respective obligations hereunder
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ARTICLE 19
GENERAL
19.1. GOVERNMENTAL APPROVALS: The Parties recognize that the transfer of
Technical Information and Development Software to foreign countries
may be subject to the specific approval of the governments of said
foreign countries, or various agencies thereof, and international
control organizations in which that government participates, and
that such governments or agencies may require further approval
before the communication or transfer of any Technical Information
or the sale of interWAVE Products and Developed Products is made to
or for a country other than the U.S.A. Accordingly, interWAVE shall
not sell or lease interWAVE Products and Developed Products or
transfer or communicate Technical Information into any such
countries without receiving such prior specific approval.
19.2. PREEXISTING DUTIES: Nothing in this Agreement shall be construed
as requiring Nortel to disclose Technical Information, to grant
rights under licenses, or to render any technical assistance, which
would violate any confidentiality undertakings which it has towards
third persons or which would violate any present or future law or
decree of any government or governmental officer or agency, and
nothing contained herein shall require the disclosure of Technical
Information which would increase or impose any obligations on
Nortel with respect to third parties. In the event that Nortel
determines that any disclosure by it hereunder would require the
consent of any third party, Nortel agrees to use reasonable efforts
to obtain the consent of such third party to the disclosure.
19.3. EXCLUSIONS: Nothing contained in this Agreement shall be construed
as:
(a) requiring Nortel to file any patent application, to secure
any patent or other intellectual property right or to
maintain any patent or other intellectual property right in
force;
(b) constituting a warranty or representation by Nortel as to the
validity or scope of any patent or other intellectual
property right licensed hereunder;
(c) constituting a warranty or representation by Nortel that any
manufacture, use, lease, sale or sublicense by interWAVE
hereunder will be free from infringement of patents or other
intellectual property rights other than those under which,
and to the extent to which, licenses are granted hereunder;
(d) constituting an agreement to bring or prosecute actions or
suits against third parties for infringements;
(e) conferring any right to use, in advertising, publicity or
otherwise, any name, trade name or trademark, or any
contraction, abbreviation or simulation thereof; or
(f) conferring by implication, estoppel or otherwise upon
interWAVE any license or other right under any patent or
other intellectual property right, except the licenses and
rights expressly granted hereunder to interWAVE.
19.4. AUTONOMY: Nothing contained in this Agreement shall limit in any
manner Nortel's right to discontinue or change the design or
characteristics of its products at any time without notice and
without liability.
Page 19 of 29
<PAGE>
19.5. NOTICE OF BREACH: The failure of either Party to give notice to
the other Party of the breach or non-fulfillment of any term,
clause, provision or condition of this Agreement shall not
constitute a waiver thereof, nor shall the waiver of any breach or
non-fulfillment of any term, clause, provision or condition of this
Agreement constitute a waiver of any other breach or
non-fulfillment of that or any other term, clause, provision or
condition of this Agreement.
19.6. INTEGRATION / ENTIRE AGREEMENT: This Agreement sets forth the entire
agreement and understanding between the Parties with respect to
Technical Information and interWAVE's use thereof, save for
Development Agreements, and supersedes and cancels all previous
negotiations, agreements, commitments and writings in respect to the
subject matter hereof. Neither Party hereto shall be bound by any
term, clause, provision or condition save as expressly provided in
this Agreement or as duly set forth on or subsequent to the date
hereof in writing, signed by duly authorized officers of the Parties.
19.7. INDEPENDENT PARTIES: Nothing in this Agreement shall be construed
as establishing or implying any partnership between the Parties
hereto, and nothing in this Agreement shall be deemed to constitute
either of the Parties hereto as the agent of the other Party or
authorize either Party to incur any expenses on behalf of the other
Party or to commit the other Party in any way whatsoever, without
obtaining the other Party's prior written consent.
19.8. CONFIDENTIALITY OF TERMS, PUBLICITY: The existence of this
Agreement, as well as its terms and conditions, shall be held in
confidence by both Parties and only disclosed as may be agreed to
by both Parties or as may be required to meet security disclosure
or export permit requirements. Neither Party shall make public
statements or issue publicity or media releases with regard to this
agreement or the relationship between the Parties without the prior
written approval of the other Party.
19.9. GOVERNING LAW: This Agreement and all Purchase Orders shall be
governed by the laws of the State of California, without
application of conflict of law rules. The Vienna International
Convention for the Sale of Goods shall not apply.
IN WITNESS WHEREOF, the Parties hereto have signed and executed
this Agreement on the date first above mentioned.
NORTHERN TELECOM LIMITED interWAVE Communications International, Ltd.
Per: /s/ [ILLEGIBLE] Per: /s/ [ILLEGIBLE]
-------------------- ---------------------
Per: Per:
-------------------- ---------------------
Page 20 of 29
<PAGE>
SCHEDULE "A"
SUPPORT INFORMATION
A-interface
<TABLE>
<CAPTION>
# Title Reference Description
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Approved GSM http://136.147.68.68/ References the latest GSM specs.
specs. Reference plm/PLP/index.html That are used by Nortel
table
- -----------------------------------------------------------------------------------------------
2 BSS v9 conformance Pe/bss/dd/94 Provides the table of compliance
to GSM phase2 3.2en against the latest GSM specs.
- -----------------------------------------------------------------------------------------------
3 BSS fmg validation Pe/sys/djd/244 Test specifications used to establish
test specification 5.1en compliancy
- -----------------------------------------------------------------------------------------------
4 BSS load, fmg, Pe/sys/djd/402 Test spec for traffic management
stability test spec functions under load
- -----------------------------------------------------------------------------------------------
5 GSM BSSMAP spec. Pe/bss/dd/0060 A interface procedure definition in the
Procedures V8.02 view of the BSS
- -----------------------------------------------------------------------------------------------
6 GSM BSSMAP spec. Pe/bss/dd/0066 A interface message dictionary
Messages V8.02
- -----------------------------------------------------------------------------------------------
7 DMS-MSC MAP PLS/MMA2BC Complete MAP Phase 2 spec
Phase 2
Specification
- -----------------------------------------------------------------------------------------------
8 NSS GSM08 http://136.147.68.68/ This document provides the NSS
compliance rdops/sysint/SPECX compliance table for the GSM08
FR/approved spec/i release
ndex.html
- -----------------------------------------------------------------------------------------------
</TABLE>
Air-interface
<TABLE>
<CAPTION>
# Title Reference Description
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
9 BSS L1M validation test Pe/sys/djd/025 BSS v10 layer 1
specification 0 management
V06.02/en functions
- -----------------------------------------------------------------------------------------------
10 BSS TMG validation test Pe/sys/djd/024 Traffic management
specification Tome1 4 functional test (V10)
V06.02/en
- -----------------------------------------------------------------------------------------------
11 BSS TMG validation test Pe/sys/djd/024 Traffic management
specification Tome2 2 functional test (V10)
V02.02/en
- -----------------------------------------------------------------------------------------------
</TABLE>
Page 21 of 29
<PAGE>
MSC - PSTN (SS7,R1,R2,PRI)
<TABLE>
<CAPTION>
# Title Reference Description
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
12 NSS GSM08 compliance http://136.147.68.68 This document
/rdops/sysint/SPEC provides the NSS
XFR/approved_spec compliance table for
/index.html the GSM08 release
- -----------------------------------------------------------------------------------------------
13 ETSI ISUP Specification PLS/ETSIISUP/AD0 Generic list of
4 specification and
procedure to adopt
country specific ISUP
- -----------------------------------------------------------------------------------------------
14 ETSI ISUP R2 Interworking PLS/ETSIIR2IW/AB Specification and tests
03 for R2 PSTN
termination
- -----------------------------------------------------------------------------------------------
15 ETSI PRI < > ETSI ISUP PLS/EPRIESUP/AA Specification and tests
Interworking 09 for PRI PSTN
Release 8.3 termination
- -----------------------------------------------------------------------------------------------
</TABLE>
MSC - TWF
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
# Title Reference Description
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
16 MSC/IWF interface Protocol PLS/MSCIWF Specifies the interface with
Specification the Motorola IWF
- -----------------------------------------------------------------------------------------------
</TABLE>
MAP (HLR - MSC, MSC - MSC, SMS - HLR/MSC, HLR/MSC-SIM)
<TABLE>
<CAPTION>
# Title Reference Description
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
17 DMS HLR MAP v.2 Ae1338rt.ab01 Description of the MAP access
Support protocols to the HLR
- -----------------------------------------------------------------------------------------------
18 DMS HLR basic Ae1338dd.ab01 Description of inter-MSC
roaming protocols for roaming
- -----------------------------------------------------------------------------------------------
19 HLR/AUC PS FILE FMDOC/HMDFT Describes the interfaces
TRANSFER SPEC. supported by the HLR/AUC
Provisioning Server for the
processing of files containing
provisioning data.
- -----------------------------------------------------------------------------------------------
20 MOBILE SUBSCRIBER PLS Describes the interface between
PROVISIONING FMDOC/MSPPS the (AdC) for subscription
PROTOCOL administration towards a DMS
HLR via a DMS HLR/AUC
Provisioning Server (HLR-PS).
- -----------------------------------------------------------------------------------------------
21 SIM PERSONALIZATION PLS Describes the interface between
SYSTEM INTERFACE FMDOC/SPSIS the SIM Personalization System
(SPS) and the HLR/AUC
Mediation Device for the
creation and deletion of
subscribers.
- -----------------------------------------------------------------------------------------------
</TABLE>
VMS - MSC/HLR
<TABLE>
<CAPTION>
# Title Reference Description
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
22 VMS acceptance test Inter - op test lab library Lists the test cases and
plan procedures for VMS
- -----------------------------------------------------------------------------------------------
</TABLE>
Page 22 of 29
<PAGE>
SMS - MSC/HLR
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
# Title Reference Description
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
23 SMS acceptance test plan Inter - op test lab library Lists the test cases and
procedures for SMS
- -----------------------------------------------------------------------------------------
</TABLE>
BILLING
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
# Title Reference Description
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
24 MSC FTAM PLS/DOC/MSC/FTAM Describes the structure of
the CDR in FTAM mode
- -----------------------------------------------------------------------------------------
25 MSC XFER PLS/DOC/MSC/XFER Describes the structure of
the CDR in XFER mode
- -----------------------------------------------------------------------------------------
26 Q-239-1 MSC PLS/DOC/MSC/Q239 Lists CDR parameters
- -----------------------------------------------------------------------------------------
</TABLE>
PBX INTERWORKING
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
# Title Reference Description
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
27 PABX Interworking Document in progress This document will describe
test specification the interworking test for GSM
MSC with Nortel PBX products
- -------------------------------------------------------------------------------------------
</TABLE>
Page 23 of 29
<PAGE>
SCHEDULE "B"
NORTEL LAB COSTS
<TABLE>
<S> <C>
NTP Documentation* $200/doc
Consulting Services $195/hr
Engineering Support $195/hr
Lab Setup Fee $3200/visit
Test Plan Review Fee $1200/plan
Onsite Lab Access (incl. Technical Support) $3120/day
Remote Lab Access $3120/day
Author Test Plan $8000/plan
Exit Report $5200/report
MSC Access Cost
Lab Setup Fee $3200/visit
Engineering Support [two engineers] $390/hr
</TABLE>
- - Documentation fees are per document and do not include interpretation.
*"NTP" means Northern Telecom Practice.
- - Consulting Services and Lab Access are quoted per job based on a specific
statement of work.
- - On site and remote access is available in one-day (i.e., 8-hour) increments.
- - Fees are required in advance.
Page 24 of 29
<PAGE>
SCHEDULE C
TEST BED SPECIFICATIONS
<TABLE>
<CAPTION>
Part No. Description Qty
- -------------------------------------------------------------
<S> <C> <C>
M5060N WAVEXchange NSS 1
S500400N WAVEXchange NSS S/W - Base 1
S500500N WAVEXchange NSS S/W - per TRX 24
M5030N WAVEXpress BSC-30 2
M5320N WAVEXpress 3-TRX BTS (900Mhz) 4
M5322N WAVEXpress 3-TRX BTS (1800Mhz) 4
M8050SN WAVEView OMC-200 1
S500600N WAVEView OMC-200 S/W - Base 1
S500700N WAVEView OMC-200 S/W - per TRX 24
</TABLE>
interWAVE shall provide like for like card substitutions to allow Nortel to
test GSM 1900 versions of interWAVE products.
Page 25 of 29
<PAGE>
SCHEDULE D
PARTIAL TERMINATION REFUND
<TABLE>
<CAPTION>
DATE OF PARTIAL TERMINATION PERCENT REFUND INTERWAVE SHARES* OR US$*
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Prior to 1st Anniversary** 65% 375,556 $2.275 m
Prior to 2nd Anniversary 45% 260,000 $1.575 m
Prior to 3rd Anniversary 30% 173,333 $1.05 m
Prior to 4th Anniversary 15% 86,667 $0.525 m
After 4th Anniversary 0 0 $0
</TABLE>
* For greater certainty, the refund shall be paid in Shares or cash, but not
both, and the amounts shown are based on consideration of three million, five
hundred thousand US dollars (US$3,500,000) or five hundred and seventy-seven
thousand, seven hundred and seventy-eight (577,778) interWAVE shares.
** Anniversary refers to the anniversary of the Effective Date.
Page 26 of 29
<PAGE>
EXHIBIT 10.19
[LETTERHEAD]
interWAVE
Priscilla Lu
Dear Priscilla:
You have heard the exciting news that your partner, Quadrus Manufacturing,
will be acquired by the global contract manufacturer and engineering services
firm -- PEMSTAR. All of us at Quadrus are enthusiastic about the merger
because it offers all employees entry into a team with outstanding prospects
in a growing and demanding industry. We are especially excited because we can
now offer our customers many new capabilities which enhance your
competitiveness -- a goal PEMSTAR intends to pursue aggressively.
Now we ask our Quadrus partners to formally join our new organization --
PEMSTAR. The acknowledgement attached formalizes the change and is a
condition of closing which is scheduled for later this month. Signing this
document simply indicates your awareness of this change but is critical to
the consummation of this merger.
As a dedicated Quadrus team member, I thank you for your business. As a proud
member of the PEMSTAR team, I appreciate your prompt acknowledgement of our
new partnership and look forward to serving you with additional global
manufacturing and engineering capabilities.
/s/ CHRIS LINEBERRY
Chris Lineberry
Director of Program Management
Quadrus Manufacturing
<PAGE>
[LETTERHEAD]
ASSIGNMENT OF CONTRACT
As you may be aware, Bell Microproducts Inc., a California corporation ("Bell
Micro") proposes to sell its Quadrus contract manufacturing division
("Quadrus") business to PEMSTAR INC., a Minnesota corporation ("PEMSTAR").
Based on our due diligence relating to the Quadrus business, INTERWAVE
COMMUNICATIONS, INC. has an agreement with Bell Micro dated AUGUST 28, 1995,
(the "Contract"). Upon consummation of the acquisition, PEMSTAR will assume
(and Bell Micro will no longer be liable for) the rights and obligations of
Bell Micro under the Contract and be bound by the terms thereof.
Please countersign this letter in the space provided below to signify receipt
of this document assigning the rights and obligations under the Contract to
PEMSTAR as described above. Please return as soon as possible your signed
agreement to me at Quadrus by fax at 408/918-5186. You should retain a
duplicate copy of the executed agreement for your records. Please call me at
the number listed above if you have any questions.
Sincerely,
/s/ STEVE PETRACCA
Steve Petracca
Executive Vice President
ACKNOWLEDGED AND AGREED:
By: /s/ PRISCILLA LU
-----------------------------
Name: Priscilla Lu
-----------------------------
Title: CEO & President
-----------------------------
Date: May 26, 1999
-----------------------------
<PAGE>
MASTER AGREEMENT
VALUE-ADDED SERVICES
TURNKEY
I PREAMBLE
This Agreement is made on this 28th day of August, 1995, by and between
interWAVE Communications, Inc., a subsidiary of interWAVE Communications
International, Ltd. (hereinafter referred to as "Buyer"), and Bell
Microproducts Inc., Manufacturing Division, (hereinafter referred to as
"Seller"), under which value-added Turnkey services shall be performed.
II SCOPE
This Agreement shall constitute the Terms and Conditions under which the
Buyer and Seller shall conduct business. It is the intent of this Agreement
to cover the major concerns of both parties, and to serve as the basis for a
Business Relationship that both parties desire to undertake. It is not
intended to cover every detail of the business relationship, and it is
understood that detail agreements will be entered into periodically, and both
parties agree to abide by those individual agreements.
III TERM OF AGREEMENT
This Agreement shall be valid for a period of 12 months from the date of
execution of this Agreement by both parties, and shall be automatically
renewed yearly unless canceled by either parties.
IV CONFIDENTIALITY/NON-DISCLOSURE
The Confidentiality and Non Disclosure Agreement dated November 7, 1994 is
hereby incorporated into this agreement.
Rev3/94
<PAGE>
2
V RESPONSIBILITIES
A) BUYER
The Buyer shall be responsible for providing the Seller with the following,
as appropriate, for each item covered under this Agreement:
1) Definition of Buyer's expectations for each item, such as Assembly
only, In-circuit Testing requirements, Functional Testing
requirements, etc.
2) Approved documentation stating Buyer's expectations as it relates to
Bill of Materials, Approved Vendor Listing, Fabrication Drawings,
Assembly Drawings, Wiring Diagrams, Schematics, Functional Test
Specifications, Labeling and Packaging Specifications, and any other
expectations that may be required.
3) Product documentation and equipment or fixtures provided by the
Buyer to support product manufacture will be used in the
manufacturing and testing of the Buyer's product only and will
remain the property of the Buyer and be returned to the Buyer by the
Seller when requested.
B) SELLER
The Seller shall be responsible for providing to the Buyer finished products
that conform to all applicable documentation as specified by Buyer under this
Agreement:
1) Seller shall build products in accordance with those documents
supplied by Buyer, and will deviate from those documents only after
Buyer has issued to Seller, in writing, an approved Deviation
authorizing Seller to deviate from the original documentation.
2) Seller shall make all reasonable efforts to comply with Buyer's
requests for changes. It is understood that some changes may require
added expense to perform, and that such added expenses will need to
be authorized by Buyer prior to Seller's expenditure of such.
Rev3/94
<PAGE>
3
C) BUYER AND SELLER
1) Buyer and seller will establish and agree on quality metrics and
criteria and a quality improvement plan for every production run of
each printed circuit assembly.
NOTE: It is understood that these responsibilities are of a general nature,
and in no way should be construed as all inclusive under this Agreement.
VI PLACEMENT OF ORDERS/RELEASES
It is the desire of the Seller to support the Buyer with products in a timely
fashion, and with a continuous flow of products, as uninterruptable as
possible. Therefore:
1) Buyer will issue orders/releases for individual items defined under
Exhibits attached, including quantities, delivery requirements, and
contract pricing.
2) Initial delivery of the orders/releases shall be in accordance with
the material/assembly lead-times stated in Seller's quotation.
3) Buyer agrees that subsequent with placement of the initial
orders/releases, Buyer will place additional orders/releases through
a 120-day window. As time moves on and the 120-day window shrinks to
90 days, Buyer will place additional orders/releases that again
increases the order/release window up to 120 days. Buyer agrees to
maintain this 90-120 day window with orders/releases through the
term of this Agreement. Seller agrees to acknowledge such
orders/releases firming up the forecast within five (5) working
days.
4) In order for Seller to maintain a continuous flow of long lead-time
material, Buyer agrees to issue a forecast to Seller that covers an
additional 180-day period beyond the existing orders/releases that
exist at any given time. Seller will provide Buyer with a listing of
long-lead time materials periodically. This will inform Buyer of the
commitments that Seller will need to make to insure a smooth flow of
raw material. All commitments for custom material, allocated
material, non-cancelable non-returnable material, etc. will be
approved by Buyer prior to Seller making the commitment.
Rev3/94
<PAGE>
4
VII RESCHEDULING/CANCELLATION OF ORDERS/RELEASES
Seller recognizes that Buyer's requirements will change from time to time,
and it is the desire of the Seller to support as much of these changes as
possible without Seller bearing a financial burden to do so. Therefore:
1) Buyer agrees that all orders/releases that call for delivery from 1
to 45 days out are non-reschedulable/non-cancelable. Orders/releases
that call for delivery from 46 to 60 days out are non-cancelable,
but may be scheduled out to a maximum of 30 days. When requested by
Seller, Buyer agrees to reimburse Seller for material purchased for
the production of the scheduled out orders.
2) Buyer agrees that all orders/releases that call for delivery from 61
to 90 days out are reschedulable out, to a maximum of 30 days from
the original delivery date.
3) Buyer agrees that all orders/releases that call for delivery from 91
to 120 days out are reschedulable out to a maximum of 60 days from
the original delivery date.
4) Buyer agrees that all orders/releases that call for delivery from 91
to 120 days out are cancelable. Buyer further understands that Buyer
will be obligated for the inventory and cancellation charges that
the Seller may be responsible for as a result of Buyer canceling the
orders/releases.
5) When Buyer requests Seller to reschedule an order in, Seller will
make every effort to satisfy Buyer's request. Seller will respond to
Buyer's request for pull-in within five (5) working days of Buyer's
request.
VIII ENGINEERING CHANGE ORDERS (ECO's)
It is the desire of the Seller to implement Buyer's ECO's in accordance with
the requirements of the Buyer, and to do so in the most economical way
possible. Therefore:
1) Upon receipt of Buyer's ECO's, Seller will immediately review the
required changes and submit the following information to the Buyer:
Rev3/94
<PAGE>
5
a) Where there is no material cost impact, the Seller will advise
the Buyer of the added labor cost to rework any products that
are beyond the point where the ECO could normally be
implemented. The Seller will also advise the Buyer of any labor
cost impact for future products.
b) Where there is material cost impact, the Seller will advise the
Buyer of the added material and labor cost to rework any
products that are beyond the point where the ECO could normally
be implemented. The Seller will also advise the Buyer of any
material and labor cost impact for future products.
c) Where there is material obsolescence involved, the Seller will
advise the Buyer of the added material obsolescence cost to
implement the ECO on the desirable date. Seller will also advise
the Buyer of the date when the obsolete material would be
exhausted from inventory if the Buyer elected to delay the
implementation of the ECO.
2) After Seller has submitted the appropriate response to the Buyer for
review, Buyer agrees to advise Seller in writing the direction
Seller should take in order to implement the ECO.
IX SOURCE INSPECTION OF PRODUCT
All products produced by Seller for Buyer are subject to Source Inspection by
Buyer, as Buyers option.
X PRICING/PAYMENT/FOB TERMS
PRICING
All prices for the products sold under this Agreement are included on the
Exhibits attached hereto.
PAYMENT TERMS
Payment terms for products delivered under this Agreement are to be on a Net
30-day basis.
Rev3/94
<PAGE>
6
FOB POINT
FOB point for all deliveries under this Agreement are to be FOB Shipping
Point/Point of Origin.
XI WARRANTY
Since the products sold under this Agreement may be sold under various
specifications, the warranties shall vary according to those specifications,
as follows:
1) Seller warrants all products sold under this Agreement to be free
from defects in material for a period of ninety (90) days from the
date of shipment. Seller warrants all products sold under this
agreement to be free from defects in workmanship for a period of
twelve (12) months from the date of shipment. Should a failure occur
during this warranty period, Buyer and Seller agree that such
failures will be handled in the following manner:
a) If the product is In-circuit tested or Functional tested, Buyer
will obtain a Return Material Authorization (RMA) from the
Seller, prior to returning the failed product to Seller. Seller
shall repair or replace the failed product, in a timely
fashion, at Seller's discretion, at Seller's expense.
b) If the product is not In-circuit tested or Functional tested,
and the failure is workmanship related, then Buyer and Seller
agree to follow the steps stated under XI.1.a.
c) If the product is not In-circuit tested or Functional tested,
and the failure is material related, then the Buyer will advise
the Seller of the failed component, and the Seller will deliver
the replacement component to the Buyer, at no charge to the
Buyer, in a timely fashion. Buyer agrees to perform the
replacement of the failed component at no additional cost to the
Seller.
2) This warranty shall not apply to breakdown, malfunction, or other
failure of the product if the product is:
Rev3/94
<PAGE>
7
a) Used, operated, or maintained in a manner, or subjected to any
condition, not consistent with the intended purpose of the
product.
b) Improperly repaired by the Buyer.
c) Damaged or affected by the negligence of Buyer or the End User,
or by causes external to the equipment, such as, but not limited
to, air conditioning failure, electrical surges, or negligent
sets or conduct of a third person/s.
3) In the event of failures occurring outside the Warranty period,
Buyer may elect to return the defective products to Seller, after
obtaining an RMA number, for repair by Seller. Such costs as are
necessary to effect repairs will be quoted in advance to Buyer. If
Buyer elects to have Seller repair or replace the defective product,
Buyer will issue a Purchase Order to cover quoted costs.
XII COMMUNICATIONS
It is the desire of both Buyer and Seller to maintain a business
relationship/partnership whereby both parties are successful, and the results
of this Agreement are rewarding for both. It is, therefore, agreed that Buyer
and Seller will maintain excellent levels of communication through periodic
meetings, written communication, verbal communication, and any other means of
communication that will achieve both parties desire under this Agreement.
XIII FORCE MAJEURE
Neither party shall be liable in any way, whatsoever, to the other party in
the event that the performance of this Agreement, or any part, thereof, is
delayed through causes beyond the reasonable control of the delaying party,
such as, but not limited to, acts of God, acts of civil or military
authorities, fires, industrial disputes, floods, wars, riots. In the event of
such delay, the performance of this Agreement or any part affected by such
cause(s) shall be suspended for so long and to the extent that such cause(s)
prevents or delays its performance. The delaying party shall immediately and
fully
Rev3/94
<PAGE>
8
inform the other party of such delay. In the event the delay exceeds thirty
(30) days (or is anticipated to exceed thirty (30) days), the parties shall
meet to mutually decide what action should be taken with respect to the work
and this Agreement. Both parties undertake to make "best efforts" to recover
from such situations as timely as possible with minimal impact on the other
party.
XIV TERMINATION
This Agreement may be terminated by either party with one hundred and twenty
(120) days' written notice. In the event of such termination by Buyer, Buyer
shall be obligated for all completed products, work-in-process, all component
material purchased by Seller in support of Buyer's Orders/Releases, all long
lead-time material purchased by Seller to support Buyer's forecast, all
reeled quantity inventory, all non-cancelable/non-returnable inventory, all
minimum buy quantities of inventory, and all other such items resulting from
services provided herein.
It is further agreed that in the event of such a termination, Buyer will
promptly, and without delay, issue Seller Purchase Orders to cover all
aforementioned subjects.
In the event of such termination by Seller, Seller agrees to support Buyer
with product sufficient enough to cover the period upon which the Buyer had
orders/releases in place at the time of the termination. It is further agreed
that Buyer will be obligated for all completed products, work-in-process, all
component material purchased by Seller in support of Buyer's orders/releases,
all long lead-time material purchased by Seller to support Buyer's forecast,
all reeled quantity inventory, all non-cancelable/non-returnable inventory,
all minimum buy quantities of inventory, and any other such items resulting
from services provided herein.
XV GOVERNING LAW
This Agreement shall be construed and interpreted in accordance with the laws
of the State of California.
Rev3/94
<PAGE>
9
XVI APPROVALS
In witness whereof, the parties hereto have caused this Agreement to be duly
and properly executed by the duly authorized representatives as of the day
and year written below.
On Behalf of Buyer: On Behalf of Seller:
inverWAVE Communications, Inc. Bell Microproducts, Inc.
- ------------------------------------- ------------------------------------
/s/ PRISCILLA M. LU /s/ JACK BULLMANN
- ------------------------------------- ------------------------------------
Signature Signature
Priscilla M. Lu Jack Bullmann
- ------------------------------------- ------------------------------------
Name Name
President and C.E.O. V.P. Sales & Marketing
- ------------------------------------- ------------------------------------
Title Title
Sept. 21, 1995 10/24/95
- ------------------------------------- ------------------------------------
Date Date
Rev3/94
<PAGE>
EXHIBIT 10.20
REDACTED
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
POWER OF ATTORNEY
I the undersigned,
Olivier Houssin,
President Directeur General of Alcatel Business Systems, a company incorporated
under the laws of France as a societe anonyme with a share capital of FRF
734,376,000, having its registered office at 12 rue de la Baume 75008 Paris,
registered with the Commercial and Companies Registry of Paris under number B
602 033 185 (the "Company").
Acting in accordance with the powers granted to me by the Board of Directors of
the Company on April 134, 1999.
Hereby grant to Philippe Coffre, Director of Strategy
The following powers:
To execute an OEM Agreement with a maximum amount of US$ 25,000,000 (twenty five
million US Dollars) with Interwave Communication Inc., a company incorporated
under the laws of California
And to carry out in the name of the Company and on its behalf any act, matter or
thing, and to pass and sign any and all documents which the Company may do and
which relate in any way to the aforementioned transaction.
Made on October 19, 1999.
/s/ Olivier Houssin
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Olivier Houssin
President Directeru General
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DISTRIBUTION AND OEM AGREEMENT
BETWEEN
INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
AND ALCATEL BUSINESS SYSTEMS
This Distribution and OEM Agreement (hereinafter referred to as the
"Agreement"), is made and entered into as of the 27th day of OCTOBER, 1999,
(hereinafter referred to as the "Effective Date"), by and between
INTERWAVE COMMUNICATIONS INTERNATIONAL Ltd, company incorporated in Bermuda with
its US offices at 656 Bair Island Road, Suite 108, Redwood City, CA 94063-2704
(hereinafter referred to as the "SUPPLIER"),
and
ALCATEL BUSINESS SYSTEMS, a company organized under the laws of France with its
registered office at 12, rue de la Baume, 75008 Paris, France (referred to
hereinafter as "ALCATEL");
(collectively referred to as the "Parties" or individually as a "Party").
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TABLE OF CONTENTS
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1. DEFINITIONS ......................................................................................1
2. SCOPE OF AGREEMENT ...............................................................................3
3. DEVELOPMENT ......................................................................................3
4. SALE OF THE PRODUCTS BY ALCATEL ..................................................................9
5. CONTENT OF PRODUCT ..............................................................................10
6. TESTING AND ACCEPTANCE ..........................................................................10
7. QUALITY ASSURANCE ...............................................................................11
8. PRODUCT EVOLUTION AT THE INITIATIVE OF SUPPLIER .................................................13
9. GENERIC PRODUCT EVOLUTION REQUESTED BY ALCATEL ..................................................13
10. HOMOLOGATION OF SUPPLIER PRODUCTS INCLUDING DEVELOPED PRODUCTS ..................................14
11. SUPPLY AND MAINTENANCE OBLIGATIONS OF ALCATEL ...................................................14
12. LABELLING, SALES DOCUMENTATION AND USE OF TRADEMARKS ............................................15
13. TERM OF AGREEMENT ...............................................................................15
14. PRICES ..........................................................................................16
15. PURCHASE ORDERS .................................................................................18
16. DELIVERY OF PRODUCTS ............................................................................19
17. PAYMENT .........................................................................................22
18. TAXES ...........................................................................................22
19. DOCUMENTATION ...................................................................................22
20. TRAINING ........................................................................................23
21. INSTALLATION ....................................................................................23
22. MAINTENANCE AND SUPPORT SERVICES ................................................................24
23. MANUFACTURING LICENSE ...........................................................................26
24. PRODUCT SOFTWARE LICENSE ........................................................................29
25. WARRANTY ........................................................................................31
26. INDEMNITY .......................................................................................33
27. LIMITATION OF LIABILITY .........................................................................34
28. PROPRIETARY TECHNICAL MATERIALS .................................................................35
29. STRATEGY AND MARKETING COORDINATION COMMITTEE ...................................................36
30. TERMINATION AND CHANGE OF OWNERSHIP OR DIRECTION ................................................36
31. GENERAL .........................................................................................40
32. ESCROW AGREEMENT ................................................................................45
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ANNEXES
Annex A (1) DEVELOPED PRODUCTS DESCRIPTION AND GENERAL TECHNICAL
SPECIFICATIONS
Annex A (2) MILESTONES
Annex A (3) NRE COSTS
Annex B NEW RELEASES ROAD MAP
Annex C ALCATEL ROLLING FORECASTS & PO TIMEFRAMES
Annex D PRICING
Annex E LIST OF SUBCONTRACTORS
Annex F TECHNICAL PRODUCT SUPPORT BY THE SUPPLIER
Annex G LIST OF ALL ALCATEL COMPETITORS
Annex H TRAINING
Except as set forth in Section 3.3, in the case of any conflict between the
Agreement and any Annex, the Agreement shall control, unless otherwise expressly
agreed in writing by the Parties.
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Whereas, ALCATEL and SUPPLIER desire to develop corporate mobility
business, integrating wireless cellular coverage (technology, GSM, PCS, TDMA,
CDMA, ...) with corporate networks (including the evolution toward IP);
Whereas, ALCATEL is a world leader in telecommunications systems and
equipment and first in enterprise solutions, as well as related cables and
components activities, and operates in over 130 countries. ALCATEL provides
complete solutions and services to Customers, service providers, companies and
consumers, ranging from backbone networks to user terminals. ALCATEL is the
World leader in public switching and the European leader in PABX business
communications.
Whereas, SUPPLIER supplies compact mobile wireless network solutions
supporting corporate mobility and wireless networks, including IP;
Whereas, ALCATEL wishes to offer for sale a complete range of products
in the field of cellular mobility (especially for Enterprise and Campus)
communication, including certain Products and Developed Products, as those terms
are defined hereinafter, which it does not manufacture itself;
NOW, THEREFORE, in consideration of the mutual promises contained
herein and the covenants, conditions and provisions hereinafter set forth, the
parties hereby agree as follows:
1. DEFINITIONS
The following terms used in this Agreement shall have, unless
the context otherwise requires, the meanings hereby assigned to them:
ASSOCIATED COMPANIES shall mean any business entity which is
under the control of, in control of or under common control with a Party.
"Control" within the meaning of this provision means to have, directly or
indirectly a controlling interest at any time during the term of this Agreement
and as long as such an interest exists, by owning a majority of the voting stock
or equivalent rights.
CUSTOMERS shall mean ALCATEL's and its Associated Companies'
end user customers.
DETAILED TECHNICAL SPECIFICATION shall mean a detailed
specification for a Developed Product provided by SUPPLIER and accepted by
ALCATEL based upon the General Technical Specifications, which includes the
specific types of detailed information about the Developed Product mutually
identified and agreed by the Parties.
DEVELOPED PRODUCTS shall mean any software, firmware or
hardware for which ALCATEL has provided a General Technical Specifications and
which it has requested SUPPLIER, and SUPPLIER has agreed, to design and/or
develop, and which is funded by ALCATEL.
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GENERAL TECHNICAL SPECIFICATIONS shall mean those
specifications initially prepared by ALCATEL described in Annex A (1).
KNOW-HOW AND TECHNOLOGY SHALL MEAN any technical information
or knowledge created by a party related to the technology underlying the Product
or Developed Products.
LEAD TIME shall mean the period between the date of SUPPLIER's
receipt of an Order and the date of shipment of such Products pursuant to the
terms and conditions of this Agreement.
MAINTENANCE UPDATE RELEASE shall mean an update to a version
that remedies existing Severe Defects or Minor Defects and contains no new
features.
MALFUNCTION shall mean material non-conformity of the
Developed Product with the Detailed Technical Specifications.
MILESTONE shall mean a mutually agreed date for completion of
a task or deliverable as defined in an Annex A (2) to this Agreement.
MINOR DEFECTS shall mean moderate deviations in a Developed
Product or Product which do not preclude operation but do not strictly comply
with the corresponding Detailed Technical Specification (for Developed Products)
or SUPPLIER's published specifications (for Products).
NEW VERSION RELEASE shall mean Release 4 (R4), Release 5 (R5),
Release 6 (R6) and Release 7 (R7), as described in Annex B.
ORDER shall mean an order including but not limited to a
purchase order, placed by ALCATEL or its Associated Companies in accordance with
Section 15 of this Agreement.
PRODUCT SOFTWARE shall mean Software provided by SUPPLIER
designed to operate a Product.
PRODUCTS shall mean those products, consisting of hardware,
firmware and software (together with related documentation, and New Version
Releases, etc.), set out in Annex B as amended from time to time by written
agreement of the Parties including products operating in the 900, 1800 and 1900
Mhz range.
RELEASE shall mean a fix package or upgrade to a version that
improves product attributes capabilities, or usability, or contains major
enhancements thereto, an may also incorporate corrections to Severe Defects or
Minor Defects thereto.
ROLLING FORECAST PROCEDURE shall mean the procedure set forth
in Section 15.4.
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SERVICES shall mean all services rendered by SUPPLIER to
ALCATEL including, but not limited to studies, development, maintenance and
support for software, training and technical assistance.
SEVERE DEFECT shall mean the system or network is down and
unusable as a result of a problem with a Product or Developed Product which
causes failures, or results in server intermittent operations with no customer
acceptable work-arounds, or the customer states the problem has a critical
impact on their operation. It may also mean the situation where a system or
network is up and running, however the problem with a Product or Developed
Product exists with significant impact and which has difficult or no
work-arounds, such problem causing substantial performance degradation, or
preventing the customer from using a critical feature of the Product or the
system.
SOFTWARE shall mean, all or any part of the specific computer
software program or collection of programs and related design material and
documentation (whether in human or machine readable form), including system and
support software delivered to ALCATEL.
STANDARD LEAD TIME shall mean, in respect of any Product,
eight weeks from the date of SUPPLIER's receipt of an Order to the date of
shipment to ALCATEL.
2. SCOPE OF AGREEMENT
2.1 The purpose of this Agreement is to define:
- a distribution and OEM relationship for the Products between
the Parties,
and
- a design and development relationship between the Parties
for Developed Products.
