<PAGE>
As filed with the Securities and Exchange Commission on April 11, 2000
Registration No. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Airspan Networks Inc.
(Exact name of registrant as specified in its charter)
Washington 4812 75-2743995
(Primary Standard (IRS Employer
(State or other Industrial Identification No.)
jurisdiction of Classification Code
incorporation or Number)
organization) ---------------
Cambridge House, Oxford Road
Uxbridge, Middlesex UB8 1UN England
011 44 1895 467 100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)
PTSGE, Inc.,
701 Fifth Avenue, Suite 5000,
Seattle, Washington 98104
(206) 623-7580
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies of all communications to:
Mark R. Beatty William M. Kelly
Christopher H. Cunningham Davis Polk & Wardwell
Preston Gates & Ellis LLP 1600 El Camino Real
701 Fifth Avenue, Suite 5000 Menlo Park, California 94025
Seattle, Washington 98104-7078 (650) 752-2000
(206) 623-7580
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement as the
underwriters shall determine.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
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,
check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Maximum
Title of securities aggregate offering Amount of
to be registered price (1)(2) registration fee
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<S> <C> <C>
Common stock, $0.0001 per share............ $65,000,000 $17,160
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</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
(2) Includes shares issuable upon the underwriters exercise of their over-
allotment option.
---------------
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.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 11, 2000.
Shares
[logo]
Airspan Networks Inc.
Common Stock
-----------
Prior to this offering, there has been no public market for our common stock.
We currently estimate that the initial public offering price per share will be
between $ and $ per share. We intend to apply to list the common stock on
The Nasdaq Stock Market's National Market under the symbol "AIRN."
The underwriters have an option to purchase a maximum of additional
shares to cover over-allotments of shares.
Investing in our common stock involves risks. See "Risk Factors" on page 7.
<TABLE>
<CAPTION>
Price to Underwriting Discounts Proceeds to
Public and Commissions Airspan
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<S> <C> <C> <C>
Per Share.................................. $ $ $
Total...................................... $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about , 2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Credit Suisse First Boston
Deutsche Banc Alex. Brown
Lehman Brothers
U.S. Bancorp Piper Jaffray
The date of this prospectus is , 2000.
<PAGE>
Inside front cover artwork
Graphics depicting Airspan products including base stations, antennas, and
urban and rural settings where they are deployed with text: "Airspan provides
advanced CDMA-based fixed wireless access solutions to enable communications
service providers to deliver integrated high-speed data, voice and Internet
access services to business and residential customers around the globe."
Logo, Airspan The Wireless Future for Telecommunications
<PAGE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................. 3
Risk Factors........................ 7
Special Note Regarding Forward-
Looking Statements................. 16
Use Of Proceeds..................... 17
Dividend Policy..................... 17
Capitalization...................... 18
Dilution............................ 19
Selected Financial Data............. 20
Management's Discussion And Analysis
Of Financial Condition And Results
Of Operations...................... 21
Business............................ 30
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management....................... 38
Principal Shareholders........... 45
Description Of Capital Stock..... 47
Shares Eligible For Future Sale.. 49
Underwriting..................... 51
Notice To Canadian Residents..... 52
Legal Matters.................... 53
Experts.......................... 54
Where You Can Find More
Information..................... 55
Index To Consolidated Financial
Statements...................... F-1
</TABLE>
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You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
Dealer Prospectus Delivery Obligation
Until , 2000 (25 days after the commencement of this offering), all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to its unsold allotments or subscriptions.
2
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary does not contain all of the information that may be important to
you. You should read this entire prospectus before making an investment
decision.
In this prospectus, the terms "Airspan", "we", "our" and "us" refer to
Airspan Networks Inc., our subsidiaries and our predecessor, the unit of DSC
Communications Corporation that designed and sold fixed wireless communications
access products, except where it is clear that such term means only Airspan
Networks Inc.
Airspan Networks Inc.
We are a leading global supplier of fixed wireless communications access
systems that enable communications service providers to cost effectively
deliver integrated high speed data and voice services. Our systems are based on
proven, robust Code Division Multiple Access or CDMA technology that provides
wide area coverage, security and resistance to fading. Our systems can be
deployed rapidly and cost effectively, providing an attractive alternative to
wireline communications networks. Our integrated solutions include software
tools that provide coverage and spectrum optimization and ongoing network
management. To facilitate the deployment and operation of our systems, we also
offer network installation, integration, training and support services.
Our systems feature a point-to-multipoint architecture with each base
station providing services to multiple customer sites. During 1996, we began
shipping our first generation products which were among the first fixed point-
to-multipoint systems to be commercially deployed. Our systems have been
installed by over 35 communications service providers in approximately 25
countries and are being tested by numerous other service providers.
The explosive growth in Internet use is driving the global demand for
reliable high speed access and increased bandwidth. This demand, together with
global deregulation and competition, is driving incumbent and alternative
communications service providers to offer integrated high speed data and voice
services. Further, even in countries where communications systems are
unreliable or not yet widely deployed, businesses and consumers require
Internet access, fax and modem capabilities, in addition to basic telephone
service. In order to serve the rapidly growing communications access market,
communications service providers are demanding high performance, cost effective
systems enabling integrated high speed data and voice services.
The Airspan Solution
In order to address the demand for integrated high speed reliable data and
voice services, our fixed wireless communications access systems are designed
to deliver the following benefits to communications service providers:
Integrated Services Platform. Our solutions enable communications service
providers to offer integrated high speed data and voice services, unlike many
other access technologies that are optimized for either data or voice traffic,
but not both. Our technology platform is designed as a modular solution to
enable our systems to evolve as our technologies and customers' needs evolve.
Quality of Service and Reliability. Our proven technology allows
communications service providers to offer high quality data and voice services
with the same levels of reliability as traditional wireline networks. Our
technology provides wide area coverage, security and resistance to fading. In
addition, our systems allow alternative service providers to bypass the
incumbent's network.
3
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Rapid, Cost Effective Deployment. Our fixed wireless solutions are generally
less expensive to deploy than fiber or copper networks or other high speed
fixed wireless networks. Our systems' wide area coverage requires fewer base
stations, allowing faster deployment with lower initial capital outlays.
Communications service providers can quickly begin generating new subscriber
revenues due to the reduced up-front planning and infrastructure costs and the
relative ease of installation of our base stations. Our systems allow for rapid
provisioning of new subscribers that can be brought online in hours once the
basic infrastructure is in place.
Flexibility and Scalability. Our systems are highly configurable based on
customer requirements for frequency allocations. The modular design of our
systems allows for scalability as customer capacity requirements increase. In
addition, multiple service types, including data, voice and ISDN, can be
delivered over a single radio channel enabling communications service providers
to differentiate and customize their service offerings.
Comprehensive Implementation and Support Solutions. We offer our customers a
range of software tools that provide comprehensive frequency coverage and
interference planning analysis, together with subscriber provisioning, alarm,
maintenance and testing functions. In addition, to facilitate deployment and
operation of our systems, we offer network installation, integration, training
and support services.
The Airspan Strategy
Our goal is to be the leading provider of integrated fixed wireless
communications access systems to communications service providers. Key elements
of our strategy include the following:
. capitalize on our early market acceptance by communications service
providers
. extend our technology leadership position through continued substantial
investment in research and development
. target key growth market opportunities globally
. develop and expand our strategic relationships
. expand global sales, marketing and customer support presence
We were originally organized in 1994 as a unit within DSC Communications
Corporation. In January 1998 we created a new corporation that purchased the
Airspan unit from DSC Communications Corporation. We are a Washington, USA
corporation and our principal executive offices are located at Cambridge House,
Oxford Road, Uxbridge, Middlesex UB8 1UN England. Our telephone number is + 44
1895 467 100. We have a website located as www.airspan.com. The information on
our website does not form a part of this prospectus.
4
<PAGE>
The Offering
Common stock offered................ shares
Common stock outstanding after this shares (1)
offering...........................
Use of proceeds..................... Working capital, general corporate
purposes including increased research and
development and sales and marketing
expenditures and possible acquisitions
Proposed Nasdaq National Market AIRN
symbol.............................
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(1) The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of March 31, 2000, and does
not include the following:
. 5,330,554 shares issuable upon exercise of outstanding options at a
weighted average exercise price of $0.65 per share
. an aggregate of 843,270 shares available for future issuance under our
stock option plan
. an aggregate of 249,998 shares issuable upon the exercise of 249,998
warrants to purchase common stock at an exercise price of $1.75 per
share
Except where we state otherwise, the information we present in this prospectus:
. reflects the amendment of our charter to increase the authorized number
of shares of common stock to shares
. assumes that the underwriters do not exercise their over-allotment
option to purchase additional shares
. reflects the conversion of our outstanding convertible preferred stock
into common stock upon the closing of this offering
5
<PAGE>
Summary Financial Data
The following tables summarize our financial data. You should read our
financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The pro forma balance sheet data reflects
the conversion of our outstanding convertible preferred stock into common stock
upon the closing of this offering. The pro forma as adjusted balance sheet data
reflect our sale of shares of common stock in this offering at an assumed
initial public offering price of $ per share, after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by us.
<TABLE>
<CAPTION>
Predecessor(1) Company
------------------------ -------------------------------------
Year Ended Month Ended
December 31, January 25, Eleven Months Ended Year Ended
1997 1998 December 31, 1998 December 31, 1999
------------ ----------- ------------------- -----------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenue................. $ 4,818 $ 135 $ 11,485 $ 12,480
Gross profit............ 870 35 1,954 4,394
Operating expenses...... 17,613 1,850 37,519(2) 33,890
-------- ------- ---------- ----------
Loss from operations.... $(16,743) $(1,815) (35,565) (29,496)
======== =======
Net loss................ -- -- $ (35,596) $ (29,449)
========== ==========
Pro forma basic and
diluted net loss per
share(3)............... -- -- $ (0.85) $ (0.46)
Shares used to compute
pro forma basic and
diluted net loss per
share.................. -- -- 41,990,964 63,435,701
========== ==========
</TABLE>
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(1) The statement of operations data relating to our predecessor are further
described in Note 1 to our financial statements.
(2) Includes a charge of $14 million for acquired in-process research and
development in connection with the acquisition of the net assets of our
predecessor.
(3) Pro forma basic and diluted per share calculations reflect the pro forma
conversion at the date of issuance of all outstanding shares of preferred
stock into shares of common stock.
<TABLE>
<CAPTION>
As of December 31, 1999
---------------------------
Pro Pro Forma
Actual Forma As Adjusted
------- ------- -----------
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents........................... $58,828 $58,828 $
Working capital..................................... 68,795 68,795
Total assets........................................ 88,220 88,220
Long term debt...................................... 20,138 20,138
Stockholders' equity................................ 57,212 57,212
</TABLE>
6
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making a
decision to invest in Airspan.
Risks Related To Our Business
We have incurred substantial losses and may not be profitable in the future.
We have incurred net losses since we became an independent company, and as
of December 31, 1999 we had an accumulated deficit of $65.0 million. Our
operating losses have been due in part to the commitment of significant
resources to our research and development and sales and marketing
organizations. We expect to devote additional resources to these areas and, as
a result, will need to continue increasing our quarterly revenues to achieve
and maintain profitability. Although our revenues have increased in recent
periods, we cannot be certain that our revenues will grow at past rates or that
we will achieve sufficient revenues for profitability. If we do achieve
profitability, we cannot be certain that we can sustain or increase
profitability on a quarterly or annual basis in the future.
We have a limited operating history, which makes our future operating results
uncertain.
We are an early-stage company in the emerging fixed wireless communications
access market. We operated as a unit of DSC Communications Corporation
beginning in 1994 and did not become an independent company until January 1998.
As a result of our limited operating history, we have limited financial data
that you can use to evaluate our business. Accordingly, our prospects must be
considered in light of the risks and difficulties frequently encountered by
companies in the early stage of development, particularly companies in new,
rapidly evolving and highly competitive markets.
In addition, the historical financial information for the year ended
December 31, 1997 and the one month ended January 25, 1998 that we have
included in this prospectus may not reflect what our results of operations
would have been had we operated as a separate, stand-alone company during those
periods. The information for these periods has been prepared as a statement of
revenues and direct costs and does not include DSC corporate allocations of
certain overhead, general and administrative expenses, interest expense and
income taxes, as it is impracticable to allocate such expenses arbitrarily on a
retroactive basis. Therefore, those periods are not good indications of our
future performance.
Our results of operations are volatile and difficult to predict. If we fail to
meet earnings estimates, our stock price could decline significantly.
Our quarterly and annual operating results have fluctuated in the past and
will likely vary in the future. As a result, we believe that period-to-period
comparisons of our results of operations are not a good indication of our
future performance. In some future quarter or quarters, our operating results
may be below the expectations of public market analysts or investors. In such
an event, the market price of our common stock may decline significantly. A
number of factors are likely to cause our quarterly results to vary, including:
. the timing and size of individual orders for our products, particularly
those of our customers involving major deployments that would materially
affect our revenue in a given quarter
. the length of the sales cycle for our products
. innovation and introduction of new technologies, products and services
by our competitors and our ability to react quickly compared to our
competitors
. reductions in the price of communications systems by our competitors
. the ability of our suppliers and manufacturers to fulfill our orders and
potential shortages of key components
7
<PAGE>
. the overall level of demand for communications systems by consumers and
businesses and its effect on the demand for our product and services by
our customers
We incur expenses in significant part based on our expectations of future
revenue. As a result, we expect our operating expense to be relatively fixed
in the short run. Accordingly, an unanticipated decline in revenue for a
particular quarter could have an immediate negative effect on results for that
quarter.
A loss of one or more of our key customers could cause a significant decrease
in our net revenue.
We currently derive, and expect to continue to derive, a substantial
percentage of our net sales from fewer than ten customers. For the year ended
December 31, 1999, our ten largest customers accounted for 89% of our revenue.
A number of our customers are affiliated companies, increasing our customer
concentration. The amount of revenue we derive from a specific customer is
likely to vary from period to period, and a major customer in one period may
not produce significant additional revenue in a subsequent period. To the
extent that any major customer terminates its relationship with us, our
revenues could decline significantly.
Our customer contracts vary widely in terms and duration, allow our customers
to terminate and are subject to regulatory approvals.
Our contracts and purchase orders are separately negotiated with each of
our customers and the terms may vary widely. Some customers may only execute
short-term purchase orders for a single or a few systems at one time instead
of long-term contracts for large scale deployment of our systems. These
purchase orders do not ensure that they will purchase any additional products
beyond that specifically listed in the order.
Moreover, since we believe that these purchase orders may represent the
early portion of longer term customer programs, we expend significant
financial and personnel resources and expand our operations. If our customers
fail to purchase additional products to fulfill their program as we expect, we
may be unable to recover the costs we incurred and our business could suffer.
In addition, our contracts generally contain provisions allowing our
customers to terminate the agreement without significant penalties, and some
contracts are conditional upon our customer's ability to receive foreign
regulatory approvals. If our customers fail to obtain the required regulatory
approvals in a timely manner, or elect to terminate their contracts wit us,
our revenues would be reduced.
Our sales cycle is typically long and unpredictable.
The length of the sales cycle with a particular customer is influenced by a
number of factors, including:
. the particular communications market that the customer serves
. the testing requirements imposed by the customer on our systems
. the customer's experience with sophisticated communications equipment
including fixed wireless technology
. the cost of purchasing our systems, including the cost of converting to
our products from previously installed equipment, which may be
significant
Before we receive orders, our customers typically test and evaluate our
products for a period of months or, in some cases, more than a year. In
addition, the emerging and evolving nature of the communication access market
may cause prospective customers to delay their purchase decisions as they
evaluate new technologies or competing technologies or wait for new products
or technologies. As the average order size for our products increases, our
customers' processes for approving purchases could become more complex,
leading to a longer sales cycle. As a result, the unpredictable length of our
sales cycle contributes to the uncertainty of our future operating results.
8
<PAGE>
Our international operations may be difficult and costly.
Sales to customers based outside the U.S. have historically accounted for a
substantial majority of our revenues. In 1999, our international sales
accounted for 96% of our total revenue. We are a U.K. based operation with
primarily international sales, which exposes us to risks associated with
international operations including:
. longer payment cycles, including difficulty in collecting accounts
receivable and timing delays associated with collection
. tariffs, duties, price controls or other restrictions on foreign
currencies or trade barriers imposed by foreign countries and
fluctuations in currency exchange rates
. import or export licensing and product certification requirements
. seasonal reductions in business activity in some parts of the world
. unexpected changes in regulatory requirements
. difficulties and costs of staffing and managing foreign operations
. political and economic instability, including the impact of economic
recessions
. limited ability to enforce agreements, intellectual property and other
rights in some foreign countries
. higher levels of regulation relating to the telecommunications industry
We may not be able to expand our sales and distribution capabilities, which
would harm our ability to generate revenue.
We believe that our future success depends upon our ability to expand our
direct and indirect sales operations, including establishing relationships with
international distributors. We cannot be certain that we will be successful in
these efforts. In addition, our distributors may not devote adequate resources
to marketing, selling and supporting our products. If we fail to expand these
sales channels, our business will be seriously harmed.
Our results of operations could be negatively affected if we are unable to
manage our rapid growth effectively.
We have experienced a period of rapid growth and expansion that has strained
our resources. Since we became an independent company, the number of our
employees, including contract personnel, increased from 74 to 217 as of March
31, 2000. We intend to continue to expand rapidly. In order to manage growth
effectively, we must continue to develop and expand our operational systems,
procedures and controls. A failure to do so would impair our ability to
accurately forecast sales demand, manage our product inventory and record and
report financial and management information on a timely and accurate basis. Our
inability to manage growth effectively could seriously harm our business.
Competition from larger, better capitalized or emerging competitors for our
products could result in price reductions, reduced gross margins and loss of
market share.
We compete in a new, rapidly evolving and highly competitive and fragmented
market. We compete with companies that are producing fixed wireless
communications access systems, satellite access systems, cable access systems
and other new entrants to this industry, as well as traditional communications
companies.
We expect competition to persist and intensify in the future. In the
particular frequencies where we operate, we compete directly with ECI and
Lucent, as well as smaller start-up companies. We compete indirectly with a
number of large telecommunication equipment suppliers such as Alcatel,
Ericsson, Hughes,
9
<PAGE>
and Nortel. In addition, our technology competes with other high speed
solutions, such as digital subscriber lines, optical fiber cable, cable modems
and high speed leased lines and satellite technologies.
Many of our competitors are substantially larger than we are and have
significantly greater financial, sales and marketing, technical, manufacturing
and other resources and more established distribution channels. These
competitors may be able to respond more rapidly to new or emerging technologies
and changes in customer requirements or to devote greater resources to the
development, promotion, sale and financing of their products than we can.
Furthermore, some of our competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with third parties to
increase their ability to gain customer market share rapidly. These competitors
may enter our existing or future markets with systems that may be less
expensive, provide higher performance or contain additional features.
We expect our competitors to continue to improve the performance of their
current products and to introduce new products or new technologies that may
supplant or provide lower cost alternatives to our systems. To remain
competitive, we must continue to invest significant resources in research and
development, sales and marketing and customer support. We cannot be certain
that we will have sufficient resources to make these investments or that we
will be able to make the technological advances necessary to remain
competitive.
Our dependence on key suppliers and one manufacturer may result in product
delivery delays.
Some of the key components of our products, including ASICs, printed circuit
boards and radio frequency filters, are purchased from single vendors for which
alternative sources are not readily available. If our vendors fail to supply us
with components, we could experience significant delays in shipping our
products, which may result in our customers claiming damages. At times we have
been forced to purchase these components from distributors instead of from the
manufacturers, which significantly increases our costs.
In addition, we outsource most of our manufacturing processes to Flextronics
International. Flextronics relies on our forecasts of future orders to make
purchasing and manufacturing decisions. If our forecast turns out to be
inaccurate, it may lead either to excess inventory that would increase our
costs or a shortage of components that would delay shipments of our systems.
Our products incorporate software developed and maintained by third parties.
We depend on these third parties to deliver, support and enhance their
software. The failure of these third parties to do so could seriously harm our
business.
Our ability to attract, train and retain qualified employees is crucial to our
results of operations and future growth.
Our future success depends, in large part, on our ability to attract and
retain highly skilled personnel. The design and development of fixed wireless
communications access systems is complex. Accordingly, we need highly trained
professional software, hardware and radio frequency engineers and customer
support personnel. In addition, we will need to expand our sales and marketing
operations in order to increase market awareness of our products. We will need
to train new sales personnel and marketing personnel who will need time to
become fully productive. Skilled personnel are in short supply, and this
shortage is likely to continue. As a result, competition for personnel is
intense, especially in the London, England area where we maintain our primary
operations. The inability to attract or retain qualified personnel in the
future or delays in hiring required personnel, particularly engineers and sales
and marketing professionals, may seriously harm our business.
The loss of Eric Stonestrom or any of our other executive officers could impair
our ability to implement our business plan successfully.
We believe that our success will depend on the continued employment of our
senior management team, in particular our president and chief executive
officer, Eric Stonestrom. Our senior management team would be
10
<PAGE>
very difficult to replace and the loss of these key employees could make it
difficult for us to execute our business plan effectively.
If we are not able to implement a program to reduce costs over time, introduce
new products or increase sales volume, our gross margin may decline.
We expect the average selling prices of our products to decline due to a
number of factors, including competitive pricing pressures, rapid technological
change and volume sales discounts. Accordingly, to maintain or increase our
gross margin, we must develop and introduce new products or product
enhancements with higher gross margins and implement cost reductions.
To date, the erosion in the average selling prices has not had a material
effect on our business. However, if our average selling prices continue to
decline and we are not able to maintain or increase our gross margin, our
results of operations could be harmed.
We may not have adequate protection for our intellectual property, which may
make it easier for others to sell competing products at lower prices.
Our success depends in part on proprietary technology. We rely on a
combination of patent, copyright, trademark and trade secret laws and
contractual restrictions on disclosure to protect our intellectual property
rights. Despite our efforts to protect our proprietary rights, we cannot be
certain that the steps we have taken will prevent misappropriation of our
technology, and we may not be able to detect unauthorized use or take
appropriate steps to enforce our intellectual property rights. The laws of some
foreign countries do not protect our proprietary rights to the same extent as
the laws of the U.S. and the U.K., and we may encounter substantial
infringement problems in those countries. In addition, we do not file for
patent protection in every country where we conduct business. If we fail to
adequately protect our intellectual property rights, or fail to do so under
applicable law, it would be easier for our competitors to copy our products and
sell competing products at lower prices, which would harm our business.
Our products may infringe on the intellectual property rights of third parties,
which may result in lawsuits and prohibit us from selling our products.
Third parties could assert exclusive patent, copyright, trademark and other
intellectual property infringement claims against the technologies that are
important to us. In addition, third parties may assert claims, or initiate
litigation against us, or our manufacturers, suppliers or customers with
respect to existing or future products, trademarks or other proprietary rights.
There is a substantial risk of litigation regarding intellectual property
rights in our industry. Any claims against us or customers that we indemnify
against intellectual property claims, with or without merit, may:
. be time-consuming, costly to defend and harm our reputation
. divert management's attention and resources
. cause delays in the delivery of our products
. require the payment of money damages
. result in an injunction, which would prohibit us from using these
technologies and require us to stop shipping our systems until they
could be, if possible, redesigned
. require us to enter into license or royalty agreements, which may not be
available on acceptable terms or require payment of substantial sums
11
<PAGE>
Fluctuations in the values of foreign currencies could have a negative impact
on our profitability.
Although 87% of our sales in 1999 were denominated in U.S. dollars, we incur
most of our expenses in British pounds and most of our cost of goods sold in
Swedish krona. We expect these percentages to fluctuate over time. We do not
currently engage in currency hedging activities to limit the risks of exchange
rate fluctuations. As a result, fluctuations in the value of foreign currencies
could have a negative impact on the profitability of our global operations and
our business. The value of foreign currencies may also make our products more
expensive than local products.
A material defect in our products could seriously harm our credibility and harm
our business.
We have detected and are likely to continue to detect errors and product
defects in connection with new product releases and product upgrades. These
problems may adversely affect our ability to sell our systems, cause us to
incur significant warranty and repair costs and harm our credibility with our
customers. Fixed wireless communications access devices are highly complex and
frequently contain undetected software or hardware errors when first introduced
or as new versions are released. If our hardware or software contains
undetected errors, we could experience:
. delayed or lost revenues and market share due to adverse customer
reactions
. higher costs and expenses due to the need to provide additional products
and services to a customer at a reduced charge or at no charge
. claims for substantial damages against us, regardless of our
responsibility for any failure, which may lead to increased insurance
costs
. negative publicity regarding us and our products, which could adversely
affect our ability to attract new customers
. diversion of management and development time and resources
Our general liability insurance coverage may not continue to be available on
reasonable terms or in sufficient amounts to cover one or more large claims, or
our insurer may disclaim coverage as to any future claim. The successful
assertion of any large claim against us could adversely affect our business.
If there is a problem in one of our networks, we may have difficulty
identifying the source of the problem.
Our products must successfully integrate with products from other companies.
When problems occur in a network, it may be difficult to identify the source of
the problem. Although a third-party's product may be the source of hardware or
software errors in our network, our customers may hold us responsible. We may
not be able to respond quickly to correct these problems, which may result in
the loss of future sales and harm to our reputation. In addition, we may be
forced to incur significant expenses.
Risks Related To Our Industry
Fixed wireless communications access systems may not achieve widespread
acceptance, which could cause our business to fail.
While the wireless mobile market is an established worldwide market, the
fixed wireless communications access market is relatively new. Our ability to
sell and deploy our systems in the future depends on commercial acceptance of
fixed wireless technology as a communications access system. In particular, if
alternative technologies, including wireline, cable and satellite approaches,
achieve a significantly different cost, performance or deployment profile from
what we currently expect, fixed wireless systems could be significantly less
competitive.
12
<PAGE>
In order to achieve commercial acceptance, we will need to educate
prospective customers, including large, established communications companies,
governments and government contractors in developing countries, about the
benefits and uses of fixed wireless communications access systems in general
and our systems in particular. If our efforts fail or if fixed wireless
communications access systems do not achieve commercial acceptance, our
business could be seriously harmed.
Changes in telecommunications regulation could adversely affect our customers
and may lead to lower sales and may also restrict our business.
Our customers are subject to extensive regulation as communications service
providers. Changes in legislation or regulation that adversely affect our
existing and potential customers could lead them to spend less on
communications access systems, which would harm our business.
At present there are few laws or regulations that specifically address our
business of providing communications access equipment. However, future
regulation may include access or settlement charges or tariffs which could
impose economic burdens on us and our customers. We are unable to predict the
impact, if any, that future legislation, judicial decisions or regulations will
have on our business.
The communications systems market is changing rapidly, and failure to
anticipate and react to the rapid change could result in loss of customers or
unnecessary capital expenditure.
The market for communications systems has been characterized by:
. rapid technological developments
. evolving industry standards
. dramatic changes in the regulatory environment
. frequent new product and service introductions
Our future success depends largely on our ability to enhance our existing
products and services and to introduce new products and services that are based
on leading technologies and that are capable of adapting to changing
technologies, industry standards and customer preferences, in a timely and cost
effective manner.
New technologies, services or standards could require us to significantly
change our business model, develop new products or provide additional services.
New products and services may be expensive to develop and may result in the
introduction of additional competitors into the marketplace. Furthermore, if
the overall market for communications systems grows slower than anticipated, or
if our products and services fail in any respect to achieve market acceptance,
our revenues would be lower than we anticipate and our business could be
adversely affected.
Risks Related to the Offering
Our existing shareholders have voting control over Airspan.
On completion of this offering, our executive officers and directors and
their affiliates will beneficially own in the aggregate approximately % of our
outstanding common stock. This percentage will be % if the underwriters
exercise their over-allotment option in full. As a result, these shareholders
will be able to exercise significant control over all matters requiring
shareholder approval, including the election of directors and approval of
significant corporate transactions, which may have the effect of delaying or
preventing a third party from acquiring control over us.
13
<PAGE>
Our stock price may be volatile after this offering because our shares have not
been publicly traded before this offering.
Prior to this offering, you could not buy or sell our common stock publicly.
Accordingly, we cannot assure you that an active trading market for our stock
will develop or be sustained after this offering. Although the initial public
offering price will be determined based on several factors, the market price
for our common stock will vary from the initial offering price after this
offering. The market price of our common stock may fluctuate significantly in
response to a number of factors, some of which are beyond our control:
. variations in our quarterly operating results
. changes in financial estimates or investment recommendations by
securities analysts relating to our stock
. changes in market valuations of similar companies or the
telecommunications business in general
. announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments
. loss of a major customer
. the potential for future sales of our common stock
. fluctuations in the stock market price and volume of traded shares
generally, especially fluctuations in the traditionally volatile
technology sector
We may not be able to raise capital as needed to maintain our operations.
We expect the net proceeds from this offering together with our existing
resources and cash from operations to be sufficient to meet our working capital
and capital expenditure needs for at least the next 18 months. We may need to
raise additional funds for other purposes, and additional financing may not be
available on favorable terms, if at all. We may also require additional capital
to acquire or invest in complementary businesses or products or obtain the
right to use complementary technologies. If we cannot secure needed funds on
acceptable terms, we may not be able to develop or enhance our products, take
advantage of future opportunities or respond to competitive pressures or
unanticipated cash requirements, which could seriously harm our business. If we
issue additional equity securities to raise funds, the ownership percentage of
existing shareholders would be reduced. New investors may demand rights,
preferences or privileges senior to those of existing holders of our common
stock.
We may in the future be the target of securities class action litigation, which
could be costly and time consuming to defend.
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation.
Securities litigation may result in substantial costs and divert management's
attention and resources, which may seriously harm our business.
Our articles of incorporation and bylaws and Washington law contain provisions
that could delay or prevent a change of control of Airspan.
Certain provisions of our articles of incorporation and bylaws and
Washington law may discourage, delay or prevent a merger or acquisition that a
shareholder may consider favorable. These provisions include:
. authorizing the board of directors to issue additional common and
preferred stock
. not permitting cumulative voting in the election of directors
. limiting the persons who may call special meetings of shareholders
14
<PAGE>
. not permitting shareholder action by written consent
. establishing advance notice requirements for nominations for election of
the board of directors or for proposing matters that can be acted on by
shareholders at shareholder meetings
We are also subject to certain provisions of Washington law that could
delay, deter or prevent us from entering into an acquisition. Chapter 19 of the
Washington Business Corporation Act prohibits a Washington corporation such as
Airspan from engaging in a business combination with an interested shareholder
unless specific conditions are met.
Substantial future sales of our shares in the public market may cause our stock
price to fall.
If our shareholders (especially our existing shareholders) sell substantial
amounts of our common stock in the public market after this offering, our stock
price may decline significantly. These sales also might make it more difficult
for us to sell equity securities in the future. All of the shares sold in this
offering will be freely tradable. Substantially all of the remaining shares are
subject to lock-up arrangements between the shareholders and us or the
underwriters. Of the remaining shares of common stock outstanding after this
offering, will be eligible for sale in the public market 180 days following
the date of the final prospectus. Of these shares, shares will be subject
to volume limitations under federal securities laws.
In addition, on the date 180 days following the date of the final
prospectus, approximately shares will be subject to vested options.
15
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under the captions "Prospectus Summary", "Risk
Factors", "Use of Proceeds", "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" and elsewhere in this
prospectus are "forward-looking statements". These statements involve known and
unknown risks and uncertainties, such as our plans, objectives, expectations
and intentions, and other factors that may cause our, or our industry's, actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by the forward-looking statements. These
factors are listed under "Risk Factors" and elsewhere in this prospectus.
In some cases, you can identify forward-looking statements by terminology
such as "expects", "anticipates", "intends", "may", "should", "plans",
"believes", "seeks", "estimates" or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we do not guarantee future results, levels of
activity, performance or achievements. Our actual results and the timing of
certain events could differ materially from those anticipated in these forward-
looking statements. Moreover, neither we nor any other person assumes
responsibility for the accuracy and completeness of these statements. You
should not place undue reliance on these forward-looking statements. We are
under no duty to update any of the forward-looking statements after the date of
this prospectus to conform these statements to actual results.
16
<PAGE>
USE OF PROCEEDS
We expect to receive proceeds of approximately $ from the sale of
shares of common stock, and an additional $ from the sale of shares if
the underwriters' over-allotment option is exercised in full, at an assumed
initial public offering price of $ per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by us.
We intend to use the net proceeds of this offering primarily for additional
working capital and other general corporate purposes, including increased
research and development and sales and marketing expenditures. The amounts and
timing of these expenditures will vary depending on a number of factors,
including the amount of cash generated by our operations, competitive and
technological developments and the rate of growth, if any, of our business. We
may also use a portion of the net proceeds to acquire businesses, products and
technologies, or to establish joint ventures that we believe will complement
our current or future business. However, we have no specific plans, agreements
or commitments to do so and are not currently engaged in any negotiations for
any acquisition or joint venture.
Pending the uses described above, we intend to invest the net proceeds in
short-term, interest bearing, investment-grade securities. We cannot predict
whether the proceeds will be invested to yield a favorable return.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain any future earnings to fund the development and
growth of our business. In addition, pursuant to a loan agreement with a
capital equipment lessor, we cannot pay dividends without such lender's
consent. Accordingly, we do not currently anticipate paying any cash dividends
in the foreseeable future.
17
<PAGE>
CAPITALIZATION
The following table sets forth our cash and cash equivalents and
capitalization as of December 31, 1999:
. on an actual basis
. on a pro forma basis to reflect the conversion of our outstanding
convertible preferred stock into common stock upon the closing of this
offering
. on a pro forma as adjusted basis to reflect our sale of shares of
common stock in this offering at an assumed initial public offering
price of $ per share, after deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by us
The information set forth in the table below is qualified by, and you
should read it in conjunction with, our more detailed consolidated financial
statements and notes to financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this prospectus.
<TABLE>
<CAPTION>
As of December 31, 1999
-------------------------------
Pro Pro Forma
Actual Forma as Adjusted
-------- -------- -----------
(in thousands)
<S> <C> <C> <C>
Cash and cash equivalents...................... $ 58,828 $ 58,828 $
======== ======== ====
Long-term debt, net of current portion......... $ 20,138 $ 20,138 $
Stockholders' equity:
Convertible preferred stock $0.0001 par value;
in series A, B and C, 80,000,000 shares
authorized, 78,571,429 shares issued and
outstanding, actual; 81,000,000 authorized,
none issued and outstanding, pro forma and pro
forma as adjusted............................. 785 --
Common stock, $0.0001 par value; 100,000,000
shares authorized, 3,965,160 shares issued and
outstanding, actual; 100,000,000 shares
authorized, pro forma and pro forma as
adjusted; shares issued and outstanding,
shares issued and outstanding, pro forma
and pro forma as adjusted..................... 40 825
Notes receivable--stockholder.................. (130) (130)
Additional paid-in capital..................... 121,562 121,562
Accumulated deficit............................ (65,045) (65,045)
-------- -------- ----
Total stockholders' equity .................. 57,212 57,212
-------- -------- ----
Total capitalization......................... $ 77,350 $ 77,350 $
======== ======== ====
</TABLE>
- --------
This table excludes the following shares as of March 31, 2000:
. 5,330,554 shares issuable upon exercise of outstanding options at a
weighted average exercise price of $0.65 per share
. an aggregate of 843,270 shares available for future issuance under our
stock option plan
. an aggregate of 249,998 shares issuable upon the exercise of 249,998
warrants to purchase common stock at an exercise price of $1.75 per share
18
<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was
approximately $55.4 million, or $ per share after giving effect to the
conversion of all of our outstanding preferred stock into common stock upon the
closing of this offering. Pro forma net tangible book value per share
represents the amount of our total assets less total liabilities, divided by
the number of shares of common stock outstanding, after giving effect to the
conversion of all of our outstanding preferred stock into common stock.
Dilution per share to new investors represents the difference between the
amount per share paid by purchasers of shares of common stock in this offering
and the pro forma net tangible book value per share of common stock immediately
after the completion of this offering. After giving effect to the sale of the
shares of common stock in this offering at an assumed initial public
offering price of $ per share and after deducting the estimated underwriting
discounts and commissions and estimated offering expenses payable by us, our
pro forma net tangible book value at December 31, 1999 would have been
approximately $ , or $ per share. This represents an immediate increase in
net tangible book value of $ per share to existing shareholders and an
immediate dilution in net tangible book value of $ per share to new
investors of common stock in this offering. The following table illustrates
this dilution on a per share basis:
<TABLE>
<S> <C>
Assumed initial public offering price per share............................ $
Pro forma net tangible book value per share as of December 31, 1999......
Increase per share attributable to new investors.........................
---
Pro forma net tangible book value per share after this offering............
Dilution per share to new investors...................................... $
---
</TABLE>
The following table sets forth, on a pro forma basis as of December 31,
1999, after giving effect to the conversion of all of our outstanding
convertible preferred stock into common stock upon the closing of this
offering, the difference between the number of shares of common stock purchased
from us, the total consideration paid and the average price per share paid by
existing holders of common stock and by the new investors, before deducting
underwriting discounts and commissions and estimated offering expenses payable
by us, at an assumed initial public offering price of $ per share.
<TABLE>
<CAPTION>
Shares Total
Purchased Consideration Average
-------------- -------------- Price Per
Number Percent Amount Percent Share
------ ------- ------ ------- ---------
% $ % $
<S> <C> <C> <C> <C> <C>
Existing shareholders...................
New investors...........................
--- --- --- --- ---
Total................................... 100% $ 100% $
=== === === === ===
</TABLE>
- --------
This table excludes:
. 5,330,554 shares issuable upon exercise of outstanding options at a weighted
average exercise price of $0.65 per share
. an aggregate of 843,270 shares available for future issuance under our stock
option plan
. an aggregate of 249,998 shares issuable upon the exercise of 249,998
warrants to purchase common stock at an exercise price of $1.75 per share
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read together
with our consolidated financial statements and related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus. The financial information for the year
ended December 31, 1997 and month ended January 25, 1998 relates to the periods
while we were a unit of DSC, which we refer to as the predecessor business. The
information relating to the predecessor business has been prepared as a
statement of revenues and direct costs and expenses and is not intended to be a
complete presentation of the financial results of operations of the predecessor
business. The statement of revenues and direct costs and expenses for the year
ended December 31, 1997 and month ended January 25, 1998 and the consolidated
statement of operations data and balance sheet data for the eleven months ended
or as of December 31, 1998 and the year ended or as of December 31, 1999 are
derived from our audited consolidated financial statements included elsewhere
in this prospectus which have been audited by Ernst & Young, independent
auditors, whose report thereon is also included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Predecessor(1) Company
------------------------ -----------------------------------
Year Ended Month Ended Eleven
December 31, January 25, Months Ended Year Ended
1997 1998 December 31, 1998 December 31, 1999
------------ ----------- ----------------- -----------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenue................. $ 4,818 $ 135 $ 11,485 $ 12,480
Cost of revenue......... 3,948 100 9,531 8,086
-------- ------- ----------- -----------
Gross profit............ 870 35 1,954 4,394
-------- ------- ----------- -----------
Research and
development............ 9,747 1,074 10,524 13,845
Sales and marketing..... 3,832 398 6,765 9,883
General and
administrative......... 4,034 378 3,960 7,686
Acquired in-process
research and
development and
amortization of
intangibles............ -- -- 16,270(2) 2,476
Total operating
expenses............... 17,613 1,850 37,519 33,890
-------- ------- ----------- -----------
Loss from operations.... $(16,743) $(1,815) (35,565) (29,496)
======== =======
Interest and other
income, net............ -- -- 119 147
Income taxes............ -- -- (150) (100)
----------- -----------
Net loss................ -- -- $ (35,596) $ (29,449)
=========== ===========
Net loss per share--
basic and diluted...... -- -- $ (22.22) $ (11.59)
Shares used to compute
net loss per share--
basic and diluted...... -- -- 1,602,273 2,541,653
Pro forma net loss per
share--basic and
diluted(3)............. -- -- $ (0.85) $ (0.46)
Shares used to compute
pro forma net loss per
share--basic and
diluted................ -- -- 41,990,964 63,435,701
</TABLE>
<TABLE>
<CAPTION>
As of
-----------------------------------
December 31, 1998 December 31, 1999
----------------- -----------------
<S> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents................... $36,178 $58,828
Working capital............................. 39,758 68,795
Total asset................................. 57,840 88,220
Long term debt(2)........................... 16,095 20,138
Stockholders' equity........................ 32,624 57,212
</TABLE>
- --------
(1) The statement of operations data relating to our predecessor are further
described in Note 1 to our financial statements.
(2) Includes a charge of $14 million for acquired in-process research and
development in connection with the acquisition of the net assets of our
predecessor.
(3) Pro forma basic and diluted per share calculations reflect the pro forma
conversion at the date of issuance of all outstanding shares of preferred
stock into shares of common stock.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should be read in conjunction with our
consolidated financial statements and the related notes included else where in
the prospectus. The financial information for the year ended December 31, 1997
and January 1998 relate to the periods while we were a unit of DSC, which we
refer to as the predecessor business. The information relating to the
predecessor business has been prepared as a statement of revenues and direct
costs and expenses and is not intended to be a complete presentation of the
financial results of operations of the predecessor business. Since our
financial information for the eleven months ended December 31, 1998 is not a
full year, we refer to that period as "fiscal 1998" in the following discussion
and analysis.
Overview
We are a leading global supplier of fixed wireless communications access
systems that enable communications service providers to cost effectively
deliver integrated high speed data and voice services. We were originally
organized in 1994 as a unit within DSC Communications Corporation. DSC began
developing fixed wireless access systems in 1992. In January 1998 we created a
new corporation that purchased the Airspan unit from DSC. During February 1999
we moved to our own premises in Uxbridge, U.K. We generated revenue of $4.8
million in 1997, $11.5 million in fiscal 1998 and $12.5 million in 1999. We
have incurred net losses of $16.7 million, $35.6 million and $29.4 million for
1997, fiscal 1998 and 1999, respectively. Since becoming an independent
company, we have accumulated a deficit of $65.0 million as of December 31,
1999.
We generate revenue from sales of our integrated systems including hardware
and software and from services related to implementation and support
activities. Sales of our systems, primarily our AS4000 systems, constituted 93%
in fiscal 1998 and 89% in 1999. Although service revenue does not currently
constitute a material portion of our revenue, we believe services will increase
as a percentage of our revenue. Revenue is recognized on the sale of products
when they are shipped, all significant contractual obligations have been
satisfied and the collection of the resulting revenues is reasonably assured.
Revenue from customer service contracts, generally installation, maintenance,
and consulting, are recognized as the services are performed. Any billings in
excess of revenue are classified as deferred revenue.
We sell our products primarily through our direct sales force and, to a
lesser extent, through distribution channels. We have a direct sales presence
in the U.S., U.K., Sweden, Denmark, Poland, Czech Republic, Brazil, the
Philippines, South Korea, Sri Lanka and Canada. We also sell through
independent agents and resellers in markets where we do not have a direct sales
presence and to original equipment manufacturers who may sell our products
under their name.
In 1999, our international sales accounted for 96% of our total revenue,
while U.S. sales accounted for 4%. Most of the U.S. sales consisted of systems
sold to U.S. customers but were shipped to destinations outside the U.S. In the
future, we expect U.S. sales to increase as a percentage of our total sales. In
1999, our top ten customers accounted for 89% of our revenue, of which our
three largest customers each represented 27%, 18% and 13%, respectively.
Cost of revenue consists of component and material costs, direct labor
costs, warranty costs, royalties, overhead related to manufacturing our
products and customer support costs. Our gross margin is affected by changes in
our product mix because our gross margin on base stations and related equipment
is substantially higher than the gross margin on subscriber terminals. In
addition, our gross margin is affected by changes in the average selling price
of our systems, volume discounts granted to significant customers and the
proportion of total revenue of sales of software and services. Software sales,
which typically carry a higher gross margin than hardware sales, are expected
to increase as a proportion of total revenues in the future. Service sales,
21
<PAGE>
which typically carry a comparable gross margin to our hardware sales, are also
expected to increase as a proportion of total revenues in the future. Further,
we expect to derive an increasing proportion of our revenue from the sale of
our integrated systems through distribution channels. Revenue derived from
these sales channels typically carry a lower gross margin than direct sales.
Research and development expenses consist primarily of salaries and related
costs for personnel and expenses for design, development and testing facilities
and equipment. These expenses also include costs associated with product
development efforts, including consulting fees and prototyping costs from
initial product concept to manufacture and production. We expect to continue to
make substantial investments in research and development.
Sales and marketing expenses consist of salaries and related costs for
personnel, sales commissions, consulting fees and expenses for advertising,
travel, technical assistance, trade shows, and promotional and demonstration
materials. We expect to continue to incur substantial expenditures related to
sales and marketing activities including cost associated with the recruitment
of additional sales and marketing personnel and for the expansion of our
distribution channels.
General and administrative expenses consist of salaries and related expenses
for personnel, professional and consulting fees and other related expenses
including facilities costs. We expect general and administrative expenses to
continue to increase as we add personnel and incur additional costs related to
the anticipated growth of our business and operation as a public company.
We expect research and development, sales and marketing and general and
administrative expense categories to increase in absolute dollars. However, the
percentage of revenue that each of these categories represents will vary
depending on the rate of our revenue growth and investments that may be
required to support the development of new products and our penetration of new
markets.
Results of Operations
The results of operations have been prepared for the periods:
. the year ended December 31, 1997 from the predecessor business
. the month ended January 25, 1998 from the predecessor business
. the eleven months ended December 31, 1998 as an independent company
. the year ended December 31, 1999 as an independent company
22
<PAGE>
The following table provides operating data as a percentage of revenue for
the periods presented.
<TABLE>
<CAPTION>
Predecessor Company
------------------------ --------------------------
Eleven Months
Year Ended Month Ended Ended Year Ended
December 31, January 25, December 31, December 31,
1997 1998 1998 1999
------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
Revenue.................... 100.0% 100.0% 100.0% 100.0%
Cost of revenue............ 81.9 74.1 83.0 64.8
------ -------- ------ ------
Gross Profit............. 18.1 25.9 17.0 35.2
------ -------- ------ ------
Operating expenses:
Research and
development............. 202.3 795.6 91.6 110.9
Sales and marketing...... 79.5 294.8 58.9 79.2
General and
administrative.......... 83.7 280.0 34.5 61.6
Acquired in-process
research and development
and amortization of
intangibles............. -- -- 141.7 19.8
------ -------- ------ ------
Total operating expenses... 365.6 1,370.4 326.7 271.6
------ -------- ------ ------
Loss from operations....... (347.5) (1,344.4) (309.7) (236.3)
Interest and other income,
net....................... -- -- 1.0 1.2
Income taxes............... -- -- 1.3 0.8
------ -------- ------ ------
Net loss................... (347.5)% (1,344.4)% (309.9)% (236.0)%
====== ======== ====== ======
</TABLE>
Comparison of Fiscal Period Ended December 31, 1998 and Year Ended December 31,
1999
Revenue
Revenue increased 9% from $11.5 million in fiscal 1998 to $12.5 million in
1999. During 1999, revenue from older generation products decreased
substantially but was more than offset by revenue from sales of newer
generation products to customers located in Asia Pacific and Europe.
Cost of Revenue
Cost of revenue decreased 15% from $9.5 million in fiscal 1998 to $8.1
million in 1999, resulting from shipment of lower cost products and a $2.1
million provision for excess inventory for older generation products in fiscal
1998. Gross profit as a percentage of revenue increased from 17.0% during
fiscal 1998 to 35.2% during 1999. Excluding the inventory provision for older
generation products of $2.1 million, gross profits remained constant from
fiscal 1998 to 1999.
Research and Development Expenses
Research and development expenses increased 32% from $10.5 million in fiscal
1998 to $13.8 million in 1999, reflecting increased head count and increased
product manufacturing development costs as newer generation products moved from
development to manufacturing.