2.2 SUPPLIER shall design and develop the Developed Products
as further specified in this Agreement.
2.3 ALCATEL or its Associated Companies shall purchase, or
cause to be purchased by an Associated Company, the Products, documentation,
training, maintenance, and support services as defined in Annex D from
SUPPLIER, by means of Orders placed from time to time during the term of this
Agreement and include such Products in its catalogue in order to resell them.
ALCATEL and its Associated Companies shall only issue Orders for Products to
SUPPLIER under the terms of this Agreement.
3. DEVELOPMENT
3.1 ALCATEL may at any time submit requests for a modification
of the Product and/or Developed Products to the Strategic Marketing and
Coordination Committee to be developed by SUPPLIER hereunder (hereinafter
"Modifications").
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3.2 If, after SUPPLIER receives the General Technical
Specifications, the Parties mutually agree to proceed, SUPPLIER shall undertake
the feasibility study and shall subsequently provide ALCATEL with an estimate of
the price for effecting the agreed Modifications. SUPPLIER shall determine,
among other things, the appropriate Milestone or the revised Milestone for
effecting the Modifications.
3.3 If and when the estimate is accepted by ALCATEL, the
Parties shall sign an amendment to the Agreement (including a new or revised
Annex A), in particular with respect to financial conditions and possible
revision of the time schedule. Any amendment hereunder to add a new Developed
Product shall only serve to amend this Agreement with respect to that particular
Developed Product, and specifically shall not amend the Agreement with respect
to previous Developed Products, unless otherwise expressly agreed by the
parties.
3.4 ALCATEL will pay the amounts for the development on the
schedule specified in Annex A (3).
3.5 SUPPLIER may invoice ALCATEL for such amounts upon
completion of Milestones specified in Annex A (2).
3.6 ALCATEL shall pay such invoices in accordance with the
payment provisions set forth in Article 17.
3.7 SUPPLIER shall use members of its technical expert staff
with appropriate expertise for performance of its obligations. SUPPLIER shall
use reasonable efforts to maintain the same technical expert staff for the
duration of the development of a module of the Developed Product.
3.8 Cooperation Between The Parties
The Parties specifically acknowledge that the
development of the Developed Products shall require active and continual
cooperation between SUPPLIER and ALCATEL.
3.8.1 Project Managers and Technical Experts
The Parties recognize that the successful
completion of the project calls for continuous supervision, and each Party
agrees to assign a Project Manager with the authority to take technical
decisions related to the activities which are the subject matter of this
Agreement. If either Party's Project Manager cannot continue to serve, the
Party concerned shall appoint a replacement Project Manager and give the
other Party written notice of the change.
SUPPLIER's Project Manager shall allocate
a dedicated team of highly qualified engineers to the project for development
of the Developed Products.
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ALCATEL shall have the right to during the
term of this Agreement to have at least one of its or its Associated Company's
employees located at SUPPLIER's facilities at ALCATEL's cost.
3.8.2 Progress Reviews
Progress reviews shall be made on a monthly
basis, as jointly agreed upon in writing by ALCATEL and SUPPLIER.
Written minutes of each progress review
meeting shall be prepared and issued alternately by each of the Parties and
shall be approved by the other Party within eight (8) business days after the
non-preparing Party's receipt thereof. If, upon expiration of the
above-mentioned period, the preparing Party has received no recommended changes
on the minutes from the non-preparing Party, the minutes shall be deemed
approved by both Parties.
3.8.3 Technical Committee.
A Technical Committee shall be established.
Its role shall be limited to overseeing the technical aspect and the
implementation of Developed Product program under this Agreement. The Technical
Committee shall be composed of two (2) members empowered to make day to day
decisions, each Party appointing its own representative.
(a) In particular, the role of the Technical
Committee shall be:
(i) To liaise between The SUPPLIER
and ALCATEL;
(ii) To monitor the development and
installation of the Developed Products including the review of Progress Reviews;
(iii) To check that both Parties are
complying with the time schedule; and
(iv) To transmit all decisions
necessary for the implementation of the Developed Products to both Parties.
(b) The Technical Committee shall also
examine all matters relating to the performance of the Developed Product program
under the Agreement, in particular:
(i) The resolution of any difficulty
encountered in the performance of the Developed Product program under the
Agreement;
(ii) The negotiation of any
supplement to or modification of the terms of the Developed Product program
under this Agreement, including prices or time schedule; and
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(iii) All important questions raised
by either Party with respect to the performance of the Developed Product program
under the Agreement and the decisions to be made in respect thereto.
Decisions of the Technical Committee shall
be made by unanimous agreement and shall be given due consideration by the
Parties. In the event of disagreement between the members of the Technical
Committee, the matter shall be referred to the respective management of each
Party.
Meetings of the Technical Committee shall
take place on a quarterly basis, as jointly determined by ALCATEL and the
SUPPLIER. Besides the regular progress reviews, a meeting shall be organized as
soon as any significant problem is identified by the SUPPLIER and ALCATEL.
Minutes of the Technical Committee meetings
shall be alternately prepared and issued by each of the Parties' representatives
and shall be approved by the other Party's representative within eight (8) days
after receipt thereof. If upon expiration of the above-mentioned period the
preparing Party has received no recommended changes on the minutes from the
non-preparing Party, the minutes shall be deemed approved by both Parties.
3.9 Acceptance Procedures
3.9.1 Prior to SUPPLIER conducting a feasibility
study and preparing an estimate for a Developed Product under Section 3.2,
ALCATEL shall provide General Technical Specifications for each Developed
Product.
3.9.2 After the Parties execute an amendment to this
Agreement for a new Developed Product pursuant to Section 3.3, SUPPLIER shall
generate a set of Detailed Technical Specifications on the schedule set forth in
the Milestones.
3.9.3 The Parties shall jointly review the Detailed
Technical Specifications within fifteen (15) business days from receipt of
Detailed Technical Specifications and mutually agree on any changes to the
Detailed Technical Specifications.
3.9.4 SUPPLIER shall create a detailed test procedure
including test criteria which ensures that the Developed Product meets the
requirements of the Detailed Technical Specification.
3.9.5 The Parties shall jointly review the test
procedure and acceptance criteria within fifteen (15) business days from receipt
of test procedure and acceptance criteria and mutually agree on any changes to
the test procedure and/or acceptance criteria.
3.9.6 SUPPLIER shall test the Developed Product in
accordance with agreed upon test procedures and ensure that the Developed
Product meets the acceptance criteria.
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SUPPLIER shall notify ALCATEL of all Malfunctions and Minor and Severe Defects
noted during testing, whether corrected or not.
3.9.7 SUPPLIER shall provide a written test report
detailing the test results and the attainment or non-attainment of any
acceptance criteria.
3.9.8 ALCATEL reserves the right to test the
Developed Product in accordance with test procedures given in Article 6,
provided that such testing is detailed in the agreed upon test procedure.
3.9.9 If the Developed Product meets the acceptance
criteria specified in the test procedure, then the Developed Product shall be
deemed to have met Provisional Acceptance.
3.9.10 SUPPLIER shall create a detailed final test
procedure including test acceptance criteria which ensures that the Developed
Product meets the requirements of the Detailed Technical Specification.
3.9.11 The Parties shall jointly review the final
test procedure and acceptance criteria within fifteen (15) business days from
receipt of final test procedure and acceptance criteria and mutually agree on
any changes to the final test procedure and/or acceptance criteria.
3.9.12 SUPPLIER shall test the Developed Product
in accordance with agreed upon final test procedures and ensure that the
Developed Product meets the acceptance criteria. SUPPLIER shall notify
ALCATEL of all Malfunctions and Minor and Severe Defects noted during
testing, whether corrected or not.
3.9.13 SUPPLIER shall provide a written final test
report detailing the test results and the attainment of any acceptance criteria.
3.9.14 If the Developed Product meets the acceptance
criteria specified in the final test procedure, then the Developed Product shall
be deemed to have met Final Acceptance.
3.9.15 In the event that the Developed Product fails
to meet the final test acceptance criteria within thirty (30) days SUPPLIER
shall propose an action plan for meeting the final test acceptance criteria.
3.10 Milestones
SUPPLIER shall deliver to ALCATEL the deliverables
including but not limited to reports and/or Developed Products as specified in
the Milestones in Annex A (2).
ALCATEL shall have the right to terminate all of its
obligations with respect to a particular Developed Product program under the
present Agreement (except with respect to Milestones already delivered
hereunder) if SUPPLIER fails to achieve the final milestone for the
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particular Developed Product program within 150% of the agreed upon program
duration unless otherwise agreed in writing.
ALCATEL will have to pay only for Milestones
completed before the delay period begins.
3.11 Intellectual Property Rights in Developed Products
3.11.1 Ownership Of Developed Product
All Developed Products including all
software (in both binary and source code form) and all copies thereof are and
shall be the exclusive property of ALCATEL and shall be delivered to ALCATEL
promptly at ALCATEL request from time to time at the termination or completion
of development or at the termination of this Agreement, which ever is earlier.
3.11.2 Ownership of Inventions and Intellectual
Property
SUPPLIER hereby grants and agrees to grant
to ALCATEL all right, title and interest in and to the following (collectively,
"Supplier Developed Rights"): any and all things of value, including, but not
limited to, all services product, inventions (patentable or unpatentable), trade
secrets, and copyrights, together with any applications for patents which may
issue thereunder and registrations of copyrights, which are embodied in or cover
the Developed Products and are discovered, created, developed, or otherwise
acquired by SUPPLIER or any of its representatives, or subcontractors solely in
connection with the development of Developed Products. Upon request of ALCATEL,
SUPPLIER shall, at ALCATEL's expense, do or cause to be done all things
necessary to enable ALCATEL to register, file, prosecute, maintain and protect
trade secrets, copyrights, and applications for patents and patents issuing on
such applications, and to perfect the full ownership and right, title and
interest in and in all the rights and properties described hereinabove in this
Section 3.11.2. For purposes of clarification, Supplier Developed Rights shall
not include rights in items (a) developed by SUPPLIER before the Effective
Date, (b) obtained by SUPPLIER from a third party, and which SUPPLIER has no
legal right to provide such, right, title and interest or (c) independently
developed by SUPPLIER without access or reference to any information provided by
ALCATEL or its Associated Companies, whether before, during or after the
Developed Products development.
3.11.3 Background Intellectual Property Rights
With respect to any Developed Products
provided by SUPPLIER under this Agreement, SUPPLIER agrees to grant, and hereby
grant to ALCATEL an irrevocable, paid up, non-exclusive worldwide license:
(a) to make, use and sell under any and all
patent rights, owned or controlled by SUPPLIER to the extent needed for making,
using, selling or licensing equipment, materials or other goods based on or
using documents or tangible materials provided as part of the Developed Products
supplied by SUPPLIER; or
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(b) to display, perform, use, reproduce,
prepare derivative works based on, or distribute any documents or other tangible
materials provided as part of the Developed Products supplied by SUPPLIER; and
(c) to disclose and use any and all of the
information contained in such documents or tangible materials.
3.11.4 Grant Back
ALCATEL agrees with ALCATEL's prior written
consent to grant and hereby grants to SUPPLIER, under the Supplier Developed
Rights, a world-wide, non-exclusive, perpetual, non-terminable, sublicensable
but non-assignable, irrevocable, paid-up and royalty-free right and license
under intellectual property rights created by SUPPLIER to make, have made, use,
sell, offer for sale, import, copy, reproduce, modify, display, perform,
transmit, prepare derivative works and otherwise exploit in any way and
commercialize without restriction any products, software, equipment, materials,
or other goods, services, methods or processes.
4. SALE OF THE PRODUCTS BY ALCATEL
4.1 Scope of the sale
ALCATEL or its Associated Companies and their
respective Customers shall have the worldwide right to sell to Customers the
Product for resale, loan or lease by such Customers for the benefit of their
customers under ALCATEL's or its Associated Company's or Customers brand names,
provided, however that if ALCATEL or its Associated Company or Customer desire
to have SUPPLIER label the Product, SUPPLIER shall have the right to charge
ALCATEL or the Associated Company.
4.1.1 ALCATEL shall be free to determine the prices
and other terms pursuant to which it shall sell the Products.
4.1.2 If SUPPLIER is interested in subcontracting any
manufacturing, SUPPLIER shall consider ALCATEL or Associated Companies for such
manufacturing.
4.2 Relationship of the Parties
4.2.1 The relationship of ALCATEL and SUPPLIER
established by this Agreement is that of independent contracting parties, and
nothing contained in this Agreement shall be construed as (i) giving either
party the power to direct or control the day-to-day activities of the other,
(ii) constituting the parties as partners, joint ventures, co-owners,
principals, and agents or otherwise as participants in a joint or common
undertaking or (iii) creating an employment relationship.
4.2.2 Nothing in this Agreement shall be construed as
granting to ALCATEL distributorship or franchising rights.
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4.2.3 Neither Party, its agents and employees, shall
have power or authority as agent, employee or in any other capacity to
represent, act for, find or otherwise create or assume any obligation on behalf
of the other Party for any purpose whatsoever.
4.2.4 All sales and other agreements between ALCATEL
and its Customers shall be the sole responsibility of ALCATEL, except as
otherwise provided in this Agreement.
5 CONTENT OF PRODUCT
5.1 The list of Products and minimum feature for future
releases are set forth in Annex B and may be amended from time to time upon the
mutual written consent of the Parties.
5.2 The evolution of the Product beyond that described in
Annex B shall be discussed in the Strategic Marketing and Coordination Committee
in accordance with Article 9 of the Present Agreement.
6 TESTING AND ACCEPTANCE
6.1 Initial acceptance
Prior to placing any Orders for the Products listed
in Annex D and any new Products developed in the future, ALCATEL shall carry out
a platform testing and acceptance procedure for each such Product.
6.1.1 Such testing shall be carried out according to
the standard procedures of ALCATEL. These standard procedures will be made
available to SUPPLIER no less than sixty (60) days prior to the scheduled test.
6.1.2 Any non-conformity of the Products with
SUPPLIER's published specifications tested shall be duly recorded by both
Parties, and SUPPLIER will correct such non-conformities within two (2) months.
6.1.3 Upon successful performance testing of the
Products, ALCATEL will issue a written acceptance of the Products and their
related specifications. SUPPLIER agrees to work with ALCATEL to make sure that
SUPPLIER'S standard tests are consistent with ALCATEL's standard procedures as
tested in 6.1.1.
6.2 Pre-delivery inspection and certification by SUPPLIER
6.2.1 Prior to delivery of any Order, the Products
must be inspected by SUPPLIER in accordance with SUPPLIER's standard inspection
procedure to ensue that the Products comply with such Order and, in particular,
with the specifications for the Products to be delivered thereunder.
6.2.2 ALCATEL shall have the right to participate in
such inspection with regard to any Order with at least one (1) week's notice to
SUPPLIER.
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6.2.3 Upon delivery, SUPPLIER shall communicate to
ALCATEL in writing a certification from SUPPLIER's manager for quality control
that such Products are in conformity with the SUPPLIER's standard inspection
procedures.
6.3 Subsequent inspection and acceptance by ALCATEL
6.3.1 Within eight (8) weeks after arrival of the
Products at the destination indicated in the Order, ALCATEL may inspect such
Products, in accordance with agreed test procedures, to ensure that they comply
with the Order and specifications, as in effect at the time of delivery, and
that they are in good working order.
6.3.2 ALCATEL shall notify SUPPLIER in writing within
such eight (8) week period of any failure in this respect.
(a) ALCATEL shall have no obligation to pay
SUPPLIER for properly rejected Products.
(b) The SUPPLIER shall have 6 (six) weeks to
remedy any Severe Defects.
(c) Failure to provide such notification
shall constitute acceptance.
6.4 Return and replacement of defective Products
6.4.1 SUPPLIER shall ship replacement Products to
ALCATEL FCA airport closest to SUPPLIER's manufacturing plant, in accordance
with the 2000 INCOTERMS of the International Chamber of Commerce, within
four (4) working days from date of receipt of written notification to SUPPLIER
of the rejection of the Products.
6.4.2 All defective Products will be repaired or
replaced at SUPPLIER s sole discretion and at its own expense.
6.4.3 SUPPLIER shall provide ALCATEL with a "Return
Material Authorization", and ALCATEL shall ship to SUPPLIER all defective
Products, transportation, insurance and any other related costs to be borne by
SUPPLIER with regard to replacement Products only during the Product's original
warranty period. Costs for Products returned to the SUPPLIER for repair after
the original warranty period shall be borne by ALCATEL.
7. QUALITY ASSURANCE
7.1 General Requirements
7.1.1 SUPPLIER is free to choose the quality
assurance system that best enables SUPPLIER to meet ALCATEL's requirements.
However, SUPPLIER recognizes and accepts that ALCATEL shall use standard ISO
9001, in whole or in part, to evaluate the suitability
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and efficiency of the Quality Assurance set up for this purpose. The SUPPLIER
shall get ISO 9001 certification within 12 (twelve) months of this agreement's
signature.
7.1.2 SUPPLIER is at all times responsible for the
quality assurance of the Products and services relating thereto. In this regard,
SUPPLIER is, in particular, responsible for the quality of its purchases and the
quality of production expertise.
7.1.3 SUPPLIER shall appoint a representative to deal
with matters concerning ALCATEL and also delegate to such representative the
authority to act as its representative in connection with the quality assurance
of the Products supplied.
7.1.4 SUPPLIER must document and implement a Quality
Assurance program which demonstrates capacity to supply Products conforming to
the requirements of this Agreement.
(a) Such documentation, which shall be in
English, shall consist of:
(i) a quality manual defining the
quality system of SUPPLIER, including, another other subjects, the organization
and procedures followed within SUPPLIER, a copy of which shall be delivered to
ALCATEL on the effective date of this Agreement and any future updates as the
same are made.
(ii) a quality plan, which must
contain a process for review and correction of errors;
(iii) the specific quality testing
procedures of the Products and corresponding certification.
(b) SUPPLIER shall deliver to ALCATEL copies
of the documents described in paragraphs (ii) and (iii) within sixty (60) days
of the effective date of this agreement.
7.2 Analysis and Investigation of Failures
All defects or anomalies in the manufacture of the
Products noted by either or both parties shall be recorded and appropriate
corrective action shall be taken by SUPPLIER.
7.3 Investigations and Audits
7.3.1 ALCATEL may carry out quality insurance
investigations and audits during the term of this Agreement upon seven (7) days
notice.
7.3.2 At all times upon seven (7) days notice
ALCATEL, and/or its Customers, when such Customers so require, shall have access
to the documents and control systems accounting records at SUPPLIER'S premises,
or the premises of its major sub-contractors, for the purpose of verifying the
implementation of the quality assurance of the Products in all respects.
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7.3.3 In this event SUPPLIER shall hold at the
disposal of ALCATEL's representatives all reasonable material and qualified
personnel.
7.3.4 ALCATEL shall be solely responsible for, and
shall indemnify and hold the SUPPLIER free and harmless from, any and all
claims, damages, costs (including reasonable attorney s fees) or lawsuit arising
out of its acts or omissions or those of its employees, servants, agents or any
of them during any such investigation or audit.
8. PRODUCT EVOLUTION AT THE INITIATIVE OF SUPPLIER
8.1 SUPPLIER shall cause the Products to evolve, as concerns
the Product Software, in the form of Maintenance Update Releases and New Version
Releases.
8.2 SUPPLIER shall inform ALCATEL of its Releases of feature
improvements which may be suitable for use on, or in connection with, the
Products, as well as new generic products that are similar or equivalent to the
Products, provided it can do so lawfully, in which case the Parties shall meet
to discuss the suitability and terms and conditions of the sale of such new
products to ALCATEL.
8.3 SUPPLIER shall not impact form, fit or function of the
Products or the specifications without giving ALCATEL sixty (60) days notice and
SUPPLIER will not ship any such impacted equipment to ALCATEL without ALCATEL's
written permission.
8.4 Upgrade of delivered Products
SUPPLIER will produce New Version Releases of Product
Software reflecting functional evolution for installation in delivered Products,
in accordance with Annex B and will consider in good faith the recommendations
of the Strategic and Marketing Coordination Committee.
The costs of developing any upgrade reflecting
changes in design of generic products made by SUPPLIER in the normal course of
product evolution will be for the account of SUPPLIER. SUPPLIER commits to make
future Releases of generic Product Software as described in Annex B available to
ALCATEL for sublicensing to Customers in accordance with the provisions of this
Agreement.
9. GENERIC PRODUCT EVOLUTION REQUESTED BY ALCATEL
9.1 As a result of the output of the Strategic and Marketing
Coordination Committee, ALCATEL may request new technical specifications and
request SUPPLIER to implement the corresponding modifications, subject to
SUPPLIER's acceptance. SUPPLIER shall consider such request within a reasonable
period of time and respond to ALCATEL whether it accepts such a request.
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9.2 With respect to any upgrade, as well as new features or
facilities added to the current generic version, made at the request of ALCATEL
the parties will negotiate in good faith sharing of financing and property
rights in the event that ALCATEL funds the development, and a specific written
agreement is mandatory. In the event that ALCATEL does not fund the requested
development the proprietary rights will remain with the SUPPLIER.
10. HOMOLOGATION OF SUPPLIER PRODUCTS INCLUDING DEVELOPED PRODUCTS
SUPPLIER will furnish proof of compliance with
general requirements of CE homologation and with CE marking, a list of countries
where SUPPLIER is homologated and verified, accepted and approved by
Underwriter's Laboratories ("U.L") and in compliance with Class B under 47 CFR
part 15 and other applicable limits under 47 CFR part 24 of the Regulations of
the U.S. Federal Communications Commission. In any case, all the delivered
product will be stamped with CE marking label. SUPPLIER will provide a list of
certifications obtained. ALCATEL shall provide a list of countries in which it
desires to certify the Product. ALCATEL will be responsible for identifying any
additional compliance tests required in those countries. SUPPLIER shall have the
option of:
1) Agreeing to perform such compliance tests in a
time frame agreed to by both Parties at
SUPPLIER expense;
2) Requesting ALCATEL to assist in accordance with
Section 10.1.2 below; or
3) Deciding not to pursue the test nor pay the
expense of pursuing such compliance.
10.1.1 With respect to any such country, SUPPLIER
shall, at ALCATEL's request, furnish documentary proof of such compliance.
10.1.2 At SUPPLIER's request, ALCATEL agrees to
assist SUPPLIER in seeking homologation compliance approval in a particular
country, provided that:
(a) SUPPLIER shall furnish ALCATEL, at
SUPPLIER's sole expense, all necessary documentation, including powers of
attorney to act on behalf of SUPPLIER; and
(b) SUPPLIER shall reimburse ALCATEL for all
costs and expenses incurred by ALCATEL in connection therewith.
11. SUPPLY AND MAINTENANCE OBLIGATIONS OF ALCATEL
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11.1 ALCATEL will develop, within six (6) months after the
Effective Date, and thereafter maintain, an adequate staff of trained
technicians and provide technical support and service to Customers at such
prices and on such terms as ALCATEL may establish.
11.2 ALCATEL will maintain a spare parts inventory in
quantities and mix reasonably sufficient to support the installed base of
Products in all locations where ALCATEL has service technicians trained to
service SUPPLIER's Products, provided that SUPPLIER shall provide ALCATEL with
the necessary information concerning the quantifies and mix, Mean Time Before
Failure (MTBF), and lead time for repairs.
12. LABELLING, SALES DOCUMENTATION AND USE OF TRADEMARKS
12.1 ALCATEL shall market and resell the Products under its
own name and trademark, or that of its Associated Companies or Customers which
right shall include:
12.1.1 The use of ALCATEL's name and trademark in
advertising and sales promotion activities, as well as trade shows, technical
seminars and any other activities related to the marketing and sale by ALCATEL
of the Products.
12.1.2 The use of ALCATEL's name and trademark by
Customers, including Customers and customers of Customers, for all such
activities, provided that ALCATEL has agreed to same.
12.1.3 ALCATEL shall have the right to request in
writing from SUPPLIER use of SUPPLIERS trademark in specific situations.
SUPPLIER will signify approval of the request in writing to ALCATEL.
12.2 SUPPLIER shall provide marking of the Products as
follows:
12.2.1 Products purchased under this Agreement shall
include a front panel reflecting ALCATEL's product markings.
(a) With respect to the Products set forth
in Annex D as of the Effective Date, ALCATEL and SUPPLIER shall agree on the
most appropriate and efficient means of applying ALCATEL's product markings at
the earliest possible date.
(b) With respect to new Products which may
be added in the future to Annex D, ALCATEL shall supply a marking specification,
together with ALCATEL's "private label" panels to SUPPLIER.
13. TERM OF AGREEMENT
Subject to any other provisions in this Agreement concerning
the right of either Party to terminate this Agreement:
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13.1.1 Initial Term. This Agreement shall commence
upon the Effective Date and shall remain in full force and effect until December
31, 2001.
13.1.2 Renewal for Subsequent Periods. At the end of
the initial period and any subsequent period, this Agreement shall automatically
be renewed for an additional twelve (12) month period unless either party gives
written notice of non-renewal at least ninety (90) days prior to the end of the
current period.
14. PRICES
14.1 Prices and Discounts
Prices to ALCATEL for Products shall be as set forth
in Annex D.
14.2 Prices in U.S. Dollars
All prices under this Agreement are stated and shall
be paid in U.S. Dollars, unless otherwise agreed by the Parties.
14.3 Most Favoured Pricing
SUPPLIER will agree to sell the Products to ALCATEL
at prices equal to the lowest price charged by SUPPLIER to a third party
purchasing same or lesser quantities of the similar Product under an agreement
with comparable terms and conditions (including same or lesser volumes
commitments) to those in this Agreement. If at any time during the term of this
Agreement, SUPPLIER sells the same or lesser quantities of the Product to a
third Party at a lower price than that charged to ALCATEL, SUPPLIER shall
promptly notify ALCATEL in writing and ALCATEL shall then have the option to
purchase the Product from SUPPLIER at the prices offered to such third party for
so long as ALCATEL sells at the volume levels for which such third party was
offered such prices.
14.4 Purchase Commitments
During each Semester of this Agreement, ALCATEL shall
purchase Products, Services and/or Support (exclusive of NRE specified in Annex
A(3)) totaling at least the amount specified for such Semester (the "Semester
Commitment") as shown in the table below:
<TABLE>
<CAPTION>
- ------------------------------------- ------- ---------------------------------- ----------------------------------
USSM 1999 2000 2001
- ------------------------------------- ------- ---------------------------------- ----------------------------------
Calendar Quarter ending Dec Mar Jun Sep Dec Mar Jun Sep Dec
- ------------------------------------- ------- -------- -------- ------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Quarterly Revenue *** *** *** *** *** *** *** *** ***
- ------------------------------------- ------- -------- -------- ------- -------- -------- ------- -------- --------
Semester Revenue *** *** *** ***
- ------------------------------------- ------- -------- -------- ------- -------- -------- ------- -------- --------
Annual Revenue *** *** ***
- ------------------------------------- ------- -------- -------- ------- -------- -------- ------- -------- --------
Cumulative Revenue *** *** ***
- ------------------------------------- ------- -------- -------- ------- -------- -------- ------- -------- --------
</TABLE>
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* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE>
For purposes of this Agreement, a "Semester" shall
mean a six (6) month period commencing on January first or July first of any
year during the term of this Agreement, provided that the first Semester shall
commence on the Effective Date and end on June 30, 2000.
14.5 Shortfall Payment
14.5.1 Provided that ALCATEL uses commercially
reasonable efforts to sell the volumes of Product or use the Support and
Services covered by this Agreement, in the event that ALCATEL fails to meet the
Semester Commitment stated above for any Semester, SUPPLIER'S sole remedy and
ALCATEL's total liability shall be calculated as follows:
(a) ALCATEL may carryover up to [*****]
of the Semester Commitment for a given Semester to the next Semester, provided
that in no event may any amount carried over from the preceding Semester to
the current Semester be carried over to the next Semester. The actual
carryover amount from any semester (the "Carryover Amount") shall be equal to
the lesser of (i) [*****] of the Semester Commitment for such Semester; and
(ii) the sum of the Semester Commitment for such Semester and the Carryover
Amount from the immediately preceding Semester less the amount actually
purchased during such Semester.
(b) If, at the end of any Semester, the
amount actually purchased during such Semester is less than the sum of the
Carryover Amount from the previous Semester and [*****] of the Semester
Commitment for the current Semester, then ALCATEL shall pay SUPPLIER a
shortfall payment of [*****] of such difference. SUPPLIER shall invoice
ALCATEL for such shortfall payment after the end of such Semester, and
ALCATEL shall pay such invoice in accordance with Article 17.
(c) If, at the end of any Semester, the
amount actually purchased during such Semester exceeds the sum of the
Semester Commitment for such Semester and the Carryover Amount from the
preceding Semester, then ALCATEL shall receive a credit against purchases
equal to the lesser of: (i) the shortfall payment actually paid by ALCATEL
pursuant to Section 14.5.l(b) for a shortfall in the previous Semester, and
(ii) [*****] of the amount by which the volume actually purchased during the
current Semester exceeds the sum of the Semester Commitment for such Semester
and the Carryover Amount from the preceding Semester.
d) At the end of each Calendar Year, the
Parties will make the grand total of all ALCATEL and its Associated Companies'
purchases during this Calendar Year.
If ALCATEL and its Associated Companies have
reached their Purchase commitments here above mentioned, ALCATEL shall be
completely reimbursed by SUPPLIER of all shortfall payments paid by ALCATEL
during the first Semester.
Unless mutually agreed by the Parties, if SUPPLIER delays meeting the
general availability dates for any agreed upon Release milestones exceeds six
(6) months, then ALCATEL's volume commitments for that calendar year are hereby
terminated.
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* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE>
15. PURCHASE ORDERS
15.1 Purchase Order Documents
ALCATEL shall purchase Products under this Agreement
by placing Orders in writing with SUPPLIER.
15.1.1 ALCATEL shall communicate firm purchase Orders
to SUPPLIER at SUPPLIER's office in Paris, France, or such other office as
SUPPLIER shall designate in writing.
15.1.2 Each Order shall:
(a) Identify the Products desired by
quantity, SUPPLIER model number and description, and shall describe the hardware
and programming configurations of said Products.
(b) Set forth a delivery schedule, which
shall not be less than the Standard Lead Time.
15.1.3 SUPPLIER shall be obligated to accept any
Order which conforms to the Rolling Forecast Procedure and this Article 15,
except that SUPPLIER shall not be obligated to accept any Order while ALCATEL is
in default of payment or for Products not covered in this Agreement.
(a) SUPPLIER shall acknowledge acceptance of
Orders within five (5) working days after receipt of such Orders.
(b) As promptly as practical after receipt
of ALCATEL's Order, but in no event less than Seven (7) working days of receipt
of such Order, SUPPLIER will notify ALCATEL in writing of the estimated shipment
dates for the Products ordered in conformity with Rolling Forecast Procedure.
(c) If SUPPLIER has not issued a notice of
acceptance, or a duly justified rejection, within such period, then the Order
shall be deemed accepted according to its terms.
15.2 Cancellation of Orders
15.2.1 ALCATEL may cancel any Order for Products
placed in accordance with the Standard Load Time upon written notice provided to
SUPPLIER within fifteen (15) days after placement of the Order.
15.3 Phase out of the Product - Last Time Buy Order
15.3.1 Should SUPPLIER intend at any time to cease
production of Products, then, it shall so notify ALCATEL, in writing sent by
prepaid registered mail, a minimum of six
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months prior to such cessation. ALCATEL may, in the three months following the
giving of notice, order further Products of the type to be discontinued at
reasonable prices to be agreed upon during the notice period, for delivery up to
the date of final production (provided that such orders are not disproportionate
to the existing volume commitments).
15.3.2 SUPPLIER shall make available for sale at the
prices stated in Annex D spare parts needed for maintenance of the Products sold
hereunder, during a minimum period of three (3) years from the date of the last
delivery. SUPPLIER will do its best efforts to provide ALCATEL with spare parts
after the period of three (3) years from the date of the last delivery.
SUPPLIER shall continue during a period of five (5) years from the date of the
last delivery to provide ALCATEL with support, maintenance, and repair.
15.4 Rolling Forecast Procedure
During each calendar month of the Agreement, ALCATEL shall
provide a rolling twelve month forecast as follows ("Rolling
Forecast Procedure"):
- For each of the twelve calendar months following the
date of the forecast, the forecast shall state the
amount of the Products to be delivered in such month
by dollar volume and country including a breakdown by
Product type for each of the six calendar months
following the date of the forecast.
- Forecast accuracy must be within fifty percent (50%)
by the ninth month and seventy-five percent (75%) by
the sixth month; i.e., actual Orders for delivery in
each of the first six months in the forecast shall
not vary by more than twenty-five percent (25%) from
the amount forecasted, and actual Orders for delivery
in each of the seventh, eighth and ninth months in
the forecast shall not vary by more than fifty
percent (50%) from the amount forecasted.
- The rolling forecast shall not be construed as an
Order, provided that ALCATEL may only change the
quantities as stated above.
- This process shall be reviewed to optimize the
requirements of both Parties on a quarterly basis.
- ALCATEL shall have a right to verify SUPPLIER's
capacity to meet the forecasts, including site visits
to SUPPLIER facilities within fourteen (14) days
notice.
- ALCATEL's initial twelve (12) month rolling forecast
is attached hereto as Annex C.
16. DELIVERY OF PRODUCTS
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16.1 Delivery period
16.1.1 The Standard Lead Time shall apply to all
Orders placed in accordance with the Rolling Forecast Procedure in Section 15.4,
unless otherwise agreed by the Parties.
16.1.2 If delivery of any item of Product is delayed
beyond the agreed delivery date, for reasons other than events constituting
force majeure:
(a) ALCATEL shall be entitled to receive
from SUPPLIER, as liquidated damages, to amount equal to one quarter of one
percent (.25%) of the net contract price of delayed Products for each calendar
week, starting after the first month of delay, provided that liquidated damages
in respect of any delayed Product shall not exceed five percent (5%) of the net
contract price of the Products delayed.
(b) Such liquidated damages shall be paid
within sixty (60) days of the issue of an appropriate invoice by ALCATEL and
shall be in full and final satisfaction of SUPPLIER'S liability for such delay.
16.1.3 If delayed Products have not been delivered
within twenty (20) weeks of the agreed delivery date, ALCATEL shall have the
right to cancel without liability, in whole or in part, the Order concerned, in
so far as it related to the delayed Products, without prejudice to ALCATEL's
right to receive liquidated damages up to the date of such cancellation, subject
to the aforementioned maximum of five per cent (5%).
16.1.4 Any delay in the delivery beyond the agreed
upon delivery date shall delay the Rolling Forecast by the same number of days
of the delay.
16.2 Method of Delivery
16.2.1 The Products shall be delivered to ALCATEL FCA
San Francisco Airport or its other designated non-USA location at ALCATEL's
expense, in accordance with the 2000 INCOTERMS of the International Chamber of
Commerce.
16.3 Title
16.3.1 Title to Goods for all shipments shall pass to
ALCATEL at port of entry of the country addressed on the Order. Title to all
SUPPLIER Product Software shall remain with SUPPLIER.
16.4 Retention by SUPPLIER of security interest
16.4.1 Until such time as SUPPLIER shall have
received, in cash or cleared funds, full payment for the Products, SUPPLIER
shall retain a security interest in such Products, including any insurance
proceeds arising from loss or damage to same.
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16.4.2 ALCATEL shall not be entitled to pledge or in
any way charge by way of security for any indebtedness any of the Products for
which full payment has not been received, and if ALCATEL does so, all Moines
owing by ALCATEL to SUPPLIER for such products shall (without prejudice to any
other right or remedy of SUPPLIER) immediately become due and payable.
16.4.3 If ALCATEL fails to pay any portion of the
purchase price or any related charges as required under the terms of Article 17,
SUPPLIER shall have the right, without liability, to repossess the Products and
to avail itself of any legal remedy; provided, however, that SUPPLIER shall not
repossess the Products from any Customer of ALCATEL except upon thirty (30) days
prior written notice to ALCATEL.
16.4.4 ALCATEL agrees to execute and deliver such
financing statements and other documentation as SUPPLIER may reasonably request
to perfect and protect SUPPLIER's security interest in the Products, provided
that any and all costs of obtaining and perfecting such security interest shall
be borne by SUPPLIER.
16.5 Export and Import Licensing
Subject to the terms of this Agreement:
16.5.1 SUPPLIER shall undertake to obtain such United
States export licenses and approvals as may be necessary or appropriate to
permit the export of Products hereunder, but makes no representation that such
licenses or approvals can be obtained or maintained.
(a) ALCATEL shall undertake to obtain all
licenses, approvals or permits required by any other government.
(b) SUPPLIER and ALCATEL each agree to
provide to the other such information and assistance as may be reasonably
required by the other in connection with obtaining such licenses, approvals and
permits and to take timely action to attempt to obtain all required import and
export documents.
16.5.2 SUPPLIER shall be at all times subject to the
export administration and control laws and regulations of the United States
Government, and any agency thereof. ALCATEL agrees that, with respect to resale
or any other disposition of Products and printed commercial and technical data
and information supplied by SUPPLIER, ALCATEL shall comply fully with the
export administration and control laws and regulations of the United States of
America, any amendments to such laws and regulations, and any instructions
provided by SUPPLIER relating to such compliance.
16.5.3 ALCATEL shall comply with all other applicable
laws of the United States and all other jurisdictions in which it carries on its
activities pursuant to this Agreement and
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shall take commercially reasonable steps to ensure that its Customers comply
with such requirements..