Sales and Marketing Expenses
Sales and marketing expenses increased 46% from $6.8 million in fiscal 1998
to $9.9 million in 1999, reflecting higher headcount and the expansion of our
sales and marketing activities. In addition, sales and marketing expenses for
fiscal 1998 and 1999 included provisions totaling $0.6 million and $0.7
million, respectively, for potential bad debt expense.
23
<PAGE>
General and Administrative Expenses
General and administrative expenses increased 94% from $4.0 million in
fiscal 1998 to $7.7 million in 1999, reflecting higher headcount, additional
costs of implementing systems and procedures for an independent company and
increased costs of our new facilities.
Acquired in-process research and development and amortization of intangibles
Acquired in-process research and development and amortization of intangibles
expense decreased 85% from $16.3 million in fiscal 1998 to $2.5 million in
1999, primarily reflecting the one-time write-off in fiscal 1998 of in-process
technology. We obtained an independent appraisal that resulted in the following
asset valuation and economic life estimations for the assets we acquired from
DSC.
<TABLE>
<CAPTION>
Estimated Fair Value Estimated Economic
Asset ($ in millions) Life
- ------------------------- -------------------- ------------------
<S> <C> <C>
In-process technology $14.0 0 Years
Core/developed technology 1.9 2 Years
Purchase contracts 2.1 2 Years
Patents 0.1 2 Years
Assembled workforce 1.2 4 Years
</TABLE>
Interest and Other Income, Net
Interest and other income increased 42% from $1.1 million in fiscal 1998 to
$1.6 million in 1999 and consisted of interest earned on cash deposits with
financial institutions. The increase from fiscal 1998 to 1999 was caused by
higher cash balances from the additional equity capital we raised. Amounts from
interest income were partially offset by fiscal 1998 and 1999 interest expense
of $1.0 million and $1.4 million, respectively, on predominately outstanding
indebtedness of $15.0 million owed to DSC Telcom L.P. related to the purchase
of the company's assets in January 1998.
Income taxes
We did not record an income tax benefit for the tax losses generated in the
U.K. The fiscal 1998 and 1999 tax provision of $0.2 million and $0.1 million,
respectively, relates to U.S. federal income taxes currently payable primarily
attributable to intercompany interest income.
Comparison of Year Ended December 31, 1997 and Fiscal Period Ended December 31,
1998
Revenue
Revenue increased 138% from $4.8 million in 1997 to $11.5 million in fiscal
1998. The $6.7 million increase during fiscal 1998 was primarily a result of
system sales to new customers located in Asia Pacific and Europe.
Cost of Revenue
Cost of revenue increased 141% from $3.9 million in 1997 to $9.5 million in
fiscal 1998. The $5.6 million increase during fiscal 1998 was largely
attributable to higher revenues as well as a $2.1 million excess inventory
provision related to older generation products. Gross profit as a percentage of
revenue decreased from 18.1% in 1997 to 17.0% in fiscal 1998 due primarily to
the inventory reserve. Gross profit in fiscal 1998 excluding the $2.1 million
inventory provision for older generation products would have been 36.7%.
24
<PAGE>
Research and Development Expenses
Research and development expenses increased 8% from $9.7 million in 1997 to
$10.5 million in fiscal 1998. This increase was predominately due to an
increase in head count and new product development programs.
Sales and Marketing Expenses
Sales and marketing expenses increased 77% from $3.8 million in 1997 to $6.8
million in fiscal 1998. The increase was largely attributable to recruiting,
hiring and relocating a direct sales, marketing and technical assistance staff
during fiscal 1998. During 1997, sales of our products were made through DSC's
sales organization, which sold a variety of DSC's products, including ours. The
costs of the sales organization were not allocated by DSC and are not reflected
in our 1997 expenses.
General and Administrative Expenses
General and administrative expenses were unchanged at $4.0 million in 1997
and in fiscal 1998. This reflects an increase in costs related to
administrative personnel and being an independent company being offset by lower
facilities related expenses.
Acquired in-process research and development and amortization of intangibles
Acquired in-process research and development and amortization of intangibles
expense increased from $0.0 in 1997 to $16.3 million in fiscal 1998 primarily
reflecting the one time write-off in fiscal 1998 of in-process technology.
Interest and Other Income, Net
We did not have any interest income or expense in 1997 while we were a unit
of DSC. Interest and other income increased to $1.1 million for fiscal 1998 and
consisted of interest earned on cash deposits with financial institutions. This
amount was partially offset by interest expense of $1.0 million on outstanding
indebtedness of $15.0 million owed to DSC related to the purchase of the
company's assets in January 1998.
Income taxes
We did not have any direct income taxes in 1997 while we were a unit of DSC.
The fiscal 1998 tax provision of $0.2 million relates to U.S. federal income
taxes primarily attributable to intercompany interest income.
25
<PAGE>
Quarterly Results of Operations
The following table represents our consolidated operating results for each
of the eight quarters ending December 31, 1999. The information for each of
these quarters is unaudited and has been prepared on the same basis as our
audited consolidated financial statements appearing elsewhere in this
prospectus. In the opinion of management, all necessary material adjustments
have been included to present fairly the unaudited quarterly results when read
in conjunction with our audited financial statements and related notes.
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------------------------------------
April 3, July 3, Oct. 2, Dec. 31, April 4, July 3, Oct. 3, Dec. 31,
1998(1) 1998 1998 1998 1999 1999 1999 1999
-------- ------- ------- -------- -------- ------- ------- --------
($ in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenue................. $ 976 $ 3,030 $ 2,696 $ 4,783 $ 1,301 $ 2,094 $ 3,509 $ 5,576
Cost of revenue......... 693 2,110 1,794 4,934 886 1,112 2,209 3,879
-------- ------- ------- ------- ------- ------- ------- -------
Gross profit (loss)..... 283 920 902 (151) 415 982 1,300 1,697
-------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development........... 1,850 2,341 2,920 3,413 3,215 3,330 3,460 3,840
Sales and marketing.... 639 1,414 1,779 2,933 1,931 1,707 2,388 3,857
General and
administrative........ 593 884 1,164 1,319 1,799 1,783 1,900 2,204
Acquired in-process
research and
development and
amortization of
intangibles........... 14,413 619 619 619 619 619 619 619
-------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses.............. 17,495 5,258 6,482 8,284 7,564 7,439 8,367 10,520
-------- ------- ------- ------- ------- ------- ------- -------
Loss from operations.... (17,212) (4,338) (5,580) (8,435) (7,149) (6,457) (7,067) (8,823)
Other income (expense):
Interest expense....... (176) (265) (273) (280) (282) (403) (377) (372)
Interest and other
income................ 242 224 302 345 392 471 334 384
-------- ------- ------- ------- ------- ------- ------- -------
Total other income
(expense)............. 66 (41) 29 65 110 68 (43) 12
-------- ------- ------- ------- ------- ------- ------- -------
Loss before income
taxes.................. $(17,146) $(4,379) $(5,551) $(8,370) $(7,039) $(6,389) $(7,110) $(8,811)
======== ======= ======= ======= ======= ======= ======= =======
As a Percentage of
Revenue:
Revenue................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue......... 71.0 69.6 66.5 103.2 68.1 53.1 63.0 69.6
-------- ------- ------- ------- ------- ------- ------- -------
Gross profit (loss)..... 29.0 30.4 33.5 (3.2) 31.9 46.9 37.0 30.4
-------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development........... 189.5 77.3 108.3 71.4 247.1 159.0 98.6 68.9
Sales and marketing.... 65.5 46.7 66.0 61.3 148.4 81.5 68.1 69.2
General and
administrative........ 60.8 29.2 43.2 27.6 138.3 85.1 54.1 39.5
Acquired in-process
research and
development and
amortization of
intangibles........... 1,476.7 20.4 23.0 12.9 47.6 29.6 17.6 11.1
-------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses.............. 1,792.5 173.5 240.5 173.2 581.4 355.3 238.4 188.7
-------- ------- ------- ------- ------- ------- ------- -------
Operating loss.......... (1,763.5) (143.2) (207.0) (176.4) (549.5) (308.4) (201.4) (158.2)
Other income (expense):
Interest expense....... (18.0) (8.7) (10.1) (5.9) (21.7) (19.2) (10.7) (6.7)
Interest income........ 24.8 7.4 11.2 7.2 30.1 22.5 9.5 6.9
Total other income
(expense)............. 6.8 (1.4) 1.1 1.4 8.5 3.2 (1.2) 0.2
-------- ------- ------- ------- ------- ------- ------- -------
Loss before income
taxes.................. (1,756.7)% (144.5)% (205.9)% (175.0)% (541.0)% (305.1)% (202.6)% (158.0)%
======== ======= ======= ======= ======= ======= ======= =======
</TABLE>
- --------
(1) For the period from January 26, 1998 to April 3, 1998.
26
<PAGE>
Our revenue and results of operations have fluctuated significantly from
quarter to quarter in the past, and we expect these fluctuations to continue in
the future. We have also incurred net losses in each quarter since inception,
and we expect to continue to incur losses for the foreseeable future. The
following discussion highlights significant events that have impacted our
revenues and financial results for the eight quarters ended December 31, 1999.
During fiscal 1998, our revenue was predominantly from sales of our older
generation products. Revenue substantially decreased in the first quarter of
1999 from the fourth quarter of fiscal 1998 due to a combination of (1)
customers spending budgeted funds prior to year-end and (2) a transition during
the first quarter of 1999 from older generation products to newer generation
products, including a lower-priced subscriber terminal. Following the
commercial introduction of our new products, revenues increased in each
subsequent quarter of 1999.
Cost of revenue, in absolute dollars, fluctuated throughout 1998 and 1999,
due to a combination of manufacturing start up costs and low volume production.
Gross profits fluctuated during each year in part due to changes in product mix
and were also adversely affected by volume price discounts. We made provisions
of $2.3 million and $0.2 million for excess inventory in the fourth quarter of
fiscal 1998 and the third quarter of 1999, respectively.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through private
sales of convertible preferred stock, which totaled $111.9 million (net of
transaction expenses) through December 31, 1999. We have also financed our
operations through equipment leases and loans aggregating an additional $5.0
million.
At December 31, 1999, our cash and cash equivalents totaled $62.9 million,
including $4.1 million of restricted cash that is held as collateral for
performance guarantees on customer and supplier contracts and with landlords.
We do not have a line of credit or similar borrowing facility, nor do we have
any material capital commitments.
Our long term debt consists primarily of the amount owed to DSC as part of
the purchase price paid for the company in January 1998. The debt, under a
promissory note of $17.2 million, consists of the original principal amount of
$15.0 million, plus accrued but unpaid interest. Interest accrues on the debt
at an annual rate of 7% and is compounded on a quarterly basis until February
2001, at which time principal and interest are to be repaid in equal
installments over the subsequent 36 months. We have other term loans or
subordinated debt aggregating $5.0 million at rates ranging from 6% to 9%
annually, payable in installments over periods ranging from 21 to 54 months.
We used cash in operating activities of $16.2 million in fiscal 1998 and
$29.8 million in 1999. The cash used in fiscal 1998 was primarily attributable
to an operating loss of $35.6 million and an increase in accounts receivables
and other current assets of $5.8 million. This use of cash was partly offset by
an in-process research and development charge of $14.0 million, in addition to
reductions in inventory, accounts payable, other accrued expenses and
depreciation and amortization of $10.4 million. The cash we used in 1999 was
mainly attributable to an operating loss of $29.5 million, an increase in
accounts receivables, inventory and other current assets of $6.4 million and a
reduction of accounts payable of $0.3 million. These amounts were partly offset
by accruals, accretion of interest on notes payable, and depreciation and
amortization of $6.3 million.
We used $3.4 million in cash in fiscal 1998, and $4.3 million in 1999, for
investing activities. In each period these amounts related primarily to capital
equipment purchases.
Our financing activities from the sale of convertible preferred stock
provided us with cash of $58.2 million in fiscal 1998 and $53.7 million in
1999. In addition, we obtained term loan and subordinated debt aggregating
27
<PAGE>
$5.0 million in 1999, which was offset in part by payments on long-term debt,
including capital lease obligations and depositing cash into a restricted
account as collateral.
We believe that the net proceeds from this offering, together with our
current cash, cash equivalents and borrowing capacity, will be sufficient to
meet our anticipated cash needs for working capital and capital expenditures
for at least the next 18 months.
Year 2000 Issues
As a result of the change over from 1999 to 2000, none of our systems or
products were affected nor are we aware of any issues that have affected our
third party suppliers or customers.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued FASB Statement
No. 133, "Accounting for Derivative and Hedging Activities." Statement 133
establishes standards for accounting for derivative financial instruments and
hedging activities and is effective for fiscal year ending December 31, 2001.
We currently hold no derivative instruments nor do we engage in hedging
activities. Accordingly, we anticipate that the adoption of Statement 133 will
not have a material impact on our financial positions, results of operations or
cash flows.
In March 1998, the AICPA issued Statement of Position ("SOP") 98-1,
"Accounting for the Cost of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 will be effective for fiscal year ending September 30,
2000. SOP 98-1 provides guidance on accounting for computer software developed
or obtained for internal use including the requirement to capitalize specified
costs and amortization of such costs. We have begun capitalizing costs in
calendar year 2000.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-
Up Activities." SOP 98-5 is effective for our year ending December 31, 2000.
This SOP provides guidance on the financial reporting of start-up costs and
organization costs. It requires the costs of start-up activities and
organization costs to be expensed as incurred. We do not expect that the
adoption of SOP 98-5 will have any material impact on our financial positions,
results of operations or cash flows.
During December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements". SAB
101 provides guidance on the recognition, presentation and disclosure of
revenue in the financial statements. Implementation of guidance prescribed in
the bulletin which applies to all registrants will not result in a change to
our revenue recognition policy.
Disclosures About Market Risk
The following discusses our exposure to market risk related to changes in
interest rates, equity prices and foreign currency exchange rates. This
discussion contains forward-looking statements that are exposed to risks and
uncertainties. Actual results could vary materially as a result of a number of
factors, including those discussed in "Risk Factors" and elsewhere in this
prospectus.
As of December 31, 1999, we had cash and cash equivalents of $62.9 million
(including restricted cash). Substantially all of these amounts consisted of
highly liquid investments with remaining maturities at the date of purchase of
less than 90 days. These investments are exposed to interest rate risk and will
decrease in value if market interest rates increase. A hypothetical increase or
decrease in market interest rates by 10 percent from the December 31, 1999
rates would cause the fair market value of these short-term investments to
change by an insignificant amount. Due to the short duration of these
investments, an immediate increase in interest rates would not have a material
effect on our financial condition or results of operations. Declines in
interest rates over time will, however, reduce our interest income.
28
<PAGE>
We do not own any equity investments, other than in our subsidiaries. As a
result, we do not currently have any direct equity price risk.
In 1999, 87% of our sales were denominated in U.S. dollars. Since our
manufacturing occurs in Sweden, most of our cost of goods are denominated in
Swedish krona. A large proportion of our expenses are denominated in British
pounds. We expect these proportions to fluctuate over time. Currently, we do
not hedge this risk; however, we will continue to monitor our foreign currency
exposures and may implement hedging strategies as we deem prudent.
29
<PAGE>
BUSINESS
Business Overview
We are a leading global supplier of fixed wireless communications access
systems that enable communications service providers to cost effectively
deliver integrated high speed data and voice services. Our systems are based on
proven, robust CDMA technology that provides wide area coverage, security and
resistance to fading. Our systems can be deployed rapidly and cost effectively,
providing an attractive alternative to wireline communications networks. Our
integrated solutions include software tools that provide coverage and spectrum
optimization and ongoing network management. To facilitate the deployment and
operation of our systems, we also offer network installation, integration,
training and support services.
Our systems feature a point-to-multipoint architecture with each base
station providing services to multiple customer sites. During 1996, we began
shipping our first generation products which were among the first fixed point-
to-multipoint systems to be commercially deployed. Our systems have been
installed by over 35 communications service providers in approximately 25
countries and are being tested by numerous other service providers.
Industry Overview
The Global Need for Integrated Data and Voice Communications Services
The explosive growth in Internet use is driving the global demand for
reliable high speed access and increased bandwidth. End-users worldwide are
demanding integrated communication access solutions that include reliable high
speed data and Internet access and high quality voice telephony services. Even
in countries where communications systems are unreliable or not yet widely
deployed, businesses and consumers increasingly require Internet access and fax
and modem capabilities, in addition to basic telephone service.
Global Deregulation and Increased Competition
Worldwide deregulation of the telecommunications industry has created the
opportunity for new competitors to provide local access connections that
historically were offered by a single incumbent provider. Most countries in
Europe, Latin America, and Asia have joined the U.S. and the U.K. in promoting
competition for communications services. Incumbent and alternative
communications service providers are seeking to differentiate their service
offerings on the basis of their range of services, quality and reliability,
customer service, provisioning and pricing.
Need for Cost Effective and Rapid Network Deployments
Alternative communications service providers have expanded their focus
beyond large business customers to small and medium-sized businesses and high-
end residential, small-office/home-office (SOHO) customers as well as providing
services outside of the major urban areas. These markets require more cost-
effective network deployment solutions to compensate for lower average customer
spending on communications services and larger coverage area requirements.
Many countries have networks that are unable to provide reliable data, voice
and fax services while many other countries lack the network infrastructure to
make basic telephony services broadly available. Communications service
providers in these markets, both incumbent and new entrants, need cost
effective, rapidly deployable alternatives to traditional copper based
networks. Time-to-market and the ability to offer integrated data and voice
services with attractive pricing are key success factors.
Access Network Bottleneck
While the communications transport network and Internet backbone are capable
of delivering data at extremely high speeds, data can only be delivered to the
end user as fast as the end-user's connection will
30
<PAGE>
permit. Traditional access methods are inadequate to address the rapidly
expanding bandwidth requirements. To address this access network bottleneck, a
number of alternative solutions have emerged.
. Digital Subscriber Line. Digital subscriber line, or DSL, technology
improves the data transmission rate of existing copper networks. DSL
transmission rates and service availability, however, are limited by
both the quality of the available copper and the distance from the
subscriber to the service provider's network equipment. These
limitations restrict the use of DSL in many countries outside the U.S.,
Canada and portions of western Europe.
. Cable Modems. Two-way cable modems using coaxial cable enable data
services to be delivered over a network originally designed to provide
television service to residential subscribers. Coaxial cable has greater
transmission capacity than copper wires, but is often costly to upgrade
for two-way data services. Additionally, because office buildings are
generally not wired for cable service, it is not a viable alternative
for many business users worldwide.
. Fiber Optics. Fiber optics provide the highest data transmission rate of
any access solution, but are the most costly to deploy. As a result,
fiber is typically used only to solve the bandwidth needs of the largest
businesses who can justify the higher costs.
. Satellite. Broadband satellite solutions enable two-way access services.
These solutions use broadcast satellite technology for high speed
transmissions from the network service provider to the subscriber, but
use slower wire-based connections to transmit data from the subscriber
to the network service provider. The data rate available to each
subscriber in a service area decreases as usage increases. As a result,
because they are not cost effective, satellite solutions are not widely
deployed worldwide.
Need for Fixed Wireless Access Solutions
The technology and cost limitations of existing wireline and satellite
network technologies have led many communications companies to deploy fixed
wireless networks because wireless technology can deliver high performance
integrated services more cost effectively, quickly and flexibly than other
solutions.
Wireless communications equipment operates within assigned, often licensed
frequency bands that vary as to the bandwidth of data that can be carried, the
effective range of a single cell hub and the cost of deployment. The following
diagram compares several currently available wireless technologies:
[Diagram depicting a comparison of millimeter wave wireless, wireless LAN,
fixed wireless access, cordless, cellular and advanced mobile systems
technologies in terms of user bit rate and maximum range.]
Each of these technologies is best suited to specific applications. Systems
based on millimeter wave technologies which utilize frequencies above 10 GHz,
for example, provide high bandwidth services, but are costly to deploy, have
significant range limitations, require line-of-sight to provide services and
are limited by weather conditions. These systems are generally targeted at
large business customers in major cities.
At the other end of the spectrum, lower frequency cordless and cellular
technologies have been widely deployed to deliver wireless voice service. The
bit rate limitations of these services, however, make them unsuitable for
delivering advanced high speed Internet access.
The 1.5 to 4.0 GHz frequency bands comprise a portion of the wireless
frequency spectrum that is increasingly being licensed worldwide, particularly
in the 3.5 GHz range. These frequency bands offer greater range and are less
sensitive to line-of-sight obstructions and weather conditions. They also
permit a much higher capacity for data transmission than with frequencies below
1.5 GHz.
The combination of technology costs and performance makes this spectrum
ideal for broader market applications. Communications service providers
addressing these markets require high performance, cost effective systems
enabling integrated high speed data and voice services.
31
<PAGE>
The Airspan Solution
We are a leading global supplier of fixed wireless communications access
systems that enable communications service providers to cost effectively
deliver integrated high speed reliable data and voice services. We have
developed a comprehensive access solution, which provides the following
benefits:
Integrated Services Platform. Our solutions enable communications service
providers to offer integrated high speed data and voice services, unlike many
other access technologies that are optimized for either data or voice traffic,
but not both. Our systems solve this problem by flexibly allocating the
available bandwidth to the services required, thereby permitting data and voice
to be transmitted efficiently. Our technology platform is designed as a modular
solution to enable our systems to evolve as our technologies and customers'
needs evolve.
Quality of Service and Reliability. Our systems are based on robust, proven
CDMA technology, which allows communications service providers to offer high
quality data and voice services with the same level of reliability that
traditional wireline networks provide. This technology provides wide area
coverage, security and resistance to fading. In addition, our systems allow
alternative service providers to bypass the incumbent's network enabling the
service provider to monitor on a real time basis the end user's network access
connection. Our products are successfully deployed and operated in a wide range
of demanding environments throughout the world.
Rapid, Cost Effective Deployment. Our fixed wireless solutions are generally
less expensive to deploy than fiber or copper networks or other high speed
fixed wireless networks. Our systems' wide area coverage requires fewer base
stations, allowing faster deployment with lower initial capital outlays. A
single base station in urban settings covers up to 70 square miles and in rural
settings covers as much as a 700 square miles. Communications service providers
can quickly begin generating new subscriber revenues due to the reduced up-
front planning and infrastructure costs and the relative ease of installation
of our base stations. Our systems allow for rapid provisioning of new
subscribers that can be brought online in hours once the basic infrastructure
is in place. For communications service providers, the "pay as you go" approach
reduces up-front capital costs and can increase return on investment.
Flexibility and Scalability. Our systems are highly configurable based on
customer requirements for frequency allocations. The modular design of our
systems allows for scalability as customer capacity requirements increase. Our
point-to-multipoint architecture also facilitates scalability by permitting
multiple subscribers to be connected to a single base station and multiple base
stations to be supported by a single access concentrator. In addition, multiple
service types, including data, voice and ISDN, can be delivered over a single
radio channel enabling communications service providers to differentiate and
customize their service offerings.
Comprehensive Implementation and Support Solutions. We offer our customers a
range of software tools that provide comprehensive frequency coverage and
interference planning analysis, together with subscriber provisioning, alarm,
maintenance and testing functions. In addition, to facilitate deployment and
operation of our systems, we offer network installation, integration, training
and support services. The communications service provider is generally
responsible for site preparation as well as having the responsibility and
installation for subscriber terminal installation. We have also developed a
network of subcontractors that allows us to support customers wherever our
products are deployed.
Our Strategy
Our goal is to be the leading provider of integrated fixed wireless
communications access systems to communications service providers. Key elements
of our strategy include the following:
Capitalize on our early market acceptance by communications service
providers. Our numerous installations with communications service providers
worldwide serve both as proof of concept and as a basis
32
<PAGE>
for reference selling to other communications service providers. We intend to
build upon this early acceptance of our products to become the primary provider
of fixed wireless communications access systems to these service providers. We
are particularly focused on expanding our existing customer relationships to
supply systems to their subsidiaries and affiliates worldwide.
Extend our technology leadership position. We believe that we have
established a technology leadership position in the market for fixed wireless
communications access solutions, and we intend to extend this position by
continuing to invest substantially in research and development. Our expertise
in wireless telecommunications and radio frequency engineering is based on
eight years of development experience and four years of deployment experience.
Our research and development efforts are particularly focused on increasing
data transmission capability and coverage area while reducing the cost of our
systems. To support our technological leadership position, we are actively
involved in the development of standards through our membership in or
participation with leading standards organizations such as the European
Telecommunications Standards Institute. We also expect to evaluate the
acquisition of additional businesses, products and technologies in order to
accelerate the development of and time-to-market with new technologically
advanced products.
Target key growth market opportunities globally. Our fixed wireless
communications access solutions find their strongest competitive advantage in
areas where there is a growing demand for integrated high speed data and voice
services and where cost considerations make traditional wireline solutions
impracticable. As a result, in a developed market like the United States, we
focus on small and medium sized businesses, SOHO users and high-end consumers
as well as end users in suburban and rural areas. In the developing world, our
opportunities are much broader due to the general inadequacy of the existing
communications infrastructure. In these markets, wireless solutions can be the
basis for a new national infrastructure.
Develop and expand our strategic relationships. We intend to develop and
expand our strategic relationships with large communications equipment
manufacturers to help us market our products to communications service
providers deploying large-scale networks. These relationships facilitate
broader deployments of our systems worldwide, through stronger sales presence
and additional integration services and support capabilities. We also intend to
form strategic relationships with communications companies situated within
certain countries where there are competitive advantages to having a local
presence. For example, in Brazil, where high import tariffs make it very
difficult for us to compete and where local relationships are important, we
have a manufacturing and marketing alliance with Tropico S.A.
Expand global sales, marketing and customer support presence. We intend to
significantly expand our sales, marketing and customer support presence to
drive additional deployments and increase awareness of Airspan among
communications service providers. We plan to aggressively hire sales and
marketing personnel in our existing offices as well as to open new sales and
customer support offices in key strategic markets globally.
Products
General
We supply fixed wireless access systems that provide integrated fixed
wireless data and voice services that connect residential and business
customers to a communications service provider's network. The end user
experiences a transparent connection with performance and features equivalent
to a high quality wireline access service. Our products consist primarily of
the following:
. AS4000, a product solution consisting of an access concentrator that
connects multiple base stations which in turn connect multiple
subscriber terminals
. AS8100, a network management system simplifying tasks such as
configuration and provisioning of subscribers, performance monitoring
and alarm management
33
<PAGE>
. AS9000, a comprehensive radio frequency and deployment planning tool
Overview of Airspan Fixed Wireless Access System
[picture and diagram of Airspan System Architecture including Central Office
Site, Base-Station Site, Subscriber Sites and Management Site.]
AS4000 Fixed Wireless Access Systems
Our AS4000 fixed wireless access systems provide a robust high speed CDMA
technology to deliver high speed data, voice and ISDN to a communications
service provider's local access networks.
[close up picture of subscriber terminal variants] [picture of subscriber
terminal antenna in mounted setting]
. the AS4000 System allows the signal to travel to and from the
subscriber's equipment (router, computer, fax or telephone) through the
building's existing internal wiring to a subscriber interface unit
. the subscriber interface unit is connected by a coaxial cable to an
external antenna which together form the subscriber terminal
. the antenna relays the information to the base station
. the signals from the various subscriber terminals (up to 2000 telephony
lines per base station) are routed through the base station to the
access concentrator, normally located at the communications service
provider's central switching center
. the signals are routed through the network to the final destination
The AS4000 System typically allocates a line to a subscriber terminal only
when needed; for example, when a customer picks up a telephone handset. This
technology allocates spectrum efficiently and increases total system capacity.
The access concentrator assigns capacity and provides a node for network
management. Priority channels can be configured to provide access to key users
such as emergency services.
AS8100 Network Management System
The AS8100 Network Management System is a configuration, alarm, test and
performance manager for the AS4000 range of products. The management system
helps ensure that the services provided over the AS4000 network are
uninterrupted and of high quality. The AS8100 is flexible and scalable to suit
a range of different networks and is available in different versions for the
network center, desktop and the field.
The AS8100 Network Management System operates on a Microsoft Windows NT
platform and the user interface is entirely graphical and windows-based, uses
drag-down menus, icon-based representations, maps and equipment views. The
system permits communications service providers to remotely manage a
geographically dispersed set of network elements.
AS9000 Airplan Planning and Configuration Tools
The AS9000 Planning and Configuration Tool is a sophisticated planning
solution that enables operators to plan and deploy our systems. This product is
based on third party software customized for use with our systems. The main
task of the planning tool is to find the optimal location and configuration for
the access concentrator and base stations of the AS4000. The system provides a
powerful prediction engine that can generate coverage predictions for multiple
scenarios until the best case scenario is found.
Once the location of the access concentrator and base stations have been
determined, the AS9000 can be used to compare radio signal propagation and
extent of coverage. The four key aspects of the predictive tool are the terrain
(altitude) databases, clutter (natural terrain features and man-made
obstructions) information, antenna information and system configuration, which
are used to predict transmission coverage.
34
<PAGE>
Technology
As of March 31, 2000 we had 75 people engaged in research and development.
Our technology has been under continuous development since the inception of the
system design in 1993, and from the outset our goal has been to develop high
performance systems that are resilient in a wide range of deployment
conditions.
CDMA Technology
Our choice and development of CDMA technology for fixed wireless access
applications has yielded many benefits over older Time Division Multiple Access
(TDMA) and Frequency Division Multiple Access (FDMA) technologies. For example,
we believe that CDMA offers:
. greater spectral efficiency, a factor that is important for customers
with limited spectrum allocations
. improved fading and multipath performance, resulting in more robust and
reliable radio links
. lower end-to-end delay, consistent with wireline network standards
. dramatically better security
Although CDMA is significantly more difficult to develop than TDMA and FDMA,
because of its challenging network synchronization and power control
requirements, we have successfully developed a reliable and robust CDMA-based
system employing our own enabling technology which has resulted in, as of March
31, 2000, 18 separate patents granted in the U.S. and 20 pending applications
in the U.S. Furthermore, our CDMA technology was designed from the outset to
support high speed data as well as voice applications, unlike some alternative
CDMA systems on the market.
Integration
The complexity of CMDA algorithms can require multiple semiconductor
components and significant software elements. In order to improve system
performance and reduce costs, we have developed a custom integrated circuit,
Trinity I, which is the key element of the AS4000 System. We are currently
developing next generation components that are expected to produce further cost
reductions, increased bandwidth and enhanced functionality.
Frequency Choice
We recognized early that no single fixed wireless access spectrum allocation
would apply around the world. Consequently, our designs have accommodated the
ability to easily change radio frequency subsystems to match the customer's
specific spectrum allocation. We believe we have the widest choice of radio
subsystems in the industry within the 1.5 to 4.0 GHz bands.
Extensive testing and integration facilities
We have taken extensive steps to ensure that our products are thoroughly
stress-tested prior to release. We have secured radio licenses for and
implemented a live multi-cell test network which provides service to a number
of volunteer customers situated in and around the town of Stratford-upon-Avon,
U.K. In addition to providing valuable long-term system reliability,
availability and other performance data, this unique facility permits us to
empirically investigate radio propagation and interference behavior for
existing and emerging products.
35
<PAGE>
Customers
We began shipping our products in 1996 and through March 2000 we had shipped
our products to over 35 communications service providers in approximately 25
countries. Our customers include integrated data and voice carriers, data
centric carriers and mobile carriers. As of March 31, 2000, our top customers
and their locations included:
<TABLE>
<C> <S>
Aliatel, a.s. Mobitel Limited
(Czech Republic) (Nigeria)
AZ Communications Incorporated Motorola, Inc.
(The Philippines) (various countries)
Bell Telecommunications Phils., Inc. MTT Network Private Limited
(The Philippines) (Sri Lanka)
Cable & Wireless Jamaica Ltd. Petersburg Telephone Network
(Jamaica) (Russia)
Joint Stock Company Central Telegraph Suntel Private Ltd.
(Russia) (Sri Lanka)
</TABLE>
Sales, Marketing and Customer Service
We sell our systems and solutions through our direct sales force,
independent agents, resellers and OEM partners. Our direct sales force targets
communications service providers in both developed and developing markets.
Currently we have a direct sales presence in the U.S., U.K., Sweden, Denmark,
Poland, Czech Republic, Brazil, the Philippines, South Korea, Sri Lanka and
Canada. In markets where we do not have a direct sales presence, we also sell
through independent agents and resellers who target communications service
providers. In certain countries we also sell to OEMs who may sell our products
under their names.
Our marketing efforts are focused on communications service providers that
provide integrated communications services to their customers. Through our
marketing activities, we provide technical and strategic sales support
including in-depth product presentations, technical manuals, sales tools,
pricing, marketing communications, marketing research, trademark administration
and other support functions.
A high level of ongoing service and support is critical to our objective of
developing long-term customer relationships. In order to facilitate the
deployment of our systems, we offer our customers a wide range of
implementation and support services including spectrum optimization and network
management, installation, training and support services.
Most major installations are performed by our subcontractors who have the
expertise and ability to professionally install our products. This enables us
to efficiently manage fluctuations in volume of installation work.
As of March 31, 2000, we had 57 employees dedicated to sales, marketing and
customer service.
Manufacturing
We outsource our manufacturing to global contract manufacturers in order to
realize the advantages in cost, quality and volume and geographic flexibility.
We currently outsource most of our manufacturing to Flextronics International,
located in Karlskrona, Sweden. Our manufacturing support activities consist
primarily of prototype development, materials planning and procurement, final
product assembly testing and quality control.
Our operation and manufacturing strategies enable us to configure our
products to meet a wide variety of customer requirements and facilitate
technology transfer between our research and development group and our contract
manufacturers. We are ISO 9001 certified.
Competition
Competition in our markets is intense and involves rapidly-changing
technologies and customer requirements. We compete with established vendors of
communications systems.
36
<PAGE>
We believe several factors make Airspan a strong competitor including:
. range of product offerings (data, voice and ISDN)
. quality and performance of our products
. high quality customer service
. ability to implement and integrate solutions
Competitors vary in size and scope, in terms of products and services
offered. In the particular frequencies where we operate, we compete directly
with ECI and Lucent, as well as smaller start-up companies. We compete
indirectly with a number of large telecommunication equipment suppliers such as
Alcatel, Ericsson, Hughes, and Nortel. In addition, our technology competes
with other high speed solutions, such as digital subscriber lines, optical
fiber cable, cable modems and high speed leased lines and satellite
technologies.
Intellectual Property Rights
We rely on a combination of copyright, patent, trademark, trade secret and
other intellectual property laws together with confidentiality and/or license
agreements with our employees, customers and others to protect our proprietary
rights. Our patent portfolio consists of, as of March 31, 2000, 18 patents that
have been granted in the U.S., together with their foreign counterparts. We
also have 20 U.S. patent applications that are currently pending, together with
their foreign counterparts. Our other intellectual property rights relate to
the trademark and trade name Airspan(R), our website, our software and hardware
design and technology.
Employees
As of March 31, 2000, we had a total of 217 full-time employees, including
contract personnel. Our employees are not presently represented by a labor
union. We have not experienced any work stoppages and consider our relations
with our employees to be good.
Properties
We are headquartered in Uxbridge, U.K. where we lease three facilities with
approximately 25,000, 17,000 and 12,000 square feet, respectively. These leases
expire in 2006, 2010 and 2003, respectively.
Legal Proceedings
We are not currently subject to any material legal proceedings. We may from
time to time become a party to various legal proceedings arising in the
ordinary course of our business.
37
<PAGE>
MANAGEMENT
Executive Officers and Directors
The names, ages and positions of our executive officers and directors as of
March 31, 2000 are listed below along with their business experience during the
past five years. Messrs. Cooper, Paget and Terry are officers of Airspan
Communications Ltd., our wholly owned U.K. operating subsidiary.
<TABLE>
<CAPTION>
Name Age Title
- ---- --- -----
<S> <C> <C>
Thomas S. Huseby........ 52 Chairman of the Board of Directors
Eric D. Stonestrom...... 38 President and Chief Executive Officer, Director
Joseph J. Caffarelli.... 55 Senior Vice President, Finance, Chief Financial Officer
Ian Cooper.............. 41 Vice President, Engineering
Jonathan Paget.......... 53 Vice President, Product Operations
Nigel J. Terry.......... 42 Vice President, Sales and Marketing
Jon W. Bayless.......... 59 Director
Bandel L. Carano........ 38 Director
H. Berry Cash........... 61 Director
Ovid Santoro............ 40 Director
David A. Twyver......... 53 Director
</TABLE>
Thomas S. Huseby has served as the chairman of the board of directors of
Airspan since January 1998. Since August 1997, Mr. Huseby has served as
managing partner of SeaPoint Ventures, a venture capital fund focused on
communications and Internet infrastructure. Prior to SeaPoint Ventures, from
1994 to 1997, Mr. Huseby was the chairman and chief executive officer of
Metawave Communications, a manufacturer of cellular infrastructure equipment.
Previously he was president and chief executive officer of Innova Corporation,
a manufacturer of millimeter wave point-to-point radios. Mr. Huseby holds a
B.A. in Economics from Columbia College, a B.S.I.E. from the Columbia School of
Engineering and a M.B.A. from Stanford University.
Eric D. Stonestrom joined Airspan at its inception in January 1998 as
executive vice president and chief operating officer. In May 1998, he was named
president and chief executive officer as well as a member of the board of
directors. From 1995 to 1998, Mr. Stonestrom joined DSC Communications
Corporation as the vice president of Network Management. From 1984 to 1995, Mr.
Stonestrom worked at Bell Laboratories and AT&T in a variety of positions. He
received B.S., M.S. and M. Eng. degrees in 1982, 1983 and 1984, respectively,
from the College of Engineering at the University of California at Berkeley.
Joseph J. Caffarelli joined Airspan in April 1999 as senior vice president
and chief financial officer. Prior to joining Airspan, from 1994 to February
1999, he was executive vice president and chief financial officer of Physio-
Control International Corporation, a worldwide leader in external
defibrillation, monitoring and noninvasive pacing devices. Prior to joining
Physio-Control, he was the executive vice president and chief financial officer
of OECO Corporation, a diversified electronics manufacturer. Prior to joining
OECO, he worked in various financial management positions, including positions
in the manufacturing operations of General Electric Company. He received a B.A
from the State University of New York at Albany.
Ian Cooper joined Airspan in February 1998 as vice president, engineering.
Prior to joining Airspan, he joined DSC Communications Corporation in 1994 to
develop products for the Airspan unit. In 1997, he attained responsibility for
all research and development activities, including the development of the
AS4000 platform. Before joining DSC, he worked at various companies as an ASIC
and hardware/systems designer and, previously he worked as a scientist for the
NZ Department of Scientific and Industrial Research developing satellite
communication and signal processing solutions for precision scientific
instrumentation. He graduated from the University of Auckland with a Science
degree in 1981.
Jonathan Paget joined Airspan in April 1999 as vice president, product
operations. Prior to joining Airspan, from 1997 to October 1998, he served
Telspec Plc, a company specializing in the development,
38
<PAGE>
manufacture and sale of advanced telecommunications equipment, as group chief
executive. From 1992 to 1996, he served as vice president and general manager
of the European Radio Networks Solutions Group of Motorola, a provider of
integrated communications solutions and embedded electronic solutions. He holds
a Masters Degree in Engineering Science from Cambridge University.
Nigel J. Terry joined Airspan in November 1998 as vice president, sales and
marketing. Prior to joining Airspan, from 1993 to November 1998, Mr. Terry
served in a number of positions for Madge Networks, a vendor of advanced
multimedia equipment. Most recently, Mr. Terry served as the vice president and
general manager of Madge Networks' WAVE business unit. Mr. Terry holds a M.A.
in Physics from the University of Oxford.
Jon W. Bayless has served as a director of Airspan since January 1998. Since
1981, Dr. Bayless has been associated with Sevin Rosen Funds, a series of
venture capital partnerships, and he currently is a general partner of such
partnerships. He also serves as a director of several privately-held companies.
Dr. Bayless holds a B.S. in Electrical Engineering from the University of
Oklahoma, a M.S. in Electrical Engineering from the University of Alabama and a
Ph.D. in Electrical Engineering from Arizona State University.
Bandel L. Carano has served as a director of Airspan since January 1998. Mr.
Carano has been a general partner of Oak Investment Partners, a venture capital
firm, since 1987. Mr. Carano currently serves as a member of the Investment
Advisory Board of the Stanford University Engineering Venture Fund. Mr. Carano
also serves as a member of the board of directors of Netopia, Inc., Polycom,
Inc., Wireless Facilities Inc., Virata, Advanced Radio Telecom and PulsePoint
Communications, as well as several private companies. Mr. Carano graduated from
Stanford University with a B.S. in Electrical Engineering and also received a
M.S. in Electrical Engineering from Stanford University.
H. Berry Cash has served as a director of Airspan since January 1998. He
been a general partner with InterWest Partners, a venture capital fund focusing
on technology and healthcare, since 1985. Mr. Cash currently serves as a member
of the board of directors of the following public companies: Panja Corporation,
CIENA Corporation, i2 Technologies, Inc. and Liberte', Inc. He is also an
advisor to Austin Ventures. Mr. Cash received a B.S. in Electrical Engineering
from Texas A&M University and a M.B.A. from Western Michigan University.
Ovid Santoro joined the board of directors of Airspan in November 1998. He
currently serves as the chief executive officer of SurfCast, Inc., a software
development company. He is a board member of CyberSafe Corporation, a provider
of network security software products and services to the business community.
From March 1998 until December 1999, Mr. Santoro was the founder, managing
director and global head of venture capital at Deutsche Bank AG as well as the
deputy chairman of Deutsche Bank AG's private equity commitment committee.
Prior to joining Deutsche Bank AG, from May 1993 to March 1998, Mr. Santoro was
a strategic consultant to various technology companies. Mr. Santoro holds a
B.A. from Columbia University.
David A. Twyver joined the board of directors of Airspan in May 1999. Mr.
Twyver is currently president and chief executive officer of Ensemble
Communications Inc., a supplier of LMDS wireless equipment. From 1996 to 1997,
he served as chief executive officer of Teledesic Corporation, a broadband
satellite telecommunications company. From 1974 to 1996, he served in several
management positions at Nortel, a leading global supplier of data and telephony
network solutions and services, most recently as president of Nortel Wireless
Networks from 1993 to 1996. Mr. Twyver is a director of several private
wireless equipment companies. He received his B.S. in Mathematics and Physics
from Royal Roads Military College and University of Saskatchewan.
Board Composition
Our bylaws currently provide for a board of directors consisting of seven
members. All directors hold office until the next annual meeting of our
shareholders and until their successors have been elected and qualified. Our
officers are appointed annually and serve at the discretion of the board of
directors.
39
<PAGE>
Board of Directors Committees
We have an audit committee and a compensation committee. Our audit committee
consists of Messrs. Twyver, and Santoro and reviews the results and scope of
the audits and other services provided by our independent accountants.
Our compensation committee consists of Messrs. Huseby, Bayless and Cash and
reviews and approves the compensation and benefits for our executive officers,
administers our stock purchase and stock option plans and make recommendations
to the board of directors regarding such matters. No interlocking relationship
exists between our board of directors or compensation committee and the board
of directors or compensation committee of any other company, nor has any such
interlocking relationship existed in the past.
Board Compensation
SeaPoint Ventures receives $12,500 per month for providing a chairman of our
board. Thomas S. Huseby is a general partner of SeaPoint Ventures and the
chairman of our board. David Twyver receives $2,000 per month for serving as a
member of our board of directors. Otherwise, except for reimbursement for
reasonable travel expenses relating to attendance at board meetings and the
grant of stock options, directors are not compensated for their services as
directors. Directors who are also our employees are eligible to participate in
our Stock Option Plan. See "--Stock Plans."
Executive Compensation
Summary Compensation Table
The following table sets forth the compensation of our chief executive
officer and our four other most highly compensated executive officers who were
serving at December 31, 1999 (collectively, the "named executive officers") for
fiscal 1998 and the year ended December 31, 1999. See "--Employment
Agreements."
<TABLE>
<CAPTION>
Annual Compensation(1) Long-Term Compensation Awards
-------------------------- -------------------------------------
Restricted Securities
Name and Stock Underlying All Other
Principal Position Year Salary($) Bonus($) Awards($) Options Compensation($)
- ------------------ ---- --------- -------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Eric D. Stonestrom,..... 1999 $218,000 $50,000 $ 0 200,000 $50,000
president and chief
executive officer 1998 200,000 0 0 1,500,000 25,000
Joseph J. Caffarelli,... 1999(2) 149,999 0 0 368,000 55,000(3)
senior vice president,
finance and chief
financial officer
Ian Cooper,............. 1999 164,448 1,391 0 75,000 0
vice president,
engineering 1998 134,722 0 0 200,000 0
Jonathan Paget,......... 1999(2) 145,566 0 0 368,000 0
vice president, product
operations
Nigel J. Terry,......... 1999 195,705 38,931 0 20,000 0
vice president, sales
and marketing 1998 25,029 0 0 180,000 0
</TABLE>
- --------
(1) Salary amounts for Messrs. Cooper, Paget and Terry reflect a conversion
rate from U.K. pounds to U.S. dollars of (Pounds)1:$1.6549 in 1998 and
(Pounds)1:$1.6174 in 1999, as applicable.
(2) Both Messrs. Caffarelli and Paget joined Airspan on April 1, 1999. Mr.
Caffarelli's annualized compensation for 1999 was $200,000 and Mr. Paget's
annualized compensation for 1999 was $194,088.
(3) Mr. Caffarelli's other compensation consisted of payments to Mr. Caffarelli
for reimbursement of certain relocation expenses and tax equalization
payments.
40
<PAGE>
Option Grants During 1999 Fiscal Year
The following table provides information regarding stock options granted
during fiscal 1999 to the named executive officers. We have not granted any
stock appreciation rights.
<TABLE>
<CAPTION>
% of Total Potential Realizable Value
Options at Assumed Annual Rates
Number of Granted to of Stock Appreciation
Securities Employees in Exercise or for Option Term(1)
Underlying Fiscal Base Price Expiration ---------------------------
Name Options(#) Year(%) ($/share)(1) Date 5%($) 10%($)
- ---- ---------- ------------ ------------ ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eric D. Stonestrom...... 200,000 10.43% $1.20 10/4/09 $ 150,935 $ 382,498
Joseph J. Caffarelli.... 343,000 17.89 0.18 3/31/09 38,828 98,398
25,000 1.30 1.20 10/4/09 18,867 47,812
Ian Cooper.............. 75,000 3.91 1.20 10/4/09 56,601 143,437
Jonathan Paget.......... 120,000 6.26 0.18 3/31/09 13,584 34,425
60,000 3.13 0.18 4/14/09 6,792 17,212
188,000 9.80 1.20 10/4/09 141,879 359,548
Nigel J. Terry.......... 20,000 1.04 1.20 10/4/09 15,093 38,249
</TABLE>
- --------
(1) The potential realizable value illustrates value that might be realized
upon exercise of the options immediately prior to the expiration of their
term, assuming the specified compounded rates of appreciation of the market
price of the common stock over the term of the options. These numbers do
not take into account provisions of certain options providing for
termination of the option following termination of employment,
nontransferability or vesting over periods of up to ten years.
Aggregated Option Exercises During 1999 Fiscal Year and Fiscal Year-End Option
Values
The following table provides information as to the number and value of all
outstanding options exercised during fiscal year 1999 to the named executive
officers. We have not granted any stock appreciation rights.