17. PAYMENT
17.1 General Payment Terms
Payment shall be made by ALCATEL to SUPPLIER's Hong
Kong office thirty (30) days following receipt of a valid written invoice. A
valid written invoice must include the ALCATEL purchase order number and must be
for the exact amount of that ALCATEL purchase order. If the Order allows for
partial shipments, then ALCATEL will pay invoices for such partial shipments up
to the amount aggregated in the Order upon receipt of an otherwise valid written
invoices.
17.1.1 Products shall be invoiced as of the date of
shipment by the SUPPLIER.
18. TAXES
18.1 The prices specified in SUPPLIER's price list as set
forth in Annex D are exclusive of any sales, use or privilege tax, value added
tax, customs duty or impost, export or import license fee, excise tax based on
gross revenue or any similar tax or change which might be levied as a result of
the production, sale, license or shipment of any Products or the use of any
Products by ALCATEL.
18.2 ALCATEL agrees to pay and otherwise be fully responsible
for any such taxes (except for taxes based on the net income of SUPPLIER and any
withholding tax payable under the provisions of the Tax Treaty between France
and the United States, in force at the time of payment). Any personal property
taxes assessable on the Products after delivery shall be borne by ALCATEL.
SUPPLIER shall have the right, but shall not be obligated, to pay any such taxes
directly, in which event ALCATEL shall promptly reimburse SUPPLIER in the amount
thereof upon presentation by SUPPLIER of evidence of payment. If a certificate
of exemption or similar document or proceeding is to be made in order to exempt
the sale from sales or use tax liability, ALCATEL will obtain and pursue such
certificate, document or proceeding and present to SUPPLIER evidence of such
exemption satisfactory to SUPPLIER no later than sixty (60) days prior to
shipment.
19. DOCUMENTATION
19.1 Provision of Documentation by SUPPLIER
19.1.1 Upon acceptance of ALCATEL's first Order for
Products, SUPPLIER shall provide ALCATEL with one (1) copy of each of the
following documents of SUPPLIER in English, in both CD-ROM and diskette formats:
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(a) Installation Guides
(b) Operations (User) Guides
(c) All documents concerning dimensioning
and configuration rules
(d) Payment for such documents shall be in
accordance with the terms noted in Article 17 and for the amount provided in
Annex D.
19.1.2 Upon publication by SUPPLIER, SUPPLIER will
provide one (1) copy of any new document that is similar to the above and is
made generally available to SUPPLIER's Customers and potential Customers and any
revisions to the documents listed above.
19.2 Use - Reproduction - Translation - Distribution
19.2.1 ALCATEL may use, reproduce, translate, modify
and distribute the documents described in Section 19.1.1, provided that:
(a) ALCATEL may use and distribute such
documents only in connection with the exercise of its rights to resell and
sublicense Products under this Agreement, and ALCATEL may translate and modify
such documents as long as the documents continue to accurately describe such
Products and do not materially change the information in such documents.
(b) ALCATEL may not make any warranty or
otherwise incur any liability on behalf of SUPPLIER with respect to the
accuracy or completeness of any such translated or modified version; and
shall indemnify SUPPLIER against any and all loss, damages, costs (including
reasonable attorneys fees) and expenses arising out of any breach by ALCATEL
of such obligation.
(c) Title to and ownership of the
documentation described above shall at all times remain in SUPPLIER.
20. TRAINING
20.1 Training classes and prices are catalogued in Annex H
20.2 All costs for trainees appointed by ALCATEL, including
but not limited to costs for instruction charges, transportation, lodging, and
meals, shall be paid by ALCATEL.
21. INSTALLATION
21.1 The parties intend that at the earliest practical time
ALCATEL's personnel shall gain the required knowledge and expertise to perform
Products installation without participation of SUPPLIER's personnel. ALCATEL may
request and SUPPLIER may agree to provide assistance in the installation of
SUPPLIER's products at ALCATEL's expense.
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21.2 If the installation of Products is performed by
SUPPLIER's personnel on request of ALCATEL the fees shall be as follows:
21.3 Charges for SUPPLIER-furnished installation shall be on a
time and materials basis in accordance with the hourly charges provided in Annex
F List Prices, plus travel and living expenses for SUPPLIER's personnel, in
accordance with ALCATEL'S corporate reimbursement policy.
21.4 Charges shall be paid by ALCATEL.
22. MAINTENANCE AND SUPPORT SERVICES
22.1 Customer support
22.1.1 ALCATEL will set up a technical assistance
center, in order to provide maintenance and support services to its Customers.
22.1.2 SUPPLIER shall provide training to ALCATEL
personnel with regard to such services in accordance with the fees in Annex H.
22.1.3 Service problems arising due to the Product's
non-conformity to the published specifications at the time the product was
shipped will be the SUPPLIER's responsibility to correct in accordance with the
time frames based upon the severity level tables in this Agreement and the
warranty provisions in Article 25 assuming the product has been used in the
manner for which it was designed. For problems arising outside the warranty
period the SUPPLIER will be obligated to provide support in accordance with the
support agreements in place at the time.
22.2 Repairs
22.2.1 The repair services set forth in Annex F
provided by SUPPLIER shall be made available to ALCATEL at the prices set forth
in that Annex F, which may be changed by SUPPLIER once per year upon thirty (30)
days written notice.
22.2.2 ALCATEL shall be responsible for shipping
charges to SUPPLIER and agrees to request and use the shipping containers
provided by SUPPLIER and to ship the Products and modules in the manner
prescribed by SUPPLIER.
22.2.3 SUPPLIER will ship the repaired Product, or
its replacement, within two weeks of receipt, and shall be responsible for
shipping charges to ALCATEL. Emergency repairs required in less than two weeks
will be made with all reasonable efforts.
22.2.4 Except for loss or damage caused by SUPPLIER's
negligence, ALCATEL relieves SUPPLIER of responsibility and shall indemnify
SUPPLIER against any liability whatsoever for all risks of loss or damage to the
Products and modules during the period
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such Products and modules are in transit to and from SUPPLIER's Technical
Assistance Center and while in the possession of SUPPLIER at that location.
22.3 SUPPLIER hardware and software support service
22.3.1 In accordance with the provisions of Article
6, SUPPLIER shall be fully responsible for correcting errors and anomalies from
SUPPLIER's Product specifications.
22.3.2 SUPPLIER shall therefore establish and
maintain, a Technical Telephone Support and Software Update operation ("TSU") to
analyze and resolve such problems and to lend technical support to ALCATELs
maintenance technicians on-site.
(a) The TSU shall include emergency callout
services, which shall be available to respond to calls seven (7) days a week and
twenty-four (24) hours a day. The TSU shall provide acknowledgement and status
on cases escalated by ALCATEL within 24 hours of receipt of such escalated
cases.
(b) The TSU shall be staffed with trained
technicians to analyze problems and propose solutions to ALCATEL maintenance
representatives on site, including temporary bypass or workaround solutions to
blockages, major problems and minor problems.
(c) The escalation process will be reviewed
and approved by the ALCATEL service factory organization.
22.3.3 The parties will agree to case severity
classifications using the definitions below as a guideline. If the Parties do
not agree upon the emergency classification, the decision of the Technical
Steering Committee will apply.
S1 - EMERGENCY - System or network is down
and unusable as a result of a problem which causes failures, or results in
server intermittent operations with no customer acceptable work-arounds, or the
customer states the problem has a critical impact on their operation.
S2 - SIGNIFICANT IMPACT - System of network
is up and running however the problem exists with significant impact and which
has difficult or no work-arounds causing substantial performance degradation, or
prevents the customer from using a critical feature of the product or the
system.
S3 - LIMITED IMPACT - System or network is
up and running but minor problems exist having limited impact. Customer can use
the system or product with limitation or workarounds that are not critically
impacting the overall operations. This could also be non-problematic issue such
as documentation errors.
S4 - RMA - Logging a request for a Return
Material Authorization.
S5 - ENHANCEMENT - Required for a new
product or feature.
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S6 - INFORMATIONAL - Used for Customer
information requests.
Target time for resolution of such faults
within receipt of initial fault report are as follows based upon severity:
<TABLE>
<CAPTION>
- ------------------------------ --------------------------- --------------------------- ----------------------------
Severity NSS Workaround BSS Workaround Full Fix
- ------------------------------ --------------------------- --------------------------- ----------------------------
- ------------------------------ --------------------------- --------------------------- ----------------------------
<S><C>
S1 Within 24 hours Within 48 hours 2 weeks
- ------------------------------ --------------------------- --------------------------- ----------------------------
- ------------------------------ --------------------------- --------------------------- ----------------------------
S2 1 Week 2 Weeks 90 calendar Days or with
next Maintenance Update
Release whichever is
earlier
- ------------------------------ --------------------------- --------------------------- ----------------------------
- ------------------------------ --------------------------- --------------------------- ----------------------------
S3 Not Required Not Required A commitment will be made
within three months to a
future Release for which
the fix is planned.
- ------------------------------ --------------------------- --------------------------- ----------------------------
</TABLE>
22.3.4 All costs and expenses associated with such
corrective action shall be for SUPPLIERS account if the problem:
(a) arises during the warranty period of the
Products in question; or
(b) arises after expiration of the warranty
period but is due to non-conformity of the Product with SUPPLIERS
specifications at the time the product was shipped.
22.3.5 The Technical Committee will meet within
thirty (30) days of the Effective Date of this Agreement and determine the best
possible support procedure.
22.4 With regard to the hardware portion of the Products,
SUPPLIER shall maintain service capabilities to repair hardware problems for a
period of five (5) years from the date of shipment of a Product, provided that
such repairs shall be for ALCATEL's expense after expiration of the warranty
period on same. At the end of the five (5) year period, if SUPPLIER will no
longer repair such Products, SUPPLIER agrees to propose an alternative solution
which could include an end of life buy pursuant to Section 15.3, appointment by
SUPPLIER of a third party to repair such Products, or transfer of repair
technology.
23 MANUFACTURING LICENSE
23.1 In The event that, during the term of this Agreement,
ALCATEL and its Associated Companies pay invoices from SUPPLIER in an aggregate
and cumulative amount of at least $25 million in product revenue for New Version
Release Products (not including any Support, Services or development revenue)
then ALCATEL may in its sole discretion upon written notice to SUPPLIER exercise
one of the following options:
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23.1.1 OPTION 1. License to Manufacture
ALCATEL may elect to receive a non-exclusive, non-transferable, royalty
bearing, worldwide license to manufacture New Version Release Products at any of
ALCATEL's worldwide manufacturing facilities for resale under its brand name or
that of its Customer's brand names (such products being referred to as "ALCATEL
Manufactured Products"), provided however that in no event shall such license be
granted with respect to a specific New Version Release prior to the end of the
second complete calendar quarter following SUPPLIER's designation of that
Release being generally available. The date that SUPPLIER grants such license to
ALCATEL for a specific New Version Release shall be called "Manufacturing
License Commencement" (MLC) for such Product Release.
SUPPLIER shall provide, and this Manufacturing License for a specific
New Version Release shall permit ALCATEL or its Associated Companies to use the
following with respect to such New Version Release:
- Hardware manufacturing information including but not limited
to assembly drawings, blueprints, bill of materials and other
manufacturing information
- Product(s) Technical Functional Specifications
- Packaging and Transport Specifications
- Lists of components and their certified suppliers
- Manufacturing Processes
- Test Procedures
- Rights to procure test tools from SUPPLIER at a reasonable
price
-
- ALCATEL shall have the right to procure ASICs at the same
terms and conditions as SUPPLIER gets ASICs from its own
suppliers (procurement will be made either from SUPPLIER, or
from SUPPLIER's suppliers directly with written authorization
given by SUPPLIER to its own suppliers).
- Binary code for all Software (including middleware) and
related corrections
- Firmware in binary form
- Notification of component changes and/or obsolescence of
components
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(all of the foregoing information, not including the rights to procure,
hereinafter referred to as the "Manufacturing Information").
SUPPLIER shall provide, during the first quarter after ALCATEL has
exercised its option, at SUPPLIER's then current labor and other related support
costs and at ALCATEL's expense, a reasonable amount of technical support in the
form of access to qualified technical persons.
SUPPLIER shall review and approve of ALCATEL's manufacturing process.
This Manufacturing License shall also include the right to have ALCATEL
Manufactured Products made by a third party contractor solely for ALCATEL and/or
its Associated Companies, such contractor approved in writing and in advance by
SUPPLIER and such approval shall not be unreasonably withheld.
ALCATEL and/or its Associated Companies agree to pay SUPPLIER a royalty
amount based upon the prices listed in Annex D effective immediately before
Manufacturing License Commencement (the "Transfer Price") which royalty shall be
calculated for each New Version Release in accordance with the table shown
below. If SUPPLIER reduces the price for a Product after Manufacturing License
Commencement, the Transfer Price shall be reduced by a factor equivalent to the
same factor by which the price for the SUPPLIER Product is reduced.
If Manufacturing License Commencement for a specific New Version
Release occurs during the term of this Agreement, then the manufacturing license
for such New Version Release granted in this provision shall survive any
termination or expiration of this Agreement for three (3) years, except when the
Agreement is terminated by supplier under Section 30.1 or 30.3.
23.1.2 OPTION 2. Discounts
In lieu of OPTION 1 above, ALCATEL may elect to continue purchasing
Products from SUPPLIER, in which case ALCATEL and/or its Associated Companies
shall receive the additional discounts on New Version Release Products described
in the fourth column of the table below, such discounts computed separately for
each New Version Release based upon the Minimum Volume and timing for such New
Version Release.
MANUFACTURING LICENSE AND DISCOUNT OPTION TABLE
<TABLE>
<CAPTION>
- ------------------------------ --------------------------- --------------------------- ----------------------------
Manufacturing Step for a Royalty for each Release Minimum Volume of Additional Discount from
Release (12 month specific Release to Transfer Price if
- ------------------------------ --------------------------- --------------------------- ----------------------------
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- ------------------------------ --------------------------- --------------------------- ----------------------------
periods commencing on MLC (as a percentage of advance to next lower SUPPLIER manufactures for
for such Release) Transfer Price) Royalty level (measured ALCATEL under OPTION 2
by the Transfer Price of
such Products)*
- ------------------------------ --------------------------- --------------------------- ----------------------------
<S> <C> <C> <C>
Manufacturing Step 1 30% $15 million 5%
- ------------------------------ --------------------------- --------------------------- ----------------------------
Manufacturing Step 2* 25% $7.5 million 10%
- ------------------------------ --------------------------- --------------------------- ----------------------------
Manufacturing Step 3* 15% $5 million 20%
- ------------------------------ --------------------------- --------------------------- ----------------------------
Manufacturing Step 4* 10% No minimum volume for 25%
five (5) years
- ------------------------------ --------------------------- --------------------------- ----------------------------
Thereafter 0%
- ------------------------------ --------------------------- --------------------------- ----------------------------
</TABLE>
ALCATEL and/or its Associated Companies will only advance to a lower royalty
percentage for a specific New Version Release at the end of a Manufacturing
Step:
- if ALCATEL and/or its Associated Companies have manufactured such Release,
- during twelve (12) month period commencing on MLC for such Release,
- and if ALCATEL and/or its Associated Companies have reached a Minimum
Volume corresponding to such Manufacturing Step.
24. PRODUCT SOFTWARE LICENSE
24.1 Subject to the terms and conditions set forth herein,
SUPPLIER hereby appoints ALCATEL and it Associated Companies as non-exclusive
worldwide reseller of the Product Software to Customers, and in connection
therewith hereby grants ALCATEL a non-exclusive and non-transferable worldwide
right and license to promote and distribute, either directly or indirectly
through its Associated Companies, the Product Software to Customers as an
integrated part of ALCATEL's or Associated Company's products.
24.2 SUPPLIER shall be free to appoint other distributors, use
other distribution channels, enter into OEM relationships or sell the Product
Software directly to any customer,
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without incurring any liability to ALCATEL or its Associated Companies for so
doing. ALCATEL shall have no right to indirectly sell, sublicense or otherwise
distribute copies of the Product Software and shall not appoint any
sub-distributor, reseller, agent or other third party in connection with the
Product Software, except that ALCATEL or its Associated Companies shall be
entitled to provide the Product Software as part of the ALCATEL or Associated
Company's products to its Associated Companies for resale and sublicensing to
their Customers.
24.3 ALCATEL and its Associated Companies shall be entitled to
grant Customers sublicenses for use of the Product Software in connection with
ALCATEL or it Associated Company's products and to deliver to Customers copies
of the Product Software paid for by ALCATEL and provided by SUPPLIER and only in
connection with ALCATEL's or it Associated Company's products.
24.4 ALCATEL agrees not to sublicense or otherwise distribute
the Product Software except under a license in a written agreement (either a
sublicense agreement or an overall contract containing sublicense clauses) that
shall contain at least the following contractual restrictions and requirements:
24.4.1 Use of the Product Software restricted to
object code only; and
24.4.2 Prohibition of any transfer or assignment of
the Product Software, except for temporary installation in the event of a
computer malfunction; and
24.4.3 Prohibition of any reverse engineering,
disassembly or decompilation of the Product Software, save as permitted by law,
and prohibition of copying the Product Software except for a single backup or
archival copy; and
24.4.4 Requirement for Customer to discontinue use
and destroy or return to ALCATEL all copies of the Product Software and
documentation upon term or termination of the sublicense; and
24.4.5 Prohibition on removing or masking any
copyright notice, trademark (or trademark notice) or restrictive legend affixed
to the Product Software or appearing in the documentation.
24.4.6 Warranty disclaimers to disclaim all implied
warranties and limitations on liability to exclude all consequential damages.
24.5 If the Product in which the Product Software is
incorporated or embedded is licensed or sold by ALCATEL through an Associated
Company, ALCATEL shall require such Associated Company to enter with the
Customer into a written agreement containing the above-listed restrictions and
requirements.
24.6 ALCATEL agrees that in marketing and sublicensing the
Product Software as part of the ALCATEL or it Associated Company's products,
ALCATEL shall neither engage in any
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<PAGE>
deceptive, misleading, illegal or unethical practices that could be detrimental
to SUPPLIER, nor make to potential Customers any representations, warranties or
guarantees that are inconsistent with or in addition to those contained in this
Agreement or made otherwise by SUPPLIER, and that in promoting and distributing
the Product Software as part of the ALCATEL or it Associated Company's products
ALCATEL shall comply with all applicable laws and regulations.
24.7 ALCATEL or its Associated Companies shall use
commercially reasonable efforts to promote and market the Product Software
incorporated in The ALCATEL or it Associated Company's products in those
countries where the ALCATEL conducts business..
24.8 ALCATEL will maintain a sufficient number of capable
technical and sales personnel that will have completed the applicable training
in accordance with Article 20.
25. WARRANTY
25.1 Warranty Period
25.1.1 Hardware Warranty
SUPPLIER, warrants to ALCATEL that for a
period of sixteen (16) months from the date of shipment (referred to as the
Hardware Warranty Period), each Product, other than the Product Software, will
conform in all material respects to SUPPLIER's written specifications for the
Product and will be free from defects in materials and workmanship, provided
that, in the event of any repairs made to Products and returned to ALCATEL or
its Customer during the last six months of the above warranty period, the
repaired Products shall continue to benefit from the warranty for a period of
six months. SUPPLIER's sole obligation under this warranty is limited to
repairing or replacing at SUPPLIER's option, at a SUPPLIER designated location,
any non-Product Software Products or parts thereof that SUPPLIER determines do
not conform to this warranty.
The above Hardware Warranty is contingent
upon proper use in accordance with the specifications for the Product. The
warranty will not apply if adjustment, repair or parts replacement is required
because of misuse, neglect, improper installation, repair, alteration or
accident including humidity, temperature, power supply requirements, etc.
THE WARRANTIES SET FORTH IN THIS SECTION
25.1.1 CONSTITUTE THE ONLY WARRANTIES WITH RESPECT TO ANY HARDWARE PRODUCT. THEY
ARE IN LIEU OF ALL OTHER WARRANTIES, CONDITIONS OR OTHER TERMS, WRITTEN OR
ORAL, STATUTORY, EXPRESS OR IMPLIED INCLUDING WITHOUT LIMITATION THE WARRANTY OF
MERCHANTABILITY AND THE WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, ALL OF
WHICH ARE EXPRESSLY EXCLUDED. THESE EXCLUSIONS DO NOT APPLY TO DEATH OR PERSONAL
INJURY CAUSED BY NEGLIGENCE.
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25.1.2 Software Warranty
SUPPLIER warrants that Software provided
under this Agreement will perform in all material respects with the current
published specification for a period of twelve (12) months from the date of
shipment (Referred to as the Software Warranty Period). During the Software
Warranty Period, SUPPLIER shall take all reasonable steps without charge to
correct errors or defects in any such Software and any corrections, or defects
may at SUPPLIER election be provided to ALCATEL directly and/or incorporated in
subsequent updates from SUPPLIER. The actions described in this Section 25.1.2.
shall constitute SUPPLIER's sole obligation and ALCATEL's sole remedy for breach
of the Warranty in this Section 25.1.2.
Any modifications or alteration of
Software without the approval of the SUPPLIER shall void SUPPLIER's
obligation under this Section unless and until the Software is returned to
its unaltered state.
SUPPLIER does not warrant the Software will
operate in accordance with the published documentation in the combinations which
may be selected for use by ALCATEL, or will meet ALCATEL's requirements.
SUPPLIER does not warrant that the operation of the Software will be
uninterrupted or error free, or that all Software errors will be corrected.
Notwithstanding the prior disclaimer, SUPPLIER warrants that all Software
provided by SUPPLIER shall be free from any viruses coded or introduced into
Products.
THE WARRANTIES SET FORTH IN THIS SECTION
25.1.2 CONSTITUTE THE ONLY WARRANTIES WITH RESPECT TO ANY SOFTWARE PRODUCT.
THEY ARE IN LIEU OF ALL OTHER WARRANTIES, CONDITIONS OR OTHER TERMS, WRITTEN
OR ORAL, STATUTORY, EXPRESS OR IMPLIED INCLUDING WITHOUT LIMITATION THE
WARRANTY OF MERCHANTABILITY AND THE WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE, ALL OF WHICH ARE EXPRESSLY EXCLUDED. THESE EXCLUSIONS DO NOT APPLY
TO DEATH OR PERSONAL INJURY CAUSED BY NEGLIGENCE.
25.2 Obligation to Notify
25.2.1 ALCATEL shall promptly notify SUPPLIER in
writing of any alleged non-conformities or defects in the Products and
specifically describe the problem.
25.2.2 SUPPLIER shall have no obligations under this
warranty with respect to any non-conformity or defect unless SUPPLIER receives
notice and a description of such non-conformity or defect no later than five (5)
business days after the expiration of the warranty period.
25.2.3 Upon receipt of such notice, SUPPLIER shall
(i) instruct ALCATEL as to the element or elements of the Products that ALCATEL
shall return to SUPPLIER and (ii) designate SUPPLIER's location to which such
element(s) shall be shipped.
25.3 Shipment under Warranty
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25.3.1 Warranty service and repair and parts
replacement will be performed at SUPPLIER location designated by SUPPLIER.
(a) In performing warranty service, SUPPLIER
will furnish parts on an exchange basis and the replaced parts will become the
property of SUPPLIER.
(b) Charges for shipping Products or Product
elements to SUPPLIER are the responsibility of ALCATEL and shall be prepaid by
ALCATEL.
25.3.2 If Product or Product elements are determined
by SUPPLIER to be non-conforming or defective, SUPPLIER shall be responsible
for the cost of shipping both the nonconforming or defective Product or Product
element to SUPPLIER and shipping the repaired or replaced Product or Product
element to ALCATEL. If such Products or Product elements are determined by
SUPPLIER not to be non-conforming or defective, ALCATEL shall bear all costs of
such return.
25.4 Packaging
25.4.1 ALCATEL agrees to request and use the shipping
containers designated and provided by SUPPLIER and to ship the Products and
Products elements in the manner prescribed by SUPPLIER.
25.4.2 Except for loss or damage caused by SUPPLIER's
negligence, ALCATEL relieves SUPPLIER of responsibility for and shall indemnify
SUPPLIER against liability howsoever arising from all risks of loss or damage to
the Products and Product elements during the period such Products and Product
elements are in transit to and from a SUPPLIER location or are in the possession
of SUPPLIER at such location.
25.5 Warranty Exclusion
25.5.1 The warranties provided by SUPPLIER under
this Agreement do not include:
(a) Performance of preventive maintenance;
or
(b) Repair of damages or delays in service
caused by: failure to provide a suitable installation environment, use of the
Products for other than the purposes for which they were designed, accident,
neglect, disaster, damage incurred in transit, alterations to the Products or
other work on the Products not permitted or not performed as specified by
SUPPLIER or other damage not arising under normal operating conditions.
26. INDEMNITY
26.1 Indemnification
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<PAGE>
26.1.1 Notwithstanding any provisions of this
Agreement to the contrary, SUPPLIER shall protect, defend, indemnify and hold
harmless ALCATEL and its Associated Companies, co-owners, Customers and joint
ventures (if any), and their respective officers, directors, agents,
contractors and employees against loss or damage arising out of any claim or
suit for misappropriation of trade secret or for patent, copyright, trademark
or other proprietary right infringement by the possession, sale, licensing,
reproduction, modification, distribution, disclosure, manufacture or use, as
authorized under this Agreement, of the Products, Developed Products,
Software or Services provided by SUPPLIER hereunder. ALCATEL shall promptly
notify SUPPLIER of any such claim or suit and afford SUPPLIER an opportunity
at SUPPLIER's expense to undertake the defense of any such suit, provided
that, at ALCATEL's election, ALCATEL may join (but not control or direct) in
such defense at its expense. If SUPPLIER refuses or fails to defend such
suit, SUPPLIER shall reimburse ALCATEL in full for ALCATEL's reasonable costs
and expenses in the defense of such suit including attorneys' fees. SUPPLIER
shall pay promptly any final judgments or decrees which may be entered
against ALCATEL in such suit, and in event of the grant of injunctive relief,
SUPPLIER shall: (i) procure for ALCATEL the right to use such Products.
Developed Products, Software or other Services; (ii) provide non-violating
information, goods, equipment, and/or material substantially equal in value
and efficiency; or (iii) if it is commercially infeasible for SUPPLIER to do
(i) or (ii), grant ALCATEL a credit based on the remaining beneficial use of
the products. The foregoing obligations shall not apply to infringement
claims directly and necessarily arising from (i) the combination of a
SUPPLIER product with other products not provided, specified, recommended, or
suggested by SUPPLIER for use with such SUPPLIER products, if such
infringement would have been avoided by the use of such SUPPLIER product
alone, (ii) modification of a SUPPLIER product not made or authorized by
SUPPLIER, if such infringement would have been avoided by the use of the
unmodified SUPPLIER product; (iii) following ALCATEL's specifications,
designs, methods or directions, unless a commercially reasonable
non-infringing implementation of such specifications, designs, methods or
direction exists; or (iv) any trademark infringement involving branding not
applied by SUPPLIER or applied at ALCATEL's direction. THE FOREGOING STATES
THE ENTIRE LIABILITY AND OBLIGATIONS OF SUPPLIER AND THE EXCLUSIVE REMEDY OF
ALCATEL WITH RESPECT TO ANY ALLEGED OR ACTUAL INTELLECTUAL PROPERTY
INFRINGEMENT.
27. LIMITATION OF LIABILITY
27.1 IN NO EVENT WILL EITHER PARTY BE LIABLE FOR (i) SPECIAL,
INDIRECT OR CONSEQUENTIAL DAMAGES OR (ii) ANY DAMAGES WHATSOEVER RESULTING FROM
LOSS OF USE, DATA OR PROFITS, ARISING OUT OF OR IN CONNECTION WITH THIS
CONTRACT, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN
CONTRACT TORT; INCLUDING NEGLIGENCE, OR OTHERWISE. [IN NO EVENT SHALL EITHER
PARTY'S AGGREGATE LIABILITY ARISING OUT OF OR RELATED TO THIS AGREEMENT EXCEED
THE AMOUNTS PAID OR EXPRESSLY PAYABLE BY SUCH PARTY UNDER THE AGREEMENT DURING
THE LAST TWELVE (12) MONTHS.
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SUCH LIMITATION OF LIABILITY SHALL NOT APPLY WITH RESPECT TO ANY
ALLEGED OR ACTUAL INTELLECTUAL PROPERTY INFRINGEMENT.
27.2 Nothing in this Agreement or otherwise shall limit
either Party's liability for death or personal injury resulting from its
negligence.
28. PROPRIETARY TECHNICAL MATERIALS
28.1 Reverse Engineering
ALCATEL agrees not to disassemble, decompile, reverse
engineer, duplicate or modify any Software (except Developed Products software)
in any form or manner, nor directly or indirectly permit or allow its Customers
or any other person to do so except in the case of the existence of a license
granted under this agreement.
28.2 Documentation License
Subject to the terms and provisions of this
Agreement, and in particular Article 12 [Labeling, Sales Documentation and Use
of Trademarks] and Article 19 [Documentation]:
28.2.1 Confidential documentation, maintenance
manuals and drawings related to the Products or the Software (except Developed
Products), specifically excluding the items described in Section 19.1.1
(collectively, "Proprietary Technical Materials") which SUPPLIER may furnish
shall be in ALCATEL's possession pursuant only to a restrictive,
non-transferable (except for purposes of sublicensing), nonexclusive license
under which ALCATEL may use such Proprietary Technical Materials internally
solely for the purpose of selling, operating, servicing and repairing the
Products and the Software and for no other purpose.
28.2.2 Without limiting the generality of the
foregoing, ALCATEL may not reproduce or copy any Proprietary Technical Materials
or transfer, assign, sublicense, loan or disclose or otherwise make available
all or any portion of such Proprietary Technical Materials to any other person
or entity, without the prior express written consent of SUPPLIER. Such
Proprietary Technical Materials shall also be considered Confidential
Information for purposes of Section 31.4.
28.3 Ownership of Documentation
28.3.1 Title to and ownership of the Proprietary
Technical Materials shall at all times remain in SUPPLIER.
28.3.2 In addition to any other remedy SUPPLIER may
have, SUPPLIER reserves the right to terminate this license or to terminate this
Agreement pursuant to Article 30 hereof if ALCATEL fails to comply with any
significant or material term or condition hereof.
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28.3.3 This license shall also terminate at such time
as ALCATEL shall permanently cease to use the Products for the purposes for
which they were manufactured by SUPPLIER and as permitted by this Agreement.
28.3.4 ALCATEL agrees, upon notice from SUPPLIER of
any termination of this license and in accordance with any more specific
directions from SUPPLIER, to deliver immediately to SUPPLIER all Proprietary
Technical Materials and all copies thereof.
29. STRATEGY AND MARKETING COORDINATION COMMITTEE
29.1 A Strategy and Marketing Coordination Committee composed
of representatives of the Parties is hereby created. Each Party shall appoint
immediately after the signature of this agreement a representative who has
authority to act in the name and on behalf of the relevant Party, subject only
where necessary to Board approval.
29.2 An alternate shall be also nominated by each Party, who
in case of absence of the Party's representative shall have full power to act in
the name and on behalf of the relevant Party, subject as aforesaid, to Board
approval. Each party may replace its representative and the alternate.
29.3 The Co-ordination Committee shall be chaired
alternatively by the representative of each of the Parties Meetings of the
Co-ordination Committee shall be held, in principle, at least two (2) times a
year, but should circumstances so require, a meeting may be convened at any time
at the request of any of the Parties. Decisions of the Coordination Committee
shall be made by unanimous agreement and shall be given due consideration by the
Parties.
29.4 The Chairman shall prepare minutes of each meeting of the
Strategic Coordination Committee and shall distribute copies of the same to the
other Party.
29.5 Finalized minutes once agreed shall be a true and
complete record of the decision taken by the Parties.
29.6 The Strategy and Marketing Coordination Committee shall
examine all important matters relating to the performance of the Agreement
including evolution of the Product and vision and strategic direction of
corporation with respect to the corporate mobility market.
30. TERMINATION AND CHANGE OF OWNERSHIP OR DIRECTION
30.1 Termination by SUPPLIER
30.1.1 Without prejudice to SUPPLIER's rights under
any other provision of this Agreement, SUPPLIER may, without incurring any
liability, terminate this Agreement at any time by giving written notice to such
effect to ALCATEL, upon the occurrence of any one of the following events:
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(a) All or a substantial portion of the
assets of ALCATEL are transferred to an assignee for benefit of creditors;
(b) A receiver, trustee in bankruptcy or
person with similar powers has been appointed with respect to ALCATEL, or any
voluntary or involuntary action is commenced by or against ALCATEL under any
bankruptcy or similar law, and such action or appointment is not dismissed or
terminated within sixty (60) days thereafter;
(c) ALCATEL is generally not paying its
debts as they become due;
(d) Any legally constituted court or
governmental agency rules that a material provision of this Agreement is illegal
or unenforceable or requires a modification which would materially alter the
basic intent of the Parties in entering into this Agreement;
(e) Any currency or other controls are
imposed by any governmental entity which prevents ALCATEL from making payments
as required by this Agreement.
30.1.2 In the event of termination by SUPPLIER under
this Article 30.1, ALCATEL's sole liability to SUPPLIER shall be for amounts due
and payable under this Agreement on the date of termination.
30.2 Termination by ALCATEL
30.2.1 Without prejudice to ALCATEL's rights under
any other provision of this Agreement, ALCATEL may, without incurring any
liability, including but not limited to shortfall payments and volume
commitments, terminate this Agreement at any time by giving written notice
to such effect to SUPPLIER, upon the occurrence of any one of the following
events:
(a) All or a substantial portion of the
assets of SUPPLIER are transferred to an assignee for benefit of creditors;
(b) A receiver, trustee in bankruptcy or
person with similar powers has been appointed with respect to SUPPLIER, or any
voluntary or involuntary action is commenced by or against SUPPLIER under any
bankruptcy or similar law, and such action or appointment is not dismissed or
terminated within sixty (60) days thereafter;
In the event of termination under this provision:
- ALCATEL's purchase commitments under Section 14.4 are hereby
terminated
- then SUPPLIER agrees to grant and hereby grants to ALCATEL a
worldwide, perpetual, non exclusive, sublicensable, assignable right
to use any information provided by SUPPLIER or use the Escrow
Information to allow ALCATEL and/or its Associated Companies anywhere
in the world to make, sell, license, distribute lease, copy, operate
or otherwise use such information for any purpose (subject only to
any non disclosure
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obligations stated herein) which it may determine. In addition,
ALCATEL its Associated Companies may brand any Products of
resale under the ALCATEL or its Associated Company's name.
(c) SUPPLIER is generally not paying its
debts as they become due;
(d) Any legally constituted court or
governmental agency rules that a material provision of this Agreement is
illegal or unenforceable or requires a modification which would materially
alter the basic intent of the Parties in entering into this Agreement;
(e) Any currency or other controls are
imposed by any governmental entity which prevents SUPPLIER from performing its
obligations under this Agreement; or
30.3 Termination by either Party
Subject to the terms of this Agreement, either
Party shall have the right, at its option, by written notice to such effect
to the other Party, and in addition and without prejudice to any other rights
or remedies, to terminate this Agreement with immediate effect upon failure
of the other party to pay any Monies when due hereunder, or upon material
failure of the other Party to observe, keep or perform any of the covenants,
terms or conditions of this Agreement, if in either case such default
continues for ninety (90) days (or such lesser period as may be provided in
this Agreement) or more after written notice to such other Party.
30.4 SUPPLIER Obligations Upon Expiration or Termination
of this Agreement
30.4.1 Except in the case of termination by SUPPLIER
for the reasons set forth in Article 30.1 or 30.3, SUPPLIER shall continue,
during a period of three (3) years, to provide support, maintenance and repair
services for all Products which have previously been sold to ALCATEL at the
prices and under relevant terms and conditions stated in this Agreement and any
technical assistance needed by ALCATEL to exercise its post termination rights
at SUPPLIER's hourly rates set forth herein.
30.5 ALCATEL Obligations Upon Expiration or Termination of
this Agreement
Except as SUPPLIER may otherwise authorize in
writing, ALCATEL shall cease to use the trade names, symbols, logos and
trademarks of SUPPLIER and shall take all necessary action to ensure that any
contractor, agent or other party utilizing SUPPLIER's trade name, logos, symbols
or trademarks, pursuant to the rights granted to ALCATEL under this Agreement,
ceases to do so.
30.6 Orders after termination
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The acceptance of any order from, or the sale of any
Products to, ALCATEL after the expiration or termination of this Agreement shall
not be construed as a renewal or extension hereof nor as a waiver of
termination, but in the absence of a written agreement signed by SUPPLIER and
ALCATEL, all such transactions shall be governed by provisions identical to the
applicable provisions of this Agreement, except the provisions regarding term.
30.7 Surviving Rights and Obligations
30.7.1 Notwithstanding anything to the contrary in
this Agreement, no termination by either party, or expiration at the end of its
term, of the OEM relationship created by this Agreement shall affect any rights
or obligations of either party:
(a) which are accrued pursuant to this
Agreement as of the effective date of such termination or expiration; or
(b) which are intended by their terms to
survive such termination or expiration, including, without limitation, Article
26 (Indemnity) and Article 31.4 (Confidentiality).
30.8 CHANGE OF OWNERSHIP OR DIRECTION
30.8.1 If any entity listed in Annex G (an "ALCATEL
Competitor") who, as of the Effective Date, had no ownership of the stock of
SUPPLIER entitled to vote in an election of its board of directors ("SUPPLIER's
Stock"), purchases more than fifteen percent (15%) of SUPPLIER's Stock during
the term of this Agreement, then:
-
- ALCATEL's purchase volume commitments under Section 14.4 are
hereby terminated.
- The term of the contract, at ALCATEL's request, shall be
extended for a period of three years from the date such entity
obtains that interest.
- ALCATEL may for convenience reasons, terminate this Agreement
with a six (6) months prior written notice without any
penalties and or liquidated damages to be paid.