<TABLE>
<CAPTION>
Value of Unexercised In-
Number of Securities Underlying the-Money
Unexercised Options at Fiscal Options at Fiscal Year-
Shares Year-End(#) End($)
Acquired on Value ----------------------------------- -------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- --------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eric D. Stonestrom...... 1,500,000 $150,000 0 200,000 $ 0 $240,000
Joseph J. Caffarelli.... 0 0 0 368,000 0 91,740
Ian Cooper.............. 50,000 5,000 33,333 191,667 3,333 101,668
Jonathan Paget.......... 0 0 20,000 348,000 3,600 254,400
Nigel J. Terry.......... 0 0 48,750 151,250 4,875 37,125
</TABLE>
Stock Plans
Our 1998 Stock Option and Restricted Stock Plan (the "Stock Option Plan")
was adopted by our board of directors and approved by our shareholders on
February 1, 1998. As of March 31, 2000, options to purchase a total of
2,201,176 shares of common stock had been exercised, options to purchase a
total of 5,330,554 shares at a weighted average exercise price of $0.65 per
share were outstanding, and 843,270 shares remained available for future option
grants.
The Stock Option Plan provides for the grant to our employees (including
officers and employee directors) of "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code of 1986 and for the grant
of nonstatutory stock options to our employees, officers, directors and
consultants. Non-employee directors are not eligible for option grants under
the Stock Option Plan. To the extent an optionee would have the right in any
calendar year to exercise for the first time one or more incentive stock
options for shares having an aggregate fair market value (under the Stock
Option Plan and determined for each share as of the date the option to purchase
the share was granted) in excess of $100,000, any such excess options are
treated as nonstatutory stock options.
41
<PAGE>
The Stock Option Plan is administered by the board of directors or a
committee of the board of directors (the "Administrator"). The Administrator
determines the terms of options granted under the Stock Option Plan, including
the number of shares subject to the option, exercise price, term and
exercisability. The exercise price of all incentive stock options granted under
the Stock Option Plan must be at least equal to the fair market value of our
common stock on the date of grant. The exercise price of all nonstatutory stock
options granted to persons who are not 10% shareholders cannot be less than
100% of the fair market value of our common stock on the date of grant. The
Administrator determines the term of options. The term of an incentive stock
option granted under the Stock Option Plan may not exceed ten years. Options
granted to each employee under the Stock Option generally become exercisable at
the rate of 25% of the total number of shares subject to the options after the
first anniversary following the date of grant, with 2.778% vesting monthly
thereafter.
In the event of certain changes in control, our stock options generally
require that each outstanding option be assumed or an equivalent option
substituted by the successor corporation. In the event that a successor
corporation refuses to assume each option or substitute an equivalent option,
the Administrator shall provide for the optionee to have the right to exercise
the option as to 50% of the remaining unvested options, including shares as to
which the option would not otherwise be exercisable. The Administrator has the
authority to amend or terminate the Stock Option Plan as long as such action
does not adversely affect any outstanding option and provided that shareholder
approval shall be required for an amendment to increase the number of shares
subject to the Stock Option Plan, or any change in the designation of the class
of persons eligible to be granted options, or a material increase in benefits
accruing to participants under the Stock Option Plan if a class of our shares
is registered under Section 12 of the Securities Exchange Act of 1934. If not
terminated earlier, the Stock Option Plan will terminate February 1, 2008.
42
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following is a description of transactions during our last three fiscal
years to which we have been a party, in which the amount involved in the
transaction exceeds $60,000 and in which any director, executive officer or
holder of more than 5% of our capital stock had or will have a direct interest
or indirect material interest, other than compensation arrangements that are
otherwise required to be described under "Management."
During the past three years, in addition to issuances of common stock upon
option exercises, we have issued or sold common stock and convertible preferred
stock:
. in November 1999, February and April 2000, we sold an aggregate of
22,178,573 shares of Series C convertible preferred stock at $2.50 per
share
. in November 1998, we sold an aggregate of 18,571,429 shares of Series B
convertible preferred stock at $1.75 per share
. in January 1998, we sold an aggregate of 40,000,000 shares of Series A
convertible preferred stock at $1.00 per share
. in January 1998, we sold an aggregate of 1,625,000 shares of common
stock at $0.01 per share
Our officers, directors and 5% shareholders participated in these
transactions as follows:
<TABLE>
<CAPTION>
Number of Shares Number of Shares Number of Shares
of Series A of Series B of Series C Number of Shares
Name of Purchaser Preferred Stock Preferred Stock Preferred Stock of Common Stock
- ----------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Sevin Rosen Funds(1).... 7,330,000 1,047,143 572,098 --
Oak Investment
Partners(2)............ 7,330,000 2,047,143 2,000,000 --
InterWest Partners(3)... 7,330,000 1,047,143 572,098 --
Venrock Associates...... 5,330,000 761,429 416,000 --
Charles River
Partnership............ 4,000,000 857,143 532,000 --
Deutsche Bank(4)........ -- 5,714,286 1,100,000 --
Meritech Capital........ -- -- 5,680,064 --
Weston Presidio
Capital................ -- -- 4,532,000 --
SeaPoint Ventures(5).... -- -- 760,000 1,250,000
</TABLE>
- --------
(1) Jon W. Bayless is a director of Airspan and a partner of Sevin Rosen Funds.
(2) Bandel L. Carano is a director of Airspan and a general partner of Oak
Investment Partners.
(3) H. Berry Cash is a director of Airspan and a general partner of InterWest
Partners.
(4) Ovid Santoro is a director of Airspan and a former managing director of
Deutsche Bank.
(5) Thomas S. Huseby is a director of Airspan and managing partner of SeaPoint
Ventures.
In connection with our acquisition of the Airspan assets from DSC in January
1998, Sevin Rosen Funds, Oak Investment Partners and InterWest Partners agreed
to purchase our Series A convertible preferred stock. All of these entities may
be deemed to be promoters of Airspan. Other than purchasing Series A preferred
stock at the same price per share as other investors in our Series A
convertible preferred stock financing, Sevin Rosen Funds, Oak Investment
Partners and InterWest Partners did not receive any item of value, nor did
these entities sell any property or assets to Airspan.
The original purchasers of our common stock include SeaPoint Ventures, of
which Mr. Huseby, a director, is the managing partner. SeaPoint Ventures paid
$0.01 per share, with an aggregate capital contribution of $16,250, for
approximately 0.004% of Airspan's capitalization (based on our capitalization
immediately following the Series A financing) and 4.0% of the issued shares
(based on our issued shares immediately following the Series A financing).
43
<PAGE>
As compensation for performing services in the original formation of
Airspan, SeaPoint Ventures was issued 1,000,000 shares of common stock at $0.01
per share. In addition, SeaPoint later purchased 250,000 shares of common stock
for $0.18 per share in connection with Airspan's Series B round of financing.
Employment Agreements
In January 1998, we entered into an employment agreement with Eric D.
Stonestrom, our president and chief executive officer. Mr. Stonestrom's annual
compensation was set at an annual base salary of $180,000, with a bonus based
on achieving gross profit objectives. Mr. Stonestrom was also granted stock
options to purchase 1,000,000 shares of common stock. In May 1998, we entered
into another employment agreement with Mr. Stonestrom. Pursuant to this
agreement, Mr. Stonestrom's annual base salary was increased to $210,000 and he
received additional options to purchase 500,000 shares of common stock. The
agreement with Mr. Stonestrom further provides certain tax equalization
payments of $50,000 annually. Mr. Stonestrom is also entitled to receive six
months of severance payments if his employment is terminated involuntarily. In
May 1999, Mr. Stonestrom's annual base salary was increased to $222,000 and in
October 1999 he received additional options to purchase 200,000 shares of
common stock.
In April 1999, we entered into an employment agreement with Joseph J.
Caffarelli, our senior vice president, finance and chief financial officer.
This agreement provides for annual compensation of $200,000, with an additional
signing bonus of $30,000. In addition to the signing bonus, Mr. Caffarelli may
receive additional bonuses if certain gross profit objectives are met. Mr.
Caffarelli was also granted options to purchase 343,000 shares of common stock.
In October 1999, Mr. Caffarelli received additional options to purchase 25,000
shares of common stock. The agreement with Mr. Caffarelli further provides
certain tax equalization payments of $50,000 annually. We also reimbursed Mr.
Caffarelli for his moving expenses and cost of certain living expenses incurred
in moving from the U.S. to the U.K. Mr. Caffarelli is entitled to receive six
months of severance payments if his employment is terminated involuntarily. In
March 2000, Mr. Caffarelli received additional options to purchase 50,000
shares of common stock.
In November 1998, we entered into an employment agreement with Nigel J.
Terry, our vice president, sales and marketing. Mr. Terry's annual compensation
was set at an annual base salary of $195,705, with a guaranteed bonus of
$40,435 for the first twelve months of employment only. In addition to the
guaranteed bonus, Mr. Terry may receive additional bonuses if certain revenue
objectives are met. Mr. Terry was also granted options to purchase 180,000
shares of common stock. In October 1999, Mr. Terry received additional options
to purchase 20,000 shares of common stock. We also reimbursed Mr. Terry for a
portion of his moving expenses to the U.K.
In April 1999, we entered into an employment agreement with Jonathan Paget,
our vice president, product operations. Mr. Paget's annual compensation was set
at an annual base salary of $194,088, with options to purchase 180,000 shares
of common stock. In October 1999, Mr. Paget received additional options to
purchase 188,000 shares of common stock.
In January 1998, we entered into an employment agreement with Ian Cooper,
our vice president, engineering. Mr. Cooper's annual compensation was set at an
annual base salary of $164,448. In addition to the base salary Mr. Cooper was
granted options to purchase 150,000 shares of common stock. In October 1998, we
entered into another employment agreement with Mr. Cooper where he was named
vice president, engineering. Pursuant to this agreement, Mr. Cooper"s annual
base salary was increased to $120,745 and he received options to purchase
50,000 shares of common stock. In October 1999, Mr. Cooper received options to
purchase 75,000 shares of common stock, and in March 2000, Mr. Cooper received
options to purchase 30,000 shares of common stock.
44
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of March 31, 2000, and as adjusted to reflect
the sale of our common stock offered by this prospectus for:
. each shareholder who is known by us to own beneficially more than 5% of
our common stock
. each of our named executive officers
. each of our directors
. all of our directors and executive officers as a group
Unless otherwise indicated, to our knowledge, all persons listed below have
sole voting and investment power with respect to their shares of our common
stock, except to the extent authority is shared by spouses under applicable
law.
<TABLE>
<CAPTION>
Percentage of Shares
Outstanding(1)
---------------------
Number of Shares Before the After the
Beneficial Owner Beneficially Owned Offering Offering
- ---------------- ------------------ ---------- ----------
<S> <C> <C> <C>
Oak Investment Partners(2)........... 11,377,143 13.15% %
Sevin Rosen Funds(3)................. 8,949,241 10.35
InterWest Partners(4)................ 8,949,241 10.35
DB UK Finance PLC(5)................. 6,814,286 7.88
Venrock Associates(6)................ 6,507,429 7.52
Meritech Capital(7).................. 5,680,064 6.57
Charles River Partnership(8)......... 5,389,143 6.23
Weston Presidio Capital(9)........... 4,532,000 5.24
Thomas S. Huseby(10)................. 2,010,000 2.32
Eric D. Stonestrom(11)............... 1,500,000 1.65
Joseph J. Caffarelli(11)(12)......... 92,896 *
Ian Cooper(11)(13)................... 104,167 *
Jonathan Paget(11)(14)............... 48,760 *
Nigel J. Terry(11)(15)............... 67,500 *
Jon W. Bayless(16)................... 8,949,241 9.87
Bandel L. Carano(17)................. 11,377,143 12.55
H. Berry Cash(18).................... 8,949,241 9.87
Ovid Santoro(19)..................... -- --
David A. Twyver(20).................. -- --
All directors and officers as a group
(11 persons)........................ 32,098,938 38.27
</TABLE>
- --------
*Less than one percent
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Applicable percentage ownership is
based on shares of common stock outstanding as of , , including
shares issuable upon exercise of warrants, together with options for
that shareholder that are currently exercisable or exercisable within 60
days of March 31, 2000. In computing the number and percentage of shares
beneficially owned by a person, shares of common stock subject to options
currently exercisable, or exercisable within 60 days of March 31, 2000 are
counted as outstanding, while these shares are not counted as outstanding
for computing the percentage ownership of any other person. The percentage
of shares outstanding after the offering is calculated after giving effect
to the issuance of shares of common stock offered by this
prospectus, assuming no exercise of the underwriters' over-allotment
option.
(2) The address of Oak Investment Partners is 525 University Avenue, Suite
1300, Palo Alto, CA 94301. Includes purchases made by Oak Investment
Partners VII, L.P. and Oak VII Affiliates Fund, L.P., each of which is an
affiliate of Oak IW Partners.
45
<PAGE>
(3) The address of Sevin Rosen Funds is 13455 Noel Road, Suite 1670, Dallas,
Texas 75240. Includes purchases made by Sevin Rosen Bayless Management
Company, Sevin Rosen Fund VL.P., Sevin Rosen Fund VIL.P., Sevin Rosen V
Affiliates Fund L.P., and Sevin Rosen VI Affiliates Fund L.P. each of
which is an affiliate of Sevin Rosen Funds.
(4) The address of InterWest Partners is 3000 Sand Hill Road #3-255, Menlo
Park, CA 94025. Includes purchases made by InterWest Investors VI, L.P.
and InterWest Partners VI, L.P., each of which is an affiliate of
InterWest Partners.
(5) The address of DB UK Finance PLC is 6 Bishopsgate, London, England EC2N
4DA.
(6) The address of Venrock Associates is 30 Rockefeller Plaza, Room 5508, New
York, New York 10112
(7) The address of Meritech Capital is 428 University Avenue, Palo Alto, CA
94301.
(8) The address of Charles River Partnership is 1000 Winter Street, Suite
3300, Waltham, MA 02154.
(9) The address of Weston Presidio Capital is 343 Sansome Street, San
Francisco, California 94104.
(10) The address of Mr. Huseby is 777 108th Avenue N.E., Suite 1895, Bellevue,
WA 98004. Mr. Huseby is a general partner of SeaPoint Ventures. The shares
listed represent 2,010,000 shares held by investment entities within
SeaPoint Ventures. Mr. Huseby disclaims beneficial ownership of the shares
held by SeaPoint Ventures, except to the extent of his pecuniary interest
therein.
(11) The addresses of Messrs. Stonestrom, Terry, Cooper, Caffarelli and Paget
is Cambridge House, Oxford Road, Uxbridge, Middlesex UB8 1UN, England.
(12) Includes 92,896 shares of common stock issuable on exercise of presently
exercisable stock options.
(13) Includes 54,167 shares of common stock issuable on exercise of presently
exercisable stock options.
(14) Includes 48,750 shares of common stock issuable on exercise of presently
exercisable stock options.
(15) Includes 67,500 shares of common stock issuable on exercise of presently
exercisable stock options.
(16) The address of Mr. Bayless is 13455 Noel Road, Suite 1670, Dallas, Texas
75240. Mr. Bayless is a general partner of Sevin Rosen Funds. The shares
listed represents 8,949,241 shares held by investment entities within the
Sevin Rosen Funds. Mr. Bayless disclaims beneficial ownership of the
shares held by Sevin Rosen Funds, except to the extent of his pecuniary
interest therein.
(17) The address of Mr. Carano is 525 University Avenue, Suite 1300, Palo Alto,
CA 94301. Mr. Carano is a general partner of Oak Investment Partners VII,
LP and Oak VII Affiliates Fund, LP. The shares listed represents
11,098,403 shares held by Oak Investment Partners VII, LP and 278,740
shares held by Oak VII Affiliates Fund, LP. Mr. Carano disclaims
beneficial ownership of the shares held by the Oak entities, except to the
extent of his pecuniary interest therein.
(18) The address of Mr. Cash is 3000 Sand Hill Road #3-255, Menlo Park, CA
94025. Mr. Cash is a general partner of InterWest Partners. The shares
listed represents 8,949,241 shares held by investment entities of
InterWest Partners. Mr. Cash disclaims beneficial ownership of the shares
held by InterWest partners except for his pecuniary interest therein.
(19) The address of Mr. Santoro is 6 Bishopsgate, London, England EC2N 4DA.
(20) The address of Mr. Twyver is P.O. Box 2447, Friday Harbor, WA 98250.
46
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our amended and restated articles of incorporation, which will become
effective immediately prior to consummation of the offering, authorizes the
issuance of ,000,000 shares of common stock, $0.0001 par value per share and
81,000,000 shares of preferred stock, $0.0001 par value per share. Immediately
prior to the offering, shares of common stock and no shares of preferred
stock will be issued and outstanding.
Common Stock
Holders of common stock are entitled to one vote per share on all matters to
be voted upon by the shareholders generally, including the election of
directors. Holders of common stock have no cumulative voting rights and no
preemptive or conversion rights. There are no redemption or sinking fund
provisions available to the holders of common stock. All outstanding shares of
common stock are fully paid and non-assessable. Subject to preferences that may
be applicable to any then-outstanding preferred stock, holders of common stock
will be entitled to receive ratably such dividends as may be declared by our
board of directors out of funds legally available for such dividends. In the
event of a liquidation, dissolution or winding up of Airspan, holders of common
stock will be entitled to share ratably in all assets remaining after payment
of liabilities and the liquidation preference to any then-outstanding holders
of preferred stock.
Preferred Stock
Our Articles of Incorporation authorize us to issue shares of preferred
stock, which may be issued from time to time in one or more classes or series
or both upon authorization by our board of directors. Our board of directors,
without further approval of the shareholders, is authorized to fix the dividend
rights and terms, conversion rights, voting rights, redemption rights and
terms, liquidation preferences and any other rights, preferences, privileges
and restrictions applicable to each class or series of preferred stock. The
issuance of preferred stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could adversely affect the
voting power of the holders of our common stock and, under certain
circumstances, make it more difficult for a third party to gain control of
Airspan, discourage bids for our common stock at a premium, or otherwise
adversely affect the market price of our common stock.
Warrants and other Rights
As of March 31, 2000, there were 249,998 warrants to purchase 249,998 shares
of preferred stock convertible into 249,988 shares of common stock outstanding
with an exercise price of $1.75 that will expire on , 2003.
Registration Rights of Certain Holders
The holders of 81,000,000 shares of preferred stock that will convert into
shares of common stock, or their transferees, are entitled to some
rights with respect to the registration of these shares under the Securities
Act. These rights are provided under the terms of an agreement between us and
the holders of registrable securities. Subject to some limitations in this
agreement, the holders of the registrable securities may require, on three
occasions at any time after one year from the effective date of this offering,
that we use our best efforts to register the registrable securities, for public
resale, provided that the proposed aggregate offering price exceeds
$10,000,000. If we register any of our common stock either for our own account
or for the account of other security holders, the holders of registrable
securities are entitled to include their shares of common stock in the
registration. A holder's right to include shares in an underwritten
registration is subject to the ability of the underwriters to limit the number
of shares included in the offering. All fees, costs and expenses of such
registrations must be borne by us and all selling expenses, including
underwriting discounts, selling commissions and stock transfer taxes, relating
to registrable securities must be borne by the holders of the securities being
registered.
47
<PAGE>
Business Combination Statute
The Washington Business Act, Section 23B.19 of the Revised Code of
Washington, prohibits a "target corporation," with certain exceptions, from
engaging in certain "significant business transactions," such as a merger or
sale of assets, with an "acquiring person" who acquires more than 10% of the
voting securities of the target corporation for a period of five years after
such acquisition, unless the transaction is approved by the majority of the
members of the target corporation's board of directors prior to the date of the
transaction or unless the aggregate amount of the cash and the market value of
non-cash consideration received by holders of outstanding shares of any class
or series of stock of the target corporation is equal to certain minimum
amounts. Our Articles of Incorporation provide that we will be subject to such
prohibitions and shall remain subject to such prohibitions even if the law is
repealed.
Transfer Agent and Registrar
The Transfer Agent and Registrar for our common stock is ChaseMellon
Shareholder Services, L.L.C.
Listing
We intend to apply to list the common stock on The Nasdaq Stock Market's
National Market under the symbol "AIRN."
48
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have outstanding shares of
common stock, assuming no exercise of the underwriters' over-allotment option
and no exercise of outstanding options or warrants after December 31, 1999. Of
these shares, the shares of common stock sold in this offering will be
freely tradable without restriction under the Securities Act except for any
shares purchased by our "affiliates" as defined in Rule 144 under the
Securities Act. The remaining shares are "restricted securities" within
the meaning of Rule 144. The restricted securities may not be sold unless they
are registered under the Securities Act or are sold under an exemption from
registration, such as the exemption provided by Rule 144.
Our executive officers, directors and our other securityholders have entered
into lock-up agreements in which they have agreed that, for a period of 180
days after the date of this prospectus, they will not offer, sell, contract to
sell, pledge or otherwise dispose of any shares of our common stock, or any
securities convertible into or exchangeable or exercisable for any shares of
our common stock, or publicly disclose their intention to make any offer, sale,
contract, pledge or disposal, without the prior written consent of Credit
Suisse First Boston Corporation, other than shares of common stock acquired
pursuant to this offering or in the open market or transferred (i) as a bona
fide gift or gifts, or (ii) as a distribution to the partners, members, or
shareholders of the holder, provided the transferee(s) has agreed to be bound
in writing by the terms of this the lock-up agreement. In addition, we have
agreed in the underwriting agreement that, for a period of 180 days after the
date of this prospectus, we will not offer, sell, contract to sell, pledge or
otherwise dispose of any shares of our common stock, or any securities
convertible into or exchangeable or exercisable for any shares of our common
stock, or publicly disclose our intention to make any offer, sale, contract,
pledge or disposal, without the prior written consent of Credit Suisse First
Boston Corporation. We have similarly agreed that, with limited exceptions, we
will not file a registration statement with the SEC or publicly disclose our
intention to do so. Credit Suisse First Boston Corporation may, at any time and
without notice, waive any of the terms of these lock-up agreements.
Under these lock-up agreements, our outstanding shares of common stock will
be available for sale in the public market as follows:
<TABLE>
<CAPTION>
Percent of
Number of Total Shares
Shares Outstanding Date of Availability for Sale
--------- ------------ --------------------------------------------------------
<C> <C> <S>
, 2000 (date of this prospectus) to , 2000
(90 days after the date of this prospectus)
, 2000 (90 days after the date of this prospectus)
to , 2000 (180 days after the date of this
prospectus, in some cases under Rule 144
, 2000 (180 days after the date of this
prospectus), in some cases under Rule 144
At various times after , 2000
</TABLE>
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned restricted shares for at least one year, including
persons who may be deemed our "affiliates," would be entitled to sell within
any three-month period a number of shares that does not exceed the greater of
(a) 1% of the number of shares of common stock then outstanding or (b) the
average weekly trading volume of the common stock as reported through the
Nasdaq National Market during the four calendar weeks preceding the filing of a
Form 144 with respect to such sale. Sales under Rule 144 are also subject to
certain manner of sale provisions and notice requirements and the availability
of current public information about us. In addition, a person who is not deemed
to have been our affiliate at any time during the 90 days preceding a sale and
who has beneficially owned for at least two years the shares proposed to be
sold would be entitled to sell such shares under Rule 144(k) without regard to
the requirements described above. Persons deemed to be "affiliates" must always
sell pursuant to Rule 144, even after the applicable holding periods have been
satisfied.
49
<PAGE>
In general, Rule 701 permits resales of shares issued pursuant to certain
compensatory benefit plans and contracts commencing 90 days after the issuer
becomes subject to the reporting requirements of the Securities Exchange Act of
1934 in reliance upon Rule 144 but without compliance with certain
restrictions, including the holding period requirements, contained in Rule 144.
We will file registration statements on Form S-8 under the Securities Act of
1933 to register common stock issuable under our stock option plans and stock
purchase plan. Such registration will permit the resale of shares in the public
market without restriction under the Securities Act.
We intend to file, after the effective date of this offering, a registration
statement on Form S-8 to register up to approximately shares of common
stock reserved for issuance under our stock plans. The registration statement
will become effective automatically upon filing. After the registration
statement has been filed, shares issued under the stock plans may be sold in
the open market, unless the sale is limited by the provisions of Rule 144
applicable to our affiliates or the lock-up agreements.
No prediction can be made as to the effect, if any, that market sales of
shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of substantial amounts of our
common stock in the public market after the lapse of the restrictions described
above could adversely affect the prevailing market price and our ability to
raise equity capital in the future.
50
<PAGE>
UNDERWRITING
Under the terms and conditions contained in an underwriting agreement dated
, 2000, we have agreed to sell to the underwriters named below, for whom
Credit Suisse First Boston Corporation, Deutsche Bank Securities Inc., Lehman
Brothers, Inc. and U.S. Bancorp Piper Jaffray Inc. are acting as
representatives, the following respective numbers of shares of common stock:
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation...........................
Deutsche Bank Securities Inc.....................................
Lehman Brothers, Inc.............................................
U.S. Bancorp Piper Jaffray Inc. .................................
----
Total..........................................................
====
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all of the shares of common stock in the offering if any are
purchased, other than those shares covered by the over-allotment option
described below. The underwriting agreement also provides that if an
underwriter defaults, the purchase commitments of non-defaulting underwriters
may be increased or the offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares at the initial public offering price
less the underwriting discounts and commissions. The option may be exercised
only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on the sales to other broker/dealers. After the initial public offering, the
public offering price, concession and discount to broker/dealers may be changed
by the representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
Per Share Total
------------------- -------------------
Without With Without With
Over- Over- Over- Over-
allotment allotment allotment allotment
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Underwriting discounts and commissions
paid by us........................... $ $ $ $
Expenses payable by us................ $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We, our officers and directors and other shareholders holding an aggregate
of shares have agreed that we and they will not offer, sell, contract to
sell, announce our intention to sell, pledge or otherwise dispose of, directly
or indirectly, or, in our case, file with the Securities and Exchange
Commission a registration statement under the Securities Act of 1933 relating
to, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any of our common stock without the prior
written consent of Credit Suisse First Boston Corporation for a period of 180
days after the date of this prospectus, except in certain limited exceptions.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock for some of our vendors,
customers, employees, directors and other people and entities with whom we
maintain business relationships who have expressed an interest in purchasing
common stock in the offering. The number of shares available for sale to the
general public in the offering will be reduced by the
51
<PAGE>
number of the reserved shares purchased. Any reserved shares not purchased will
be offered by the underwriters to the general public on the same terms as the
other shares.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act of 1933, or contribute to payments which the underwriters may be
required to make.
We intend to apply to list the common stock on The Nasdaq Stock Market's
National Market under the symbol "AIRN."
Prior to this offering, there has been no public market for our common
stock. The initial public offering price has been determined by negotiations
between us and the representatives. The principal factors considered in
determining the public offering price included:
. the information set forth in this prospectus and otherwise available to
the representatives
. the history and the prospects for the industry in which we compete
. the ability of our management
. the prospects for our future earnings
. the present state of our development and our current financial condition
. the general condition of the securities markets at the time of this
offering
. the recent market prices of, and the demand for, publicly-traded common
stock of generally comparable companies
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Securities Exchange Act of 1934. A description of each of these
terms is below:
. over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position
. stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum
. syndicate covering transactions involve purchase of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions
. penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by such
syndicate member is purchased in a syndicate covering transaction to
cover syndicate short positions
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on The Nasdaq Stock Market's National Market or otherwise and, if
commenced, may be discontinued at any time.
NOTICE TO CANADIAN RESIDENTS
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common
stock in Canada
52
<PAGE>
must be made under securities laws which will vary depending on the relevant
jurisdiction, and which may require resales to be made under available
statutory exemptions or under a discretionary exemption granted by the Canadian
securities regulatory authority that has jurisdiction. Purchasers are advised
to seek legal advice prior to any resale of the common stock.
Representations of Purchasers
Each purchaser of common stock in Canada who receives a purchase
confirmation will represent to us and the dealer from whom the purchase
confirmation is received that:
. the purchaser is entitled under the provincial securities laws that
apply to the purchaser to purchase the common stock without the benefit
of a prospectus qualified under these securities laws;
. the purchaser is purchasing as principal and not as agent if the
purchaser is not allowed to purchase as agent under the provincial
securities laws that apply to the purchaser;
. the purchaser has reviewed the text above under "Resale Restrictions."
Rights of Action of Ontario Purchasers
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named in
this prospectus may be located outside Canada and, as a result, it may not be
possible for Canadian purchasers to serve process within Canada upon the issuer
or these persons. All or a substantial portion of the assets of the issuer and
these persons may be located outside Canada and, as a result, it may not be
possible to satisfy a judgment against the issuer or these persons in Canada or
to enforce a judgment obtained in Canadian courts against the issuer or these
persons outside Canada.
Notice to British Columbia Residents
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by the purchaser under this offering. This report must be
in the form attached to British Columbia Securities Commission Blanket Order
BOR #95/17, a copy of which may be obtained from us. Only one report must be
filed for common stock acquired on the same date and under the same prospectus
exemption.
Taxation and Eligibility for Investment
Canadian purchasers of common stock should consult with their own legal and
tax advisors about the tax consequences of an investment in the common stock in
their particular circumstances and about the eligibility of the common stock
for investment by the purchaser under Canadian legislation.
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be passed
upon for us by our counsel, Preston Gates & Ellis LLP, Seattle, Washington.
Certain legal matters in connection with the offering will be passed upon for
the underwriters by Davis Polk & Wardwell.
53
<PAGE>
EXPERTS
The statements of revenues and direct costs and expenses of the predecessor
business for the year ended December 31, 1997 and the month ended January 25,
1998 and the consolidated financial statements of Airspan at December 31, 1998
and 1999, and for the eleven months ended December 31, 1998 and the year ended
December 31, 1999, appearing in this prospectus and the registration statement
of which this prospectus forms a part have been audited by Ernst & Young,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein and in the registration statement, and are included in reliance upon
such report given on the authority of such firm as experts in accounting and
auditing.
54
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1. This
prospectus, which forms a part of the registration statement, does not contain
all of the information included in the registration statement and its exhibits
and schedules. References in this prospectus to any contract or other document
are not necessarily complete and, if we filed the contract or document as an
exhibit to the registration statement, you should refer to the exhibit for more
information. You may inspect a copy of the registration statement without
charge at the public reference facilities maintained by the SEC at 450 Fifth
Street, NW, Judiciary Plaza, Washington, D.C. 20549, and you may obtain copies
of all or any part thereof from the SEC upon payment of certain fees prescribed
by the SEC. The SEC maintains a World Wide Web site that contains reports,
proxy and information statements and other information filed electronically
with the Securities and Exchange Commission. The address of the site is
http://www.sec.gov.
55
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors............................................. F-2
Consolidated Balance Sheets of the Company at December 31, 1998 and
December 31, 1999......................................................... F-3
Statements of Revenues and Direct Costs and Expenses of the Predecessor
Business for the year ended December 31, 1997 and month ended January 25,
1998 and Consolidated Statements of Operations of the Company for the
eleven months ended December 31, 1998 and the year ended December 31,
1999...................................................................... F-4
Consolidated Statements of Stockholders' Equity of the Company for the
eleven months ended December 31, 1998 and the year ended December 31,
1999...................................................................... F-5
Consolidated Statements of Cash Flows of the Company for the eleven months
ended December 31, 1998 and the year ended December 31, 1999.............. F-6
Notes to the Financial Statements.......................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To: The Board of Directors and Shareholders
Airspan Networks Inc.
We have audited the accompanying statement of revenues and direct costs and
expenses of the Predecessor Business for the year ended December 31, 1997 and
the month ended January 25, 1998 and consolidated balance sheets of Airspan
Networks Inc. as of December 31, 1998 and December 31, 1999, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the eleven month period ended December 31, 1998 and the year ended December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurances about whether the financial statements are free
from 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 the management, as well as evaluating the overall financial
presentation. We believe our audits provide a reasonable basis for our opinion.
As discussed in Note 1, the accompanying financial statements of the
Predecessor Business have been prepared solely to present the revenue and
direct costs and expenses of the Predecessor Business for the year ended
December 31, 1997 and month ended January 25, 1998 for the purpose of complying
with the requirements of the Securities and Exchange Commission and is not
intended to be a complete presentation of the financial results of operations
of the Predecessor Business.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the revenues and direct costs and expenses of the
Predecessor Business for the year ended December 31, 1997 and the month ended
January 25, 1998 and consolidated financial position of Airspan Networks Inc.
at December 31, 1998 and December 31, 1999 and the consolidated results of its
operations and its consolidated cash flows for the eleven month period ended
December 31, 1998 and the year ended December 31, 1999 in conformity with
United States generally accepted accounting principles.
/s/ Ernst & Young
Ernst & Young
London, England
February 9, 2000 (April 11, 2000, as to Note 16)
F-2
<PAGE>
AIRSPAN NETWORKS INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share data)
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............................ $ 36,178 $ 58,828
Restricted cash...................................... 2,421 4,068
Accounts receivable, less allowance for doubtful
accounts of $578 in 1998--and $1,130 in 1999........ 5,343 6,091
Unbilled accounts receivable......................... 559 1,581
Inventory............................................ 3,022 7,127
Prepaid expenses and other current assets............ 1,356 1,970
-------- --------
Total Current Assets............................... 48,879 79,665
Property, plant and equipment, net................... 4,681 6,751
Intangible assets, net............................... 4,280 1,804
-------- --------
Total Assets....................................... $ 57,840 $ 88,220
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable..................................... $ 5,682 $ 5,334
Accrued taxes........................................ 520 874
Other accrued expenses............................... 2,873 2,866
Current portion of capital lease obligations......... 46 53
Current portion of long-term debt.................... -- 1,743
-------- --------
Total Current Liabilities.......................... 9,121 10,870
-------- --------
Non current liabilities
Note payable to DSC Telcom L.P. ..................... 15,771 16,904
Other long-term debt................................. -- 2,947
Accrued interest on long-term debt................... 236 253
Capital lease obligations............................ 88 34
-------- --------
16,095 20,138
-------- --------
Stockholders' equity
Preferred stock, $.01 par value, 70,000,000 and
80,000,000 shares authorized in 1998 and 1999,
respectively
Series A convertible preferred stock, $0.01 par
value, 40,000,000 shares authorized and issued in
1998 and 1999....................................... 400 400
Series B convertible preferred stock, $0.01 par
value, 18,571,429 shares authorized in 1998 and
1999; 16,442,858 and 18,571,429 shares issued in
1998 and 1999, respectively......................... 164 185
Series C convertible preferred stock, $0.01 par
value, 20,000,000 shares authorized and issued in
1999................................................ -- 200
Common stock, $.01 par value; 100,000,000 shares
authorized in 1998 and 1999; 3,125,000 and 3,965,160
shares issued in 1998 and 1999, respectively........ 31 40
Note receivable--stockholder......................... (150) (130)
Additional paid in capital........................... 67,775 121,562
Accumulated deficit.................................. (35,596) (65,045)
-------- --------
Total Stockholders' Equity......................... 32,624 57,212
-------- --------
Total Liabilities and Stockholders' Equity......... $ 57,840 $ 88,220
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
AIRSPAN NETWORKS INC.
STATEMENT OF REVENUES AND DIRECT COSTS AND EXPENSES OF THE PREDECESSOR BUSINESS
AND CONSOLIDATED STATEMENTS OF OPERATIONS OF THE COMPANY
(in thousands, except for share and per share data)
<TABLE>
<CAPTION>
Predecessor Company
------------------------ --------------------------
Eleven
Year Month months Year
ended ended ended ended
December 31, January 25, December 31, December 31,
1997 1998 1998 1999
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue................... $ 4,818 $ 135 $ 11,485 $ 12,480
Cost of revenue........... (3,948) (100) (9,531) (8,086)
-------- ------- ----------- -----------
Gross profit.............. 870 35 1,954 4,394
-------- ------- ----------- -----------
Operating expenses:
Research and development.. 9,747 1,074 10,524 13,845
Sales and marketing....... 3,832 398 6,765 9,883
General and
administrative........... 4,034 378 3,960 7,686
Acquired in-process
research and development
and amortization of
intangibles.............. -- -- 16,270 2,476
-------- ------- ----------- -----------
Total operating
expenses............... 17,613 1,850 37,519 33,890
-------- ------- ----------- -----------
Loss from operations...... $(16,743) $(1,815) (35,565) (29,496)
======== =======
Interest expense.......... -- -- (994) (1,434)
Interest and other
income................... -- -- 1,113 1,581
----------- -----------
Loss before income taxes.. -- -- (35,446) (29,349)
Income taxes.............. -- -- (150) (100)
----------- -----------
Net loss.................. -- -- $ (35,596) $ (29,449)
=========== ===========
Net loss per share-basic
and diluted.............. -- -- $ (22.22) $ (11.59)
Weighted average shares
outstanding-basic and
diluted.................. -- -- 1,602,273 2,541,653
Pro forma net loss per
share-basic and diluted.. -- -- $ (0.85) $ (0.46)
Pro forma weighted average
shares outstanding- basic
and diluted.............. -- -- 41,990,964 63,435,701
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
AIRSPAN NETWORKS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except for share data)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
---------------- --------------- Additional Note
Par Par paid in receivable Accumulated
Shares value Shares value capital stockholder deficit Total
---------- ----- --------- ----- ---------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock
upon incorporation..... 1,625,000 $16 $ 16
Issuance of Series A
preferred stock........ 40,000,000 $400 $ 39,025 39,425
Issuance of Series B
preferred stock........ 16,442,858 164 28,611 28,775
Exercise of stock
options................ 1,500,000 15 135 $(150)
Stock compensation...... 4 4
Net loss for the
period................. $(35,596) (35,596)
---------- ---- --------- --- -------- ----- -------- -------
At December 31, 1998.... 56,442,858 564 3,125,000 31 67,775 (150) (35,596) 32,624
Issuance of Series B
preferred stock........ 2,128,571 21 3,704 3,725
Issuance of Series C
preferred stock........ 20,000,000 200 49,800 50,000
Issuance of Series B
stock warrants......... 95 95
Issuance of common
stock.................. 250,000 3 42 45
Exercise of stock
options................ 590,160 6 53 59
Stock compensation...... 93 93
Repayment of note
receivable............. 20 20
Net loss for the year... (29,449) (29,449)
---------- ---- --------- --- -------- ----- -------- -------
At December 31, 1999.... 78,571,429 $785 3,965,160 $40 $121,562 $(130) $(65,045) $57,212
========== ==== ========= === ======== ===== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
AIRSPAN NETWORKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Eleven months Year
ended ended
December 31, December 31,
1998 1999
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss........................................... $(35,596) $(29,449)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization.................... 3,707 4,821
Stock compensation............................... 4 93
Purchased in-process research and development.... 14,000 --
Accretion of interest on notes payable........... 755 1,134
Amortization of deferred financing costs......... -- 20
Changes in operating assets and liabilities:
Increase in receivables.......................... (4,300) (748)
Decrease/(increase) in inventories............... 1,774 (4,105)
Increase in other current assets................. (1,497) (1,561)
Increase/(decrease) in accounts payable.......... 2,968 (348)
Increase other accrued expenses.................. 1,946 346
Decrease in notes receivable..................... -- 20
-------- --------
Net cash used in operating activities.............. (16,239) (29,777)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment................. (3,256) (4,276)
Acquisition costs.................................. (100) --
-------- --------
Net cash used in investing activities.............. (3,356) (4,276)
-------- --------
CASH FLOWS FINANCING ACTIVITIES
Net proceeds from issuance of common stock......... 16 45
Net proceeds from issuance of preferred stock...... 58,200 53,725
Net proceeds from issuance of long-term debt....... -- 5,000
Payment on long-term debt, including capital lease
obligations....................................... (22) (479)
Exercise of stock options.......................... -- 59
Restricted cash.................................... (2,421) (1,647)
-------- --------
Net cash provided by financing activities.......... 55,773 56,703
-------- --------
Increase in cash and cash equivalents.............. 36,178 22,650
Cash and cash equivalents, beginning of period..... -- 36,178
-------- --------
Cash and cash equivalents, end of period........... $ 36,178 $ 58,828
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Issuance of preferred stock warrants in connection
with debt facilities.............................. -- $ 95
Interest paid...................................... $ 3 $ 296
Assets acquired under capital lease................ $ 156 --
Preferred stock issued in purchase of business..... $ 10,000 --
Note payable issued in purchase of business........ $ 15,016 --
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
AIRSPAN NETWORKS INC.
NOTES TO THE FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
1. THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
The Company is a global supplier of fixed wireless communications access
systems that enable communications service providers to deliver integrated high
speed data and voice services. The Company's systems are based on Code Division
Multiple Access, CDMA, technology that can be deployed rapidly and cost
effectively, providing an alternative to traditional wireline communications
networks. The Company's integrated solutions include software tools that
provide coverage and spectrum optimization and ongoing network management. To
facilitate the deployment and operation of its systems, the Company also offers
network installation, integration, training and support services. The Company's
main operations are based in Uxbridge, United Kingdom.
Basis of presentation for the Predecessor
Airspan Networks Inc. (the "Company" or "Airspan") was formed as a U.S.
company in January 1998 and is now incorporated in the State of Washington. The
Company was formed simultaneously with the acquisition of a business unit of
DSC Communications Corporation ("DSC") that began development of fixed wireless
access systems in 1994. In accordance with the terms of the acquisition, the
assets and liabilities of the business unit were transferred from DSC to the
Company on January 26, 1998. The assets and liabilities acquired were the fixed
wireless communications access systems operations of DSC (the "Predecessor
Business"). These operations consisted of a research and development function,
product management, direct sales and marketing and direct general and
administration costs.
The Predecessor Business was not a separate legal entity and its operations
formed part of the activities of several legal entities within DSC world wide.
Except for compilations of product line revenue, direct costs, direct expenses
and corporate allocations, no separate financial statements of the Predecessor
Business were prepared in the past. The assets and liabilities associated with
the Predecessor Business were components of larger business units. Accordingly,
other than certain inventory and equipment, the assets and liabilities of the
Predecessor Business were not identified or maintained in separate accounts. In
addition, the Predecessor Business did not maintain its own cash accounts.
Given these constraints, the balance sheets of the Predecessor Business and
related statement of operations and cash flows have not been presented.
Certain costs and expenses incurred by DSC were allocated to individual
product lines, including the Predecessor Business, on various bases, applying
internal management allocations. These corporate allocations are not
necessarily indicative of the level of expenses which might have been incurred
had the Predecessor Business been operated as an independent business. The
accompanying statement of revenues and direct costs and expenses of the
Predecessor Business do not include DSC corporate allocations of certain
overhead, general and administrative expenses, interest expense and income
taxes as it is impracticable to allocate such expenses arbitrarily on a
retroactive basis.
The accompanying statement of revenues and direct costs and expenses of the
Predecessor Business was prepared solely to comply with the requirements of the
Securities and Exchange Commission. These financial statements are not intended
to be a complete presentation of the results of operations of the Predecessor
Business.
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiary which is wholly-owned. All significant inter-company
transactions and balances have been eliminated on consolidation.
F-7
<PAGE>
AIRSPAN NETWORKS INC.
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
(in thousands, except for share and per share data)
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Fair value of financial instruments
The financial instruments of the Company consist mainly of cash and cash
equivalents, restricted cash, accounts receivable, accounts payable and
promissory notes. In view of their nature, the fair value of the financial
instruments included in the accounts of the company does not significantly vary
from their carrying amount.
Inventories
Inventories are stated at the lower of cost or market value. Cost includes
all costs incurred in bringing each product to its present location and
condition, as follows:
Raw materials, consumables and goods for resale--average cost
Work in progress and finished goods--cost of direct materials, labor and
allocated manufacturing overhead
Property and equipment
Property and equipment are stated at cost. Depreciation is provided on all
tangible fixed assets at rates calculated to write off the cost, less estimated
residual value based on prices prevailing at the date of acquisition, of each
asset evenly over its expected useful life, as follows:
Leasehold improvements--over the minimum lease term
Plant, machinery and equipment--over 2 to 5 years
Furniture and fixtures--over 4 to 5 years
Identifiable intangible assets
Identifiable intangible assets arose in connection with the acquisition of
the Predecessor Business. They are stated at allocated cost and include
developed technology, purchase contracts, patents and assembled workforce.
Identifiable intangible assets are amortized using the straight line method
over their estimated useful lives ranging from two to four years.
Goodwill arising on business combinations
The excess of the purchase price (including associated expenses) paid over
net assets of the business acquired is being amortized over its estimated
useful life of ten years on the straight-line method. The
F-8
<PAGE>
AIRSPAN NETWORKS INC.
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
(in thousands, except for share and per share data)
Company reviews the recoverability of goodwill whenever events or changes in
circumstances indicate that its carrying value may not be recoverable from the
anticipated future cash flows of the related businesses on an undiscounted
basis. A loss is recognized for the difference between the carrying value and
the estimated fair value of the asset.
Restricted cash
Restricted cash consists of bank accounts set aside for various guarantees.
Impairment of long lived assets
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed", the Company reviews its long-lived assets for impairment when
events or changes in circumstances indicate that the carrying value of such
assets may not be recoverable. This review consists of a comparison of the
carrying value of the asset with the asset's expected future undiscounted cash
flows. Estimates of expected future cash flows represent management's best
estimate based on reasonable and supportable assumptions and projections. If
the expected future cash flows exceed the carrying value of the asset, no
impairment is recognized. If the carrying value of the asset exceeds the
expected future cash flows, an impairment exists and is measured by the excess
of the carrying value over the fair value of the asset. Any impairment
provisions recognized are permanent and may not be restored in the future. No
impairment expense was recognized in 1997, 1998 or 1999.
Product development
All product development expenditures are charged to product development
expense in the period incurred. Generally accepted accounting principles
require the capitalization of certain software development costs after
technological feasibility of the software is established. In the development of
the Company's new products and enhancements to existing products, the
technological feasibility of the software is not established until
substantially all product development is complete, including the development of
a working model. Internal software development costs that were eligible for
capitalization were insignificant and were charged to research and development
expense in the accompanying statements of operations.
Revenue recognition
Revenue is recognized on the sale of products when they are shipped, all
significant contractual obligations have been satisfied and the collection of
the resulting revenues is reasonably assured. Revenue from customer service
contracts, generally installation, maintenance, and consulting, are recognized
as the services are performed. Any billings in excess of revenue are classified
as deferred revenue.
Concentration of credit risk
Financial instruments which potentially subject Airspan to concentration of
credit risk consist primarily of cash and cash equivalents and accounts
receivable. Airspan places its cash equivalents and short-term investments only
in highly rated financial instruments. Airspan's accounts receivable are
derived from sales of wireless local loop products and approximately 73% and
96% of product sales were non US sales for the 11 month period ended December
31, 1998 and the year ended December 31, 1999, respectively (see Note 9).
Airspan generally requires a US dollar irrevocable letter of credit for the
full amount of significant sales to be in place at the time of shipment, except
in cases where credit risk is considered to be acceptable. The
F-9
<PAGE>
AIRSPAN NETWORKS INC.
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
(in thousands, except for share and per share data)
Predecessor Business derived 76% of revenue from four customers in 1997 and 78%
of revenue from one customer in January 1998. Airspan derived 46% of revenue
from three customers in the 11 months ended December 1998 and 57% of revenue
from three customers in 1999. The Predecessor Business received 100% in 1997
and January 1998 of goods for resale from one supplier, DSC Telcom LP. Airspan
received 93% in 1998 and 66% in 1999 of goods for resale from two suppliers,
DSC Communications Ireland and Flextronics International AB. These suppliers
act as sub-contractors to manufacture a substantial part of Airspan's product
for resale.
Stock based compensation
Stock options are granted under various stock compensation programs to
employees and independent directors. The Company accounts for stock option
grants in accordance with Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" ("APB 25"). In rare instances, stock
is issued to non-employees in return for services. The Company recognizes
compensation expense for options granted to non-employees in accordance with
the provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-based Compensation" ("SFAS 123"), and Emerging Issues
Task Force Consensus 96-18, "Accounting for Equity Instruments that are Issued
to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services".
Segment reporting
During the periods, the Company operated as a single segment, being the
development and supply of wireless local loop systems and solutions.