30.8.2 If any ALCATEL Competitor takes effective
control of the SUPPLIER by acquiring more than fifty percent (50%) of SUPPLIER's
Stock, or if SUPPLIER otherwise changes its strategic direction (change of
strategic direction means that SUPPLIER abandons future releases in the
corporate mobility market and/or refuses or consistently fails to materially
comply with its support, service, supply or development obligations under this
Agreement, and/or fails to meet the deadlines for general availability for New
Version Releases with minimum features stated in Annex B by at least six (6)
months).
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<PAGE>
In such case, SUPPLIER shall inform ALCATEL as of the occurrence of
such an event.
- ALCATEL's purchase volume commitments under Section 14.4 are
hereby terminated
- The term of the contract, at ALCATEL's request, shall be
extended for a period of three years from the date such entity
obtains that interest or the date of change in strategic
direction;
- ALCATEL may for convenience reasons, terminate this Agreement
with a six (6) months prior written notice without any
penalties and or liquidated damages to be paid.
The right to the Manufacturing License shall, upon request of ALCATEL vest
without the need for ALCATEL to meet its [*****] purchase requirements, but
with an initial payment equal to [*****] the cumulative purchases
by ALCATEL prior to the exercise of ALCATEL's right to the manufacturing
license] and payment of periodic royalties in accordance with the table
(MANUFACTURING LICENSE AND DISCOUNT OPTION TABLE) in Section 23.1.2 of this
Agreement; and
- SUPPLIER agrees to negotiate in good faith with ALCATEL, for a
reasonable lump-sum payment plus a royalty percentage applied
to the price stated in this Agreement, for SUPPLIER to grant
to ALCATEL a worldwide, perpetual, non exclusive,
sublicensable, assignable right to use any information
provided by SUPPLIER or use the Escrow Information to allow
ALCATEL and/or its Associated Companies anywhere in the world
to make, sell, license, distribute lease, copy, operate or
otherwise use such information for any purpose (subject only
to any non disclosure obligations stated herein) which it may
determine. In addition, ALCATEL its Associated Companies may
brand any Products of resale under the ALCATEL or its
Associated Company's name.
31. GENERAL
Each Party has all requisite legal and corporate power and
authority, including receipt of any required approval or authorization of its
Board of Directors and/or shareholders (individually or collectively), to enter
into and perform this Agreement. Each Party acknowledges and represents that
there are no understandings, agreements, or prohibitions existing which would
interfere with, prohibit or limit such Party's ability to enter into this
Agreement and to fulfill its obligations hereunder.
31.1 Force Majeure.
31.1.1 Neither party shall be liable for failure to
perform or delay in performing any obligation under this Agreement (except an
obligation to pay money) if that performance is prevented, restricted or delayed
by any cause whatsoever, including, but not limited to, war, civil disturbance,
labor difficulties or direction of a governmental authority, whether or not
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*Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE>
that cause is direct or indirect and whether or not that cause was in the
contemplation of the parties at the time of execution of this Agreement,
provided such cause is beyond the reasonable control of the party whose
performance is impaired and the party so affected takes all reasonable steps to
avoid or remove the cause.
31.1.2 The party whose performance is prevented,
restricted or delayed by any such cause shall notify the other party of the
nature and estimated duration of that cause and shall thereafter report to the
other party all circumstances relating to such matter at thirty (30) day
intervals.
31.1.3 If such cause ceases to exist, the party whose
performance was impaired shall perform or resume performance of its obligations
under this Agreement.
31.1.4 If any such cause affecting the performance of
ALCATEL continues for more than sixty (60) days SUPPLIER may terminate this
Agreement by notice to ALCATEL.
31.2 Severability
If any provision or part of a provision of this
Agreement shall be, or found by any authority or court of competent jurisdiction
to be, invalid or unenforceable, such invalidity or uneforceability shall not
affect the other provisions or parts of such provision of this Agreement, all of
which shall remain in full force and effect.
31.3 Effect on Commerce
Notwithstanding the content or generality of any
provision of this Agreement, nothing in this Agreement shall be construed to
require either party to commit or to refrain from committing any act or acts if
such requirement could not be lawfully imposed under applicable law of the
jurisdiction whose commerce would be affected, including, without limitation,
any law with respect to restraint of trade, unfair competition or patents.
31.4 Confidentiality
31.4.1 Any and all information of either party
which is received by the other party, including without limitation any and
all information relating to the Products, Developed Products, Software, or
Services including but not limited to parts or sub-assemblies thereof
including hardware and software, successor products or other SUPPLIER or
ALCATEL products or marketing or maintenance information, materials or
documentation (including without limitation technical specifications therefor
and Proprietary Information), shall be used by receiving party solely for the
purposes of fulfilling its obligations and exercising its other existing
rights under this Agreement and shall not be disclosed to any third party
except as expressly permitted herein.
31.4.2 The receiving party shall use the same degree
of care that the receiving party employs to protect its own similar confidential
information but in no case less than a reasonable degree of care.
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<PAGE>
31.4.3 The receiving party ALCATEL shall not directly
or indirectly disclose confidential information to any third party.
Notwithstanding the preceding sentence, the receiving party may disclose
confidential information to a third party performing work for the receiving
party in connection with this Agreement, provided however that the third party
agrees in writing to treat such confidential information confidential as
confidential, to use it only for the purposes of its work in connection with
this Agreement, to protect it to at least the same degree as required herein,
and to return or destroy all tangible or electronic copies of such information
upon completion of such work.
31.4.4 Upon termination of this Agreement, each Party
shall immediately return or destroy, at the other Party's election, all tangible
or electronic copies of the other Party's confidential information, and shall
certify in writing that such Party no longer possesses any tangible or
electronic copies of any other Party's confidential information.
31.4.5 Notwithstanding the foregoing, the
confidentiality obligations under this Section 31.4 do not extend to information
which the receiving party can demonstrate: (i) is or becomes generally available
in the public domain without fault of the receiving party; (ii) is rightfully
obtained by the receiving party from a third party without restriction as to use
and disclosure; (iii) is shown by written record to have been known or available
to the receiving party without restriction prior to the receipt hereunder; or
(iv) is independently developed by the receiving party without use of the other
party's confidential information.
31.5 Continuing Obligations
No termination or expiration of this Agreement shall
relieve ALCATEL of its obligations hereunder to the extent provided in Section
30.7 or its obligation to make payment of all Monies due under this Agreement or
under ALCATEL's order documents issued hereunder according to the terms hereof.
31.6 Assignment
31.6.1 Any assignment or attempted assignment by
either party, in whole or in part, of its rights or obligations hereunder or of
any other interest in this Agreement without the other party's prior written
consent shall be void, except that SUPPLIER may
(a) assign the right to receive payments
hereunder; or
(b) assign this Agreement or any of its
rights or obligations hereunder to a Foreign Sales Corporation or other
affiliate of SUPPLIER now or hereafter in existence, provided that SUPPLIER
shall remain liable as guarantor for the performance of such assignee; or
(c) assign this Agreement in connection with
the acquisition of SUPPLIER, by merger or otherwise, subject, however, to the
right of ALCATEL to terminate this Agreement under the provisions of Article 30,
if applicable.
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<PAGE>
31.7 Governing Law and Resolution of Disputes
31.7.l This Agreement shall be subject to, governed
by and construed according to the substantive law of England.
31.7.2 Any dispute between the parties hereto arising
out of or in connection with this Agreement, which cannot be settled amicably,
shall be finally settled under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce by three arbitrators (unless the parties agree
on the name of a single arbitrator), appointed in accordance with the said
Rules. The arbitration shall take place in London, England.
31.8 Language
This Agreement is in the English language only, which
language shall be controlling in all respects, and all versions hereof in any
other language shall be for accommodation only and shall not be binding upon the
parties hereto.
31.9 Entire Agreement
This Agreement, along with the Annexes attached
hereto, which are incorporated herein by reference, sets forth the entire
agreement and understanding between the parties with respect to the subject
matter hereof, and supersedes any and all prior proposals, agreements, and
representations between them, whether written or oral. The terms and conditions
of this Agreement shall prevail notwithstanding any variance with any term or
condition of any order submitted by ALCATEL or any other document, without
regard to any provision to the contrary in any such order or subordinate
document, notwithstanding any acknowledgment thereof by SUPPLIER.
31.10 Article Headings
Article headings and paragraph numbers are inserted
for convenience only and shall not be used in any way to construe the terms of
this Agreement.
31.11 Amendment
No modification or amendment of this Agreement shall
be valid and binding unless in writing and signed on behalf of each party by a
duly authorized officer.
31.12 Notices
All Notices required or permitted hereunder shall be
given in writing in the English language and shall be deemed to have been given
upon delivery in person the next working day if by facsimile or five (5) days
after mailing by certified mail or local equivalent, return receipt requested to
the addresses of the parties hereto (until written notice of a change thereof
shall have been given):
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<PAGE>
SUPPLIER:
interWAVE COMMUNICATIONS INTERNATIONAL, LTD.
c/o interWAVE Communications
656 Bair Island Road
Redwood City, CA 94065, USA,
Attention: Chief Financial Officer
ALCATEL:
32, Avenue Kleber
92707 Colombes France
Attention: ESD Financial Controller
31.13 U.S. Government Requirements on Encrypted Technology
31.13.1 This Agreement is subject to all United
States Laws and regulations related to exports and pursuant to such laws and
regulations to all administrative acts of the United States Government.
31.13.2 The parties to this Agreement agree that
the obligations contained in this Agreement shall not affect the performance of
any obligations created by prior contracts or subcontracts which the parties may
have individually or collectively with the U.S. Government.
31.13.3 No liability will be incurred by or
attributed to the U.S. Government in connection with any possible infringement
of privately owned patent or proprietary rights, either domestic or foreign by
reason of the U.S. Government's approval of this Agreement.
31.13.4 No export, sale, transfer, or other
disposition of the defense articles covered by this Agreement is authorized to
any country without the prior written approval of the Bureau of Export
Administration of the U.S. Department of Commerce.
31.13.5 The parties to this Agreement agree that an
annual report of sales or other transfers pursuant to this Agreement of the
licensed articles by quantity, type, U.S. dollar value, and recipient shall be
provided by the ALCATEL to the SUPPLIER and may be provided by the SUPPLIER to
the Department of Commerce.
31.13.6 All provisions in this Agreement which refer
to the United States Government and the Department of Commerce will remain
binding on the parties after the termination of this Agreement.
31.13.7 By signing this Agreement, ALCATEL
understands and agrees that all of the Products shipped to ALCATEL are
authorized for export by the U.S. Government only to the countries named in the
Orders or otherwise communicated to SUPPLIER. They may not be
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<PAGE>
resold, diverted, transferred, transshipped, or otherwise be disposed of in any
other country, either in their original form or after being incorporated through
an intermediate process into other end-items, without the prior written approval
of the U.S. Department of Commerce.
31.14 Confidentiality of Terms, Publicity
The existence of this Agreement, as well as its terms
and conditions, shall be held in confidence by both parties and only disclosed
as may be agreed to by both parties or as may be required to meet security
disclosure of export permit requirements. Neither Party shall make public
statements including conferences or issue publicity or media releases or take
the SUPPLIERS products to trade shows without the prior written approval of the
other Party. In addition, neither Party shall make public statements or issue
publicity or media releases with regard to this agreement or the relationship
between the Parties without the prior written approval of the other Party.
31.15 Counterparts
This Agreement may be executed in multiple
counterparts, each of which shall be considered an original, but all of which
together shall constitute one instrument, and the Parties hereby authorize and
agree to be bound by counterpart signature pages delivered by each Party to the
other Party via facsimile transmission, provided that an executed original of
the Agreement is delivered to such other Party within seven (7) days thereafter.
32. ESCROW AGREEMENT
32.1 SUPPLIER shall, within thirty (30) days of execution of
this Agreement ALCATEL, enter into an escrow agreement with Data Securities
International or another mutually agreed upon agent for the deposit of Product
Software source code, and all related information necessary to use such source
code, and Manufacturing Information hardware design information including but
not limited to drawings, bill of materials and other manufacturing information
Product Technical Functional Specifications Packaging and Transport
Specifications, Lists of components, Lists of certified suppliers, Manufacturing
Processes, Test Procedures, Binary code, Firmware, Software and related upgrades
or changes relating to Products, all information necessary to use such source
code, the Manufacturing Information, and any other information necessary to
permit ALCATEL to manufacture, develop and sell, support, and exercise its other
rights under this Agreement (hereinafter collectively referred to as "Escrow
Information"). The terms of the escrow agreement are to be agreed between the
Parties, but shall at a minimum provide:
- - If Supplier commits any act of bankruptcy, or compounds with its
creditors, or a petition or receiving order in bankruptcy is presented
or made against the Supplier, or a petition for an administration order
is presented in relation to the Supplier, or a resolution or petition
to wind up the Supplier, or a receiver or administrative receiver is
appointed, other than for reconstruction, reorganization or
amalgamation, and such act or petition is not cured, dismissed, or
withdrawn within 90 days thereafter, or Supplier ceases to carry on
business, then the Escrow Information shall be released to ALCATEL,
provided that ALCATEL shall only be entitled to use the Escrow
Information to enable the continued supply of Products and the
provision of maintenance and
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<PAGE>
support services to Customers and the development, manufacture and sale
of any Products and Developed Products.
Upon execution of the escrow agreement, SUPPLIER agrees that all modifications,
updates and changes to the Escrow Information shall be deposited within thirty
(30) days of them becoming commercially available. All costs associated with the
deposit and update of Escrow Information shall be for ALCATEL's account.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
INTERWEAVE COMMUNICATIONS ALCATEL BUSINESS SYSTEMS
INTERNATIONAL Ltd.
By: /s/ [ILLEGIBLE] By:
-------------------------------- ----------------------------
Name: PRISCILLA M. LU Name:
------------------------------- --------------------------
Title: CEO & CHAIRMAN Title:
----------------------------- -------------------------
Oct. 27, 1999
<PAGE>
ANNEX A (1)
DEVELOPED PRODUCTS DESCRIPTION AND GENERAL TECHNICAL SPECIFICATION
I. DEFINITIONS:
- - GCS IP LINK shall mean the link between the BSC and the Corporate GSM
server (CGS) supporting GSM protocols BSSAP over IP.
- - CGS IP LINK SOFTWARE shall mean the software developed within the BSC, in
order to provide interworking (using GSM signaling) between BSC and CGS
over IP and or BSC and public MSC over SS7 link.
- - CGS IP LINK SPECIFICATION shall means the document prepared by ABS
expressing ABS's requests and approved By SUPPLIER.
- - IP LINK DEVELOPMENT shall mean engineering effort to make available the
BSC IP software including specification, production, validation,
integration, configuration, installation and maintenance. As described
within BSC IP link specification.
- - PRODUCT shall mean the BSC equipment supporting the "standard" BSC
software and including the functions required within CGS IP link detailed
specifications.
II. PROJECT SCOPE
On request of ALCATEL, Supplier agrees to perform the development of the CGS
IP link
The object of this agreement is to define all rights and obligations of
the parties for the development of the product: developed product, in
compliance with the CGS IP link detailed specification.
Supplier will provide all services to be performed under the OEM
agreement.
III. GENERAL TECHNICAL SPECIFICATIONS
General Technical CGS IP link Specifications.
1. INTRODUCTION
The document describes the interworking between the CMS* / CGS
(corporate GSM server) and BSS in 2 cases
1) using SS7 signalling over PCM
<PAGE>
2) using GSM signalling over IP
CGS includes functional blocks providing signalling adaptation, The GW
PBX provides the Call handling services
Several steps are identified and a road map allowing a cost
optimisation including IP connection is also considered.
Note: CMS corporate mobility server
General description of CMS is given in appendix 1
2. CGS INTERFACES TO BSS
2.1 STEP 1: SS7 INTERFACE
With the Step 1, the CGS is connected to the interface. No modification
is needed on the BSS (BSC + BTS).
- - Signalling aspects
The BSC is linked to the CGS via A link ( PCM )
"A" signalling is carried in 64K Channels (eg NDEG.16).
In the normal BSS / MSC configuration origin & destination point CODE
(OPC/ DPC) need to be defined eg: BSC PC XXX, MSC PC YYY.
The CGS will interface BSC and MSC without any addressing modification
as described below
[GRAPHIC]
- - Functional interworking
The protocols architecture is defined as below:
[GRAPHIC]
<PAGE>
- - TCH aspects
In the normal BSS / MSC configuration all PCM link are linked between
BSC and MSC.
When the CGS is introduced, a PCM link (TCH only) from the BSC is
connected to the GW PBX
[GRAPHIC]
The PCM, which links the BSC to the CGS, will be managed by the CGS
(selection of channels ...)
The BSC is configured with 2 PCM (which seems to be linked directly to
the MSC).
It is assumed that TCH are provided on a PCM G703 / G704 (voice
channels at 64 k bits).
- - Link between CGS and GWPBX
The link between the CGS and the GWPBX is Alcatel proprietary.
- - Synchronization
It is assumed that the MSC provides clock reference via PCM links
connected to the BSC.
When the clock signal is carried over the A interface connected
to the CGS.
The MSC will be the master, the CGS the slave. (Its internal
clock will use the MSC clock).
The CGS will transmit the clock signal to the BSC.
The BSC will be the slave and use the CGS /MSC clock for its
internal use.
It is assumed that the GWPBX will be synchronised from the public
network.
- - SUMMARY of the CGS / BSS interface
The interface between CGS and BSC is based on two PCM links
<PAGE>
[GRAPHIC]
- - Configuration
- TRAFFIC
The CGS is designed to allow 80 - 100 erlangs with the PBX. ( 1000
GSM terminals with 0.1 E )
- PBX LINK
The CGS is able to control 4PCM to the PBX. This capacity can be
extended up 8 PCM
- BSC/MSC links: A interface with signalling.
All A interfaces which carry the A signalling must be linked to the
CGS.
The capacity of the CGS is under definition,
the objective is support at least 4 A interfaces.
2.2 STEP 2 : IP INTERFACE BETWEEN CGS AND BSS
The IP interface between CGS and BSC may be carried on IP link,
2-sub-steps is identified.
Step 2a) A signalling over IP and TCH over PCM (64K)
step 2b)
- A signalling over IP & TCH over IP and or
- H323 signalling and TCH over IP
(specific 'adaptation' of H323 may be needed to carry all GSM
information, as far as possible all generic mechanisms to
carry additional information will be preferred)
<PAGE>
- - Step 2 a) < < A > > over IP.
THE OBJECTIVE IS TO AVOID SS7 BOARDS HANDLING SS7 LOW LAYERS. (MTP 1 -2
-3)
Basic principle:
The deviation of signalling which was possible using S87 boards should
be mapped to a < < BSC > > deviation of signalling using IP to the CGS
It is proposed that the BSC deviate the signalling GSM to the CGS over
an IP link which will return to the BSC the signalling after
processing.
The BSC will then forward the signaling to the MSC over the PCM SS7
channels.
In a similar way, in the opposite direction the SS7 signalling over PCM
coming from the MSC is first deviated to the CGS. The CGS will return
the signalling on IP to the BSC for processing.
[GRAPHIC]
- - Protocol architecture
It is proposed to interface the CGS directly at the SSCP level or
equivalent.
For the BSC the connection to the CGS must not impact any signalling
procedures.
<PAGE>
The protocol architecture could be the following:
[GRAPHIC]
The link between the CGS and the BSC corresponds to the internal link
between SCCP layer and MTP layer.
The information (messages transfert part primitives) will be carried on
IP link TCP (or UDP)
See REC Q701 para 8, MTP primitives:
- MTP transfer
- MTP pause
- MTP resume
- MTP status.
- - PCM TRUNKS
The BSC will have the normal SS7 interface (A or Ater interface) with
the MSC
The BSC will have 2 type PCM trunks
'Public' PCM trunks for GSM calls routed to the MSC
"corporate" PCM trunks for GSM calls routed to GW PBX.
All alarms related to "Corporate" PCM trunks must not be transmitted to
the MSC.
----------------------
- - RELIABILITY
In case of CGS failure or IP link failure between CGS / BSC publics
calls must always be possible.
- - Other requirements
General rules
<PAGE>
- Any signalling which relates to calls using corporate trunks must not
be transmitted to the public MSC
- Handshake process (CGS/BSC) should allow reconfiguration which
guarantees minimum quality of service..
- Alarms: in case of IP link failure an alarm is sent to the supplier
OMC.
DOCUMENTATION
Supplier shall furnish to Alcatel, free of charge, all relevant documentation
relating to the CGS IP link software, such that Alcatel may produce its own
finished literature. Alcatel shall have the right to use solely for use on or in
conjunction with the Products, reproduce and apply its trademark or copyright on
such documentation and supply the same to its Customers.
Documentation shall be Supplier standard documentation and furnished in
paper form and electronic form (worldwide standard).
3. GENERAL DESCRIPTION OF CORPORATE MOBILITY SERVER
(CMS)
3.1 SYSTEM ARCHITECTURE
The general concept is based on a server called CMS server which
interfaces the BSS (BSC+BTS) and the PBX.
[GRAPHIC]
<PAGE>
The PLMN sees the corporate BSS as standard BSS. With our CMS, this BSS
allows local routing of local calls for corporate GSM users. For these local
calls, the public MSC is not involved. There is no charging ticket in the PLMN.
By local routing of local calls we mean:
- - Calls from mobile to mobile
- - Calls from mobile to PBX fixed phone
- - Calls from PBX fixed phone to mobile
- - Calls from mobile to PSTN fixed phone
- - Calls from PSTN fixed phone to mobile
The system can welcome visitors. Visitors, if allowed, are then seen as
public GSM users. They systematically will use A interface for calls. All
visitors' calls will be handled by the public MSC. For that calls public
charging is used
The GSM PBX is a mono company equipment. It also means that the BSS is
dedicated to one company.
The PBX interface we use depends on Client PBX capabilities. Between
mobiles the level of features depends on CMS call handling capabilities. Between
fixed PBX lines and mobile lines, the level of features depends on PBX
signalling (QSIG, DPNSS)
The mobility Management (e.g. localization) is handled by the PLMN
(HLR, VLR) with the standard GSM protocol procedures.
3.2 CMS / PBX INTEROPERABILITY
[GRAPHIC]
<PAGE>
The CMS relies on two main blocks:
- - A CGS: Corporate GSM Server
- - A PBX GW: PBX gateway
The BSS brings indoor coverage with the required level of capacity.
The CGS is ensuring local routing of local calls. Today the
signaling between CGS and BSC is SS7 signalling. Signalling on IP will be
available later on.
The CGS is analysing the signalling and decides whether or not he has to
locally route the call.
USERS
2 types of GSM users are identified:
- - Corporate GSM users:
The corporate GSM users are registered in the CGs thanks to
their IMSI and in the gateway PBX by their directory number. They are also
attached to the PLMN network for authentication, ciphering and localisation
procedures.
- - Visitors GSM users:
The visitors GSM users are unknown by the CGS, nevertheless they can
use the corporate radio coverage and keep the GSM services provided by their
operator.
Call scenario for visitors GSM users:
The visitors GSM establish or receive their calls directly through the
PLMN. The CMS is transparent.
Call scenario for corporate GSM users:
The corporate GSM users can make calls using the PLMN numbering plan or
the corporate numbering plan. In order to differentiate the two numbering plans
a prefix is necessary to access the corporate numbering plan.
The corporate GSM users are called by their directory number part of
the DDI range of the PBX. When off site the UBIQUITY services can redirect the
call to the PLMN network.
<PAGE>
ANNEX A (2)
MILESTONES
Software is delivered in the form of object code and source code with all
relevant comments for the Developed Products.
The CGS IP link software delivery time is given in table below.
High level project plan
<TABLE>
<CAPTION>
Date Description Parties
Location
<S> <C> <C>
15th November 99 First draft of IP link detailed specs IW
15th December 99 CGs IP link detailed specification approval IW/ABS
Paris
1st March 00 delivery of test plan Prov acceptance IW
15th March 00 test plan approval IW/ABS
15th March 00 Delivery of CGs IP software. IW
Start of integration test ABS Paris
Documentation IW
15th April 00 Test report
alpha test Alcatel
1st May 00 provisional acceptance ABS
operator validation Paris
15th May 00 beta test ABS, customer
15th July 00 final acceptance
general availability
</TABLE>
The Supplier's program manager shall be (Pi Hui)
The Alcatel program manager shall be Jean Rene Rousseau
<PAGE>
ANNEX A (3)
NRE COSTS
ABS will pay 450 000 US$ as development fees (non refundable expenses) for the
development of the CGS IP link. The maturity date of the installment will be as
follows:
/ / 50% at signing of the OEM agreement
/ / 30% at delivery of CGS IP Software
/ / 20% at final acceptance
The detailed contents of this development shall be provided by Supplier by 5th
of December 1999.
POTENTIAL NEXT DEVELOPED PRODUCTS
Within the strategy and marketing coordination committee,
specific sessions between Supplier and Alcatel will provide
inputs to the more detailed specification on the following
items.
If Parties agree to develop, Alcatel shall pay to Supplier
for the following Products to be developped.
The Supplier shall provide Alcatel with a quotation for the
hereabove mentioned non refundable expenses.
1. O&M
The following features could be considered for R6.
A general technical specification could be targeted for 1Q 00
OMC Web based (preliminary definition)
Server in operator premises
Partitioning: on site corporation remote client
Secured access
Restricted access (e.g: no access to freq management)
Fault management of dedicated equipment
Interface to operator OSS for frequency planning
Alarms are sent to public OMC
2. BSS RADIO EVOLUTION
In order to not restrict the market to GSM countries, other radio technology
such as CDMA or TDMA could be considered.
<PAGE>
ANNEX B
NEW RELEASES ROAD MAP
RELEASE 5
TIME FRAME
/ / Alpha test : January 15th 2000
/ / Beta test : February 15th 2000
/ / General availability : April 15th 2000
RELEASE CONTENT
/ / E1/T1 module ( with Hot swap capabilities)
/ / EFR
/ / PCS 1900 frequency, GSM 900, 1800 Mhz
/ / Up link/down link control
/ / ANSI SS7 protocol stack
/ / Mu Law & A law companding
/ / 16 Kbps Switching in the BSC
/ / BS+ capacity: 3 TRX (no external BTS)
/ / BS+ with external BTS ( 2TRX in BS+)
/ / DSP (trau) Module management
/ / Turbo Wave Module Management
/ / Post Mortem analysis (Event, traces ..)
RELEASE 5+
TIME FRAME
/ / Alpha test : April 15th 2000
/ / Beta test : May 15th 2000
/ / General availability : June 30th 2000
RELEASE CONTENT
/ / CGS IP link
/ / Soft BSC shut down (power down gracefully via OMC)
<PAGE>
RELEASE 6
TIME FRAME
/ / Alpha test : July 31th 2000
/ / Beta test : September 30th 2000
/ / General availability : December 30th 2000
RELEASE CONTENT
/ / New radio module 250 mW
/ / Radio module 2 W
/ / BS+ ( up to 6 TRX with new processor) *
/ / SF Hopping
/ / GPRS: radio () Hardware Ready
/ / RJ 45 10BaseT connector
/ / E1 Board configurable on a port by port basis (with or
without TRAU)
/ / A ter (with remote transcodeurs, and TFO capabilities)
/ / SOLSA (within six (6) month of G. A.)
/ / E911 location service
*MAXIMUM CAPACITY PROPOSED BY SUPPLIER
<PAGE>
RELEASE 7 IP BSS (PRELIMINARY)
TIME FRAME
/ / Alpha test : March 30th 2001
/ / Beta test : April 30th 2001
/ / General availability : June 30th 2001
RELEASE CONTENT
/ / Rel 7 of BSS will have IP based architecture, it will support data
communications (mobile terminal to server) up to 100 K bps using
GPRS
/ / IP BSS will have Public Gb interface according to adequate ETSI
specifications.
/ / IP BSS should utilize the corporate IP infrastructure and
interoperate with H 323 based corporate Equipments (e.g.,
gatekeeper, IP PBX, DNS, ...).
/ / The bill of material for 2 TRX is targeted to be US$1500, but in
any event must not exceed US$2,000
<PAGE>
OSS PRODUCT ROADMAP
RELEASE 4.5
TIME FRAME
/ / Alpha test
/ / Beta
/ / General availability : November 1999
RELEASE CONTENT
/ / Support of new 4.5 NSS features
/ / OMC Health management
/ / Detection of OMC application failures
/ / OMC administration monitoring
/ / Simplify OMC S/W I&C
/ / Dual EISS/NSS actions
/ / Navigation shortcuts
/ / NE administrative synchronization
/ / Backward compatibility with BSS releases
RELEASE 5
TIME FRAME
/ / Alpha test : January 15th 2000
/ / Beta test : February 15th 2000
/ / General availability : April 15th 2000
RELEASE CONTENT
/ / Support of BSS NSS features
/ / Off site alarming (paging support) and interface to
external alarms
/ / On line help
<PAGE>
RELEASE 6 (PRELIMINARY)
TIME FRAME
/ / Alpha test : August 30th 2000
/ / Beta test : October 30th 2000
/ / General availability : December 30th 2000
RELEASE CONTENT
/ / Support of Release 6 features
/ / Subscriber Management
/ / Enhanced GUI
/ / Web based Management
/ / Network partitioning
<PAGE>
ANNEX C
ALCATEL ROILING FORECASTS & PO TIMEFRAMES
<TABLE>
<CAPTION>
4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Purchase order [***] [***] [***] [***] [***] [***] [***] [***] [***]
Shipments [***] [***] [***] [***] [***] [***] [***] [***] [***]
*US$ million
nb of systems [***] [***] [***] [***] [***] [***] [***] [***] [***]
( non binding forecast
subject to Customer
Orders )
of witch
BS+ [***] [***] [***] [***] [***] [***] [***] [***] [***]
BS+ & BTS [***] [***] [***] [***] [***] [***] [***] [***] [***]
nb of BT+2TRX [***] [***] [***] [***] [***] [***] [***] [***] [***]
nb of BTS2TRX [***] [***] [***] [***] [***] [***] [***] [***] [***]
The estimated average system price is US$[***] (to be retablished )
</TABLE>
Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE>
ANNEX D
PRICING FOR R4 GIVEN IN US $
<TABLE>
<CAPTION>
<S> <C>
R4
------------------------------------------------- -------------------
Combo 2TRX [***]
------------------------------------------------- -------------------
---------------------------------------------------------------------
BSC 1E1 [***]
---------------------------------------------------------------------
BSC 2E1 [***]
---------------------------------------------------------------------
---------------------------------------------------------------------
BSC 2TRX [***] (1)
---------------------------------------------------------------------
BTS 3TRX [***] (1)
---------------------------------------------------------------------
---------------------------------------------------------------------
Ext 1TRX [***]
---------------------------------------------------------------------
---------------------------------------------------------------------
OMC [***] can manage up to 30
--------------------------------------------------------------------- systems
Craft PC [***]
---------------------------------------------------------------------
</TABLE>
The RTU is included in the basic 2TRX Combo configuration
(1) RTU of [***]/TRX for each BT5 connected to a BSC
(1) RTU of [***]/TRX for each BTS connected to a Combo
Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE>
PRICING FOR R5/R5+ GIVEN IN US $
<TABLE>
<CAPTION>
R5/R5+
------------------------------------------------- -------------------
<S> <C>
Combo 2TRX [***]
------------------------------------------------- -------------------
---------------------------------------------------------------------
BS + 2TRX [***]
---------------------------------------------------------------------
BS + 3TRX [***]
---------------------------------------------------------------------
---------------------------------------------------------------------
BSC [***]
---------------------------------------------------------------------
BSC 2E1 [***]
---------------------------------------------------------------------
---------------------------------------------------------------------
BTS 2TRX [***] (1)
---------------------------------------------------------------------
BTS 3TRX [***] (1)
---------------------------------------------------------------------
---------------------------------------------------------------------
Ext 1TRX [***]
---------------------------------------------------------------------
---------------------------------------------------------------------
OMC [***] can manage up to 200
systems
---------------------------------------------------------------------
Craft PC [***]
---------------------------------------------------------------------
</TABLE>
Pricing includes a RTU license for TRX's contained in the BS+
base configurations
The RTU is included in the basic 2TRX Combo configuration
(1) RTU of [***]TRX for each BTS connected to a BSC or BS+
(1) RTU of [***]TRX for each BTS connected to a Combo
* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE>
PRICING FOR R6 GIVEN IN US $
<TABLE>
<CAPTION>
R6
------------------------------------------------- -------------------
<S> <C>
Combo 2TRX [***]
------------------------------------------------- -------------------
---------------------------------------------------------------------
BS + 2TRX [***]
---------------------------------------------------------------------
BS + 3TRX [***]
---------------------------------------------------------------------
---------------------------------------------------------------------
BSC [***]
---------------------------------------------------------------------
BSC 2E1 [***]
---------------------------------------------------------------------
---------------------------------------------------------------------
BSC 2TRX [***](1)
---------------------------------------------------------------------
BTS 3TRX [***](1)
---------------------------------------------------------------------
---------------------------------------------------------------------
Ext 1TRX [***]
---------------------------------------------------------------------
---------------------------------------------------------------------
OMC [***] can manage up to 200
systems
---------------------------------------------------------------------
Craft PC [***]
---------------------------------------------------------------------
</TABLE>
Pricing includes a RTU license for TRX's contained in the BS+
base configurations
The RTU is included in the basic 2TRX Combo configuration
(1) RTU of [***] TRX for each BTS connected to a BSC or BS+
(1) RTU of [***]/TRX for each BTS connected to a Combo
* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE>
TRANSFERT PRICE FOR R7
For R7, the transfer at least equal to R6 tranfer
price -15%
This is for equivalent level of features. It does not take into account
new features such as GPRS, wich will increase the price. Actual
pricing will be a function of periodic reviews of market based pricing
Pricing will include RTU license for additional TRX's for BSC's/BS+
configurations as well as a RTU for additional TRX's added to the basic
Combo configuration
SPARES
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Clock 13 MHz [***] [***] [***]
--------------------------------------------------------------------------------
E1, trunk, 120 Ohms, without trau 2ports [***] [***] [***]
BTS
--------------------------------------------------------------------------------
E1, trunk, 120 Ohms, without trau 2ports [***] [***] [***]
BSC
--------------------------------------------------------------------------------
E1, trunk, 75 Ohms, without trau 2ports [***] [***] [***]
BTS
--------------------------------------------------------------------------------
E1, trunk, 75 Ohms, without trau 2ports [***] [***] [***]
BSC
--------------------------------------------------------------------------------
E1, with 2 traus, 120 Ohms 32 trau [***] [***] [***]
channels
--------------------------------------------------------------------------------
E1, with 2 traus, 75 Ohms 32 trau [***] [***] [***]
channels
--------------------------------------------------------------------------------
E1, with 4 traus, 120 Ohms 64 trau [***] [***] [***]
channels
--------------------------------------------------------------------------------
E1, with 4 traus, 75 Ohms 64 trau [***] [***] [***]
channels
--------------------------------------------------------------------------------
E1, with 1 DSP 120 Ohms Switch [***] [***] [***]
--------------------------------------------------------------------------------
E1, with 1 DSP 75 Ohms Switch [***] [***] [***]
--------------------------------------------------------------------------------
IWP 16 MB, MMU [***] [***] [***]
--------------------------------------------------------------------------------
IWP 64MB, With Hard disk 810 [***] [***] [***]
--------------------------------------------------------------------------------
Power supply 350W 115V AC [***] [***] [***]
--------------------------------------------------------------------------------
</TABLE>
* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
Power supply 350W 230V AC [***] [***] [***]
--------------------------------------------------------------------------------------
Power supply 350W -48V DC [***] [***] [***]
--------------------------------------------------------------------------------------
Power supply 50A -48V DC [***] [***] [***]
--------------------------------------------------------------------------------------
Power supply 50A 115V AC [***] [***] [***]
--------------------------------------------------------------------------------------
Power supply 50A 230V AC [***] [***] [***]
--------------------------------------------------------------------------------------
RFD 900 MHz [***] [***] [***]
--------------------------------------------------------------------------------------
RFD 1800 MHz [***] [***] [***]
--------------------------------------------------------------------------------------
RFD 1900 MHz [***] [***] [***]
--------------------------------------------------------------------------------------
TuboWAVE 4W 900 et 1800MHz [***] [***] [***]
--------------------------------------------------------------------------------------
TuboWAVE 8W 900 et 1800MHz [***] [***] [***]
--------------------------------------------------------------------------------------
TRX 900 MHz [***] [***] [***]
--------------------------------------------------------------------------------------
TRX 1800 MHz [***] [***] [***]
--------------------------------------------------------------------------------------
TRX 1900 MHz [***] [***] [***]
--------------------------------------------------------------------------------------
Module Fan 12V cards [***] [***] [***]
--------------------------------------------------------------------------------------
Fan 12V Power Supply [***] [***] [***]
--------------------------------------------------------------------------------------
Cable kit full set [***] [***] [***]
--------------------------------------------------------------------------------------
BTS chassis indoor [***] [***] [***]
--------------------------------------------------------------------------------------
BSC chassis indoor [***] [***] [***]
--------------------------------------------------------------------------------------
Wall mount kit [***] [***] [***]
--------------------------------------------------------------------------------------
Rack mount kit [***] [***] [***]
--------------------------------------------------------------------------------------
Table mount kit [***] [***] [***]
--------------------------------------------------------------------------------------
Mount rack and filter BTS [***] [***] [***]
--------------------------------------------------------------------------------------
Outdoor mount kit (environmental cabinet) [***] [***] [***]
--------------------------------------------------------------------------------------
UPS kit 230V outdoor [***] [***] [***]
--------------------------------------------------------------------------------------
Heat Xchanger 230V outdoor [***] [***] [***]
--------------------------------------------------------------------------------------
Enclosure kit combiner outdoor [***] [***] [***]
--------------------------------------------------------------------------------------
</TABLE>
Pricing includes any rigths to use
* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE>
ANNEX E
LIST OF SUBCONTRACTORS
SUPPLIER agrees to provide a list of all of its subcontractors and will inform
ALCATEL and obtain ALCATEL'S prior written approval of any changes to this list.
PEMSTAR SAN JOSE
GSS ARRAY SAN JOSE
<PAGE>
ANNEX F
TECHNICAL PRODUCT SUPPORT BY THE SUPPLIER
Scope of services
- Update of documentation and training;
- Software patch and maintenance Release;
- Advanced replacement of components and or spare parts to fix
hardware's bugs
- Emergency call services (ref. 22-3.2 TSU)
A. Commencement Period
Prices for technical support shall be applicable after the expiry of
the period of warranty
B. Prices for such services are calculated on the basis of one percent
(1%) of the Supplier's sales prices. This payment is made on the
Semester basis and invoiced separately to ALCATEL.
Such services will continue for a three (3) years period following the
expiry of the warranty period.
EMERGENCY CALL OUT SERVICES
[To be completed, if requested by ALCATEL]
A. Base Rates (Assume Call Out is From RWC)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Standard Weeknights Nights/Weekends Sundays/Holidays
Job Level 8am-5pm 5pm-11pm 11pm-8am
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Junior Engineer $90 $110 $125 $150
Engineer $110 $130 $150 $185
Sr. Engineer/Spec. $150 $180 $185 $250
Project Manager $190 $225 $250 $315
- -----------------------------------------------------------------------------------------------------------
</TABLE>
1. All of these hourly rates will be discounted by 20%.
2. These rates are subject to a six month adjustment based upon an agreed to
price escalation table.
<PAGE>
*Rates do Not include transportation and a Per Diem for food and Lodging and
out-of-pocket expenses for personnel rendering such services. Expenses must
include proper justification.
ANNEX G
ALCATEL COMPETITORS
EFFECTIVE OCTOBER 22,1999
ERICSSON
NORTEL
LUCENT TECHNOLOGIES
SIEMENS
CISCO
NOKIA
<PAGE>
ANNEX H
TRAINING
[To be completed if requested by ALCATEL]
A. Overview
The SUPPLIER is proposing a strategy whereby it would train the
ALCATEL's trainers upon ALCATEL's request
It is expected that this training would take place at SUPPLIER'S
facilities in the USA.
SUPPLIER shall provide the following training for 2-3 attendees at each
of 3 categories of training sessions i.e., sales, pre-sales and
technical support for the purpose of permitting ALCATEL to train it
employees and customers:
B. SUPPLlER Obligations
1. The SUPPLIER shall make available the necessary documentation and
training courseware to enable the ALCATEL's instructors to train its
customers on the product features for the operations and maintenance of
the products. The courses available to ALCATEL are provided in the
SUPPLIER training catalogue which may be changed over time.
2. The SUPPLIER will work with ALCATEL training organization on a program
to train their trainers to enable :hem to deliver the courses In the
catalogue required by ALCATEL.
Obligations of Both Parties
The SUPPLIER shall propose a plan to train the ALCATEL trainers.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
COURSE # DESCRIPTION* ESTIMATED
COURSE DAYS
- ---------------------------------------------------------------------------------
<S> <C> <C>
T100 GSM Overview 1
- ---------------------------------------------------------------------------------
T200 Product Overview 1/2
- ---------------------------------------------------------------------------------
T300 OMC-R System Administration 2
- ---------------------------------------------------------------------------------
T400 OMC-R Network Operations 3
- ---------------------------------------------------------------------------------
T500 BSS Operations & Maintenance 3
- ---------------------------------------------------------------------------------
T600 BSS Installation & Commissioning 2
- ---------------------------------------------------------------------------------
T700 OMC-S System Administration 2
- ---------------------------------------------------------------------------------
T800 OMC Network Operations 3
- ---------------------------------------------------------------------------------
T900 WAVEXchange Operations & Maintenance 3
- ---------------------------------------------------------------------------------
</TABLE>
<PAGE>
The Supplier will invoice Alcatel for such training sessions at a fixed rate of
US[***] for each category ( maximum of 3 attendees ).
* Certain information on this page has been omitted and filed separately with
with the SEC. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE>
TRAINING CATALOGUE
[LOGO]
INTERWAVE COMMUNICATIONS, Inc.
1998
TRAINING CATALOG
REV 4.0
MAY 1, 1998
INTERWAVE COMMUNICATIONS
A U.S. SUBSIDIARY OF INTERWAVE COMMUNICATIONS INTERNATIONAL LTD.
656 Bair Island Road, Suite 108 Redwood City, CA 94063
(415) 482-6200 (415) 482-6220 FAX
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
TRAINING SERVICES ............................................14
TRAINING CENTERS .............................................15
ON-SITE CUSTOMER TRAINING ....................................15
TRAINING ADMINISTRATOR .......................................15
PLANNING YOUR CLASSES ........................................15
REGISTRATION .................................................16
CATALOG AND LITERATURE REQUEST ...............................16
TUITION ......................................................16
CANCELLATION POLICY ..........................................16
PRODUCT TRAINING PROGRAM .....................................16
COURSE SERIES ................................................17
COURSE DESCRIPTIONS ..........................................18
GSM Overview ........................................18
InterWAVE's Product Overview ........................20
WAVEView OMC-R System Administration ................21
WAVEView OMC-R Network Operations ...................23
WAVEView OMC Combined System Administration .........24
WAVEView OMC Combined Network Operations ............26
BSS Operations ......................................28
BSS Installation & Commissioning ....................30
WAVEXchange Operations & Maintenance ................31
BSS Database Engineering ............................33
BSS Advanced Maintenance & Troubleshooting ..........35
</TABLE>
<PAGE>
TRAINING SERVICES
INTERWAVE COMMUNICATIONS is developing an extensive series of training
courses designed to teach you how to use our products. The courses are
developed by a combination of subject matter experts and training
specialists in order to create highly technical materials in a modern
training format. Each of our course offerings are designed around specific
learning objectives that keep our classes on track to learning specific job
skills related to INTERWAVE'S products.
Each course incorporates a number of different elements. The bulk of the
material is presented in lecture by an experienced, full-time trainer who
is familiar with both wireless telecommunications and training theory. The
student manuals serve as an excellent reference tool, incorporating all of
the presented concepts with graphics, review questions, and appendices
containing useful information. Hands-on lab activities are extensively used
in our courses, which allow the students to experiment with the concepts
learned in the course, and interact in a "real-world" environment.
This catalog contains a listing of the INTERWAVE training services
available along with descriptions of each course. Our training materials
are divided into specific sub system training series, depending upon the
topic and job requirements.
Our courses are monitored for content and technique by our training
professionals and by attendees, so you can be assured of the highest level
of satisfaction.
INTERWAVE COMMUNICATIONS
Eric J. Kmiec
Worldwide Training Manager
<PAGE>
TRAINING CENTERS
To provide the highest level of training available, we have an established
Regional Training Center in Hong Kong and planned facilities in Redwood
City, California. All facilities are fully equipped with up to date systems
and all associated test equipment. The combination of equipment allows a
two-to-one ratio of students to systems, giving participants an edge in our
hands-on learning environment.
HONG KONG NORTH AMERICA
RM 1801 18/F National Mutual 656 Bair Island Road
Centre Suite 108
151 Gloucester Road Redwood City, CA., 94062
Wanchai, Hong Kong 415.482.2100 (tel.)
011.852.2519.9633 (tel.) 415.261.6220 (fax)
011.852.2519.9033 (fax)
ON-SITE CUSTOMER TRAINING
Customer site courses may be provided based upon equipment, and instructor
availability. INTERWAVE will supply all the necessary training
documentation, training personnel and software required to conduct the
class. Please contact your regional training administrator for more
details.
TRAINING ADMINISTRATOR
Regional Training Administrators are ready to help with any of your
questions or concerns, whether it be course availability, confirmation,
registration or general training issues.
PLANNING YOUR CLASSES
Training is offered on a space available bases; therefore, advanced
registration is recommended. Regional Training Center classes can support
up to (10) students.
<PAGE>
REGISTRATION
First, determine which courses and location you would like to enroll in.
call your regional training administrator at one of the above locations
listed above for course availability and registration forms, Monday through
Friday, 8:00 a.m. to 5:00 p.m. (LOCAL TIMES).
CATALOG AND LITERATURE REQUEST
To order a Technical Training Catalog, a class schedule, to be placed on
our mailing list, or to make address changes or corrections, please call
your local training administrator at one of the above locations listed or
visit us on our web pager, www.iwv.com for additional information.
TUITION
Tuition fees are indicated in the course description section and are
for scheduled classes held in our Training Centers. We accept checks or
purchase orders. Payment in full is required prior to the start of all
classes or your registration is subject to cancellation. Tuition
includes (1) set of manuals per student.
CANCELLATION POLICY
Cancellations received less than ten business days prior to class are
subject to a 100% cancellation fee. InterWAVE reserves the right to
reschedule or cancel a class two weeks prior to the first day of class.
PRODUCT TRAINING PROGRAM
Each course consists of a series of lessons. Each lesson is developed
to support its objectives. At the beginning of a lesson the objectives
are reviewed with the students. The students are told to insure that we
as instructors meet these objectives. At the end of each lesson the
students are asked to complete a short review (test). The test
questions reinforce the objectives.
<PAGE>
COURSE SERIES
InterWAVE Microcellular Network Solutions Training courses offer technical
training designed to fit the training requirements of the operators.
[FLOW CHART OF CLASSES OFFERED]
NSS COURSES AVAILABLE: 8/1/98
<PAGE>
COURSE DESCRIPTIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
GSM OVERVIEW
- -----------------------------------------------------------------------------------------------
COURSE SERIES 100
<S> <C>
Course Description: This course is intended to provide students with a
general overview of GSM. In this course we will introduce
the student to the principles of GSM, including the
History, Architecture, Interfaces, Protocols, Radio
Propagation problems with solutions as well, the students
will also understand how mobile station access the
network through traffic cases.
Lessons: - Introduction to GSM
- GSM Architecture
- GSM Air Interface
- GSM Interfaces
- Radio Transmission
- Traffic Cases
Objectives: AT THE END OF THIS COURSE SERIES THE STUDENT WILL BE ABLE TO:
- Describe how GSM is organized
- List three current GSM type systems
- List the four main components of a GSM network
- List all of the nodes in a GSM network, and list
their function
- Describe physical and logical channels
- Describe how the various interfaces in GSM are
used
- Explain the role of SS7 signaling
- Define roaming and location updating
- Describe the different handovers
- Describe the different types of radio
interference
- Describe the solutions to the
interference problems
- Describe basic traffic cases
Who should attend? This overview course is recommended
for all personnel; technical or non technical
management, administration personnel or anyone
who needs a refresher on the basics of GSM.
This course is designed to provide
general knowledge of the GSM/DCS system.
Prerequisites: Basic knowledge of telecommunications
and some knowledge of GSM is required
<PAGE>
Delivery: Instructor led lecture with student manuals.
Duration: 1 day
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
INTERWAVE'S PRODUCT OVERVIEW
- -----------------------------------------------------------------------------------------------
COURSE SERIES 200
<S> <C>
Course Description: InterWAVE's Microcellular products are very versatile
telecommunications products that can be used in a wide variety
of microcell applications in a GSM network. In this course we
will describe the different applications and solutions, as well
as the components within the WAVEXpress and MicroEXpress
architecture that allow it to be so versatile. We will also
introduce the student to the WAVEView OMC and CraftPC products.
Lessons: - Introduction to InterWAVE Microcellular Network
Products
- WAVEX PLATFORM
- Introduction to WAVEView & CraftPC
Objectives: AT THE END OF THIS COURSE SERIES THE STUDENT WILL BE ABLE TO:
- List the components and basic functions of
INTERWAVE'S Microcellular network solutions
- Describe the basic functionality of the different
modules found in the WAVEXpress architecture
- Describe how InterWAVE Microcellular Network
Solutions can coexist with GSM networks
- Describe the Features and Functionality of
the WAVEView OMC and CraftPC interface tools.
Who should attend? Primary audience: BSS system specialists and OMC-R personnel
Secondary audience: technical and non-technical management
personnel interested in the WAVEXpress product.
Prerequisites: Basic knowledge of GSM
Delivery: Instructor led lecture with student manuals.
Duration: 1/2 day
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
WAVEVIEW OMC-R SYSTEM ADMINISTRATION
- -----------------------------------------------------------------------------------------------
COURSE SERIES 300
<S> <C>
Course Description: This course is intended for UNIX System Administrators. It
provides the necessary knowledge to install, commission, and
backup the WAVEView OMC-R system.
Lessons: - Introduction to WAVEView
- WAVEView Hardware Components
- Software Processes Overview
- WAVEView Directory Structure
- Start Up & Shutdown Process
- System Access & Security
- WAVEView Archive & Restore Procedures with hands on
Exercise
Objectives: AT THE END OF THIS COURSE THE STUDENT WILL BE ABLE TO:
- Define all the hardware components within the WAVEView
- Define the hardware and software requirements for the
WAVEView
- Describe the software processes with the OMC-R
- Understand the directory structure and disk
partitioning of the OMC-R
- Use the Solaris install utility to configure the
client/server default parameters and disk partitions
- Install Solaris patches
- Setup UNIX user accounts
- Setup Oracle user accounts
- Client/Server Oracle RDBMS database
product installation
- Server Oracle RDBMS database setup
- Install Motif and X11 software on the client/server
- Install the client/server OMC-R application software
- E1 UNIX software installation
- Carry out daily, weekly, and monthly archives
- Restore data after a disk crash
Who should attend? Primary Audience: System Administrators
Secondary Audience: Network Administrators
Prerequisites: Course 100 & 200 Must be an experienced UNIX user.
Delivery: Instructor led lecture with theoretical and hands-on activities.
<PAGE>
Duration: 2 days
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
WAVEVIEW OMC-R NETWORK OPERATIONS
- -----------------------------------------------------------------------------------------------
COURSE SERIES 400
<S> <C>
Course Description: This course is intended to give operators
the skills to monitor and operate the
WAVEView OMC-R From this course the student
will learn to configure, troubleshoot, and
maintain the BSS network controlled by the OMC-R.
Lessons: - Introduction to WAVEView OMC
- WAVEView Features
- WAVEView User Interfaces
- WAVEView Alarm & Event Handling
- WAVEView Performance Management
- OML Management
- Network Element Configuration
- Software Management
- WAVEView Routine Procedures
Objectives: AT THE END OF THIS COURSE THE STUDENT WILL BE ABLE TO:
- Describe the OMC-R in the GSM network
- Define all the hardware and software components
within the WAVEView product
- Navigate through the WAVEView GUI
- Handle the event and alarm screens
- Open event logs and use the event filters
- Troubleshoot the network from the WAVEView GUI
- Monitor the performance of the network using the OMC-R
Performance management features
- Perform hourly, daily, and weekly tasks
- Add, delete, or modify BTS, and BSC sites
- Add, delete, or modify individual network element
component modules
- Add, delete, or modify network element module parameters
Who should attend? Primary Audience: OMC-R Operators and Network Administrators
Secondary Audience: Specialists
Prerequisites: Course 100 & 200, or familiarity with GSM and InterWAVE products
Delivery: Instructor led lecture with theoretical and hands-on activities.
Duration: 3 days
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
WAVEVIEW OMC COMBINED SYSTEM ADMINISTRATION
- -----------------------------------------------------------------------------------------------
COURSE SERIES 700
<S> <C>
Course Description: This course is intended for
UNIX System Administrators responsible
for maintaining InterWAVE's InterWAVE
Microcellular network offering. This
course provides the necessary knowledge
to install, commission, and backup the
combined WAVEView OMC system.
Lessons: - Introduction to WAVEView
- WAVEView Hardware Components
- Software Processes Overview
- WAVEView Directory Structure
- Start Up & Shutdown Process
- System Access & Security
- WAVEView Archive & Restore Procedures with hands on
Exercises
Objectives: AT THE END OF THIS COURSE THE STUDENT WILL BE ABLE TO:
- Define all the hardware components within the WAVEView
- Define the hardware and software requirements for the
WAVEView
- Describe the software processes with the OMC-R
- Understand the directory structure and disk
partitioning of the OMC-R
- Use the Solaris install utility to configure the
client/server default parameters and disk partitions
- Install Solaris patches
- Setup UNIX user accounts
- Setup Oracle user accounts
- Client/Server Oracle RDBMS database
product installation
- Sewer Oracle RDBMS database setup
- Install Motif and X11 software on the client/server
- Install the client/server OMC-R application software
- E1 UNIX software installation
- Carry out daily, weekly, and monthly archives
- Restore data after a disk crash
Who should attend? Primary Audience: System Administrators
Secondary Audience: Network Administrators
Prerequisites: Course 100 & 200. Must be an experienced UNIX user.
Delivery: Instructor led lecture with theoretical and hands-on activities.
<PAGE>
Duration: 2 days
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
WAVEVIEW OMC COMBINED NETWORK ADMINISTRATION
- -----------------------------------------------------------------------------------------------
COURSE SERIES 800
<S> <C>
Course Description: This course is intended to
give operators the skills to monitor and
operate both WAVEView OMC-R and OMC-S.
From this course the student will learn
to configure, troubleshoot, and maintain
the network controlled by the WAVEView
OMC.
Lessons: - Introduction to WAVEView OMC
- WAVEView Features
- WAVEView User Interfaces
- WAVEView Alarm & Event Handling
- WAVEView Performance Management
- OML Management
- Network Element Configuration
- Software Management
- WAVEView Routine Procedures
Objectives: AT THE END OF THIS COURSE THE STUDENT WILL BE ABLE TO:
- Describe the OMC-S in the GSM network
- Define all the hardware and software components within
the WAVEView products
- Navigate through the WAVEView GUI
- Handle the event and alarm screens
- Open event logs and use the event filters
- Troubleshoot the network from the WAVEView GUI
- Monitor the performance of the network using the OMC-S
Performance management features
- Perform hourly, dally, and weekly tasks
- Add, delete, or modify Subscribers, IMSIs, and MSISDNs
- Add, delete, or modify WAVEXchange MSC and HLR
parameters
- Add, delete, or modify Routes and Dialing parameters
- CDR administration
Who should attend? Primary Audience: OMC-S Operators and Network Administrators.
Secondary Audience: BSS Specialists
Prerequisites: Course 100 & 200, or familiarity with GSM and INTERWAVE products.
Delivery: Instructor led lecture with theoretical and hands-on activities.
<PAGE>
Duration: 2 days
</TABLE>
CUSTOMER AVAILABILITY: 4/1/98
<PAGE>
- -------------------------------------------------------------------------------
BSS OPERATIONS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COURSE SERIES 500
<S> <C>
Course Description: This course is intended to provide BSS
personnel with an in-depth understanding
of the WAVEXpress theory of operation
as well as hands-on exercises to
maintain the BSS Network with the
CraftPC user interface tool.
Lessons: - BSS Features and Functionality
- BSS Hardware Descriptions
- BSS Configurations
- BSS Software Architecture
- BSS Operations & Maintenance
- CraftPC Overview
- CraftPC NMI Exercises
- BSS Software Management
Objectives: - AT THE END OF THIS COURSE THE STUDENT WILL BE ABLE TO:
- Identify and explain the main Features and
Functionality of the WAVEXpress & MicroEXpress
- Identify the physical components within the WAVEXpress
& MicroEXpress
- Know the system and module configurations, capacity and
dimensioning rules
- Identify the major sections of the WAVEXpress/BSC
software architecture
- Identify the manageable objects within software the
Object structure
- Understand the sequence of events and processes
of fault detection and recovery
- Understand WAVEXpress diagnostic capabilities
- Describe the Boot and POST process of the
WAVEXpress
- Understand and Implement the CraftPC with the
equipping/verifying of devices under a BSC/BTS
- Know Event & Performance management through
the BSS
Who should attend? Primary audience: BSS specialist, Field Optimization, or System
and Database Engineers.
Secondary audience: OMC-R Network Operators.
Prerequisites: Course 100 & 200, or extensive knowledge of GSM and INTERWAVE
products.
Delivery: Instructor led lecture with theoretical and hands-on activities.
<PAGE>
Duration: 3 days
- -----------------------------------------------------------------------------------------------
<PAGE>
BSS INSTALLATION & COMMISSIONING
- -----------------------------------------------------------------------------------------------
COURSE SERIES 600
Course Description: This course is intended to provide BSS
personnel with the knowledge and skills
to install and commission a WAVEXpress BSC,
BTS or MicroEXpress/BTS. In this course
we will cover each step of the installation
process from customizing the installation
environment to RF commissioning.
Lessons: - Overview of BSS Installation & Commissioning Processes
- WAVEXpress/BTS Installation & Commissioning Exercises
- WAVEXpress/BSC Installation & Commissioning Exercises
- MicroEXpress/BTS Installation & Commissioning Exercises
- Field Replaceable Units (FRU) exercises
Objectives: AT THE END OF THIS COURSE THE STUDENT WILL BE ABLE TO:
- Define and understand the physical site requirements
and environmental constraints for a WAVEXpress BSC, BTS &
MicroEXpress/BTS
- Understand the POST and Diagnostic test available
through the CraftPC
- Know the test equipment associated with Installation &
Commissioning
- Perform hands-on BSC & BTS commissioning using the
CraftPC and maintenance manuals.
- Perform practical exercises of field replacements of
modules
- Perform practical hands on POST tests
Who should attend? Primary audience: BSS Installation, Commissioning and
Maintenance Engineers,
Secondary audience: BSS Specialist.
Prerequisites: Course 100 & 200, or extensive knowledge of GSM and INTERWAVE
products.
Delivery: Instructor led lecture with theoretical and hands-on activities.
Duration: 1.5 days
- -----------------------------------------------------------------------------------------------
<PAGE>
WAVEXCHANGE OPERATIONS & MAINTENANCE
- -----------------------------------------------------------------------------------------------
COURSE SERIES 900
Course Description: This course is intended to provide
MSC personnel with theory of operation as well as
hands-on exercises to Install, Commission,
Integrate, Configure the WAVEXchange platform as
an integrated network offering. Topics include
Subscriber management,(via HLR), NSS
Configurations, PSTN Interfaces (with
Configuration of all links), BSS configurations,
Along with lower level of technical product
description such as H/W, S/W architecture,
protocols, NSS Dimensioning rules, Maintenance
and recovery.
Lessons: - Network Overview
- NSS Hardware & Configuration
- NSS Software Architecture
- Using the Craft PC
- WXC Operation & Maintenance
- Signaling
- Implementation
- Configuration Management
- Software Management
- Routing
Objectives: AT THE END OF THIS COURSE THE STUDENT WILL BE ABLE TO:
- Understand and describe the system architecture/market applications
- Understand and describe the PALIM concept
- Understand and describe the Network interfaces
- Understand and describe the hardware components of WAVEXchange, OMC &
HLR
- Understand and describe the capacity of each hardware component.
- Understand and describe the Craft PC and its connections to IWP
- Understand and describe the WAVEXchange software structure and how to
navigate NMI objects
- Understand and describe the NMI object hierarchy.
- Understand and describe the vxWorks commands
- Understand the POST tests
- Understand the recovery process
- Know how to config and set the signaling connections.
- Understand the Installation and Commissioning Process.
- Know how to set up the NSS network
- Know how to define BSS data on the WAVEXchange level.
- Know how the WAVEXchange stores information
- Understand software management
- Understand Routing Concept
- Create routing definition
Who should attend? Primary audience: MSC specialist, Field Optimization, or System and Database
Engineers. Secondary audience: OMC-5 Network Operators
Prerequisites: Course 100 & 200, or extensive knowledge of GSM and INTERWAVE products.
Delivery: Instructor led lecture with theoretical and hands-on activities.
Duration: 5 days
CUSTOMER AVAILABILITY: 8/1/98
- -----------------------------------------------------------------------------------------------
<PAGE>
BSS DATABASE ENGINEERING
- -----------------------------------------------------------------------------------------------
COURSE SERIES 1000
Course Description: An Instructor Led course familiarizing
students in practical BSS database
building. To provide trainees with
the skills and knowledge to fine tune
the BSS network using the OMC-R, as well
as to give recommendations for parameter
settings.
Lessons: - Introduction
- BSS Interface Configuration
- BSC Configuration
- BTS Configuration
- Handover Configuration
- Power Control Configuration
- Adjacent Cell Configuration
- Site Configuration Exercises
Objectives: AT THE END OF THIS COURSE THE STUDENT WILL BE ABLE TO:
- Equip and understand all the database parameters used within a
Base Station Controller
- Equip and understand all the database parameters used within a
Base Transceiver Station
- Equip and understand all the database parameters used for
Handover Control & Power Budget assessment
- Equip and understand all the database parameters used for Power
Control
- Equip and understand all the database parameters used within
the BSS Interfaces (Air, A & Abis)
- Equip and understand all the database
parameters used for Adjacent Cell
sites (both managed & non managed cells)
- Build a BSC database
- Build a BTS database
- Perform C1 & C2 exercises for a given scenario
- Perform practical exercises for cell configuration using the
WAVEView OMC-R
Who should attend? Primary Audience: BSS Specialist, Optimization Engineers, or OMC Specialist
Prerequisites: Courses 200, 400, & 500 and at least 6 months field experience on the BSS
Delivery: Instructor led lecture with theoretical and hands-on activities.
<PAGE>
Duration: 2/3 days (UNDETERMINED AT THIS TIME)
NOT AVAILABLE AT THIS TIME
- -----------------------------------------------------------------------------------------------
<PAGE>
BSS ADVANCED MAINTENANCE & TROUBLESHOOTING
- -----------------------------------------------------------------------------------------------
Course Description: This course is designed to
create a better understanding of the
operation of the GSM/DCS system as a
whole and the interaction between the
BSS elements. Troubleshooting in a
complete GSM/DCS network is also taught.
To provide trainees with the skills
needed to retrieve, display and
administer performance measurement data
from the OMC-R.
Lessons: - GSM Messaging & Call Processing Functions
- Call Tracing Exercises
- Troubleshooting LALCATEL
- Performance Measurements
Objectives: AT THE END OF THIS COURSE THE STUDENT WILL BE ABLE TO:
- Understand GSM layer 1-3, messages for call processing
- Perform analyses of M-M, M-L, and location updates call
scenarios
- Effectively troubleshoot the BSS at a system level utilizing
system diagnostics and available test equipment
- Locate Hardware faults with the aid of maintenance manuals
procedures and correcting them by replacing modules
- know the counters for performance measurements
- know the objects which are monitored by the measurements
- know the benefits and purpose of the measurements
Who should attend? Primary Audience: BSS specialist, and OMC-R specialist
Prerequisites: Courses 200, 400, & 500 and at lease 6 months field experience on the
BSS
Delivery: Instructor led lecture with theoretical and hands-on activities.
Duration: 2/3 days (UNDETERMINED AT THIS TIME)
</TABLE>
NOT AVAILABLE AT THIS TIME
<PAGE>
TRAINING REQUEST FORM
Date of Request:
----------------
Customer Name: Operator / / Distributor / /
---------------------------------
Customer Contact: Telephone:
------------------------------ ----------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
TYPE OF TRAINING REQUESTED:
<S> <C> <C>
/ / Course Series 200 / / Course Series 500 / / Course Series 800
Product Overview BSS Operations & Maintenance OMC-S Network Operations
(1 2 DAY) $500USD (3 DAYS) $1500USD (5 days) $2500USD
/ / Course Series 300 / / Course Series 600
OMC-R System Administration BSS Installation &
(2 DAYS) $1000USD Commissioning
(2 DAYS) $1000USD
/ / Course Series 400 / / Course Series 700
OMC-R Network Operations NSS Operations & Maintenance
(3 DAYS) $1500USD (3 DAYS) $1500USD
PRICES ARE PER STUDENT
- ---------- ----------------------------- -------- -------------------------------- -------- -------------------------
</TABLE>
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
REQUESTED TIMEFRAME OF TRAINING: How many students:
<S> <C> <C>
Course Series 200 ----------------------------------
------------------ ------------- BILLING
Course Series 300
------------------ ------------- / / P.O. number
-------------------
Course Series 400 / / Bill To:
------------------ ------------- ------------------
-----------------------------------
Course Series 500
------------------ -------------
Course Series 600
------------------ ------------- ----------------------------------
PREFERRED TRAINING LOCATION
Course Series 700
------------------ -------------
/ / U.K.
Course Series 800 / / Hong Kong
------------------ ------------- / / Customer Location
------------------
Course Series 900 -----------------------------------
------------------ -------------
- ---------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.21
<PAGE>
300 CONSTITUTION DRIVE
OFFICE LEASE
TYCO ELECTRONICS CORPORATION
Landlord
and
INTERWAVE COMMUNICATIONS, INC.,
Tenant
<PAGE>
300 CONSTITUTION DRIVE
OFFICE LEASE
BASIC LEASE INFORMATION
<TABLE>
<S> <C>
Date: November 24, 1999
Landlord: Tyco Electronics Corporation,
a Pennsylvania corporation
Tenant: interWave Communications, Inc.,
a Delaware corporation
Building: Building I
300 Constitution Drive
Menlo Park, California 94025
Premises: Portion of first floor and entire second floor
as shown on Exhibit A
Area of Premises: 55,969 square feet
Scheduled Commencement Date: December 15, 1999
Lease Term: Five (5) years, one and one-half (1 1/2)
months
Option to Extend: Option to extend for five (5) years
(subject to Landlord's rights under
Section 18.2)
Initial Monthly Base Rent: $ 169,026.38
Advance Rental Payment: $ 169,026.38 as Base Rent for March 2000
Tenant's Share See Sections 4.2 and 4.5
Base Tax Amount: $ 0.11 per square foot, per month
$ 6,175.19 total, per month
Base Insurance Amount: $ 0.01 per square foot, per month
$ 500.27 total, per month
1
<PAGE>
Utility Allowance: $ 0.17 per square foot, per month
$ 9,473.80 total, per month
Use: General office, engineering, engineering
labs, software and hardware development
and all other legally-permitted related
uses
Security, Deposit: $676,100 Letter of Credit
Guarantor: None
Tenant's Address prior to Occupancy 656 Bair Island Road
of Premises Redwood City, CA 94063
Tenant's Address for Notices interWave Communications, Inc.
300 Constitution Drive, Building I
Menlo Park, California 94025
Landlord's Address for Notices Attention: Property Manager
300 Constitution Drive, Building I
Menlo Park, California 94025
Landlord's Broker Cornish & Carey Commercial
Tenant's Broker Cornish & Carey Commercial
</TABLE>
The foregoing Basic Lease Information is hereby incorporated into and made a
part of this Lease. Each reference in this Lease to any of the terms set
forth above shall be deemed to include the respective information set forth
above opposite such term and shall also be construed to incorporate all of
the terms provided under the particular provision of this Lease pertaining to
such term and information. In the event of any conflict between any
provisions of the Basic Lease Information and provisions of this Lease, the
Lease shall prevail and control.
2
<PAGE>
300 CONSTITUTION DRIVE
OFFICE LEASE
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
ARTICLE 1 - PREMISES...............................................................................................1
SECTION 1.1. PREMISES...........................................................................1
SECTION 1.2. AREA OF PREMISES...................................................................1
SECTION 1.3. COMMON AREA........................................................................1
SECTION 1.4. CONDITION OF PREMISES..............................................................2
ARTICLE 2 - TERM AND POSSESSION ...................................................................................3
SECTION 2.1. TERM...............................................................................3
SECTION 2.2. IMPROVEMENTS.......................................................................4
ARTICLE 3 - RENT ..................................................................................................4
SECTION 3.1. BASE RENT..........................................................................4
SECTION 3.2. PAYMENT............................................................................4
SECTION 3.3. PARTIAL MONTHS.....................................................................4
ARTICLE 4 - TAX, INSURANCE ADJUSTMENT .............................................................................5
SECTION 4.1. EXCESS TAXES.......................................................................5
SECTION 4.2. TAXES..............................................................................5
SECTION 4.3. ADDITIONAL TAXES...................................................................6
SECTION 4.4. EXCESS INSURANCE COSTS.............................................................7
SECTION 4.5. INSURANCE COSTS....................................................................7
ARTICLE 5 - INTENTIONALLY OMITTED .................................................................................8
ARTICLE 6 - USE ...................................................................................................8
SECTION 6.1. GENERAL............................................................................8
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<CAPTION>
PAGE
<S> <C>
SECTION 6.2. NUISANCE OR WASTE...................................................................8
SECTION 6.3. COMPLIANCE WITH LAW.................................................................8
SECTION 6.4. HAZARDOUS MATERIALS.................................................................9
SECTION 6.5. EXISTING CONDITION.................................................................10
SECTION 6.6. RULES AND REGULATIONS..............................................................10
SECTION 6.7. COMMON AREA PROVISIONS.............................................................11
ARTICLE 7 - SERVICES AND UTILITIES................................................................................11
SECTION 7.1. GENERAL............................................................................11
SECTION 7.2. UTILITY SERVICES...................................................................13
SECTION 7.3. SUPPLEMENTARY SERVICES.............................................................13
SECTION 7.4. INTERRUPTION OF ACCESS, USE OR SERVICES............................................13
ARTICLE 8 - ALTERATIONS...........................................................................................14
SECTION 8.1. GENERAL............................................................................14
SECTION 8.2. NOTICES............................................................................16
SECTION 8.3. LABOR, OTHER RELATIONS.............................................................16
SECTION 8.4. CONSTRUCTION INDEMNITY.............................................................16
SECTION 8.5. LANDLORD ALTERATIONS...............................................................16
ARTICLE 9 - REPAIRS...............................................................................................17
SECTION 9.1. TENANT'S OBLIGATIONS...............................................................17
SECTION 9.2. LANDLORD'S OBLIGATIONS.............................................................17
SECTION 9.3. TENANT'S NEGLIGENCE................................................................17
ARTICLE 10 - ASSIGNMENT AND SUBLEASE .............................................................................17
ii
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<CAPTION>
PAGE
<S> <C>
SECTION 10.1. GENERAL............................................................................17
SECTION 10.2. NOTICE AND PROCEDURE...............................................................18
SECTION 10.3. LANDLORD'S CONSENT.................................................................19
SECTION 10.4. CONDITIONS.........................................................................20
SECTION 10.5. LIMITATION ON REMEDIES.............................................................21
SECTION 10.6. CONTINUING LIABILITY OF TENANT.....................................................21
SECTION 10.7. BANKRUPTCY.........................................................................21
ARTICLE II - DESTRUCTION OR DAMAGE ...............................................................................22
SECTION 11.1. GENERAL............................................................................22
SECTION 11.2. INSURED CASUALTY...................................................................23
SECTION 11.3. UNINSURED CASUALTY.................................................................23
SECTION 11.4. TENANT'S ELECTION..................................................................23
SECTION 11.5. END OF TERM........................................................................24
SECTION 11.6. ABATEMENT OF RENTALS...............................................................24
SECTION 11.7. LIABILITY FOR PERSONAL PROPERTY....................................................24
SECTION 11.8. WAIVER OF CERTAIN REMEDIES.........................................................25
ARTICLE 12 - EMINENT DOMAIN.......................................................................................25
SECTION 12.1. TAKING OF PREMISES.................................................................25
SECTION 12.2. TEMPORARY TAKING...................................................................25
SECTION 12.3. ABATEMENT OF RENT..................................................................25
SECTION 12.4. CONDEMNATION AWARD.................................................................25
ARTICLE 13 - INSURANCE............................................................................................26
iii
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<CAPTION>
PAGE
<S> <C>
SECTION 13.1. LIABILITY INSURANCE................................................................26
SECTION 13.2. TENANT'S PROPERTY INSURANCE........................................................26
SECTION 13.3. TENANT'S ADDITIONAL INSURANCE......................................................27
SECTION 13.4. INSURANCE CRITERIA.................................................................27
SECTION 13.5. EVIDENCE OF COVERAGE...............................................................27
SECTION 13.6. WAIVER OF SUBROGATION..............................................................27
ARTICLE 14 - WAIVER INDEMNITY.....................................................................................27
SECTION 14.1. WAIVER OF LIABILITY................................................................27
SECTION 14.2. TENANT'S INDEMNITY.................................................................28
ARTICLE 15 - DEFAULT..............................................................................................28
SECTION 15.1. EVENTS OF DEFAULT..................................................................28
SECTION 15.2. LANDLORD'S REMEDIES................................................................29
SECTION 15.3. LATE CHARGES; INTEREST.............................................................30
SECTION 15 4. LEASE CONTINUES UNTIL TERMINATION..................................................31
SECTION 15.5. RELETTING PREMISES.................................................................31
SECTION 15.6. CURE BY LANDLORD...................................................................31
SECTION 15.7. LANDLORD'S DEFAULT.................................................................31
SECTION 15.8. REMEDIES CUMULATIVE................................................................32
SECTION 15.9. SECURITY DEPOSIT...................................................................32
ARTICLE 16 - SUBORDINATION........................................................................................33
SECTION 16.1. SUBORDINATION OF LEASE.............................................................33
SECTION 16.2. SUBORDINATION OF DEED OF TRUST.....................................................34
iv
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<CAPTION>
PAGE
<S> <C>
SECTION 16.3. APPROVAL BY MORTGAGEES..............................................................34
ARTICLE 17 - ENTRY BY LANDLORD ....................................................................................34
ARTICLE 18 - OPTION TO EXTEND TERM ................................................................................35
SECTION 18.1. OPTION..............................................................................35
SECTION 18.2. LANDLORD'S USE.....................................................................35
SECTION 18.3. FAIR MARKET RENTAL.................................................................36
ARTICLE 19 - MISCELLANEOUS........................................................................................37
SECTION 19.1. HOLDING OVER.......................................................................37
SECTION 19.2. LANDLORD'S INTEREST................................................................38
SECTION 19.3. QUIET ENJOYMENT....................................................................38
SECTION 19.4. LANDLORD'S LIABILITY...............................................................38
SECTION 19.5. NO MERGER..........................................................................38
SECTION 19.6. SURRENDER OF PREMISES..............................................................38
SECTION 19.7. ESTOPPEL CERTIFICATE...............................................................39
SECTION 19.8. NO LIGHT, AIR OR VIEW EASEMENT.....................................................39
SECTION 19.9. NOTICES............................................................................39
SECTION 19.10. SUCCESSORS.........................................................................40
SECTION 19.11. ATTORNEYS' FEES....................................................................40
SECTION 19.12. WAIVER.............................................................................40
SECTION 19.13. CAPTIONS...........................................................................40
SECTION 19.14. TIME OF ESSENCE....................................................................40
SECTION 19.15. INTEREST RATE......................................................................40
v
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<CAPTION>
PAGE
<S> <C>
SECTION 19.16. GOVERNING LAW......................................................................40
SECTION 19.17. ENTIRE AGREEMENT...................................................................40
SECTION 19.18. INVALIDITY.........................................................................41
SECTION 19.19. AUTHORITY..........................................................................41
SECTION 19.20. NO OFFER...........................................................................41
SECTION 19.21. NO REPRESENTATIONS OR WARRANTIES...................................................41
SECTION 19.22. BROKERS............................................................................41
SECTION 19.23. AMENDMENTS.........................................................................42
SECTION 19.24. NAME...............................................................................42
SECTION 19.25. SIGNS, DIRECTORY...................................................................42
SECTION 19.26. PARKING............................................................................42
SECTION 19.27. BUILDING ACCESS....................................................................42
SECTION 19.28. LANDLORD...........................................................................42
SECTION 19.29. CONFERENCE ROOMS...................................................................43
SECTION 19.30. SECURITY, CUSTOMER SERVICE AREA....................................................43
SECTION 19.31. ANTENNA............................................................................44
SECTION 19.32. EXHIBITS...........................................................................45
</TABLE>
vi
<PAGE>
300 CONSTITUTION DRIVE
OFFICE LEASE
THIS OFFICE LEASE is made and entered into as of November 24,
1999, by and between TYCO ELECTRONICS CORPORATION, a Pennsylvania corporation
("Landlord"), and INTERWAVE COMMUNICATIONS, INC., a Delaware corporation
("Tenant").