2. THE ACQUISITION OF THE PREDECESSOR BUSINESS
The Company was formed simultaneously with the acquisition of the
Predecessor Business which began development of fixed wireless access systems
in 1994. In accordance with the terms of the acquisition, the assets and
liabilities of the Predecessor Business unit were transferred from DSC to the
Company on January 26, 1998.
<TABLE>
<S> <C>
Venture capital raised:
Issue of Series A stock for cash.................................. $30,000
Stock issue costs................................................. (575)
-------
29,425
-------
Consideration issued to DSC in exchange for the Predecessor and
costs incurred:
Promissory note issued............................................ 15,016
Fair value of Preferred Series A stock issued..................... 10,000
Direct and incremental acquisition costs.......................... 100
-------
25,116
-------
Total initial assets of the Company............................. $54,541
=======
</TABLE>
As consideration for the sale Airspan issued 10,000,000 shares of Preferred
Series A stock to DSC. Total direct costs relating to the acquisition and the
issuance of venture capital were $675. Of this, $575 has been accounted for as
a reduction in the proceeds of Series A stock as this represents the cost of
issuing the shares. The remaining $100 represents other direct and incremental
acquisition costs and has been included in the cost of the acquisition.
F-10
<PAGE>
AIRSPAN NETWORKS INC.
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
(in thousands, except for share and per share data)
The purchase price allocation was as follows:
<TABLE>
<S> <C>
Inventory........................................................... $ 4,796
Accounts receivable................................................. 1,225
Tangible fixed assets............................................... 2,706
Accounts payable.................................................... (4,161)
-------
4,566
Goodwill and identifiable intangible assets......................... 20,550
-------
$25,116
=======
</TABLE>
The allocation of the excess of the purchase price over the net tangible
assets acquired to goodwill and identifiable intangibles was as follows:
<TABLE>
<CAPTION>
Amortization
Value allocated in years
------- ------------------
<S> <C> <C>
Assembled workforce............................... $ 1,200 4
Purchase contracts................................ 2,083 2
Patent technology................................. 119 2
Developed technology.............................. 1,900 2
In process research and development............... 14,000 --
Goodwill.......................................... 1,248 10
-------
$20,550
=======
</TABLE>
The amount allocated to in-process research and development was recorded as
a one-time charge to operations in 1998 because the technology was not fully
developed and had no future alternative use.
The acquired in-process research and development represents the development
of technologies associated with a new generation of the AS4000 System, which
allows a significantly larger number of subscribers to be supported on a single
radio channel. This new generation product was first shipped in June 1998 and
revenue was first recognized in December 1998.
The developed technology relates to the older generation product, designed
to provide a fixed network service.
3. TAXATION
The Company did not record an income tax benefit for the tax losses
generated in the U.K. because it has experienced operating losses since
inception. At December 31, 1999 the Company has U.K. income tax net operating
loss carryforwards of $47,918 which do not expire.
The 1998 and 1999 tax provision relates to US federal income taxes currently
payable primarily attributable to intercompany interest income.
F-11
<PAGE>
AIRSPAN NETWORKS INC.
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
(in thousands, except for share and per share data)
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Net operating loss carryforwards................... $6,944 $14,375
Accruals and reserves.............................. 241 216
Fixed assets....................................... (281) (9)
------ -------
6,904 14,582
Valuation allowance................................ (6,904) (14,582)
------ -------
$ 0 $ 0
====== =======
Since the Company's utilization of these deferred tax assets is dependent on
future profits, a valuation allowance equal to the net deferred tax assets has
been provided following the criteria under SFAS 109 as it is considered more
likely than not that such assets will not be realised.
4. PROPERTY, PLANT AND EQUIPMENT
<CAPTION>
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Plant, machinery and equipment..................... $4,983 $ 7,992
Furniture and fixtures............................. 234 602
Construction in progress........................... 901 --
Leasehold improvements............................. -- 1,932
------ -------
6,118 10,526
Accumulated depreciation........................... (1,437) (3,775)
------ -------
$4,681 $ 6,751
====== =======
Depreciation expense totalled $1,308 for the year ended December 31, 1997,
$112 for the month ended January 25, 1998, $1,437 for the eleven months ended
December 31, 1998, and $2,345 for the year ended December 31, 1999.
5. INTANGIBLE ASSETS
<CAPTION>
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Assembled workforce................................ $1,200 $ 1,200
Customer contracts................................. 2,083 2,083
Patent technology.................................. 119 119
Developed technology............................... 1,900 1,900
Goodwill........................................... 1,248 1,248
------ -------
6,550 6,550
Less accumulated amortization...................... (2,270) (4,746)
------ -------
Net intangible assets.............................. $4,280 $ 1,804
====== =======
</TABLE>
Amortization of intangible assets amounted to $2,270 for the eleven months
ended December 31, 1998 and $2,476 for the year ended December 31, 1999.
F-12
<PAGE>
AIRSPAN NETWORKS INC.
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
(in thousands, except for share and per share data)
6. INVENTORY
Inventory consists of the following:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Purchased parts and materials...................... $1,874 $4,226
Work in progress................................... 421 --
Finished goods and consumables..................... 727 2,901
------ ------
$3,022 $7,127
====== ======
</TABLE>
7. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Promissory note payable to DSC, bearing interest
at 7%.......................................... $15,771 $16,904
Promissory note, bearing interest at 9%......... -- 940
Subordinated promissory notes, bearing interest
at 6%.......................................... -- 3,750
------- -------
$15,771 $21,594
======= =======
</TABLE>
On January 30, 1998 the Company issued a promissory note with a principal
amount of $17,000 and an interest rate of 7% per annum to DSC Telcom L.P. The
principal amount of the promissory note was subsequently adjusted down by
$1,984 with an effective adjustment date of January 30, 1998, due to a purchase
price adjustment applicable to certain customer contracts. Accrued but unpaid
interest is considered additional principal and is added to the principal
indebtedness every quarter commencing April 15, 1998.
The promissory note bearing interest at 7% is repayable in 36 equal monthly
installments commencing February 1, 2001. In the event that the principal
amount payable under the promissory note is adjusted further, the amount of the
equal installments shall be recalculated from the date of the adjustment so
that the principal is paid in equal installments over the remainder of the
thirty-six month period. The amount payable under the promissory note is still
under negotiation whereby the company is seeking to reduce the principal to be
paid as a result of certain claims against DSC in connection with the
acquisition.
On March 19, 1999 the Company entered into two Loan Agreements to borrow
$2,500 in installments of $1,250 each. The Company executed the borrowing of
$1,250 against this Loan Agreement on March 29, 1999 as evidenced by the issue
of a promissory note. The promissory note is repayable in 30 equal monthly
installments of $46 commencing May 1, 1999 and two additional final
installments of $94 to be paid on October 1, 2001 and May 1, 2002. The
promissory note has an interest rate of 9% per annum.
On March 19, 1999 the Company also entered into a subordinated loan and
security agreement to borrow $3,750 in increments of $1,250 each. The loan was
executed by the Company on March 29, 1999 by the issue of three subordinated
promissory notes of $1,250. Two of the subordinated promissory notes have the
same repayment conditions of 54 monthly installments consisting of one monthly
installment of interest only of $0.4 (paid April 1999), 52 monthly installments
of interest only of $6 (starting May 1, 1999) and one final balloon payment of
$1,256 on September 1, 2003. Both subordinated promissory notes have an
interest rate of 6% per annum. The third subordinated promissory note is
payable in 21 monthly installments consisting of one
F-13
<PAGE>
AIRSPAN NETWORKS INC.
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
(in thousands, except for share and per share data)
monthly installment of interest only of $0.4 (paid April 1999), 19 monthly
installments of interest only of $6 (starting May 1, 1999) and one final
balloon payment of $1,256 on December 1, 2000. The promissory note has an
interest rate of 6% per annum.
Long term debt maturities at December 31, 1999 are as follows:
<TABLE>
<S> <C>
2000................................................................. $ 1,743
2001................................................................. 5,612
2002................................................................. 5,635
2003................................................................. 8,135
2004................................................................. 469
-------
$21,594
=======
</TABLE>
8. COMMITMENTS
Future minimum lease payments for assets under capital leases at December
31, 1999 are as follows:
<TABLE>
<S> <C>
2000.................................................................... $60
2001.................................................................... 35
---
95
Less amount representing interest....................................... (8)
---
Present value of future minimum lease payments.......................... 87
Less current portion.................................................... 53
---
$34
===
</TABLE>
The net book value of machinery and equipment under capital lease
obligations December 31, 1998 was $117 and at December 31, 1999 was $78.
Airspan has $266 in commitments for the acquisition of property, plant and
equipment at December 31, 1999.
Future minimum lease payments for assets under noncancelable operating
leases with original terms of more than one year as of December 31, 1999 are as
follows:
<TABLE>
<S> <C>
2000.................................................................. $1,184
2001.................................................................. 1,114
2002.................................................................. 1,093
2003.................................................................. 849
2004.................................................................. 583
Thereafter............................................................ 1,620
------
$6,443
======
</TABLE>
Airspan Networks Inc. has entered into various operating lease agreements,
primarily for office space, warehouse space and vehicles. Rent expense for the
eleven months ended December 31, 1998 was $1,204 and for the year ended
December 31, 1999 was $1,554.
F-14
<PAGE>
AIRSPAN NETWORKS INC.
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
(in thousands, except for share and per share data)
At December 31, 1999 the Company had guarantees with its landlords, a
supplier and customers totalling $4,068. The guarantees relate to non payment
or non performance under contracts. Bank security guarantees of similar amounts
have been established and are classified as restricted cash.
9. SEGMENTS
As a developer and supplier of fixed wireless communications access systems
and solutions, the Company has one reportable segment. The revenue of this
single segment is comprised primarily of revenue from products and, to a lesser
extent, services. All of the Company's revenue is generated from the United
Kingdom operations. Substantially all of the Company's revenue is attributable
to customers in Asia Pacific, Europe and the United States. Additionally,
substantially all of the Company's assets other than most of the cash and
certain intangibles are located within the United Kingdom and Ireland.
An analysis of revenue by geographical market is given below:
<TABLE>
<CAPTION>
Predecessor Company
------------------------ --------------------------------
Month
Year ended ended Eleven months ended Year ended
December 31, January 25, December 31, December 31,
1997 1998 1998 1999
------------ ----------- ------------------- ------------
<S> <C> <C> <C> <C>
United States........... $1,316 -- $ 3,048 $ 487
Asia Pacific............ -- $ 10 1,317 4,928
Europe.................. 1,684 16 5,503 5,151
Africa and MiddleEast... 1,711 109 1,453 1,725
Other location.......... 107 -- 164 189
------ ---- ------- -------
$4,818 $135 $11,485 $12,480
====== ==== ======= =======
</TABLE>
For the year ended December 31, 1997, the Predecessor Business had revenues
from transactions with four customers which amounted to 26%, 20%, 15% and 14%
of total revenues. For the one month ended January 25, 1998, the Predecessor
Business had revenues from transactions with one customer which amounted to 78%
of total revenues. For the 11 month period ended December 31, 1998, the Company
had revenues from transactions with three customers which amounted to 18%, 14%
and 14% of total revenues. For the year ending December 31, 1999 the Company
had revenues from transactions with three customers which amounted to 27%, 18%
and 13% of total revenues.
F-15
<PAGE>
AIRSPAN NETWORKS INC.
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
(in thousands, except for share and per share data)
An analysis of the Company's assets is given below:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Long-lived assets:
Property, plant and equipment, net:
United States....................................... -- $ 11
United Kingdom and Ireland.......................... $ 4,681 6,740
------- -------
4,681 6,751
------- -------
Intangible assets, net:
United States....................................... 2,227 1,092
United Kingdom and Ireland.......................... 2,053 712
------- -------
4,280 1,804
------- -------
Total long-lived assets........................... $ 8,961 $ 8,555
======= =======
Total assets:
United States....................................... $32,932 $55,464
United Kingdom and Ireland.......................... 24,908 32,756
------- -------
$57,840 $88,220
======= =======
</TABLE>
10. STOCK OPTIONS
On February 1, 1998, and as subsequently amended, the Board of Directors
authorized the establishment of a non-qualified employee stock option plan
whereby the Company may grant employees stock options to purchase up to
8,375,000 shares of common stock. The exercise price of each option is equal to
the market price of the Company's common stock on the date of grant, as
determined by the Board of Directors of the Company. Employee stock options
generally vest over a four-year period and expire on the tenth anniversary of
their issuance. The Company has granted 3,711,500 and 5,338,500 options as of
December 31, 1998 and December 31, 1999, respectively, to employees under the
plan.
Also, within the plan described above, the Company has granted nonqualified
common stock options to directors under various discrete option agreements. The
Company has granted 1,500,000 and 1,790,000 and non-qualified options to
directors, as of December 31, 1998 and December 31, 1999, respectively.
The Company has a full recourse note receivable from a director relating to
the exercise of such options in the amount of $150 and $130 at December 31,
1998 and December 31, 1999 respectively. Such options may be exercised for the
issuance of restricted stock to the extent such options are not vested.
Restrictions lapse over the same four year vesting schedule as the underlying
option. In the event of termination, the Company has a repurchase right
determined on the original exercise price.
The Company granted options to purchase 42,000 shares of common stock to
consultants at an exercise price of $0.10 per share in February 1998. In
December 1999 the Company granted options to purchase 15,000 shares of common
stock to a consultant at an exercise price of $2.00 per share. These options
were granted in exchange for consulting services. The Company valued these
options using the Black-Scholes option-pricing model. As such, $4 was charged
to operations in 1998 and $93 was charged to operations in 1999 to reflect the
estimated fair value of the underlying options. All such options remain
unexercised as of December 31, 1998 and December 31, 1999.
F-16
<PAGE>
AIRSPAN NETWORKS INC.
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
(in thousands, except for share and per share data)
The following table sets forth the activity for all common stock options:
<TABLE>
<CAPTION>
Weighted
Number of average
shares exercise price
---------- --------------
<S> <C> <C>
Outstanding, February 1, 1998..................... -- --
Granted......................................... 5,211,500 $0.10
Forfeited....................................... (60,000) 0.11
Exercised....................................... (1,500,000) 0.10
----------
Outstanding, December 31, 1998.................... 3,651,500 0.10
Granted......................................... 1,917,000 0.77
Forfeited....................................... (208,124) 0.10
Exercised....................................... (590,160) 0.10
----------
Outstanding, December 31, 1999.................... 4,770,216 $0.46
========== =====
</TABLE>
The following table sets forth stock options outstanding at December 31,
1999:
<TABLE>
<CAPTION>
Outstanding options Exercisable options
Weighted Weighted
average average
remaining remaining
contractual contractual
-----------------------------------------
Exercise Price Number life Number life
-------------- ------------ ------------------- --------
<S> <C> <C> <C> <C>
$0.10.............................. 2,825,716 8.25 912,740 8.23
0.18.............................. 855,500 9.15 9,531 8.92
0.60.............................. 104,500 9.57 -- --
1.20.............................. 887,500 9.75 -- --
2.00.............................. 97,000 9.92 -- --
</TABLE>
The Company applies APB 25 in accounting for its stock options and warrants.
On a pro forma basis, had compensation cost been determined on the basis of
fair value determined under the minimum value method pursuant to SFAS 123, net
loss would have been as follows for the periods ended December 31, 1998 and
December 31, 1999:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Net loss, as reported.............................. $(35,596) $(29,449)
Pro forma net loss................................. (35,628) (29,480)
Net loss per share................................. (22.22) (11.59)
Pro forma net loss per share....................... (22.24) (11.60)
</TABLE>
The pro forma effect of applying SFAS 123 is not likely to be representative
of the effects on reported net income or loss for future years.
F-17
<PAGE>
AIRSPAN NETWORKS INC.
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
(in thousands, except for share and per share data)
The weighted average fair value of the options at their grant date was $0.02
during 1998 and $0.20 during 1999. The estimated fair value of each option
granted is calculated using the Black-Scholes option-pricing model. The
following summarizes the weighted average of the assumptions used in the model:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Risk-free interest rate............................ 5.45% 5.60%
Expected years until exercised..................... 5 5
Expected dividend yield............................ 0 0
Expected volatility................................ 0 0
</TABLE>
11. CONVERTIBLE PREFERRED STOCK
The holders of the $1.00 Series A Convertible Preferred Stock (Series A
Stock) and $1.75 Series B Convertible Preferred Stock (Series B Stock) and
$2.50 Series C Convertible Preferred Stock (Series C Stock) are entitled to
receive dividends, on an as-converted basis, if and when any such dividend is
paid on the Common Stock, by declaration of the Board of Directors. No
dividends have been declared.
Upon any liquidation, dissolution or winding up of Airspan, the holders of
the Series A Stock, Series B Stock and Series C Stock will be entitled to
receive, from Airspan's assets available for distributions to stockholders,
$1.00 for each outstanding share of the Series A Stock, $1.75 for each
outstanding share of the Series B Stock, and $2.50 for each outstanding share
of Series C Stock plus all dividends accrued, on a pari passu basis, before any
distribution is made to the Common stockholders. After such payment and
distribution to any other class or series of preferred stock, the holders of
the Convertible Preferred Stock would be entitled to further distributions of
remaining assets on a pari passu basis.
The Series A Stock, Series B Stock and Series C Stock is convertible into
Common Stock at any time after issuance. The conversion price and number of
shares of Common Stock obtained upon conversion are subject to adjustment under
certain conditions. The Series A Stock, Series B Stock and Series C Stock would
be automatically converted to common stock upon the closing of a qualified
initial public offering. The Series A Stock, Series B Stock and Series C Stock
are not redeemable.
The holders of each share of the Series A Stock, Series B Stock and Series C
Stock have the right to one vote for each share of Common Stock into which each
such share of Series A Stock, Series B Stock and Series C Stock could then be
converted. The voting rights of Convertible Preferred Stock are the same as the
rights of the holders of the Common Stock.
The Company has reserved 1,514,624 shares of its Common Stock for purchase
upon exercise of options to be granted in the future.
12. STOCK WARRANTS
As of December 31, 1999, in addition to the option plans discussed above,
Airspan has various warrants outstanding to purchase 249,998 shares of the
Company's Series B Convertible Preferred Stock at exercise prices of $1.75 per
share which were issued in connection with debt facilities and lease
agreements. As of December 31, 1999 all of these warrants are currently
exercisable. These warrants expire on the earlier of seven years from the
effective date of the warrant agreement or three years from the effective date
of the Company's initial public offering. Upon the completion of a qualified
initial public offering these warrants would convert to common stock warrants.
The number of shares of Common Stock to be obtained upon exercise of certain of
F-18
<PAGE>
AIRSPAN NETWORKS INC.
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
(in thousands, except for share and per share data)
these warrants are subject to adjustment under certain conditions. The
estimated fair value of the warrants, determined based on the Black-Sholes
valuation model was $95. The value of these warrants was recorded as deferred
loan costs and are amortized over the life of the loan.
13. NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of shares
of common stock outstanding less the number of shares subject to repurchase.
Shares associated with stock options, warrants and the convertible preferred
stock are not included in the calculation of diluted net loss per share because
they are antidilutive. As described above, each share of convertible preferred
stock will automatically convert to common stock upon the completion of the
company's initial public offering. Pro forma net loss per share data has been
determined as if each share of convertible preferred stock had converted to
common stock at the time of issuance.
The following table sets forth the computation of basic and diluted net loss
per share and pro forma basic and diluted net loss per share for the periods
indicated:
<TABLE>
<CAPTION>
11 months Year
ended ended
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Numerator:
Net loss........................................... $ (35,596) $ (29,449)
=========== ===========
Denominator:
Weighted average common shares outstanding......... 2,875,000 3,719,003
Less weighted average shares of restricted stock... (1,272,727) (1,177,350)
----------- -----------
Denominator for basic and diluted calculation...... 1,602,273 2,541,653
Weighted average pro forma conversion of
convertible preferred stock....................... 40,388,691 60,894,048
----------- -----------
Denominator for pro forma basic and diluted
calculation....................................... 41,990,964 63,435,701
=========== ===========
Net loss per share:
Basic and diluted.................................. $ (22.22) $ (11.59)
=========== ===========
Pro forma basic and diluted........................ $ (0.85) $ (0.46)
=========== ===========
</TABLE>
There were 3,651,500 stock options and 56,442,858 shares of convertible
preferred stock outstanding at December 31, 1998 and 4,770,216 stock options,
249,998 Series B Convertible stock warrants and 78,571,429 shares of
convertible preferred stock outstanding at December 31, 1999 that were excluded
from the computation of diluted net loss per share as their effect was
antidilutive. If the Company had reported net income, the calculation of these
per share amounts would have included the dilutive effect of these common stock
equivalents using the treasury stock method for stock options and warrants
using the if converted method for convertible preferred stock.
14. PAR VALUE
The Company's common stock originally had a par value of $0.01. On August 6,
1999, the Company reincorporated from Delaware to Washington. In connection
with this reincorporation, the par value of the common stock was changed to
$0.0001.
15. RELATED PARTY TRANSACTIONS
Airspan paid $220 in 1998 and $263 in 1999 to SeaPoint Ventures for
executive management and accounting services. Thomas Huseby, chairman of the
Company's board of directors, is a general partner of SeaPoint Ventures.
F-19
<PAGE>
AIRSPAN NETWORKS INC.
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
(in thousands, except for share and per share data)
16. SUBSEQUENT EVENT
On March 31, 2000, the Board of Directors authorized the Company to proceed
with the filing of a registration statement with the Securities and Exchange
Commission for an initial public offering of the Company's common stock.
On February 25, 2000 the Company issued 1,600,000 Series C convertible
preferred shares at $2.50 per share, raising $4,000 and on April 11, 2000
issued 578,573 Series C convertible preferred shares at $2.50 per share,
raising $1,446.
F-20
<PAGE>
PART II
Information Not Required in the Prospectus
Item 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of common stock being registered. All amounts are estimates
except the SEC registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
Amount
To be paid
----------
<S> <C>
SEC Registration Fee................................................ $17,160.00
NASD Filing Fee..................................................... 7,000.00
Nasdaq National Market Listing Fee.................................. *
Printing Fees and Expenses.......................................... *
Legal Fees and Expenses............................................. *
Accounting Fees and Expenses........................................ *
Blue Sky Fees and Expenses.......................................... *
Transfer Agent and Registrar Fees................................... *
Miscellaneous....................................................... *
----------
Total............................................................. $ *
==========
</TABLE>
- --------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 5.4 of our Articles of Incorporation authorizes us to indemnify any
present or former director or officer to the fullest extent not prohibited by
the Washington Business Corporation Act ("WBCA") or other applicable law now or
hereafter in force. Chapter 23B.08.510 and .570 of the WBCA authorizes a
corporation to indemnify its directors, officers, employees, or agents in terms
sufficiently broad to permit such indemnification under certain circumstances
for liabilities (including provisions permitting advances for expenses
incurred) arising under the Securities Act.
In addition, we maintain directors' and officers' liability insurance under
which our directors and officers are insured against loss (as defined in the
policy) as a result of claims brought against them for their wrongful acts in
such capacities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) The Company has issued or sold the following securities within the past
three years:
. an aggregate of 22,178,573 shares of Series C convertible preferred
stock at $2.50 per share in November 1999, February and April 2000 to 26
accredited investors
. a warrant to purchase 249,998 shares of Series B convertible preferred
stock at $1.75 per share in March 1999 to a commercial equipment leasing
company
. an aggregate of 18,571,429 shares of Series B convertible preferred
stock at $1.75 per share and 250,000 shares of common stock at $0.01 per
share in November 1998 to 19 accredited investors
. an aggregate of 40,000,000 shares of Series A convertible preferred
stock at $1.00 per share in January and August 1998 to 9 accredited
investors
. an aggregate of 1,625,000 shares of common stock at $0.01 per share in
January 1998 to 3 accredited investors
II-1
<PAGE>
(b) As of March 31, 2000, an aggregate of 2,201,176 shares of Common Stock
had been issued upon exercise of options under the Registrant's Stock Option
Plan.
(c) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).