ARTICLE 1 - PREMISES
Section 1.1 PREMISES. Landlord hereby leases to Tenant,
and Tenant hereby leases from Landlord, for the term and subject to the terms
and provisions contained in the Basic Lease Information and hereinafter set
forth, those certain premises shown on the floor plan attached hereto as EXHIBIT
A ("Premises"), which Premises are located on the first and second floors of the
office building referred to in the Basic Lease Information (such office building
is hereinafter referred to as the "Building"). The Building is located on that
certain real property commonly known as 300 Constitution Drive, Menlo Park,
California, and such real property, together with the Building, the other office
buildings owned by Landlord and located on such real property and all Common
Area (as defined below) and other improvements located thereon, are sometimes
hereinafter referred to as the "Project."
Section 1.2 AREA OF PREMISES. Landlord and Tenant agree
that the area of the Premises is the square footage specified therefor in the
Basic Lease Information, and, without limiting the foregoing, Tenant
acknowledges that the rentable area of the Premises includes an allocation of
the Common Area. Such square footage of the Premises shall be conclusive for all
purposes under this Lease. Landlord and Tenant further agree that, for all
purposes under this Agreement, Tenant's Share is the percentage therefor
specified in the Basic Lease Information.
Section 1.3 COMMON AREA.
(a) The "Common Area" shall mean all streets, driveways,
entrances, exits, sidewalks, ramps, corridors, halls, stairs, elevators,
elevator equipment, landscaped areas, parking areas, loading and unloading
areas, delivery areas, Building and Project office facilities, fire vestibules,
foyers, lobbies, electric, telephone and telecommunications closets and risers,
common restrooms, mechanical rooms, service rooms, janitor's closets, light
wells, pipes, ducts, flues, chutes, conduits, wires, columns and all other
areas, facilities or improvements located in the Building or Project and
provided by Landlord for the benefit and non-exclusive use of Landlord. Tenant,
the other tenants and occupants of the Building and Project and their respective
employees, agents and invitees. Notwithstanding the foregoing, the Common Area
shall not include any of the foregoing areas, facilities or improvements which
are provided for by Landlord for the exclusive use or benefit of Landlord's
employees, agents or invitees, or which are
1
<PAGE>
provided by Landlord the exclusive use or benefit of any other tenant or other
occupant of the Building or any other portion of the project.
(b) Tenant's use and occupancy of the Premises under this
Lease shall include the non-exclusive right to use the Common Area in common
with Landlord; Landlord's employees, agents or invitees; other tenants and
occupants of the Building and Project; and other parties entitled to use the
Common Area, subject to the provisions of this Lease and to the Project rules
and regulations hereinafter described. Tenant shall not use the Common Area for
the conduct of its business or for the storage, either permanent or temporary,
of any materials, supplies, equipment or refuse, and shall keep the Common Area
free and clear of any obstructions created or permitted by Tenant or resulting
from the conduct of Tenant's business on the Premises.
Section 1.4 CONDITION OF PREMISES.
(a) Tenant acknowledges and agrees that, as of the date
of this Lease, Tenant has conducted its own investigation of the Premises, the
physical condition thereof, including accessibility and location of utilities,
improvements and the presence or absence of Hazardous Materials (as defined
below), and any other matters relating to the Premises, the Building or the
Project which in Tenant's judgment might affect or influence Tenant's use of the
Premises or Tenant's willingness to enter into this Lease. Tenant recognizes
that Landlord would not lease the Premises except on an "as is" basis and
acknowledges that, except as otherwise expressly set forth in this Lease,
Landlord has made no representations or warranties of any kind in connection
with the improvements to, or physical conditions on, or bearing on the use of,
the Premises, the Building or the Project. Tenant shall rely solely on Tenant's
own inspection and examination of such items and not on any representations or
warranties of Landlord or its agents, employees or contractors, express or
implied. Landlord shall have the right to remove from the Premises the computer
and communications systems embodied by the software and hardware at the Premises
which link the Premises to other facilities of Landlord. Such removal shall
occur prior to December 15, 1999, in the portion of the Premises other than the
Landlord Retained Area (as defined below), and prior to February 1, 2000, in the
Landlord Retained Area.
(b) Tenant acknowledges and agrees that Tenant has
examined and inspected all matters with respect to real property taxes, personal
property taxes, operating expenses, costs of insurance, permitted uses, zoning,
private covenants, conditions and restrictions, and all other matters which, in
Tenant's judgment, might bear upon the value and suitability of the Premises for
Tenant's purposes or Tenant's willingness to enter into this Lease. Tenant has
and will rely solely on Tenant's own inspection and examination of such items.
(c) Notwithstanding the provisions of this Section
1.4. Landlord hereby expressly discloses to Tenant that full telephone service
(that is, installation of a main
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point of entry within Building I, with lines from such point of entry connected
directly to Pacific Bell) shall be available on or before January 1, 2000. If
full telephone service is not available until subsequent to January 1, 2000,
Tenant will continue to pay the reduced Monthly Base Rent set forth in Section
3.1 below, until the later of (i) fifteen (15) days after the date on which full
telephone service is available, or (ii) January 31, 2000.
ARTICLE 2 - TERM AND POSSESSION
Section 2.1 TERM.
(a) This Lease shall become effective upon execution by
Landlord and Tenant. The term of this Lease ("Term") shall commence on the date
calculated as provided in subparagraph (b) below ("Commencement Date"), and
shall continue for a period of five (5) years, one month thereafter, unless
earlier terminated in accordance with this Lease or unless extended as
hereinafter provided. If Landlord shall not deliver possession of the Premises
to Tenant in the manner provided under subparagraph (b) below on or before the
"Scheduled Commencement Date" specified in the Basic Lease Information for any
reason whatsoever. Landlord shall not be liable to Tenant by reason thereof and,
except as provided below, this Lease and the parties' obligations hereunder
shall not be rendered void or voidable thereby or otherwise affected in any
manner, except that Tenant's obligation to pay Monthly Base Rent (as defined
below) and other amounts payable by Tenant under this Lease shall not commence
until the Commencement Date. In addition, no delay by Landlord in the delivery
of possession of the Premises to Tenant shall extend the Term or any obligation
of Landlord hereunder. In the event that the Commencement Date has not occurred
prior to March 1, 2000, Tenant shall have the right to terminate this Lease by
delivering written notice to Landlord of such election to terminate on or before
ten (10) days thereafter, in which event any sums paid by Tenant to Landlord
shall be immediately returned to Tenant.
(b) The Commencement Date shall be the date upon which
Landlord delivers possession of the Premises, other than the Landlord Retained
Area, to Tenant. At such time as the Commencement Date has been established, at
Landlord's request, Landlord and Tenant shall execute a written acknowledgment
of the Commencement Date. For the purposes of this Lease, the term "Landlord
Retained Area" shall mean the portion of the first floor of the Premises
occupied by Landlord's payroll group and containing approximately 1,340 square
feet of rentable area, as shown on EXHIBIT A. Landlord shall deliver possession
of the Landlord Retained Area to Tenant on or before February 1, 2000. If
Landlord shall fail to deliver possession of the Landlord Retained Area to
Tenant on or before February 1, 2000, Tenant's obligation to pay to Landlord
Monthly Base Rent with respect to the Landlord Retained Area shall be abated
until such time as Landlord shall deliver possession of the Landlord Retained
Area to Tenant. If Landlord does not deliver possession of the Landlord Retained
Area to Tenant on or before March 1, 2000. Tenant's obligation to pay to
Landlord Monthly Base Rent with
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respect to the Landlord Retained Area shall be abated for each day of such delay
in delivery beyond March 1, 2000.
(c) On the date of Landlord's delivery of possession of
the Premises to Tenant pursuant to this Section, the portion of the Premises so
delivered shall be clean and the Building systems located therein shall be in
good operating condition. Tenant's occupancy of the Premises (whether before or
after the Scheduled Commencement Date) shall constitute Tenant's acceptance of
the Premises and acknowledgment that the Premises are in such condition and
otherwise in good order and satisfactory to Tenant.
Section 2.2 IMPROVEMENTS Without limiting any other
provisions of this Agreement, Tenant expressly acknowledges and agrees that
Landlord shall have no obligation whatsoever to construct any tenant
improvements or other alterations, additions or improvements in or to the
Premises or Building, or, apart from Landlord's obligations under Section 2.l(c)
above, otherwise to prepare the Premises or Building for Tenant's occupancy.
ARTICLE 3 - RENT
Section 3.1 BASE RENT. Tenant shall pay to Landlord
throughout the term of this Lease, in lawful money of the United States, Monthly
Base Rent in the following amounts:
<TABLE>
PERIOD OF TERM MONTHLY BASE RENT
-------------- -----------------
<S> <C>
12/15/1999 - 1/31/2000 $36,601.43
2/1/2000 - 2/29/2000 $165,877.38
3/1/2000 - 1/31/200l $169,026.00
2/1/2001 - 1/31/2002 $175,787.00
2/1/2002 - l/31/2003 $182,819.00
2/1/2003 - 1/31/2004 $190,132.00
2/1/2004 - 1/31/2005 $197,737.18
</TABLE>
Tenant shall pay to Landlord the Monthly Base Rent without
notice or demand in advance, beginning on the Commencement Date and on the first
day of each calendar month thereafter during the Term. Concurrently with the
execution of this Lease by Tenant, and as a condition to its effectiveness,
Tenant shall pay to Landlord the advance rental specified in the Basic Lease
Information.
Section 3.2 PAYMENT. All payments required to be made
by Tenant under this Lease shall be made without any setoff, deduction or
counterclaim whatsoever and shall be made payable to and delivered to Landlord
at the office of Landlord in the Building or such other place as Landlord may
designate.
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Section 3.3 PARTIAL MONTHS. If the Commencement Date is
a day other than the first day of a calendar month or if the Term expires or the
Lease is terminated on a day other than the last day of a calendar month, then
the Monthly Base Rent for the first and last fractional months of the Term shall
be prorated on the basis of a thirty (30) day month.
ARTICLE 4 - TAX, INSURANCE ADJUSTMENT
Section 4.1 EXCESS TAXES. Tenant shall pay to Landlord,
in addition to the Monthly Base Rent and for each calendar year of the Term, an
amount equal to the excess, if any, of Tenant's Share of Taxes (as defined
below) paid or incurred by Landlord during such calendar year, over the Base Tax
Amount (such excess is hereinafter referred to as the "Excess Taxes"). At or
after the Commencement Date, as to the then-current calendar year, and at or
after the commencement of any subsequent calendar year. Landlord shall have the
right to notify Tenant of the amount which Landlord reasonably estimates to be
the monthly or quarterly installments of the Excess Taxes for such calendar
year, and the amount thereof shall be payable by Tenant to Landlord together
with payments of Monthly Base Rent on a monthly or quarterly basis, as
applicable. Within one hundred twenty (120) days after the end of each calendar
year, or as soon thereafter as is practicable, Landlord shall give to Tenant a
written statement of the Excess Taxes for such calendar year ("Tax Statement").
If the Excess Taxes as shown on the Tax Statement are greater or less than the
total amounts actually paid by Tenant on a monthly or quarterly basis, as
applicable, during the year covered by such Tax Statement, then Tenant shall pay
in cash any sums owed Landlord within ten (10) business days thereafter, or, if
applicable. Tenant shall receive a credit against any the Excess Taxes next
accruing for any sums owed Tenant. If the Term of this Lease commences on a date
other than the first day of the calendar year or expires or is terminated on a
day other than the last day of a calendar year, the amount of Taxes with respect
to which Tenant shall be obligated to pay its share during the year in which the
Lease commences or expires or is terminated shall be prorated on the basis which
the number of days in the calendar year within the Term bears to three hundred
sixty (360). Following expiration of the calendar year in which the Term expires
or is terminated, Landlord shall give a final Tax Statement to Tenant for such
calendar year. If the Excess Taxes as shown on such final Tax Statement are
greater or less than the total amounts actually paid by Tenant as Excess Taxes
during the year covered by the final Tax Statement, then within ten (10)
business days thereafter the appropriate party shall pay to the other party any
sums owed.
Section 4.2 TAXES. For the purpose of this Lease, the
term "Taxes" shall mean and include all taxes, assessments and charges
(including costs and expenses of contesting the amount or validity thereof by
appropriate administrative or legal proceedings) levied upon or with respect to
the Building, the Project or any personal property of Landlord therein used in
connection with the management, operation,
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maintenance or repair of the Building or the Project (and not in connection
with Landlord's core business operations conducted within the Project), or
Landlord's interest in the Building, the Project or such personal property,
including all real property taxes and general and special assessments;
charges, fees, levies or assessments for transit, housing, police, fire or
other governmental services or purported benefits to the Building or the
Project; service payments in lieu of taxes; environmental surcharges; excise
taxes; gross receipts taxes; gross income taxes; rent taxes; sales and/or use
taxes; employee taxes; water and sewer taxes; any tax, fee or excise on the
act of entering into this Lease, on the use or occupancy of the Building, the
Project or any part thereof, or upon or measured by the rent payable under
any lease or in connection with the business of renting space in the Building
or the Project; and all other governmental impositions of any kind and nature
whatsoever, regardless of whether now customary or within the contemplation
of the parties hereto and regardless of whether resulting from increased rate
and/or valuation, or whether extraordinary or ordinary, general or special,
unforeseen or foreseen, or similar or dissimilar to any of the foregoing,
which may now or hereafter be levied or assessed against Landlord by the
United States of America, the State of California, the County of San Mateo,
the City of Menlo Park or any political subdivision, public corporation,
district or other political or public entity, and any other tax, fee or other
excise, however described, that may be levied or assessed as a substitute
for, or as an addition to (in whole or in part) any other such taxes. For the
purposes of this Lease, the term "Tenant's Share of Taxes" shall mean the
product of Tenant's Tax Share (as hereinafter defined), multiplied by the
amount of Taxes for the year in question. For the purposes of this Lease.
"Tenant's Tax Share" shall mean the percentage obtained by dividing the
rentable area of the Premises by the sum of the rentable area of the Building
and the rentable area of all other building improvements located on the
assessor's tax parcel in which the Building is located.
Section 4.3 ADDITIONAL TAXES. In addition to the Monthly Base
Rent and other amounts payable by Tenant hereunder, to the extent that Tenant
shall not have paid any such amounts directly to the appropriate parts therefor,
Tenant shall reimburse Landlord upon demand for any and all taxes, surcharges,
levies, assessments, fees and charges paid by Landlord, whether or not now
customary or within the contemplation of the parties hereto: (a) upon, measured
by or reasonably attributable to the cost or value of Tenant's equipment,
furniture, fixtures and other personal property located in the Premises, or the
cost or value of any leasehold improvements, regardless of whether title to such
improvements shall be in Tenant or Landlord; (b) upon or with respect to the
possession, leasing, operation, management, maintenance, alteration, repair, use
or occupancy by Tenant of the Premises or any portion thereof; or (c) upon this
Lease transaction or any document to which Tenant is a party creating or
transferring an interest or an estate in the Premises. In the event that it
shall not be lawful for Tenant to reimburse Landlord for the additional taxes
payable hereunder, but it shall be lawful to increase the monthly rental payable
under this Lease in order to take into account Landlord's payment of such
additional taxes, the monthly rental payable to Landlord
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shall be revised to net to Landlord the same net rental without reimbursement of
such additional taxes as would have been received by Landlord with reimbursement
of such additional taxes. Tenant shall have no obligation to reimburse Landlord
for any Taxes upon the net income of Landlord.
Section 4.4 EXCESS INSURANCE COSTS. Tenant shall pay to
Landlord, in addition to the Monthly Base Rent and for each calendar year of the
Term, an amount equal to the excess, if any, of Tenant's Share of Insurance
Costs (as defined below) paid or incurred by Landlord during such calendar year,
over the Base Insurance Amount (such excess is hereinafter referred to as the
"Excess Insurance Costs"). At or after the Commencement Date as to the
then-current calendar year, and at or after the commencement of any subsequent
calendar year, Landlord shall have the right to notify Tenant of the amount
which Landlord reasonably estimates to be the monthly or quarterly installments
of Excess Insurance Costs for such calendar year, and the amount thereof shall
be payable by Tenant to Landlord together with payments of Monthly Base Rent on
a monthly or quarterly basis, as applicable. Within one hundred twenty (120)
days after the end of each calendar year, or as soon thereafter as is
practicable. Landlord shall give to Tenant a written statement of the Excess
Insurance Costs for such calendar year ("Insurance Statement"). If the Excess
Insurance Costs as shown on the Insurance Statement are greater or less than the
total amounts actually paid by Tenant as Excess Insurance Costs on a monthly or
quarterly basis, as applicable, during the year covered by such Insurance
Statement, then Tenant shall pay in cash any sums owed Landlord within ten (10)
business days thereafter, or, if applicable, Tenant shall receive a credit
against any the Excess Insurance Costs next accruing for any sums owed Tenant.
If the Term of this Lease commences on a date other than the first day of the
calendar year or expires or is terminated on a date other than the last day of
the calendar year, the amount of Insurance Costs with respect to which Tenant
shall be obligated to pay its share during the year in which the Lease commences
or expires or is terminated shall be prorated on the basis for which the number
of days in the calendar year within the Term bears to three hundred sixty (360).
Following the expiration of the calendar year in which the Term expires or is
terminated. Landlord shall give a final Insurance Statement to Tenant for such
calendar year. If the Excess Insurance Costs as shown on such final Insurance
Statement are greater or less than the total amounts actually paid by Tenant as
Excess Insurance Costs during the year covered by the final Insurance Statement,
then within ten (10) business days thereafter the appropriate party shall pay to
the other party any sums owed.
Section 4.5 INSURANCE COSTS. For the purposes of this
Lease, the term "Insurance Costs" shall mean and include all costs and expenses,
including premium charges, paid or incurred by Landlord for insurance maintained
by Landlord with respect to the Premises, the Building and/or the Project,
including, without limitation, all risk, commercial general liability,
automobile liability, property damage, worker's compensation, employer's
liability, earthquake, flood and such other insurance in such
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<PAGE>
forms of coverage and on such amounts as Landlord, in its sole discretion, shall
elect to maintain with respect to the Building or Project. In the case of
blanket insurance policies covering the Project and other property of Landlord,
Insurance Costs shall include the costs and expenses thereof allocated by
Landlord to the Project. For purposes of this Lease, the term "Tenant's Share of
Insurance Costs" shall mean the product of Tenant's Insurance Share (as
hereinafter defined) multiplied by the amount of the Insurance Costs for the
year in question. For the purposes of this Lease "Tenant's Insurance Share"
shall mean the percentage obtained by dividing the rentable area of the Premises
by the sum of the rentable area of the Building and the rentable area of all
other building improvements (including those occupied by Landlord and its
affiliates) within the Project.
ARTICLE 5 -INTENTIONALLY OMITTED
ARTICLE 6 - USE
Section 6.1 GENERAL. Tenant shall use the Premises only
for the purposes specified in the Basic Lease Information and for no other
purposes. Tenant, at its own cost and expense, shall obtain any and all
licenses, permits, authorizations and approvals of governmental authorities
required in order to enable Tenant lawfully to conduct in the Premises any such
use. Nothing contained in this Lease shall grant to Tenant the exclusive right
to conduct within the Building, the Project or the Premises the business to be
conducted by Tenant in the Premises, or otherwise limit the right of Landlord to
lease space within the Building or the Project to such tenants and for such
purposes as Landlord, in its sole discretion, shall deem appropriate.
Section 6.2 NUISANCE OR WASTE. Tenant shall not do or
permit to be done in or about the Premises anything which will in any way
obstruct or interfere with the rights of other tenants or occupants of the
Building or the Project or injure or annoy them or use or allow the Premises to
be used for any improper purpose, and Tenant shall not cause, maintain or permit
any nuisance in, on or about the Premises. Tenant shall not commit or suffer the
commission of any waste in, on or about the Premises. Tenant shall not use or
operate any equipment, machinery or apparatus within the Premises which will (a)
injure, vibrate or shake the Premises, the Building or the Project, (b) overload
existing electrical systems or other utilities or equipment servicing the
Premises, the Building or the Project, or (c) impair the efficient operation of
the sprinkler system (if any) or the HVAC equipment (if any) within or servicing
the Premises, the Building or the Project. All noises or odors generated by
Tenant's use of the Premises shall be muffled or contained in such manner such
that they do not interfere with the use or occupancy of other tenants or
occupants of the Building or the Project.
Section 6.3 COMPLIANCE WITH LAW. Tenant shall not use
the Premises or permit anything to be done in, on or about the Premises which
will in any way conflict (a) with any statute, ordinance, rule or regulation of
governmental authorities now in force or which may hereafter be enacted or
promulgated, or (b) any provisions of any
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private covenants, conditions, restrictions, equitable servitudes or rules or
regulations which may now or hereafter affect the Premises, the Building, the
Project or any portion thereof (collectively, "CC&Rs") if any. Tenant shall not
do or permit anything to be done in or about the Premises, or bring or keep
anything therein, which will in any way increase the rate of fire insurance upon
the Project, the Building, the Premises or any of their contents. Tenant, at its
sole cost and expense, shall promptly comply with (i) all statutes, ordinances,
rules and regulations of governmental authorities applicable to the Premises or
Tenant's use or occupancy thereof and now in force or which may hereafter be in
force regardless of the nature or extent thereof, (ii) all CC&Rs, if any, and
(iii) the requirements of any board of fire underwriters or other similar body
now or hereafter constituted relating to or affecting the condition, use, or
occupancy of the Premises. Notwithstanding the foregoing, in order to comply
with any such statutes, ordinances, roles and regulations of governmental
authorities applicable to the Premises or Tenant's use or occupancy thereof,
Tenant shall not be obligated to make any alteration, addition, improvement or
repair to the Premises, unless the obligation to make such alteration, addition,
improvement or repair arises by reason of Tenant's particular use of the
Premises, or results from any other alteration, addition, improvement or repair
made by Tenant to the Premises. The judgment of any court of competent
jurisdiction or the admission of Tenant in an action against Tenant, whether
Landlord be a party thereto or not, that Tenant has violated any such statute,
ordinance, rule or regulation shall be conclusive of such violation as between
Landlord and Tenant.
Section 6.4 HAZARDOUS MATERIALS.
(a) Without limiting the generality of the provisions of
Section 6.3, Tenant, at its sole cost and expense, shall comply with all
statutes, ordinances, rules and regulations of governmental authorities relating
to the storage, use, transportation, release and/or disposal on or about the
Premises or the Project by Tenant, its employees, agents, contractors and
invitees, of radioactive materials, hazardous waste, toxic or contaminated
substances or similar materials, including, without limitation, any substances
which are "hazardous substances" "hazardous waste" "hazardous materials" or
"toxic substances" under applicable federal, state and local statutes,
ordinances, rules or regulations (collectively, "Hazardous Materials"). Tenant
shall not store, use, transport, release or dispose of any Hazardous Materials
in, on, from or about the Premises without the prior written consent of
Landlord. Notwithstanding the foregoing, Landlord's prior written consent shall
not be required for Tenant's use on the Premises of substances and materials
typically used in office environments, such as office and cleaning supplies in
customary and reasonable amounts and used in strict compliance with all
statutes, ordinance, rules and regulations of governmental authorities relating
to Hazardous Materials. Tenant shall be solely responsible for, and shall
indemnify, defend and hold Landlord and its officers, directors, shareholders,
partners, members, agents, employees, contractors, invitees, representatives,
successors and assigns harmless from and against, any and all losses, costs,
claims, damages, liabilities and causes of action (including
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attorneys' fees and consultants' fees and costs, and the costs of any
investigation, monitoring and remediation) arising out of or in connection with
the storage, use, transportation, release or disposal of Hazardous Materials by
Tenant, its employees, agents, contractors and invitees, including any claims
for the clean-up or remediation of any such Hazardous Materials. Tenant shall
provide to Landlord written notice of any communication received by Tenant from
any governmental authority or other party alleging the existence of Hazardous
Materials in, on, under or about the Premises, the Building or the Project, or
any alleged violation of environmental laws with respect to the Premises, the
Building or the Project. Without limiting any other provision of this Lease,
Tenant shall provide Landlord with access to the Premises during all reasonable
times in order to enable Landlord to conduct any inspection, monitoring,
remediation, removal or repair related to the presence or alleged presence of
Hazardous Materials in, on, under or about the Premises, the Building or the
Project. Any such inspection, monitoring, remediation, removal or repair on
Premises shall be conducted by Landlord in a manner calculated to minimize
interference with Tenant's operations to the extent reasonably possible.
(b) Landlord shall indemnify, defend and hold Tenant
harmless from and against any and all losses, costs, claims, damages,
liabilities and causes of action (including attorneys' fees and costs) arising
out of or in connection with any Hazardous Materials which first came to be
located in, on or under the Project prior to the date of this Lease. Landlord
hereby discloses to Tenant that certain asbestos-containing materials are
located in the Building as described in that certain memorandum from Kristin
Stiles dated July 15, 1999, a copy of which has previously been delivered to
Tenant.
(c) The rights of Landlord under this Section 6.4 or
otherwise contained in this Lease shall be in addition to any other rights and
remedies of Landlord against Tenant under any other document or instrument now
or hereafter executed by Tenant, or at law or in equity (including any right of
reimbursement or contribution pursuant to the Comprehensive Environmental
Response. Compensation and Liability Act of 1980, 42 U.S.C. section 9601 ET
SEQ., as heretofore or hereafter amended from time to time).
Section 6.5 EXISTING CONDITION. Tenant shall accept the
Premises subject to all applicable statutes, ordinances, rules and regulations
of governmental authorities governing and regulating the use or occupancy of the
Premises, including, without limitation, all applicable zoning, planning,
environmental and land use statutes, ordinances, rules and regulations. Tenant
acknowledges that neither Landlord nor Landlord's employees, agents or
contractors have made any representation or warranty as to the suitability of
the Premises for the conduct of Tenant's business or the consistency of Tenant's
proposed use of the Premises with any applicable zoning, planning, environmental
or land use statutes, ordinances, rules or regulations.
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Section 6.6 RULES AND REGULATIONS. Tenant shall observe
and comply with all Project rules and regulations that Landlord shall from time
to time reasonably and uniformly promulgate. Landlord reserves the right from
time to time to promulgate reasonably and uniformly additional rules and
regulations for the Project or Building, and to make additions and modifications
to such rules and regulations, and such additional rules and regulations and/or
additions and modifications to such rules and regulations shall be binding upon
Tenant upon delivery of a copy thereof to Tenant. Landlord shall not be
responsible to Tenant for the non-performance of any rules and regulations by
any other tenants or occupants of the Building or the Project.
Section 6.7 COMMON AREA PROVISIONS. Landlord shall have
the right, from time to time, temporarily to close portions of the Common Area
in order to prevent a dedication thereof to the public or the perfection of any
prescriptive rights therein or to perform repair or maintenance on such portion
of the Common Area; and to change the size, shape, location and extent of the
areas, facilities and improvements included in the Common Area, including
changes in the location of driveways, entrances, exits, elevators, stairs,
corridors, common restrooms and other portions of the Common Area. Landlord's
exercise of such rights shall not subject Landlord to any liability therefor nor
shall Tenant be entitled to any compensation or any diminution or abatement of
rent, provided that Landlord exercises such rights in such manner as to minimize
any interference with Tenant's use and enjoyment of the Premises to the extent
reasonably possible. In no event shall Landlord's exercise of such rights be
deemed to be a constructive or actual eviction of Tenant, or a breach of
Landlord's covenant of quiet enjoyment.
ARTICLE 7 - SERVICES AND UTILITIES
Section 7.1 GENERAL. Landlord shall:
(a) Operate or cause the operation of the HVAC system
serving the Premises between the hours of 7:00 a.m. and 7:00 p.m., Monday
through Friday, and 9:00 a.m. and 1:00 p.m., Saturday, public holidays
excepted, at such temperatures and in such amounts as Landlord determines are
reasonably required for the comfortable occupancy of the Premises, or as may be
permitted or controlled by applicable statutes, ordinances, rules and
regulations of governmental authorities. Tenant agrees to cooperate fully with
Landlord at all times and to abide by all regulations and requirements which
Landlord may prescribe for the proper function and protection of the HVAC
system. Landlord shall not be responsible for the failure of the HVAC system to
perform its function due to Tenant's failure to keep all window coverings in the
Premises closed whenever the HVAC system is in operation, Tenant's arrangement
of partitioning in the Premises, any use of any heat-generating machinery or
equipment in the Premises, any occupancy of the Premises by an excessive number
of persons, or Tenant's failure to keep all HVAC vents within the Premises free
of obstruction;
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(b) Make customary arrangements with public utilities
and/or governmental agencies to furnish electric current to the Premises in
amounts sufficient for normal lighting by overhead fluorescent fixtures and for
normal use of typewriters and other office business machines of similar low
electrical consumption. Landlord shall have no obligation to install dedicated
circuits or other special circuitry or wiring. Tenant shall advise Landlord
prior to execution of this Lease and thereafter within five (5) days after
written request therefor from Landlord of the nature and quantity of all lights,
equipment and machines using electricity in the Premises and shall permit
Landlord and its agents to make periodic inspections of all facilities using
electricity located within the Premises. If Landlord reasonably determines that
Tenant is using excessive electricity, Landlord shall have the right to install
an electric current meter in or with respect to the Premises in order to measure
the amount of electricity consumed on the Premises. The cost of such meter, and
any conduits, wiring, panels and other equipment required in connection with
such meter, and the installation, maintenance and repair thereof, shall be paid
for by Tenant, and Tenant shall pay to Landlord promptly upon demand all such
costs, as well as the cost of any excessive electricity consumed by Tenant;
(c) Provide access to warm and cold water in the
restrooms on the floor or floors on which the Premises are located for drinking
and lavatory purposes only if Tenant requires, uses or consumes water for any
purposes in addition to ordinary drinking and lavatory purposes. Landlord may
install a separate water meter for the Premises in order to measure the amount
of water consumed in the Premises. Tenant shall bear the cost and expense of
installation, repair and maintenance of such meter. Tenant shall pay for water
consumed, as shown on such meter, as and when bills are rendered, and if Tenant
shall fail to pay such charges. Landlord may pay such charges on Tenant's behalf
and recover such amounts from Tenant, together with interest thereon at the
Interest Rate (as defined below);
(d) Make customary arrangements with public utilities
and/or governmental agencies to furnish to the Premises natural gas and sewer
service in amounts sufficient for the ordinary use of the Premises for the
purposes permitted under this Lease;
(e) Provide janitorial service to the individual offices
on the Premises three (3) days per week, and to the bathrooms, conference areas
and other common areas on the Premises five (5) days per week, such service to
be comparable to the janitorial service provided by Landlord to its own office
premises in the Project as of the date of this Lease;
(f) Operate, repair, maintain, clean and light the Common
Area. Notwithstanding the foregoing, Tenant acknowledges and agrees that
Landlord shall not be obligated to provide any security services with respect to
the Premises, the Building or the Project, and Tenant shall make all such
security arrangements as Tenant shall deem
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necessary or appropriate with respect to Tenant's use or occupancy of the
Premises; all such security arrangements shall be subject to Landlord's prior
written approval. In addition, Landlord shall not be liable to Tenant for losses
due to theft or burglary, or for any other damage done, by unauthorized persons
in the Building or the Project; and
(g) Provide access to the Premises on a twenty-four (24)
hour per day, seven (7) day per week basis, subject to such security procedures
for the Building and Project as are presently in effect and as Landlord shall
establish from time to time; such security procedures may include, without
limitation, requiring Tenant, its employees, agents, customers and invitees to
identify themselves to Landlord's security personnel or otherwise satisfy the
reasonable requirements of such security personnel, and/or sign a pre-approved
sign-in sheet after normal business hours for the Building or Project and on
weekends and public holidays.
Section 7.2 UTILITY SERVICES.
(a) Tenant shall pay to Landlord, in addition to the
Monthly Base Rent, any amount by which the Utility Charges (as defined below)
exceed the Utility Allowance (such excess is hereinafter referred to as the
"Excess Utility Charges"). Landlord shall calculate the amount of Excess
Utility Charges payable by Tenant on a quarterly basis throughout the Term, and
Tenant shall pay such Excess Utility Charges to Landlord on the date for payment
of the next installment of Monthly Base Rent. For purposes of this Lease, the
term "Utility Charges" shall mean the charges to Landlord for electrical,
natural gas, water and sewer service furnished to or consumed on the Premises
during the Term.
(b) Tenant shall pay, prior to delinquency, directly to
the appropriate party therefor, the costs of and charges for utilities other
than those specified in subparagraph (a) above and for other services furnished
to or consumed in or about the Premises during the Term. If any such utilities
or services are not separately metered to Tenant. Tenant shall pay a reasonable
proportion, to be determined by Landlord, of all charges jointly metered with
other premises in the Building or Project.
Section 7.3 SUPPLEMENTARY SERVICES. Tenant shall pay
Landlord upon demand, at the charges established by Landlord from time to time
which reflect Landlord's cost of providing such services, for all supplementary
services provided by Landlord to Tenant at Tenant's request, which services are
in addition to those which Landlord is obligated to provide under this Lease,
together with an administrative fee payable to Landlord in an amount equal to
five percent (5%) of such charges. Such supplementary services shall include,
without limitation, providing HVAC service, janitorial service and other
services during hours other than ordinary business hours and/or providing HVAC
service and utility services in amounts reasonably considered by Landlord to be
in excess of the normal and customary usage thereof for the use of the Premises
authorized by this Lease.
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Section 7.4 INTERRUPTION OF ACCESS, USE OR SERVICES.
Landlord shall not be liable for any failure to provide access to the Premises,
to assure the beneficial use of the Premises or to furnish any services or
utilities to the Premises when such failure is caused by any act of God or the
elements; shortage or unavailability of necessary materials, supplies or labor;
shortage of or interruption in transportation facilities; riots; civil
disturbances; insurrection; war; court order; public enemy; accidents; breakage;
strikes; lockouts; other labor disputes; the making of repairs, alterations or
improvements to the Premises, the Building or the Project; the inability to
obtain an adequate supply of fuel, gas, steam, water, electricity, labor or
other supplies; Y2K problems; or by any other condition not entirely within
Landlord's reasonable control, and Tenant shall not be entitled to any damages
resulting from such failure or to any diminution or abatement in any rent or
other amounts payable by Tenant hereunder. Landlord shall take commercially
reasonable action to minimize the interruptions so caused and the adverse impact
accruing therefrom to the extent reasonably possible. In no event shall such
failure be construed as a constructive or other eviction of Tenant. If any
governmental authority promulgates or revises any statute, ordinance or
building, fire or other code, or imposes mandatory controls or guidelines on
Landlord or the Building, the Project or any part thereof, relating to the use
or conservation of energy, water, gas, steam, light or electricity or the
provision of any other utility or service provided under this Lease, or if
Landlord is required to make alterations to the Building or the Project in order
to comply with such mandatory controls or guidelines. Landlord may, in its sole
discretion, comply with such mandatory controls or guidelines, or make such
alterations to the Building and/or the Project. If, at any time, owners of a
significant number of the buildings in the Menlo Park/Palo Alto, California area
comparable to the Building have elected to comply voluntarily with any request
or guideline of any appropriate governmental authority, including, without
limitation, the making of alterations to such buildings. Landlord may also
comply with such request or guideline. Neither such compliance (as set forth
in either of the previous two (2) sentences) nor the making of such
alterations shall in any event entitle Tenant to any damages, or any
diminution, or abatement in rent or other amounts payable by Tenant under
this Lease or constitute or be construed as a constructive or other eviction
of Tenant. Tenant shall comply with all mandatory rules, regulations and
requirements promulgated by the applicable governmental authorities or
utility companies concerning the use of utility services, including any
rationing, limitation or other control on the quantity of utilities consumed.
ARTICLE 8 - ALTERATIONS
Section 8.l GENERAL.
(a) Tenant shall neither make nor cause or allow to be
made any alterations, additions or improvements (collectively, "Alterations")
in, on or to any portion of the Premises, the Building or the Project, or any
part thereof without the prior written consent of Landlord, which consent shall
not be unreasonably withheld; provided,
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however, that Landlord shall have the right to withhold its consent in its sole
discretion with respect to any Alterations affecting the exterior of the
Building, the structural portions of the Building or the Building systems. In
the event that Tenant shall desire to make any Alterations. Tenant shall submit
to Landlord such information as Landlord may reasonably require prior to the
commencement of construction or installation of such Alterations, including,
without limitation, permits, licenses and bonds and evidence of sufficient
contractor's insurance coverage. Landlord shall use reasonable efforts to
notify Tenant of Landlord's approval or disapproval within ten (10) business
days following Tenant's submission of all such information to Landlord. If
Landlord consents to the making of any Alterations. Tenant shall make such
Alterations at Tenant's sole cost and expense, and any contractor selected by
Tenant to make such Alterations must be licensed by the State of California and
must first be reasonably approved in writing by Landlord. If Landlord consents
to the making of any Alterations, in order to compensate Landlord for the cost
of review and approval of the plans and specifications for the Alterations and
for additional administrative costs incurred in monitoring the construction and
installation of the Alterations. Tenant shall pay to Landlord upon demand an
administrative fee in an amount equal to fifteen percent (15%) of the cost of
such Alterations (exclusive of the cost of floor coverings and paint).
Subsequent to obtaining Landlord's consent and prior to commencement of
construction or installation of the Alterations. Tenant shall deliver to
Landlord copies of the building permit and executed construction contract
covering the Alterations. Tenant shall provide, at its sole cost and expense,
such performance and/or payment bonds as Landlord shall require with respect to
the Alterations costing in excess of $250,000. Tenant shall also require its
contractor to maintain insurance in amounts and in such form as Landlord shall
reasonably require. Any Alterations undertaken by Tenant in connection with the
Premises shall be completed in accordance with the plans and specifications
approved by Landlord, shall be carried out in a good, workmanlike and prompt
manner, shall comply with all applicable statutes, ordinances, rules and
regulations of governmental authorities having jurisdiction thereof, and shall
be subject to supervision by Landlord or its agents or contractors.
(b) Tenant shall not use any portion of the Common Area
or any other portion of the Building or the Project other than the Premises in
connection with the making of any Alterations without Landlord's prior written
consent. If any Alterations that Tenant shall construct or install shall result
in Tenant or Landlord being required to make any alterations, additions or
improvements to the Premises, or in Landlord being required to make any
alterations, additions or improvements to other portions of the Building or to
the Project, in any case in order to comply with my applicable statutes,
ordinances, rules or regulations of governmental authorities, including, without
limitation, the Americans with Disabilities Act, or any regulations promulgated
thereunder, or any similar state or local statutes, ordinances, rules and
regulations, then Tenant, at its sole cost and expense, shall be obligated to
make all such alterations, additions or improvements, or, at Landlord's option.
Tenant shall reimburse Landlord upon demand for all costs and expenses incurred
by Landlord in making such alterations,
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additions or improvements. Any Alterations shall become the property of Landlord
and shall remain on and be surrendered with the Premises upon the expiration or
earlier termination of this Lease; provided, however, that Tenant shall, if
required by Landlord at the time consent to such Alteration was given by
Landlord (or upon Landlord's demand if Tenant shall not have requested
Landlord's consent to such Alteration), at Tenant's sole cost and expense,
remove all or any portion of any Alterations which Landlord shall have
designated for removal at the time of expiration or earlier termination of the
Lease. Following any such removal of any of the Alterations, Tenant, at its sole
cost and expense, shall repair and restore the Premises to their original
condition.
Section 8.2 NOTICES. Tenant shall give Landlord at least
fifteen (15) days prior written notice of commencement of any work of
construction, alteration, addition, improvement, maintenance, repair or
replacement in the Premises in order to enable Landlord to post and/or record
such notices as Landlord deems necessary to protect the Premises, the Building,
the Project or Landlord from mechanics' liens, materialmen's liens or any other
liens. Tenant shall keep the Premises, the Common Area, the Building and the
Project free from any mechanics' liens, materialmen's liens or other liens
arising out of any labor or material furnished to Tenant or claimed to have been
furnished to Tenant or to Tenant's agents or contractors in connection with work
of any character performed or claimed to have been performed on the Premises by
or at the direction of Tenant, and promptly upon completion of any construction.
Tenant shall furnish to Landlord copies of unconditional lien waivers from all
contractors, subcontractors and suppliers involved in such construction.
Section 8.3 LABOR, OTHER RELATIONS. In the event that
Landlord shall determine that any work of construction, alteration, addition,
improvement, maintenance, repair or replacement in the Premises by Tenant shall
interfere with the labor relations in existence in the Building or the Project,
all such work shall be halted immediately by Tenant until such time as
construction can proceed without any such interference. Tenant shall cause any
work of construction, alteration, addition, improvement, maintenance, repair or
replacement by Tenant in the Premises to be conducted in such manner and at such
times so that any such work shall not disrupt or interfere with the use or
occupancy of other tenants or occupants of the Building or the Project.
Section 8.4 CONSTRUCTION INDEMNITY. Tenant shall
indemnify, defend and hold Landlord harmless from and against any and all
losses, costs, claims, damages, liabilities or causes of action (including
attorneys' fees) arising out of or in any way connected with Tenant's
performance of any work of construction, alteration, addition, improvement,
maintenance, repair or replacement in the Premises, or claims for work or labor
performed, or materials or supplies furnished, to or at the request of Tenant or
in connection with performance of any work done for the account of Tenant in the
Premises, the Common Area, the Building or the Project, whether or not Tenant
obtained
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Landlord's permission to have such work done, labor performed, or materials or
supplies furnished.
Section 8.5 LANDLORD ALTERATIONS. Landlord shall have
the right to make changes or alterations to any portion of the Common Area, the
Building or the Project (which may include, without limitation, repair or
replacement of the Building's exterior facade, exterior window glass, elevators,
electrical systems. HVAC system, plumbing system, hallways, common restrooms or
lobbies but excluding the interior of the Premises, without Tenant's prior
written consent, which shall not be unreasonably withheld). Landlord shall not
be subject to any liability, and Tenant shall not be entitled to any
compensation or any diminution or abatement of rent, as a result of any noise,
dust, vibration or other disturbance to Tenant's use or occupancy of the
Premises arising out of the making of such changes or alterations. In no event
shall such changes or alterations be deemed to be a constructive or actual
eviction of Tenant, or a breach of Landlord's covenant of quiet enjoyment.
Landlord shall use reasonable efforts (which shall not include any obligation to
employ labor at overtime rates) to minimize disruption of Tenant's business
during the making of any such changes or alterations.
ARTICLE 9 - REPAIRS
Section 9.1 TENANT'S OBLIGATIONS. Subject to Section 9.2
below, Tenant, at Tenant's sole cost and expense, shall keep the Premises and
every part thereof in a clean and sanitary condition, and in good order,
condition and repair, ordinary wear and tear excepted. Except as expressly
provided herein, Landlord shall have no obligation whatsoever to alter, improve,
repair, maintain, remodel, decorate or paint the Premises or any part thereof.
Section 9.2 LANDLORD'S OBLIGATIONS. Except as otherwise
provided in Section 9.3 below, Landlord shall repair and maintain in good
condition and repair the following: (a) the structural elements of the Building
(including the foundation, floor slab, load-bearing and exterior walls, and
structural portions of the roof); (b) the Common area; and (c) all electrical,
plumbing, HVAC, sewage and other utility lines, equipment and systems installed
or furnished by Landlord, and located in or serving the Premises. Landlord shall
not be liable for any failure to make any such repairs or to perform any
maintenance unless such failure shall persist for an unreasonable time after
written notice of the necessity for such repairs or maintenance is given by
Tenant to Landlord. There shall be no diminution in or abatement of rent or
other amounts payable by Tenant under this Lease and no liability of Landlord by
reason of any injury to or interference with Tenant's business arising from
Landlord's performance of its repair and maintenance obligations under this
Lease. Tenant hereby waives any right to make repairs at Landlord's expense
under the provisions of Sections 1932, 194l and 1942 of the California Civil
Code or any other, similar statute, ordinance, rule or regulation now or
hereafter in effect.
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Section 10.3 LANDLORD'S CONSENT. Landlord shall be
entitled to consider any reasonable factor in determining whether or not to
consent to a proposed assignment or sublease. Without limiting any other
circumstances in which it may reasonable for Landlord to withhold its consent to
a proposed assignment or sublease, Tenant acknowledges and agrees that it shall
be reasonable for Landlord to withhold its consent to any proposed assignment or
sublease if any of the following conditions shall not be satisfied:
(a) The financial condition of the proposed assignee or
sublessee shall be equal to or greater than Tenant's financial condition as of
the date hereof and shall satisfy Landlord's then-current credit standards for
tenants of the Building or Project, and the proposed assignee or sublessee shall
otherwise have the financial capacity to perform all obligations under this
Lease to be performed by Tenant;
(b) The proposed use of the Premises by the proposed
assignee or sublessee shall (i) comply with the provisions of Article 6 hereof,
(ii) be consistent with the general character of businesses carried on by
tenants of a first-class office building, (iii) not increase the likelihood of
damage or destruction to the Premises, the Building, or the Project, (iv) not
increase the density or occupancy of the Premises, (v) not be likely to cause an
increase in the insurance premiums for insurance policies carried by Landlord
with respect to the Building or Project, or (vi) not otherwise adversely impact
the Premises, the Building, the Project or Landlord's interest therein; or
(c) Any mortgagee or beneficiary under a deed of trust
whose consent to the assignment or sublease is required shall consent thereto.
Section 10.4 CONDITIONS. If Landlord consents to such
assignment or sublease in writing, Tenant shall be entitled to assign or
sublease the Subject Space to the proposed assignee or sublessee subject to the
following conditions:
(a) As of the Transfer Date, Landlord shall not have
the right to terminate this Lease because Tenant is in default under this Lease;
(b) The assignment or sublease shall be on the same
terms and conditions set forth in the Transfer Notice given to Landlord;
(c) No assignment or sublease shall be valid and no
assignee or sublessee shall take possession of the Premises or any portion
thereof until an executed counterpart of the assignment or sublease has been
delivered to Landlord;
(d) No sublessee shall have a right further to sublease;
(e) Any proposed sublease would not result in more than
two subleases of portions of the Premises being in effect at any one time during
the Term;
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(f) Any assignee shall have assumed in writing the
obligations of Tenant under this Lease;
(g) Any subtenant shall have agreed in writing to comply
with all terms and provisions of this Lease applicable to the Subject Space
except rent which shall be in the amount provided for in the sublease; and
(h) Fifty percent (50%) of any sums or other economic
consideration received by Tenant as a result of such assignment or subletting
(less reasonable, BONA FIDE finders' fees or leasing commissions payable to a
third party in connection with such assignment or subletting, and less
reasonable attorneys' fees and costs paid in connection with such assignment or
sublease) whether denominated rent or otherwise, which exceed, in the aggregate,
the Monthly Base Rent and additional rent which Tenant is obligated to pay
Landlord under this Lease (prorated as to any sublease to reflect obligations
allocable to that portion of the Premises subject to such sublease) shall be
payable to Landlord as additional rent under this Lease, without affecting or
reducing any other obligation of Tenant hereunder. At Landlord's request, Tenant
shall deliver to Landlord such evidence of the sums or other economic
consideration received by Tenant as a result of assignment or sublease, and the
amounts deducted therefrom for proposes of calculating Landlord's share of such
sums or other economic consideration, as Landlord shall require from time to
time.
Section 10.5. LIMITATION ON REMEDIES. Tenant shall have no
right to, and Tenant hereby waives any right to assert a claim for, money
damages based upon any claim or assertion by Tenant that Landlord has
unreasonably withheld or delayed its consent to a proposed assignment or
sublease. Tenant's sole remedy shall be an action or proceeding for specific
performance, injunction or declaratory relief. Tenant acknowledges that Tenant's
rights under this Article 10 satisfy the conditions set forth in Section 1951.4
of the California Civil Code with respect to the availability to Landlord of
certain remedies for a default by Tenant under this Lease.
Section 10.6. CONTINUING LIABILITY OF TENANT. Regardless of
Landlord's consent, no subletting or assignment shall release Tenant from any of
its obligations hereunder or alter, impair or diminish the primary liability of
Tenant to pay the rent and to perform all other obligations to be performed by
Tenant hereunder. The acceptance of rent by Landlord from any other person shall
not be deemed to be a waiver by Landlord of any provision hereof. Consent to one
assignment or subletting shall not be deemed consent to any subsequent
assignment or subletting. If any assignee of Tenant or any successor of Tenant
defaults in the performance of any of the terms hereof, Landlord may proceed
directly against Tenant without the necessity of exhausting remedies against
such assignee or successor. Landlord may consent to subsequent assignments or
subleases or amendments or modifications to this Lease with assignees of Tenant,
without notifying Tenant, or any successor of Tenant, and without obtaining its
or their consent thereto, and
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no such action by Landlord shall relieve Tenant from its liability under this
Lease. If Tenant assigns this Lease, or subleases all or a portion of the
Premises, or requests the consent of Landlord to any assignment or sublease,
then Tenant shall pay Landlord's reasonable attorneys' fees incurred in
connection therewith, but in no event in excess of $1,500 for each such
assignment or sublease during the initial Term of this Lease and in excess of
$2,000 for each such assignment or sublease during the Option Term (as defined
below).
Section 10.7. BANKRUPTCY.
(a) If a petition is filed by or against Tenant for
relief under Title 11 of the United States Code, as amended ("Bankruptcy Code"),
and Tenant (including for purposes of this Section Tenant's successor in
bankruptcy, whether a trustee or Tenant as debtor-in-possession) assumes and
proposes to assign, or proposes to assume and assign, this Lease pursuant to the
provisions of the Bankruptcy Code to any person or entity who has made or
accepted a bona fide offer to accept an assignment of this Lease on terms
acceptable to Tenant, then notice of the proposed assignment setting forth (i)
the name and address of the proposed assignee, (ii) all of the terms and
conditions of the offer and proposed assignment, and (iii) the adequate
assurance to be furnished by the proposed assignee of its future performance
under the Lease, shall be given to Landlord by Tenant no later than twenty (20)
days after Tenant has made or received such offer, but in no event later than
ten (10) days prior to the date on which Tenant applies to a court of competent
jurisdiction for authority and approval to enter into the proposed assignment.
Landlord shall have the prior right and option, to be exercised by notice to
Tenant given at any time prior to the date on which the court order authorizing
such assignment becomes final and non-appealable, to receive an assignment of
this Lease upon the same terms and conditions, and for the same consideration,
if any, as the proposed assignee, less any brokerage commissions which may
otherwise be payable out of the consideration to be paid by the proposed
assignee for the assignment of this Lease.
(b) If this Lease is assigned pursuant to the provisions
of the Bankruptcy Code. Landlord: (i) may require from the assignee a deposit or
other security for the performance of its obligations under the Lease in an
amount substantially the same as would have been required by Landlord upon the
initial leasing to a tenant similar to the assignee; and (ii) shall receive, as
additional rent, the sums and economic consideration described in Sections
365(b)(1) and (3) of the Bankruptcy Code. Any person or entity to which this
Lease is assigned pursuant to the provisions of the Bankruptcy Code shall be
deemed, without further act or documentation, to have assumed all of the
Tenant's obligations arising under this Lease on and after the date of such
assignment. Any such assignee shall, upon demand, execute and deliver to
Landlord an instrument confirming such assumption. No provision of this Lease
shall be deemed a waiver of Landlord's rights or remedies under the Bankruptcy
Code to oppose any assumption and/or assignment of this Lease, to require a
timely performance of Tenant's obligations under
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this Lease, or to regain possession of the Premises if this Lease has neither
been assumed nor rejected within sixty (60) days after the date of the order for
relief or within such additional time as a court of competent jurisdiction may
have fixed. Notwithstanding anything in this Lease to the contrary, all amounts
payable by Tenant to or on behalf of Landlord under this Lease, whether or not
expressly denominated as rent, shall constitute rent for the purposes of Section
502(b)(6) of the Bankruptcy Code.
ARTICLE 11 - DESTRUCTION OR DAMAGE
Section 11.1. GENERAL. For the purposes of this Lease, the
term "Insured Casualty" shall mean damage to or destruction of the Premises, the
Building and/or the Project from a cause actually insured against, for which the
insurance proceeds paid or made available to Landlord are sufficient to rebuild
or restore the Premises, the Building and/or the Project, as applicable, under
then-existing applicable law to the condition existing immediately prior to the
damage or destruction, and "Uninsured Casualty" shall mean damage to or
destruction of the Premises, the Building and/or the Project from a cause not
actually insured against, or from a cause actually insured against but for which
the insurance proceeds paid or made available to Landlord are for any reason
insufficient to rebuild or restore the Premises, the Building and/or the
Project, as applicable, under then-existing applicable law to the condition
existing immediately prior to the damage or destruction.
Section 11.2. INSURED CASUALTY.
(a) In the event of an Insured Casualty where the extent
of damage or destruction is less than twenty-five percent (25%) of the then full
replacement cost of the Premises, or is less than ten percent (10%) of the then
full replacement cost of the Building and/or the Project, as applicable.
Landlord shall rebuild or restore the Premises substantially to the condition
existing immediately prior to the damage or destruction (provided the damage or
destruction was not the result of the negligence or willful misconduct of
Tenant, its agents, employees, contractors or invitees), and provided that
then-existing applicable law would not prevent or otherwise interfere with
Landlord's ability so to rebuild or restore.
(b) In the event of an Insured Casualty where the extent
of damage or destruction is equal to or greater than twenty-five percent (25%)
of the then full replacement cost of the Premises, or is equal to or greater
than ten percent (10%) of the then full replacement cost of the Building and/or
the Project, as applicable, Landlord shall have the right to rebuild or restore
the Premises substantially to the condition existing immediately prior to the
damage or destruction, or shall have the right to terminate this Lease. Landlord
shall notify Tenant in writing within sixty (60) days following the event of
damage or destruction of Landlord's election either to rebuild or restore the
Premises or to terminate this Lease.
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Section 11.3. UNINSURED CASUALTY. In the event of an
Uninsured Casualty, Landlord shall have the right to (a) rebuild or restore the
Premises as soon as reasonably possible at Landlord's expense (unless the damage
or destruction was caused by the negligence or willful misconduct of Tenant, its
employees, agents, contractors or invitees, in which event Tenant shall pay all
costs of rebuilding or restoration), and this Lease shall continue in full force
and effect, or (b) terminate this Lease, in which event Landlord shall give
written notice to Tenant within sixty (60) days following the event of damage or
destruction of Landlord's election to terminate this Lease as of the date of the
event of damage or destruction, and if the damage or destruction was caused by
the negligence or willful misconduct of Tenant, its employees, agents,
contractors or invitees, Tenant shall be liable therefor to Landlord.
Section 11.4. TENANT'S ELECTION. Notwithstanding anything to
the contrary contained in this Article 11, Tenant may elect to terminate this
Lease in the event the Premises are damaged or destroyed and, in the reasonable
opinion of Landlord's architect or construction consultant, the repair or
restoration of the Premises cannot be substantially completed within three
hundred sixty (360) days, or cannot be commenced within one hundred eighty (180)
days following the event of damage or destruction. Tenant's election shall be
made by written notice to Landlord given within ten (10) days following Tenant's
receipt from Landlord of the estimate of the time required to complete the
repair or restoration of the Premises which Landlord shall deliver within thirty
(30) days after the occurrence of the event of damage or destruction. If Tenant
does not deliver such notice within such ten-day period, Tenant may not later
terminate this Lease even if substantial completion of the rebuilding or
restoration occurs subsequent to such 360-day period, provided that Landlord is
proceeding with diligence to rebuild or restore the Premises and has commenced
such rebuilding and restoration within the 180-day period provided for above. If
Tenant delivers such notice within such ten-day period, this Lease shall
terminate as of the date of occurrence of the event of damage or destruction.
Section 11.5. END OF TERM. Notwithstanding anything to the
contrary contained in this Article 11, in the event that the Premises, the
Building and/or the Project are damaged or destroyed in whole or in part from
any cause during the last twelve (12) months of the Term, Landlord, at
Landlord's option, may terminate this Lease as of the date of the event of
damage or destruction by giving written notice to Tenant of Landlord's election
to do so within thirty (30) days following the event of such damage or
destruction. If Tenant has been granted an option to extend or renew the Term
pursuant to any other provision of this Lease, then, unless otherwise permitted
herein, Landlord shall not be entitled to terminate this Lease by reason of such
damage or destruction during the last twelve (12) months of the Term if Tenant
exercises its option to extend or renew in accordance with this Lease within
twenty (20) days following the date of occurrence of the event of damage or
destruction.
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Section 11.6. ABATEMENT OF RENTALS. If Landlord is required or
elects to rebuild or restore the Premises pursuant to this Article 11, the
then-current Monthly Base Rent, Excess Taxes and Excess Insurance Costs shall be
proportionately reduced during the period of repair or restoration, based upon
the extent to which the damage or making of repairs interferes with Tenant's
business conducted in the Premises, as reasonably determined by Landlord, but
only to the extent of any rental loss insurance proceeds received by Landlord
with respect to such damage or destruction to the Premises. All other
obligations of Tenant under this Lease shall continue unaffected.
Section 11.7. LIABILITY FOR PERSONAL PROPERTY. In no event
shall Landlord have any liability for, nor shall Landlord be required to repair
or restore, any injury or damage to any Alterations made by Tenant, trade
fixtures, equipment, merchandise, furniture or any other property installed by
Tenant or at the expense of Tenant. If Landlord or Tenant do not elect to
terminate this Lease pursuant to this Article 11, Tenant shall promptly rebuild
or restore all such property to the condition existing immediately prior to the
event of damage or destruction.
Section 11.8. WAIVER OF CERTAIN REMEDIES. Landlord and Tenant
acknowledge that the rights and obligations of the parties in the event of the
damage or destruction of the Premises are as set forth in this Article 11.
Tenant hereby expressly waives any rights to terminate this Lease upon damage or
destruction of the Premises, except as specifically provided by this Lease,
including, without limitation, any rights pursuant to the provisions of Sections
1932(2) and 1933(4) of the California Civil Code, as amended, or any other,
similar provisions of law.
ARTICLE 12 - EMINENT DOMAIN
Section 12.1. TAKING OF PREMISES. If all or any portion of the
Premises shall be taken by any public or quasi-public authority as a result of
the exercise of the power of eminent domain (which shall include a voluntary
sale or transfer by Landlord of all or any portion of the Premises under threat
of condemnation), this Lease shall terminate as to the part so taken as of the
date of taking, and, in the case of a partial taking which, in the reasonable
judgment of Tenant, materially impairs Tenant's ability to conduct its business
on the remainder of the Premises, Tenant shall have the right to terminate this
Lease as to the remainder of the Premises by written notice given to Landlord
within thirty (30) days after the date of such taking. If a material portion of
the Building or the Project is taken or if substantial alteration or
reconstruction of the Premises, the Building and/or the Project will, in
Landlord's reasonable judgment, be necessary or desirable as a result of such
condemnation or taking, Landlord may terminate this Lease by written notice
given to Tenant within thirty (30) days after the date of such taking.
Section 12.2. TEMPORARY TAKING. If all of the Premises shall
be temporarily condemned or taken for governmental occupancy for a period of
more than
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one (1) year, this Lease shall terminate as of the date of taking, and Landlord
shall be entitled to any and all compensation, damages, income, rent and awards
in connection therewith. In the event of a temporary taking for a period of one
(1) year or less, this Lease shall remain in full force and effect, and all
compensation awarded as a result of such taking during the term of this Lease
(regardless of whether such temporary taking lasts for less or more than one (1)
year) shall be payable to Tenant.
Section 12.3. ABATEMENT OF RENT. If any portion of the
Premises shall be taken in eminent domain and this Lease shall not be terminated
as provided in this Article 12, as of the date of the taking, the Monthly Base
Rent, the Excess Taxes and Excess Insurance Costs shall be reduced in the same
proportion that the rentable area of that portion of the Premises so taken bears
to the original rentable area of the Premises.
Section 12.4. CONDEMNATION AWARD. Except as otherwise provided
in Section 12.2 above, in the event of any taking, Landlord shall be entitled to
any and all compensation, damages, income, rent, awards, and any interest
therein whatsoever which may be paid or made in connection therewith; provided,
however, that Tenant may make a separate petition, if such a separate petition
is permitted, for the cost of its moving expenses and the value of its personal
property (whether or not affixed to the Premises). In no event shall Tenant be
entitled to receive any award for any "bonus value" of this Lease or otherwise
attributable to the value of Tenant's interest under this Lease or in or to the
Premises. Each party hereby waives the provisions of California Code of Civil
Procedure Sections 1265.120 and 1265.130 allowing either party to petition the
Superior Court to terminate this Lease in the event of a partial taking of the
Premises.
ARTICLE 13 - INSURANCE
Section 13.1. LIABILITY INSURANCE. Tenant, at its sole cost
and expense, shall procure and maintain in full force and effect throughout the
Term (a) a policy of commercial general liability insurance in the minimum
amount of not less than Five Million Dollars ($5,000,000.00) combined annual
aggregate limits for bodily injury and property damage (with no lower per
occurrence limits), including contractual liability and personal injury
coverage, insuring Tenant against any liability arising out of or in connection
with Tenant's use, occupancy and/or maintenance of the Premises, the Building or
the Project, or arising out of this Lease, and (b) commercial automobile
insurance in the minimum amount of Two Million Dollars ($2,000,000) combined
single limit coveting all owned, non-owned or leased vehicles on or about the
Premises and Project. Such commercial general liability insurance shall name
Landlord, Landlord's mortgagee (of whom Tenant has been notified), if any, and
Landlord's property manager (of whom Tenant has been notified), if any, as
additional insureds, shall specifically include the liability assumed hereunder
by Tenant (provided, however, that the amount of such insurance shall not be
construed to limit the liability of Tenant hereunder), and shall provide that it
is primary insurance and not "excess over" or contributory with any other
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insurance in force for or on behalf of Landlord. The policy shall eliminate
cross-liability and shall contain a severability of interest clause. Landlord
shall have the right, periodically during the Term, but not more frequently than
once each twelve (12) months, to require that Tenant increase the minimum
liability limits specified in this Section to an amount equal to the
then-prevailing minimum liability limits required by prudent landlords of
comparable office buildings in Menlo Park/Palo Alto, California area, as
determined by Landlord in its reasonable judgment.
Section 13.2. TENANT'S PROPERTY INSURANCE. Tenant, at its sole
cost and expense, shall procure and maintain in full force and effect throughout
the Term a policy of "all risk" property insurance, with theft, vandalism and
malicious mischief endorsements, covering any Alterations and Tenant's trade
fixtures, equipment, fixtures, furnishings and other personal property located
in or on the Premises, to the extent of at least full replacement cost thereof,
without any deduction for depreciation, and with a stated value endorsement
specifying an amount not less than the actual replacement cost thereof. Such
property insurance shall include "loss of rents" coverage sufficient to cover
Tenant's obligation to pay Monthly Base Rental and other amount payable under
this Lease for a twelve (12) month period. In the event that Tenant shall suffer
an insurable loss under such policy, the proceeds from any such policy shall be
used by Tenant for the replacement or restoration of such Alterations, trade
fixtures, equipment, inventory, fixtures, furnishings and personal property.
Section 13.3. TENANT'S ADDITIONAL INSURANCE. Tenant, at its
sole cost and expense, shall also procure and maintain in full force and effect
throughout the Term such additional insurance with such forms of coverage and in
such amounts as Landlord shall reasonably require, including, without
limitation, workers' compensation and employers' liability coverage as required
by law.
Section 13.4. INSURANCE CRITERIA. All insurance required to be
maintained by Tenant under this Lease shall (a) be issued by insurance companies
authorized to do business in the State of California (or if not so authorized,
reasonably approved by Landlord in writing) with a financial rating of at least
a A-VIII or better as rated in the most recent edition of "Best's Insurance
Guide"; (b) be issued as a primary policy; and (c) contain an endorsement
requiring not less than thirty (30) days' written notice from the insurance
company to Landlord and to Landlord's mortgagee before cancellation of any such
policy, except in the case of nonpayment, in which event such policy may be
cancelled upon ten (10) days' prior written notice.
Section 13.5. EVIDENCE OF COVERAGE. Tenant shall deposit
with Landlord, at the commencement of the Term, and on renewal of each policy
not less than twenty (20) days prior to expiration of such policy, a certified
copy of each insurance policy required to be carried by Tenant hereunder, or a
certificate of insurance as to such policy, together with evidence of payment of
premiums.
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Section 13.6. WAIVER OF SUBROGATION. Landlord and Tenant each
hereby waives any and all rights of recovery against the other party for loss of
or damage to such waiving party or its property, where such loss or damage is
insured against under any insurance policy in force at the time of such loss or
damage. To the extent that such insurance endorsement is available at no or
nominal additional premium charge and does not adversely affect the ability of
such party to obtain such insurance, Landlord and Tenant each agree to obtain
for the benefit of the other party in the insurance policies carried by the
first party a waiver of any right of subrogation which any insurer of the party
may acquire.
ARTICLE 14 - WAIVER; INDEMNITY
Section 14.1. WAIVER OF LIABILITY. Landlord shall not be
liable for, and Tenant hereby waives all claims against Landlord with respect
to, any death or injury of any nature whatsoever that may be suffered or
sustained by Tenant or any employee, licensee, invitee, guest, agent or customer
of Tenant or any other person, from any causes whatsoever; or for any loss or
damage or injury to any property outside or within the Premises belonging to
Tenant or its employees, agents, customers, licensees, invitees, guests or any
other person, except to the extent that, in either event, such injury or damage
is caused by the gross negligence or willful misconduct of Landlord, its
employees or agents. Without limiting the generality of the waiver of liability
contained in this Section, Landlord shall not be liable for any damage of any
nature whatsoever to persons or property caused by explosion, fire or theft; by
breakage of any sprinkler, drainage or plumbing systems; by failure for any
cause to supply adequate drainage; by the interruption of any utility or other
service; by steam, gas, water, rain or other substances leaking, issuing or
flowing into any part of the Premises; by acts of God or the elements, acts of
public enemy, riot, strike, insurrection, war, court order, requisition or order
of governmental body or authority; by repair, maintenance or alteration of any
part of the Building or the Project (including any repair, maintenance or work
of construction performed by Tenant), or by anything done or omitted to be done
by any tenant, occupant or person in the Building or the Project, except to the
extent that any of the foregoing shall be caused by the gross negligence or
willful misconduct of Landlord, its employees or agents. Notwithstanding the
foregoing, in no event shall Landlord be liable or responsible in any way for
any loss of business by Tenant, lost profits of Tenant or any other
consequential damages of Tenant or its employees, agents, customers, licensees,
invitees, guests or any other person, regardless of the cause therefor.
Section 14.2. TENANT'S INDEMNITY. Tenant shall indemnify,
defend and hold Landlord, its employees, agents and contractors, harmless from
and against any and all losses, costs, claims, damages, liabilities or causes of
action (including attorneys' fees) arising out of or in any way connected with:
(a) Tenant's use or occupancy of the Premises or the conduct of Tenant's
business thereon, or any activity, work or other thing done, permitted or
suffered by Tenant in or about the Premises, the Building or the
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Project, except to the extent caused by the gross negligence or willful
misconduct of Landlord, its employees or agents; (b) any damage to any property,
or injury, illness or death of any person occurring in, on, or about the
Premises, or any part thereof, arising at any time and from any cause
whatsoever, except to the extent caused by the gross negligence or willful
misconduct of Landlord, its employees or agents; (c) any damage to any property
or injury, illness or death of any person occurring in, on, or about any part of
the Building or the Project other than the Premises, to the extent such damage,
injury, illness or death shall be caused in whole or in part by the negligence
or willful misconduct of Tenant, its agents, employees, invitees, licensees or
customers; and (d) arising out of Tenant's breach of the provisions of this
Lease. The provisions of this Section shall survive the termination of this
Lease.
ARTICLE 15 - DEFAULT
Section 15.1. EVENTS OF DEFAULT. In addition to any other
event specified in this Lease as an event of default, the occurrence of any one
or more of the following events shall constitute a default under this Lease by
Tenant:
(a) Tenant's failure to pay when due any Monthly Base
Rent, Excess Taxes. Excess Insurance Costs, Excess Utility Charges or any other
amounts that Tenant is obligated to pay to Landlord pursuant to this Lease;
provided, however, on not more than one occasion in any twelve (12) consecutive
month period throughout the Term, Tenant's failure to pay rent when due shall
not constitute an Event of Default unless such failure shall continue for five
(5) days following written notice thereof from Landlord;
(b) Tenant's failure to perform any other covenant,
agreement or obligation of Tenant contained in this Lease within thirty (30)
days following Landlord's written notice thereof to Tenant;
(c) Tenant's abandonment of the Premises, or Tenant's
vacation of the Premises without providing adequate security for the Premises;
(d) Tenant's making of any general assignment for the
benefit of creditors; or the commencement and continuation for at least thirty
(30) days of any case, action or proceeding by, against or concerning Tenant
under the Bankruptcy Code or any other federal or state bankruptcy, insolvency
or debtor's relief law or otherwise seeking Tenant's financial reorganization or
an arrangement with any of Tenant's creditors;
(e) Appointment of receiver, trustee or other person to
take possession of substantially all of Tenant's assets;
(f) Commencement of proceedings for winding up or
dissolving (whether voluntary or involuntary) Tenant, if Tenant is a
corporation, partnership or limited liability company;
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(g) Levy of a writ of attachment or execution on Tenant's
interest under this Lease, if such writ continues for a period of thirty (30)
days; and
(h) Assignment of this Lease or any interest hereunder,
or sublease of all or any portion of this Premises, in violation of the
provisions of Article 10 of this Lease.
Section 15.2. LANDLORD'S REMEDIES. If a default by Tenant
under this Lease shall occur, in addition to any other rights and remedies
available to Landlord at law or in equity (including, without limitation, the
provisions of Section 1951.4 of the California Civil Code or any successor
statutory provision), Landlord at any time thereafter shall have the right to
give a written notice of termination of this Lease to Tenant, and on the date
specified in such notice (which shall be not less than three (3) days after the
giving of such notice), Tenant's right to possession of the Premises and this
Lease shall terminate, unless on or before such date all arrears of Monthly Base
Rent and all other sums payable by Tenant under this Lease and all costs and
expenses incurred by Landlord with respect to such default shall have been paid
by Tenant, and any other breaches of this Lease by Tenant at that time existing
shall have been fully remedied to the satisfaction of Landlord. If Landlord
shall terminate this Lease pursuant to the provisions of this Section, Landlord
shall have all the rights and remedies of a landlord provided by Section 1951.2
of the California Civil Code or any successor statutory provision. Upon such
termination, in addition to any other rights and remedies to which Landlord may
be entitled under applicable law, Landlord may recover from Tenant: (a) the
worth at the time of award of all unpaid rent which had been earned at the time
of termination; (b) the worth at the time of award of the amount by which all
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rent loss that Tenant proves could have been
reasonably avoided; (c) the worth at the time of award of the amount by which
all unpaid rent for the balance of the term of this Lease after the time of
award exceeds the amount of such rent loss that Tenant proves could be
reasonably avoided; and (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, including, without limitation, attorneys' fees and
costs; brokerage commissions; the cost of alterations, additions, improvements,
renovations, refurbishment and repair of the Premises; the cost of removal and
storage of Tenant's trade fixtures, equipment, fixtures, furnishings and other
personal property located in the Premises; and the unamortized portion, as of
the date of termination of this Lease, of any Tenant Improvements constructed or
installed by Landlord at its expense (as amortized over the Term with interest
thereon at the Interest Rate). The "worth at the time of award" of the amounts
referred to in clauses (a) and (b) above shall be computed by allowing interest
at the Interest Rate. The worth at the time of award of the amount referred to
in clause (c) above shall be computed by discounting such amount at a rate equal
to the discount rate of the Federal Reserve Bank of San Francisco at the time of
award plus one percent (1%).
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Section 15.3. LATE CHARGES; INTEREST. Tenant acknowledges that
late payment by Tenant to Landlord of Monthly Base Rent, Excess Expenses, Excess
Taxes, Excess Insurance Costs, Excess Utility Charges or any other amounts
payable by Tenant to Landlord under this Lease will cause Landlord to incur
costs not contemplated by this Lease, the exact amount of such costs being
extremely difficult and impracticable to ascertain. Such costs include, without
limitation, processing and accounting charges, and late charges that may be
imposed on Landlord by the terms of any indebtedness secured by an encumbrance
covering the Premises. Therefore, if any such amount due from Tenant is not
received by Landlord within seven (7) days after the same shall become due and
payable, Tenant shall pay to Landlord on demand an additional sum equal to five
percent (5%) of the overdue amount as a late charge. The parties agree that this
late charge represents a fair and reasonable estimate of the costs that Landlord
will incur by reason of such late payment by Tenant. Acceptance of any late
charge shall not constitute a waiver of Tenant's default with respect to the
overdue amount, or prevent Landlord from exercising any of the other rights and
remedies available to Landlord. In addition, each installment of Monthly Base
Rent and any other amount payable by Tenant to Landlord under this Lease which
shall not have been paid within seven (7) days after the same shall have become
due and payable shall bear interest at the Interest Rate from the date that the
same became due and payable until paid, whether or not any demand shall be made
therefor.