The issuances described in Item 15(a) were deemed to be exempt from
registration under the Securities Act in reliance upon Section 4(2) thereof as
transactions by an issuer not involving any public offering. The issuances
described in Item 15(c) were deemed to be exempt from registration under the
Securities Act in reliance upon Rule 701 promulgated thereunder in that they
were offered and sold either pursuant to written compensatory benefit plans or
pursuant to a written contract relating to compensation, as provided by Rule
701. In addition, such issuances were deemed to be exempt from registration
under Section 4(2) of the Securities Act as transactions by an issuer not
involving any public offering. The recipients of securities in each such
transaction represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends where affixed to the securities
issued in such transactions. All recipients had adequate access, through their
relationships with the Company, to information about the Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Amended and Restated Articles of Incorporation of the Registrant
3.2 Bylaws of the Registrant
4.1 Form of the Registrant's common stock certificate
5.1 Opinion of Preston Gates & Ellis LLP*
10.1 Manufacturing Contract, dated August 27, 1998, between Airspan
Communications Limited and Flextronics International Sweden AB
10.2 Contract for the Sale and Purchase of Equipment and Ancillary Facilities
for the Establishment of a Wireless Access System, dated October 25,
1999, between AZ Communications Network, Inc. and Airspan Communications
Limited**
10.3 Contract for the Engineering, Project Management, Factory Inspection,
Training and Technical Assistance Services for the Establishment of a
Wireless Access System, dated October 25, 1999, between AZ
Communications Network, Inc. and Airspan Communications Limited**
10.4 Contract for purchase order No. LP/0442/99 between Airspan
Communications Ltd and Suntel Private Ltd. dated April 29, 1999
10.5 Lease for Registrant's facilities located at Oxford House, Uxbridge,
U.K.
10.6 Lease for Registrant's facilities located at Cambridge House, Uxbridge,
U.K.
10.7 Original Equipment Manufacturer Agreement between Motorola, Inc. and
Airspan Networks Inc.
10.8 Lease for Registrant's facilities located at Oxford House and Cambridge
House, Uxbridge, U.K.
10.9 Lease for Registrants facilities located at Riverside Way, Uxbridge,
U.K.
10.10 1998 Stock Option and Restricted Stock Plan*
21.1 Subsidiaries of registrant and Airspan Communications Limited
23.1 Consent of Ernst & Young, Independent Auditors
23.2 Consent of Preston Gates & Ellis LLP (included in Exhibit 5.1)
27.1 Financial Data Schedule
</TABLE>
II-2
<PAGE>
- --------
* To be filed by amendment
** Confidential treatment requested for portions of this agreement.
(b) Financial Statement Schedules
Schedule S-1
<TABLE>
<CAPTION>
AIRSPAN NETWORKS INC VALUATION AND QUALIFYING ACCOUNTS
--------------------------------------------------------------
(in thousands of U.S. dollars)
Additions Deductions
---------- ---------------------------
Balance at Balance at
Beginning of Charged to Credited to Charged Against End of
Period Expenses Expenses Provision Period
------------ ---------- ----------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
debts
Year ended December 31,
1999................... 559 856 (169) (238) 963
Year ended December 31,
1998................... 0 578 (19) 0 559
</TABLE>
II-3
<PAGE>
REPORT OF INDEPENDENT AUDITORS ON SCHEDULE S-1
We have audited the consolidated financial statements of Airspan Networks
Inc. as of December 31, 1998 and 1999 and for the eleven month period ended
December 31, 1998 and the year ended December 31, 1999, and have issued our
report thereon dated February 9, 2000 and April 11, 2000 (included elsewhere in
this Registration Statement). Our audits also included the financial statement
schedule listed in Item 16(b) of this Registration Statement. This schedule is
the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young
Ernst & Young
London, England
April 11, 2000
II-4
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this its Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Uxbridge, United
Kingdom, on the 11th day of April 2000.
Airspan Networks Inc.
/s/ Eric D. Stonestrom
By: _________________________________
Eric D. Stonestrom, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned directors and/or
officers of Airspan Networks Inc. (the "Company"), hereby severally constitute
and appoint Eric D. Stonestrom, David A. Twyver and Thomas S. Huseby, and each
of them individually, with full powers of substitution and resubstitution, our
true and lawful attorneys, with full powers to them and each of them to sign
for us, in our names and in the capacities indicated below, the Registration
Statement on Form S-1 filed with the Securities and Exchange Commission, and
any and all amendments to said Registration Statement (including post-effective
amendments), and any registration statement filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, of equity securities of the Company,
and to file or cause to be filed the same, with all exhibits hereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys, and each of them, with full power and authority
to do and perform each and every act and thing requisite and necessary to be
done in connection therewith, as fully to all intents and purposes as to each
of them might or could do in person, and hereby ratifying and confirming all
that said attorneys, and each of them, or their substitute or substitutes,
shall do or cause to be done by virtue of this Power of Attorney.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities indicated.
<TABLE>
<CAPTION>
Dated
-----
<S> <C> <C>
/s/ Eric D. Stonestrom President and Chief April 11, 2000
______________________________________ Executive Officer,
Eric D. Stonestrom Director (Principal
Executive Officer)
/s/ Joseph J. Caffarelli Senior Vice President, April 11, 2000
______________________________________ Finance; Chief Financial
Joseph J. Caffarelli Officer (Principal
Financial and Accounting
Officer)
/s/ Jon Bayless Director April 11, 2000
______________________________________
Jon Bayless
/s/ Berry Cash Director April 11, 2000
______________________________________
Berry Cash
/s/ Thomas S. Huseby Director April 11, 2000
______________________________________
Thomas S. Huseby
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Dated
-----
<S> <C> <C>
/s/ Bandel L. Carano Director April 11, 2000
______________________________________
Bandel L. Carano
/s/ David A. Twyver Director April 11, 2000
______________________________________
David A. Twyver
/s/ Ovid Santoro Director April 11, 2000
______________________________________
Ovid Santoro
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Amended and Restated Articles of Incorporation of the Registrant
3.2 Bylaws of the Registrant
4.1 Form of the Registrant's common stock certificate
5.1 Opinion of Preston Gates & Ellis LLP*
10.1 Manufacturing Contract, dated August 27, 1998, between Airspan
Communications Limited and Flextronics International Sweden AB
10.2 Contract for the Sale and Purchase of Equipment and Ancillary Facilities
for the Establishment of a Wireless Access System, dated October 25,
1999, between AZ Communications Network, Inc. and Airspan Communications
Limited**
10.3 Contract for the Engineering, Project Management, Factory Inspection,
Training and Technical Assistance Services for the Establishment of a
Wireless Access System, dated October 25, 1999, between AZ
Communications Network, Inc. and Airspan Communications Limited**
10.4 Contract for purchase order No. LP/0442/99 between Airspan
Communications Ltd and Suntel Private Ltd. dated April 29, 1999
10.5 Distributor Agreement between Airspan Networks Inc. and GLS LLC.**
10.6 Supply Agreement between Airspan Networks Inc. and GLS LLC.
10.7 Original Equipment Manufacturer Agreement between Motorola, Inc. and
Airspan Networks Inc.
10.8 Lease for Registrant's facilities located at Oxford House and Cambridge
House, Uxbridge, U.K.
10.9 Lease for Registrants facilities located at Riverside Way, Uxbridge,
U.K.
10.10 1998 Stock Option and Restricted Stock Plan*
21.1 Subsidiaries of registrant
23.1 Consent of Ernst & Young, Independent Auditors
23.2 Consent of Preston Gates & Ellis LLP (included in Exhibit 5.1)*
27.1 Financial Data Schedule
</TABLE>
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* To be filed by amendment
** Confidential treatment requested for portions of this agreement.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
AIRSPAN NETWORKS INC.
ARTICLE 1
NAME
The name of this corporation is Airspan Networks Inc.
ARTICLE 2
DURATION
This corporation is organized under the Washington Business Corporation
Act (the "Act") and shall have perpetual existence.
ARTICLE 3
PURPOSE AND POWERS
The purpose and powers of this corporation are as follows:
3.1 To engage in any lawful business.
3.2 To engage in any and all activities that, in the judgment of the Board
of Directors, may at any time be incidental or conducive to the attainment of
the foregoing purpose.
3.3 To exercise any and all powers that a corporation formed under the
Act, or any amendment thereto or substitute therefor, is entitled at the time to
exercise.
ARTICLE 4
CAPITAL STOCK
4.1 Classes and Series of Stock. This corporation is authorized to issue
two classes of stock, to be designated, respectively, "Common Stock" and
"Convertible Preferred Stock." The total number of shares that this corporation
is authorized to issue is one hundred eighty-one million (181,000,000) shares.
One hundred million (100,000,000) shares shall be Common Stock, par value $.0001
per share, and eighty-one million (81,000,000) shares shall be Convertible
Preferred Stock, par value $.0001 per share. The Convertible Preferred Stock
shall include three series as follows:
<PAGE>
forty million (40,000,000) shares of Series A Convertible Preferred Stock (the
"Series A Stock"); eighteen million eight hundred twenty-one thousand four
hundred twenty-seven (18,821,427) shares of Series B Convertible Preferred Stock
(the "Series B Stock"); and twenty-two million one hundred seventy eight
thousand five seventy-three (22,178,573) shares of Series C Convertible
Preferred Stock (the "Series C Stock"). Authority is vested in the Board of
Directors, subject to the limitations and procedures prescribed by law, to
divide any part or all of such preferred class into any number of series, to fix
and determine relative rights and preferences of the shares of any series to be
established, and to amend the rights and preferences of the shares of any series
that has been established but is wholly unissued.
Within any limits stated in these Articles or in the resolution of the
Board of Directors establishing a series, the Board of Directors, after the
issuance of shares of a series, may amend the resolution establishing the series
to decrease (but not below the number of shares of such series then outstanding)
the number of shares of that series, and the number of shares constituting the
decrease shall thereafter constitute authorized but undesignated shares.
The authority herein granted to the Board of Directors to determine the
relative rights and preferences of the preferred stock shall be limited to
unissued shares, and no power shall exist to alter or change the rights and
preferences of any shares that have been issued.
4.2 Rights, Preferences and Restrictions of Convertible Preferred Stock.
The rights, preferences, privileges, and restrictions granted to and imposed on
the Series A Stock, Series B Stock and Series C Stock are as set forth below in
this Section 4.2.
4.2.1 Dividend Provision. The holders of shares of Series A Stock,
Series B Stock and Series C Stock shall be entitled to receive dividends, on an
as-converted basis, when and if any such dividend is paid on the Common Stock by
declaration of the Board of Directors.
4.2.2 Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, subject to the rights of
other classes or series of preferred stock that may from time to time come into
existence, the holders of Series A Stock, Series B Stock and Series C Stock
shall be entitled to receive, prior and in preference to any distribution of any
of the assets of this corporation to the holders of Common Stock by reason of
their ownership thereof, an amount per share equal to the sum of (i) $1.00 for
each outstanding share of Series A Stock (the "Original Series A Issue Price"),
$1.75 for each outstanding share of Series B Stock (the "Original Series B Issue
Price"), and $2.50 for each outstanding share of Series C Stock (the "Original
Series C Issue Price," and together with the Original Series A Issue Price and
the Original Series B Issue Price, the "Original Issue Price"), and (ii) an
amount equal to declared but unpaid dividends on each such share of Series A
Stock, Series B Stock
2
<PAGE>
and Series C Stock. If upon the occurrence of such event, the assets and funds
thus distributed among the holders of the Series A Stock, Series B Stock and
Series C Stock shall be insufficient to permit the payment to such holders of
the full aforesaid preferential amounts, then, subject to the rights of other
classes or series of preferred stock that may from time to time come into
existence, the entire assets and funds of this corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Stock, Series B Stock and Series C Stock in proportion to the preferential
amount each such holder is otherwise entitled to receive.
(b) For purposes of subsections (c), (d), (e) and (f) of this Section
4.2.2, the following definitions shall apply:
"Series A Investment Amount" shall mean the Original Series A Issue
Price multiplied by the number of shares of Series A Stock outstanding.
"Series B Investment Amount" shall mean the Original Series B Issue
Price multiplied by the number of shares of Series B Stock outstanding.
"Series C Investment Amount" shall mean the Original Series C Issue
Price multiplied by the number of shares of Series C Stock outstanding.
"Series A Percentage" shall mean the Series A Investment Amount
divided by the Total Preferred Stock Investment Amount.
"Series B Percentage" shall mean the Series B Investment Amount
divided by the Total Preferred Stock Investment Amount.
"Series C Percentage" shall mean the Series C Investment Amount
divided by the Total Preferred Stock Investment Amount.
"Total Preferred Stock Investment Amount" shall mean the sum of the
Series A Investment Amount, the Series B Investment Amount and the Series C
Investment Amount.
(c) Upon the completion of the distributions required by subsection
(a) of this Section 4.2.2 and any other distribution that may be required with
respect to any other class or series of preferred stock that may from time to
time come into existence, the remaining assets of this corporation legally
available for distribution to stockholders shall be distributed as follows: (i)
an aggregate amount (the "Second Distribution Amount") equal to the product of
$2.00 multiplied by the number of shares of Series A Stock, Series B Stock and
Series C Stock then outstanding shall be distributed, on a pari passu basis, in
an amount equal to the Series A Percentage multiplied by the Second Distribution
Amount, ratably among the holders of Series A Preferred Stock, in an amount
equal to the Series B Percentage multiplied by the Second Distribution Amount,
ratably among the holders of Series B Preferred Stock, and in an amount equal to
the Series C Percentage multiplied by the Second Distribution Amount, ratably
among the holders of Series C Preferred Stock, and (ii) an amount per share
equal to $2.00 for each outstanding share of Common Stock shall be
3
<PAGE>
distributed ratably among the holders of Common Stock. If the assets and funds
thus distributed among the holders of the Series A Stock, Series B Stock, Series
C Stock and the Common Stock shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amounts, then, subject to the rights
of any other class or series of preferred stock that may from time to time come
into existence, the entire assets and funds of this corporation legally
available for distribution shall be distributed ratably among the holders of the
Series A Stock, Series B Stock, Series C Stock and Common Stock in proportion to
the amount each such holder is otherwise entitled to receive under this
subsection (c).
(d) Upon the completion of the distributions required by subsections
(a) and (c) of this Section 4.2.2 and any other distribution that may be
required with respect to any other class or series of preferred stock that may
from time to time come into existence, the remaining assets of this corporation
legally available for distribution to stockholders shall be distributed as
follows: (i) an aggregate amount (the "Third Distribution Amount") equal to the
product of $1.50 multiplied by the number of shares of Series B Stock and Series
C Stock then outstanding shall be distributed, on a pari passu basis, in an
amount equal to the Series A Percentage multiplied by the Third Distribution
Amount, ratably among the holders of Series A Stock, in an amount equal to the
Series B Percentage multiplied by the Third Distribution Amount, ratably among
the holders of Series B Preferred Stock, and in an amount equal to the Series C
Percentage multiplied by the Third Distribution Amount, ratably among the
holders of Series C Preferred Stock, and (ii) an amount per share equal to $1.50
for each outstanding share of Common Stock, in addition to the amounts paid
pursuant to subsection (c) of this Section 4.2.2, shall be distributed ratably
among the holders of Common Stock. If the assets and funds thus distributed
among the holders of the Series A Stock, Series B Stock, Series C Stock and
Common Stock shall be insufficient to permit the payment to such holders of the
full aforesaid preferential amount, then, subject to the rights of any other
class or series of preferred stock that may from time to time come into
existence, the entire assets and funds of this corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Stock, Series B Stock, Series C Stock and Common Stock in proportion to the
amount each such holder is otherwise entitled to receive under this subsection
(d).
(e) Upon the completion of the distributions required by subsections
(a), (c) and (d) of this Section 4.2.2 and any other distribution that may be
required with respect to any other class or series of preferred stock that may
from time to time come into existence, the remaining assets of this corporation
legally available for distribution to stockholders shall be distributed as
follows: (i) an aggregate amount (the "Fourth Distribution Amount") equal to the
product of $1.50 multiplied by the number of shares of Series C Stock then
outstanding shall be distributed, on a pari passu basis, in an amount equal to
the Series A Percentage multiplied by the Fourth Distribution Amount, ratably
among the holders of Series A Stock, in an amount equal to the Series B
Percentage multiplied by the Fourth Distribution Amount, ratably among the
holders of Series B Preferred Stock, and in an amount equal to the Series C
Percentage multiplied by the Fourth Distribution Amount, ratably among the
holders of Series C Preferred Stock, and (ii) an amount per share equal to $1.50
for each outstanding share
4
<PAGE>
of Common Stock, in addition to the amounts paid pursuant to subsections (c) and
(d) of this Section 4.2.2, shall be distributed ratably among the holders of
Common Stock. If the assets and funds thus distributed among the holders of the
Series A Stock, Series B Stock, Series C Stock and Common Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amount, then, subject to the rights of any other class or series of
preferred stock that may from time to time come into existence, the entire
assets and funds of this corporation legally available for distribution shall be
distributed ratably among the holders of the Series A Stock, Series B Stock,
Series C Stock and Common Stock in proportion to the amount each such holder is
otherwise entitled to receive under this subsection (e).
(f) Upon the completion of the distributions required by subsections
(a), (c), (d) and (e) of this Section 4.2.2 and any other distribution that may
be required with respect to any other class or series of preferred stock that
may from time to time come into existence, if assets remain in this corporation,
the holders of Series A Stock, Series B Stock and Series C Stock shall receive
no further distributions and the holders of the Common Stock of this corporation
shall receive all of the remaining assets of this corporation pro rata based on
the number of shares of Common Stock held by each.
(g) (i) For purposes of this Section 4.2.2, unless otherwise agreed
by holders of at least sixty-seven percent (67%) of the then outstanding shares
of Series A Stock, Series B Stock and Series C Stock, voting together as a
single class and not as a separate series, on an as-converted basis, a
liquidation, dissolution or winding up of this corporation shall be deemed to be
occasioned by, or to include, (A) any consolidation or merger of the corporation
with or into any other corporation or entity or person, or any other corporate
reorganization in which shareholders of the corporation immediately prior to
such consolidation, merger or reorganization, as a result of their ownership of
the corporation's securities, own less than 50% of the surviving corporation's
voting power immediately after such consolidation, merger or reorganization; or
(B) a sale, lease or other disposition of all or substantially all of the assets
of this corporation.
(ii) In any of such events, if the consideration received by
this corporation is other than cash, the value of such consideration will be
deemed its fair market value. Any securities shall be valued as follows:
(A) Securities not subject to investment letter or other
similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities exchange or through
the Nasdaq National Market, the value shall be deemed to be the average of the
closing prices of the securities on such quotation system over the thirty (30)
day period ending three (3) days prior to the closing of the impending
transaction;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices (whichever
is
5
<PAGE>
applicable) over the thirty (30) day period ending three (3) days prior to the
closing of the impending transaction; and
(3) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by this
corporation and the holders of at least a majority of the voting power of all
then outstanding shares of Series A Stock, Series B Stock and Series C Stock,
voting together as a single class.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate of this corporation) shall be to make an appropriate
discount from the market value determined as above in (A)(1), (2) or (3) to
reflect the approximate fair market value thereof, as mutually determined by
this corporation and the holders of at least a majority of the voting power of
all then outstanding shares of such Series A Stock, Series B Stock and Series C
Stock, voting together as a single class.
(iii) In the event the requirements of this subsection 4.2.2(g)
are not complied with, this corporation shall forthwith either:
(A) cause such closing to be postponed until such time
as the requirements of this Section 4.2.2 have been complied with; or
(B) cancel such transaction, in which event the rights,
preferences and privileges of the holders of the Series A Stock, Series B Stock
and Series C Stock shall revert to and be the same as such rights, preferences
and privileges existing immediately prior to the date of the first notice
referred to in subsection 4.2.2(g)(iv) hereof.
(iv) This corporation shall give each holder of record of
Series A Stock, Series B Stock and Series C Stock written notice of such
impending transaction not later than twenty (20) days prior to the stockholders'
meeting called to approve such transaction, if any, or twenty (20) days prior to
the closing of such transaction, whichever is earlier, and shall also notify
such holders in writing of the final approval of such transaction. The first of
such notices shall describe the material terms and conditions of the impending
transaction and the provisions of this Section 4.2.2, and this corporation shall
thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place sooner than twenty (20) days after this
corporation has given the first notice provided for herein or sooner than ten
(10) days after this corporation has given notice of any material changes
provided for herein; provided, however, that such periods may be shortened upon
the written consent of the holders of Convertible Preferred Stock that are
entitled to such notice rights or similar notice rights and that represent at
least a majority of the voting power of all then outstanding shares of such
Series A Stock, Series B Stock and Series C Stock, voting together as a single
class.
6
<PAGE>
4.2.3 Redemption. The Series A Stock, Series B Stock and Series C
Stock are not redeemable.
4.2.4 Conversion. The holders of the Series A Stock, Series B Stock
and Series C Stock shall have conversion rights as follows (the "Conversion
Rights"):
(a) Right to Convert. Each share of Series A Stock, Series B
----------------
Stock and Series C 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
this corporation or any transfer agent for such stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing the
Original Issue Price (as defined above) applicable to such series by the
Conversion Price (as defined below) applicable to such series, determined as
hereafter provided, in effect on the date the certificate is surrendered for
conversion. The initial "Conversion Price" per share for shares of Series A
Stock shall be the Original Series A Issue Price; the initial "Conversion Price"
per share for shares of Series B Stock shall be the Original Series B Issue
Price; and the initial "Conversion Price" per share for shares of Series C Stock
shall be the Original Series C Issue Price; provided, however, that the
Conversion Price for the Series A Stock, Series B Stock and Series C Stock shall
be subject to adjustment as set forth in subsection 4.2.4(d) hereof.
(b) Automatic Conversion. Each share of Series A Stock, Series
--------------------
B Stock and Series C Stock shall automatically be converted into shares of
Common Stock at the Conversion Price at the time in effect for such series
immediately upon the earlier of (i) this corporation's sale of its Common Stock
in a firm commitment underwritten public offering pursuant to a registration
statement on Form S-1 or Form SB-2 under the Securities Act of 1933, as amended,
the public offering price of which was not less than $5.25 per share (adjusted
to reflect subsequent stock dividends, stock splits or recapitalizations) and
the aggregate offering proceeds of which were not less than $40,000,000 (net of
underwriting discounts and commissions) or (ii) the date specified by written
consent or agreement of the holders of seventy-five percent (75%) of the then
outstanding shares of Series A Stock, Series B Stock and Series C Stock, voting
together as a single class on an as-converted basis and not as separate series.
(c) Mechanics of Conversion. Before any holder of Series A
-----------------------
Stock, Series B Stock or Series C Stock shall be entitled to convert the same
into shares of Common Stock, he or she shall surrender the certificate or
certificates therefor, duly endorsed, at the office of this corporation or of
any transfer agent for the Series A Stock, Series B Stock or Series C Stock, and
shall give written notice to this corporation at its principal corporate office
of the election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. This corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series A Stock, Series B Stock or
Series C Stock, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of
7
<PAGE>
Series A Stock, Series B Stock or Series C 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 as of such date. If the conversion is in connection
with an underwritten offering of securities registered pursuant to the
Securities Act of 1933, as amended, the conversion may, at the option of any
holder tendering Series A Stock, Series B Stock or Series C Stock for
conversion, be conditioned upon the closing with the underwriters of the sale of
securities pursuant to such offering, in which event the person(s) entitled to
receive the Common Stock upon conversion of the Series A Stock, Series B Stock
or Series C Stock shall not be deemed to have converted such Series A Stock,
Series B Stock or Series C Stock until immediately prior to the closing of such
sale of securities.
(d) Conversion Price Adjustments of Convertible Preferred Stock
-----------------------------------------------------------
for Certain Dilutive Issuance, Stock Splits and Combinations. The Conversion
- ------------------------------------------------------------
Price of the Series A Stock, Series B Stock and Series C Stock shall be subject
to adjustment from time to time as follows:
(i) (A) If this corporation shall issue, after the date
upon which any shares of Series C Stock were first issued (the "Purchase Date"),
any Additional Stock (as defined below) without consideration or for a
consideration per share less than the Conversion Price for the Series A Stock,
Series B Stock or Series C Stock (the "