Section 15.4. LEASE CONTINUES UNTIL TERMINATION. In the event
of a default by Tenant, this Lease shall continue in effect for so long as
Landlord shall not terminate Tenant's right to possession, and Landlord may
enforce all its rights and remedies under this Lease, including the right to
recover the rent as it becomes due under this Lease. Acts of maintenance or
preservation or efforts to relet the Premises or the appointment of a receiver
upon initiative of Landlord to protect Landlord's interest under this Lease
shall not constitute a termination of Tenant's right to possession.
Section 15.5. RELETTING PREMISES. In the event of a default by
Tenant, Landlord, at Landlord's election, may re-enter the Premises and, without
terminating this Lease, at any time and from time to time, relet the Premises or
any portion thereof for the account and in the name of Tenant. Landlord, at
Landlord's election, may eject Tenant or any of Tenant's assignees, sublessees
or any other person claiming any right in or through this Lease. Tenant shall
nevertheless pay to Landlord on the dates specified in this Lease all amounts
payable by Tenant to Landlord under this Lease, plus Landlord's costs and
expenses in connection therewith, less the proceeds of any sublease or
reletting. No act by or on behalf of Landlord under this Section shall
constitute a termination of this Lease unless Landlord gives Tenant written
notice of termination as provided in Section 15.2. Notwithstanding any prior
reletting without termination, Landlord may later elect to terminate this Lease
by reason of such default by Tenant.
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Section 15.6. CURE BY LANDLORD. If Tenant shall fail to pay
any amount payable by Tenant to Landlord hereunder or shall fail to perform any
other covenant, agreement or obligation of Tenant hereunder and such failure
shall continue for thirty (30) days after notice thereof by Landlord, then
Landlord may, but shall not be obligated to, and without waiving or releasing
Tenant from any obligation, make any such payment or perform any such covenant,
agreement or obligation on Tenant's behalf. All sums so paid by Landlord and all
costs incurred by Landlord in taking such action shall be paid to Landlord on
demand, together with interest thereon at the Interest Rate until the date of
payment. In addition to all other rights and remedies of Landlord, Landlord
shall have the same rights and remedies in the event of the non-payment thereof
by Tenant as in the case of default by Tenant in the payment of rent.
Section 15.7. LANDLORD'S DEFAULT. In no event shall Landlord
be deemed to be in default under this Lease unless and until Landlord shall have
defaulted in the performance of its obligations under this Lease and Tenant
shall have given Landlord written notice of the default and, within a reasonable
period of time following Landlord's receipt of such notice, but in no event less
than thirty (30) days nor more than forty-five (45) days following Landlord's
receipt of such notice, Landlord shall not commence diligently to prosecute the
cure of such default to completion. In the event of any alleged default on the
part of Landlord under this Lease, Tenant shall give notice by registered mail
to any beneficiary or mortgagee under a deed of trust or mortgage encumbering
the Premises whose address shall have been furnished to Tenant, and shall offer
such beneficiary or mortgagee a reasonable opportunity to cure the default,
including time to obtain possession of the Premises by power of sale or judicial
foreclosure, if such shall be necessary to effect a cure.
Section 15.8 REMEDIES CUMULATIVE. The remedies provided
for in this Lease are in addition to any other remedies available to Landlord at
law or in equity by statute or otherwise.
Section 15.9. SECURITY DEPOSIT.
(a) Concurrently with Tenant's execution of this Lease,
Tenant shall deliver to Landlord an unconditional, irrevocable, transferable
letter of credit in the stated amount of Six Hundred Seventy-Six Thousand One
Hundred Dollars ($676,100) issued by a bank approved by Landlord in favor of
Landlord as beneficiary, for the term provided for below and otherwise in form
and substance satisfactory to Landlord ("Letter of Credit"). The Letter of
Credit shall be issued for an initial term of one year following the date of
this Lease, and Tenant shall cause the Letter of Credit to be renewed for
successive twelve-month periods throughout the Term not less than thirty (30)
days prior to each expiration date of the Letter of Credit, until Tenant shall
have the right to reduce the amount of the Letter of Credit as provided in
subparagraph (b) below. The Letter of Credit shall entitle Landlord to draw the
entire stated amount thereof upon presentation of
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a sight draft in the amount of the draw. The Letter of Credit shall be held by
Landlord as security for the faithful performance by Tenant of all of the
covenants, agreements and obligations under this Lease to be performed by Tenant
during the Term. If Tenant shall fail to pay Monthly Base Rental or other
amounts payable by Tenant to Landlord under this Lease, or if Tenant shall
otherwise default with respect to any provision of this Lease after the
expiration of any applicable cure period, Landlord shall have the right, but
shall not be obligated, to draw the entire stated amount of the Letter of Credit
and to hold the proceeds thereof as a cash security deposit ("Security
Deposit"), and to use, apply or retain all or any portion of the Security
Deposit for the payment of rental or any other amount which Landlord may expend
or become obligated to expend 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 Landlord shall make any draw upon the Letter of Credit and
apply such draw to the cure of any default, Tenant shall, within ten (10) days
after Landlord's written demand therefor, deposit with Landlord a replacement,
additional or amended Letter or Letters of Credit in the same form (including
total stated amount and issuer) as the Letter of Credit drawn upon by Landlord.
If Landlord shall so use or apply any portion of any cash Security Deposit held
by Landlord. Tenant shall, within ten (10) days after Landlord's written demand
therefor, deposit cash with Landlord in the amount so used or applied by
Landlord. Landlord shall not be required to keep any Security Deposit separate
from Landlord's other funds, and Tenant shall not be entitled to any interest on
any Security Deposit. Landlord shall return the Letter of Credit, any Security
Deposit, and/or any balance thereof not applied in accordance with the
provisions of this Lease, to Tenant within thirty (30) days following the
expiration of this Lease and after Tenant has surrendered the Premises to
Landlord in the condition required under this Lease. In the event that Landlord
shall transfer its interest in the Premises, Landlord shall transfer the Letter
of Credit (to the extent transferable) and/or any funds then held by Landlord on
account of any cash Security Deposit to Landlord's transferee, and Landlord
shall thereupon be released from all liability to Tenant for return of the
Letter of Credit and/or cash Security Deposit.
(b) If a default by Tenant under this Lease after the
expiration of any applicable cure period shall not have occurred at any time
prior to such time, effective not earlier than the first day of the fourth year
of the Term, Tenant shall have the right to cause the stated amount of the
Letter of Credit to be reduced to Three Hundred Forty-Two Thousand Two Hundred
Dollars ($338,100) by delivering to Landlord an amendment to the Letter of
Credit then held by Landlord acceptable to Landlord, or by delivering to
Landlord a new Letter of Credit in such lesser stated amount, but otherwise in
the same form as the Letter of Credit then held by Landlord. Such Letter of
Credit, and any amounts drawn thereunder, shall otherwise be held by Landlord on
all of the terms and provisions of subparagraph (a) above.
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ARTICLE 16 - SUBORDINATION
Section 16.1. SUBORDINATION OF LEASE. This Lease shall be
subject and subordinate at all times to the lien of all mortgages and deeds of
trust in any amount or amounts whatsoever (including all advances thereunder,
renewals, replacement, modifications, supplements, and extensions thereof) now
or hereafter placed on or against the Premises, the Building or the Project, or
on or against Landlord's interest or estate therein, all without the necessity
of having further instruments executed on the part of Tenant to effectuate such
subordination. Tenant agrees to execute and deliver upon demand such further
instruments evidencing such subordination of this Lease to the lien of any such
mortgages or deeds of trust as may be required by Landlord, provided that each
mortgagee or beneficiary under any such mortgage or deed of trust, or purchaser
or grantee in respect thereof, shall agree, in a commercially reasonable
non-disturbance agreement, not to terminate or disturb Tenant's possession of
the Premises under this Lease in the event of termination of such ground or
underlying lease or foreclosure of such mortgage or deed of trust or deed in
lieu thereof, as the case may be, so long as Tenant is not in default under this
Lease beyond any applicable cure period under this Lease. In the event of the
foreclosure of any mortgage or deed of trust encumbering the Premises, the
Building or the Project, or on or against Landlord's estate or interest therein,
or in the event of a deed-in-lieu of foreclosure thereof, Tenant shall be bound
to any such mortgagee or beneficiary under any such mortgage or deed of trust,
or any other purchaser or grantee in foreclosure or under a deed-in-lieu
thereof, and Tenant hereby attorns to any such party as its landlord, such
attornment to be effective and self-operative without the execution of any
further instrument immediately upon such party's succeeding to Landlord's
interest under this Lease.
Section 16.2. SUBORDINATION OF DEED OF TRUST. Notwithstanding
anything to the contrary set forth above, any mortgagee or beneficiary under any
mortgage or deed of trust may at any time subordinate its mortgage or deed of
trust to this Lease in whole or in part, without Tenant's consent, by execution
of a written document subordinating such mortgage or deed of trust to this Lease
to the extent set forth in such document, and thereupon this Lease shall be
deemed prior to such mortgage or deed of trust to the extent set forth in such
document without regard to their respective dates of execution, delivery and/or
recording. In that event, to the extent set forth in such document, such
mortgage or deed of trust shall have the same rights with respect to this Lease
as would have existed if this Lease had been executed, and a memorandum thereof
recorded, prior to the execution, deliver and recording of the mortgage or deed
of trust.
Section 16.3. APPROVAL BY MORTGAGEES. Tenant hereby
acknowledges that the provisions of this Lease may be subject to the approval of
any lender that may hereafter make a loan secured by a mortgage or deed of trust
on the Premises, the Building or the Project. If such lender shall require, as a
condition to such financing, any modifications of this Lease in order to protect
the security of such mortgage or deed of
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trust, at Landlord's request, Tenant agrees to execute appropriate amendments to
this Lease to effect such modifications; provided, however, that no such
modification shall change the size, location or dimension of the Premises or
increase the amount of the rent or other amounts payable by Tenant under this
Lease or otherwise materially, adversely affects any of Tenant's rights or
obligations under this Lease.
ARTICLE 17 - ENTRY BY LANDLORD
Landlord shall have the right to enter the Premises at
reasonable hours and after reasonable notice (except in the event of an
emergency in which event no notice shall be required) to: (a) inspect the
Premises; (b) exhibit the same to prospective purchasers, lenders or tenants;
(c) determine whether Tenant is complying with all of its obligations hereunder;
(d) provide any service to be provided by Landlord to Tenant hereunder; (e) post
notices of non-responsibility and "for sale" and "for lease" signs; and (f) make
repairs required of Landlord under the terms hereof or make repairs to any
adjoining space or make repairs, alterations or improvements to any other
portion of the Building or the Project. Tenant hereby waives any claim for
damages for any injury or inconvenience to or interference with Tenant's
business, any loss of occupancy or quiet enjoyment of the Premises, and any
other loss occasioned by such entry, provided that Landlord takes reasonable
steps to minimize the interference with Tenant's use and enjoyment of the
Premises. Landlord shall at all times have and retain a key with which to unlock
all of the doors in, on or about the Premises (excluding Tenant's vaults, safes
and similar areas agreed upon in writing by Tenant and Landlord prior to the
date of execution of this Lease by the parties). Landlord shall have the right
to use any and all means which Landlord may deem appropriate to open such doors
in an emergency in order to obtain entry to the Premises, and no entry to the
Premises obtained by Landlord by any of such means shall under any circumstance
be construed or deemed to be a forcible or unlawful entry into, or a detainer
of, the Premises or an eviction, actual or constructive, of Tenant from the
Premises, or any portion thereof.
ARTICLE 18 - OPTION TO EXTEND TERM
Section 18.1. OPTION. Subject to the provisions of Section
18.2 below, Landlord hereby grants to Tenant the option to extend the Term
hereof for one (1) additional five (5) year period ("Option Term") following
expiration of the initial Term specified in the Basic Lease Information
("Initial Term"), on all of the terms and conditions contained herein, except
that Monthly Base Rent shall be as provided below and that Tenant shall have no
further option to extend the Term. Tenant shall have the right to exercise the
such option by giving written notice of exercise of the option ("Option Notice")
to Landlord not less than twelve (12) months prior to the expiration of the
Initial Term. Notwithstanding the foregoing, if Tenant shall be in default under
this Lease beyond all applicable cure periods on the date of giving the Option
Notice, Tenant shall have no right to extend the Term and, at Landlord's option,
this Lease shall expire at the end of the Initial Term; and if Tenant shall be
in default under this Lease beyond all
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applicable cure periods on the date the Option Term is to commence, the Option
Term shall not commence and, at Landlord's option, this Lease shall expire at
the end of the Initial Term. The Monthly Base Rent for the Option Term shall be
equal to the Fair Market Rental (as hereinafter defined) of the Premises at the
commencement of the Option Term. As used in this Lease, the word "Term" shall
mean the Term as the same may be extended pursuant to the provisions of this
Article 18, as applicable.
Section 18.2. LANDLORD'S USE. Notwithstanding the provisions
of Section 18.1 above, if Landlord or any affiliate of Landlord shall require
the use of the Premises at any time subsequent to the Initial Term for its own
occupancy, then Tenant shall not have the right to extend the Term of this Lease
for the Option Term, and the Term of this Lease shall expire at the end of the
Initial Term. If Landlord or any affiliate of Landlord shall so require the use
of the Premises, Landlord shall give to Tenant written notice of such fact not
later than fifteen (15) months prior to the end of the Initial Term.
Section 18.3. FAIR MARKET RENTAL.
(a) "Fair Market Rental" shall mean the monthly full
service rental being charged for comparable space in comparable office buildings
in the Menlo Park/Palo Alto, California area as of the date of commencement of
the Option Term, with similar amenities, taking into consideration the size,
location, proposed term of the lease, extent of services to be provided, the
time that the particular rate under consideration became or is to become
effective, and other relevant factors; provided, however, that Monthly Base Rent
shall in no event be less than the Monthly Base Rent which was in effect
immediately prior to the date of commencement of the Option Term. Within thirty
(30) days following receipt of the Option Notice, Landlord shall give to Tenant
written notice of Landlord's estimation of Fair Market Rental. If Tenant shall
not agree with such estimation of Fair Market Rental, Landlord and Tenant shall
negotiate in good faith to agree upon the Fair Market Rental for a period of
forty-five (45) days following the date of Landlord's notice to Tenant. If
Landlord and Tenant shall be unable to agree upon the Fair Market Rental within
such period of time, Fair Market Rental shall be determined pursuant to the
arbitration procedure set forth in this Article 18. In the event that such
arbitration not have been concluded prior to the date of commencement of the
Option Term, Tenant shall continue to pay as Monthly Base Rent hereunder, until
the Fair Market Rental has been determined by arbitration, the Monthly Base Rent
payable with respect to the month immediately preceding the commencement of the
Option Term. After the Fair Market Rental has been determined by arbitration,
then any adjustment required to adjust the amount previously paid shall be made
by payment by Tenant to Landlord within ten (10) days after such determination
of Fair Market Rental
(b) In the event that Landlord and Tenant shall be unable
to agree upon Fair Market Rental within the period of time specified in
subparagraph (a) above, within ten (10) days thereafter, each of the parties
shall select a commercial real estate broker
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from a recognized real estate brokerage firm having offices in Palo Alto or San
Jose, California, who has at least five (5) years' full-time commercial real
estate brokerage experience and who is familiar with the Fair Market Rental of
commercial office space in comparable office buildings in Menlo Park/Palo Alto,
California area, and shall give written notice of such selection to the other
party specifying therein the name and address of the person to act as the
arbitrator on such party's behalf. If either party shall fail to notify the
other party of its appointment of a broker having such qualifications within or
by the time specified, then the broker appointed by the other party shall make
the sole determination of Fair Market Rental of the Premises, and such
determination shall be binding upon the parties.
(c) The Fair Market Rental shall be determined by the two
brokers appointed by the parties in accordance with the following procedures.
Within thirty (30) days following the appointment of the brokers by the parties,
each of the brokers shall state in writing his determination of the Fair Market
Rental supported by the reasons therefor and shall provide copies to each party.
If such determinations do not differ by more than ten percent (10%), the Fair
Market Rental shall be the average of the two determinations. If such
determinations differ by more than ten percent (10%) and the two brokers are
subsequently unable to agree upon the Fair Market Rental, the two brokers shall
appoint a third broker, who shall be a competent and impartial person with
qualifications similar to those required of the first two brokers. If the two
brokers are unable to agree upon such appointment within ten (10) days following
their determinations of Fair Market Rental, then either Landlord or Tenant, on
behalf of both parties, may request appointment of such a qualified person by
the Presiding Judge of the San Mateo County Superior Court acting in his
individual capacity. Following appointment of the third broker, he shall
promptly make his determination of Fair Market Rental in the manner provided
above, and the average of the three determinations shall constitute the Fair
Market Rental. If, however, the low determination of Fair Market Rental and/or
the high determination of Fair Market Rental are more than ten percent (10%)
lower and/or higher than the middle determination, any such low determination
and/or high determination shall be disregarded. If only one determination is
more than ten percent (10%) above or below the middle determination, such that
only one determination needs to be disregarded, the remaining two determinations
shall be added together and their total divided by two; the resulting quotient
shall be the Fair Market Rental. If both the low determination and the high
determination are disregarded, then the middle determination shall establish the
Monthly Base Rent for the Premises for the Option Term and shall be final and
binding upon the parties.
(d) In the event of a failure, refusal or inability of
any broker to act, his successor shall be appointed by him, but in the case of
the third broker, his successor shall be appointed in the same manner as that
set forth herein with respect to the appointment of the original third broker.
The brokers shall make the final determination of Fair Market Rental not later
than sixty (60) days prior to the commencement of the
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Option Term. Each party shall pay the fees and expenses of its respective broker
and both shall pay one-half (1/2) of the fees and expenses of the third broker.
Attorneys' fees and expenses of counsel shall be paid by the respective party
engaging such counsel.
ARTICLE 19 - MISCELLANEOUS
Section 19.1. HOLDING OVER. If Tenant shall remain in
possession of the Premises after the expiration or earlier termination of this
Lease with the written consent of Landlord, such occupancy shall be a tenancy
from month-to-month and all of the terms, covenants and agreements hereof shall
otherwise continue to apply and bind Tenant so long as Tenant shall remain in
possession, except that the Monthly Base Rent shall be one hundred fifty percent
(150%) of the Monthly Base Rent payable for the last month of the Term, prorated
on a daily basis for each day that Tenant remains in possession. If Tenant shall
remain in possession of the Premises after the expiration or earlier termination
of this Lease without the written consent of Landlord, Tenant shall indemnify,
defend and hold Landlord harmless against any and all claims, losses and
liabilities for damages resulting from failure to surrender possession,
including, without limitation, any claims made by any succeeding tenant.
Section 19.2. LANDLORD'S INTEREST. The term "Landlord" as used
herein shall mean only the owner or owners at the times in question of fee title
to the Premises. In the event of a sale, conveyance or assignment by Landlord of
Landlord's interest in the Premises, the Building or the Project, Landlord shall
be relieved, from and after the date of such sale, conveyance or assignment, of
any liability thereafter accruing upon any of the agreements, obligations or
covenants of Landlord under the Lease, and for such future period Tenant agrees
to look solely to the successor-in-interest of Landlord in and to this Lease,
provided that any funds in the hands of Landlord, in which Tenant has an
interest, shall be delivered to such successor-in-interest. This Lease shall not
be affected by any such sale, conveyance, or assignment, however, and Tenant
agrees to attorn to the purchaser or assignee, such attornment to be effective
and self-operative without the execution of any further instruments on the part
of any of the parties to this Lease.
Section 19.3. QUIET ENJOYMENT. Landlord hereby covenants in
favor of Tenant that, provided that Tenant shall pay all rent and perform all
other covenants, agreements and obligations of Tenant under this Lease, Tenant
shall have and enjoy quiet possession of the Premises throughout the Term
without any hindrance or interruption by Landlord or any person lawfully
claiming by, through or under Landlord, subject to the terms and conditions of
this Lease and any mortgage or deed of trust to which this Lease is subject and
subordinate.
Section 19.4. LANDLORD'S LIABILITY. The liability of Landlord
under this Lease or otherwise in connection with the Premises or the Building
shall be limited to Landlord's interest in the Project, and in no event shall
any other assets of Landlord or
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any assets of any constituent partner or member of Landlord be subject to any
liability arising out of or in connection with this Lease, the Premises, the
Building or the Project.
Section 19.5. NO MERGER. The voluntary or other surrender of
this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger,
and shall, at the option of Landlord, either terminate any or all existing
subleases or operate as an assignment to Landlord of any or all of such
subleases.
Section 19.6. SURRENDER OF PREMISES. At the expiration of the
Term or upon earlier termination of this Lease, Tenant shall surrender to
Landlord possession of the Premises, in the same condition as received,
reasonable wear and tear excepted. Tenant shall have the right to remove from
the Premises any of Tenant's movable partitions, trade fixtures, furnishings,
fixtures or equipment which may be removed without causing damage to the
Premises, and shall remove any Alterations and any other alterations, additions
or improvements, trade fixtures, equipment or furnishings which Landlord shall
have directed to be removed, and shall promptly repair any damage to the
Premises caused by such removal. Any personal property of Tenant not removed
from the Premises shall, to the extent permitted by law, be deemed to have been
abandoned by Tenant and shall thereupon become the property of Landlord.
Section 19.7. ESTOPPEL CERTIFICATE. At any time and from time
to time, but in no event later than ten (10) days' following a request therefor
by Landlord, Tenant shall execute, acknowledge and deliver to Landlord, a
certificate certifying: (a) that Tenant has accepted the Premises (or, if Tenant
has not done so, that Tenant has not accepted the Premises, and specifying the
reasons therefor); (b) the commencement and expiration dates of this Lease; (c)
whether there are then existing any defaults by Tenant or Landlord in the
performance of its obligations under this Lease (and, if so, specifying the
same); (d) that this Lease is unmodified and in full force and effect (or, if
there have been modifications, that this Lease is in full force and effect, as
modified, and stating the date and nature of each modification); (e) the
capacity of the person executing such certificate, and that such person is duly
authorized to execute the same on behalf of Tenant; (f) the date, if any, to
which rent and other sums payable hereunder have been paid; (g) that no notice
has been received by Tenant of any default which has not been cured, except as
to defaults specified in the certificate; (h) the amount of any security deposit
and prepaid rent; and (i) such other matters as Landlord may request. Any such
certificate may be relied upon by any prospective purchaser of, or any existing
or prospective mortgagee or beneficiary under any deed of trust affecting, the
Building, the Project or any part thereof.
Section 19.8. NO LIGHT, AIR OR VIEW EASEMENT. Nothing
contained in this Lease shall grant to or confer upon Tenant any right to
receive any particular amount or level of light, air or view from the Premises.
Any diminution in or shutting off of light, air or view by any structure which
is now or may hereafter be erected in the Project
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or on other lands adjacent to the Building shall in no way affect this Lease or
impose any liability upon Landlord. Noise, dust or vibration or other incidents
to new construction of improvements on lands adjacent to the Building, whether
or not owned by Landlord, shall in no way affect this Lease or impose any
liability on Landlord.
Section 19.9. NOTICES. All notices and other communications
which may or are required or permitted to be given by either party to the other
hereunder shall be in writing and shall be deemed to have been given upon
receipt or refusal of receipt, when personally delivered or transmitted by
private nationally recognized overnight courier service, or by deposit in the
United States mail, certified or registered, with return receipt requested,
postage prepaid, and addressed as follows: prior to the date on which Tenant
accepts possession of the Premises, at Tenant's address prior to occupancy set
out in the Basic Lease Information, and thereafter to Tenant at the Premises, or
to such other place as Tenant may from time to time designate in a written
notice to Landlord; to Landlord at the address specified in the Basic Lease
Information, or to such other place as Landlord may from time to time designate
in a written notice to Tenant.
Section 19.10. SUCCESSORS. Subject to the provisions of
Article 10 of this Lease, all of the terms, covenants and conditions contained
in this Lease shall be binding upon, and shall inure to the benefit of, the
heirs, executors, administrators, successors and assigns of the parties hereto.
Section 19.11. ATTORNEYS' FEES. In the event of any action or
proceeding brought by either party against the other under this Lease, the
prevailing party shall be entitled to recover court costs and the fees of its
attorneys in such action or proceeding (whether at the administrative, trial or
appellate levels) in such amount as the court or administrative body may award.
Section 19.12. WAIVER. The failure of Landlord or Tenant to
exercise their respective rights in connection with any breach by Tenant or
Landlord, as applicable, of any provision of this Lease shall not be deemed to
be a waiver of such provision or any subsequent breach or violation of the same
or any other provision of this Lease. The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
or violation by Tenant of any provision of this Lease other than the failure of
Tenant to pay the particular rent so accepted, regardless of Landlord's
knowledge of such preceding breach or violation at the time of acceptance of
such rent.
Section 19.13. CAPTIONS. The captions and headings of the
Articles and Sections in this Lease are for convenience only and shall not in
any way limit or be deemed to construe or interpret the terms and provisions of
this Lease.
Section 19.14. TIME OF ESSENCE. Time is of the essence of
this Lease and of all provisions hereof, except as otherwise provided herein.
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Section 19.15. INTEREST RATE. As used herein, the term
"Interest Rate" shall mean a per annum rate of interest equal to three percent
(3%) plus the rate most recently announced by Wells Fargo Bank, N.A., at its
main office in San Francisco, California, as its "Prime Rate", serving as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, but in no event in excess of the maximum applicable
usury limitation.
Section 19.16. GOVERNING LAW. This Lease shall be governed
by, and construed and enforced in accordance with, the laws of the State of
California.
Section 19.17. ENTIRE AGREEMENT. The terms of this Lease are
intended by the parties as a final expression of their agreement with respect to
such terms as are included in this Lease and shall supersede any prior
agreements, memoranda or other written communications regarding this Lease. The
parties further intend that this Lease constitutes the complete and exclusive
statement of its terms and that no extrinsic evidence whatsoever may be
introduced in any judicial proceedings, if any, involving this Lease.
Section 19.18. INVALIDITY. If any provision of this Lease or
the application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each provision of
this Lease shall be valid and be enforceable to the full extent permitted by
law.
Section 19.19. AUTHORITY. If Tenant executes this Lease as a
corporation, a partnership or limited liability company, each of the persons
executing this Lease on behalf of Tenant does hereby covenant and warrant that
Tenant is a duly authorized and existing entity, that Tenant has full right and
authority to enter into this Lease, and that each and all of the persons on
behalf of Tenant are authorized to do so. Upon Landlord's request, Tenant shall
provide Landlord with evidence reasonably satisfactory to Landlord confirming
the foregoing covenants and warranties.
Section 19.20. NO OFFER. No contractual or other rights shall
exist between Landlord and Tenant with respect to the Premises until both have
executed and delivered this Lease, notwithstanding that Landlord has delivered
to Tenant an unexecuted copy of this Lease. The submission of this Lease to
Tenant shall not constitute the grant of an option for the Tenant to lease, or
otherwise create any interest by Tenant in, the Premises or any other premises
in the Building or Project. The execution of this Lease by Tenant and return to
Landlord shall not be binding upon Landlord, notwithstanding any time interval,
until Landlord has in fact executed and delivered this Lease to Tenant.
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Section 19.21. NO REPRESENTATIONS OR WARRANTIES. Neither
Landlord nor Landlord's members, partners, employees, agents or contractors have
made any representations or warranties with respect to the Premises, the
Building, the Project or this Lease, except as expressly set forth herein.
Section 19.22. BROKERS. Each party hereto represents and
warrants that it has dealt with no broker, finder or salesperson in connection
with this Lease, other than Landlord's Broker and Tenant's Broker listed in the
Basic Lease Information, and each party hereto shall indemnify, defend and hold
the other party harmless from and against and all losses, costs, claims,
damages, liabilities or causes of action (including attorney's fees) arising out
of or relating to any breach of the foregoing representation and warranty or
arising out of or relating to any claim made by any broker, finder or
salesperson claiming to have dealt with the indemnifying party.
Section 19.23. AMENDMENTS. This Lease may not be modified or
amended except by an instrument in writing executed by both parties hereto.
Section 19.24. NAME. Tenant shall not use the name of the
Building or the Project for any purpose other than as an address of the business
to be conducted by Tenant in the Premises. The name of the Building and/or the
Project may be changed from time to time in Landlord's sole discretion.
Section 19.25. SIGNS, DIRECTORY. Tenant shall have the right
to place a sign identifying Tenant's occupancy of the Premises on the existing
monument sign for the Building, if any, on the Building and in any directory in
the Building lobby, in each case subject to Landlord's prior written consent,
which consent shall not be unreasonably withheld by Landlord. All signs so
consented to by Landlord and placed by Tenant on any monument sign for the
Building or upon or in the Building or Premises shall be fabricated and
installed by Tenant at its sole cost and expense and shall comply in all
respects with size, design, lettering and material guidelines established from
time to time by Landlord for the Project. Landlord reserves the right to change
or alter such guidelines at such times and for such tenants as Landlord may
determine. Tenant shall comply with all applicable statutes, ordinances, rules
and regulations of governmental authorities with respect to any such signs.
Section 19.26. PARKING. Tenant, at no cost or expense to
Tenant, shall have the non-exclusive use of not more than One Hundred
Eighty-Four (184) of the parking spaces in the parking areas of the Project for
the parking of motor vehicles by Tenant's employees working on the Premises.
Landlord shall have the right to relocate such non-exclusive parking spaces from
time to time to other parking areas in or adjacent to the Project. Landlord
shall have no obligation to monitor or police the use of any parking areas or
otherwise to assure Tenant or its employees of the availability of any parking
spaces. Notwithstanding the foregoing, Landlord shall from time to time have
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the right to institute and maintain procedures for controlling the use of the
parking areas in the Project, including, without limitation, through the
issuance of stickers or badges to be displayed on the vehicles of authorized
users of the parking areas. Tenant shall cause its employees to comply with any
such procedures instituted and maintained by Landlord from time to time.
Section 19.27. BUILDING ACCESS. Landlord shall provide Tenant
with Two Hundred Fifty (250) building access cards for the Building at a cost of
$10 per card. Tenant shall return all such building access cards to Landlord
upon the expiration or early termination of the Term of this Lease. Tenant shall
pay to Landlord such charges as Landlord shall impose from time to time with
respect to any building access card not returned or damaged.
Section 19.28. LANDLORD AMENITIES. Notwithstanding anything to
the contrary contained in this Lease, Tenant and its employees shall have the
right to use, in common with the Landlord, its employees, agents, and invitees,
and any other parties to whom Landlord shall grant such rights (a) the
volleyball court, basketball court, picnic tables and lawn area immediately
adjacent to the Premises, and (b) the cafeteria located in the Administration
Building of the Project during Landlord's hours of operation of the cafeteria
from time to time. Tenant's rights under this Section shall be subject to such
rules and regulations, and amendments thereto, as Landlord shall promulgate from
time to time. In no event shall Landlord be obligated to operate the cafeteria
for Tenant's benefit, and Landlord shall have the right to change or reduce
Landlord's hours of operation of the cafeteria and to discontinue any cafeteria
service entirely, at Landlord's sole option.
Section 19.29. CONFERENCE ROOMS. Tenant shall have the
right to use the conference room on the first floor of the Administration
Building ("Conference Room") from time to time ("Use Periods") during the
Term. Tenant shall schedule each such Use Period with Landlord in writing a
reasonable period of time in advance of the date of such Use Period, and
availability of the Conference Room shall be subject to the prior right of
use by Landlord, its employees, agents or invitees and other tenants.
(b) Tenant shall pay to Landlord, at the same time and in
the same manner as the payment of Monthly Base Rent, a charge calculated in
accordance with Section 7.3 above for each Use Period. Landlord shall cause the
Conference Room to be unoccupied and available for Tenant's use during the Use
Periods. At the end of each Use Period, Tenant shall leave the Conference Room
in the same condition as it was prior to such Use Period and shall remove
therefrom any garbage or debris created by Tenant and any other parties using
the Conference Room during such Use Period.
Section 19.30. SECURITY, CUSTOMER SERVICE AREA. If at any time
during the Term of this Lease, Landlord shall no longer require the security and
customer service
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area located on the first floor of the Building and not included in the
Premises, and shall vacate such security and customer service area, such
security and customer service area shall thereupon become a part of the
Premises. Landlord and Tenant shall promptly execute and deliver an appropriate
amendment to this Lease providing for (a) incorporation of such security and
customer service area within the Premises; (b) Tenant's payment of Monthly Base
Rent with respect to such security and customer service area at the rental rate
then provided for under this Lease with respect to the balance of the Premises,
subject to such increases as are provided for under this Lease; (c) an
appropriate adjustment to Tenant's Share; and (d) such other reasonable terms
and provisions as Landlord and Tenant shall agree upon. In no event shall
Landlord be obligated to make any alterations, additions, improvements or
repairs to such security and customer service area, and Tenant shall accept
possession of such security and customer service area in its "as-is" condition.
The security and customer service area consists of 3,672 square feet of rentable
area.
(b) At Tenant's request and upon Landlord's reasonable
approval, Landlord shall caused to be installed a demising wall or door
separating such security and customer service area from the Premises. If
Landlord shall install such demising wall or door, Landlord shall cause such
demising wall or door to be removed following Landlord's vacating such security
and customer service area. Landlord and its employees, agents and contractors
occupying such security and customer service area shall have the reasonable
right to use the restrooms and similar amenities and facilities in the Premises
from time to time. Apart from such use, such occupants shall not enter upon the
Premises and Tenant, its employees, agents and contractors shall not enter upon
such security and customer service area (including through use of the stairway
connecting such areas), except in the case of an emergency requiring such
access.
Section 19.31. ANTENNA. Notwithstanding anything to the
contrary contained in this Lease, as long as space is available on the roof of
the Building, Tenant, at its sole cost and expense, shall have the right to
install, operate and maintain an antenna ("Antenna") on the roof of the Building
in a location reasonably approved by Landlord. The size and design
specifications for the Antenna, and the manner in which the Antenna shall be
installed, shall be subject to the reasonable prior written approval of
Landlord. Tenant's installation, operation and maintenance of the Antenna shall
be subject to the following terms and conditions:
(a) Tenant's right to install, operate and maintain the
Antenna shall be subject to all applicable governmental laws, rules and
regulations, and any private covenants, conditions, and restrictions and subject
to Tenant obtaining all required licenses, permits and approvals of governmental
authorities, and Landlord makes no representation or warranty that such laws,
rules and regulations, or private covenants, conditions and restrictions allow
such installation, operation and maintenance;
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(b) All costs of installation, operation and maintenance
of the Antenna and the connecting cable (including, without limitation, labor
costs for routing the cable and costs of obtaining any necessary permits) shall
be borne by Tenant;
(c) It is expressly understood that Landlord retains the
right to use the roof of the Building for any purpose whatsoever and to relocate
the Antenna provided that Landlord shall not unreasonably interfere with the use
of the Antenna;
(d) Tenant shall use the Antenna so as not to cause any
interference to Landlord or to other tenants in the Building or Project or with
Landlord's or any other tenant's communication equipment and so as not to damage
or interfere with the operation of the Building or Project;
(e) Landlord shall not have any obligations with respect
to the maintenance or repair of the Antenna, and Landlord shall not be
responsible for any damage that may be caused to Tenant or to the Antenna by any
other tenant in the Building or Project. Landlord makes no representation or
warranty that the Antenna will be able to receive or transmit communication
signals without interference or disturbance and Tenant agrees that Landlord
shall not be liable to Tenant therefor;
(f) Tenant shall (i) be solely responsible for any damage
caused as a result of the Antenna, including damage to the Building, (ii)
promptly pay any tax, license or permit fees charged pursuant to any laws or
regulations in connection with the installation, maintenance or use of the
Antenna and comply with all precautions and safeguards recommended by all
governmental authorities, (iii) pay for all necessary repairs, replacements to
or maintenance of the Antenna, and (iv) indemnify, defend and hold Landlord
harmless from and against any and all losses, costs, claims, damages,
liabilities and causes of action (including attorneys' fees and costs) arising
out of or in any way connected with the installation, operation or removal of
the Antenna;
(g) Tenant shall remove the Antenna and connecting cable
at Tenant's expense upon the expiration or earlier termination of the Lease or
upon the imposition of any governmental law or regulation which may require
removal, and shall repair any damage caused by such removal; and
(h) Tenant's rights hereunder with respect to such
Antenna shall be non-exclusive and Landlord itself shall have the right, and
Landlord may permit others, to install and maintain antenna, satellite dishes
and similar facilities on the Building.
Section 19.32. EXHIBIT. Attached hereto is EXHIBIT A, which is
hereby incorporated herein by reference.
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IN WITNESS WHEREOF, Landlord and Tenant have executed this
Lease as the date set forth in the Basic Lease Information.
LANDLORD: TYCO ELECTRONICS CORPORATION,
a Pennsylvania corporation
By:
---------------------------------
Title:
---------------------------------
TENANT: INTERWAVE COMMUNICATIONS, INC.,
a Delaware corporation
By: [Illegible]
---------------------------------
Title: EVP CFO
---------------------------------
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EXHIBIT "A"
FLOOR PLAN
1
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES
- interWAVE Communications, Inc., a Delaware corporation
- interWAVE Communications, S.A., a French corporation
- interWAVE Communications B.V., a Netherlands corporation
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
InterWAVE Communications International, Ltd.
We consent to the use of our report included herein, and to the references
to our firm under the headings "Experts" and "Selected Consolidated Financial
Data" in the prospectus.
San Francisco, California
December 3, 1999
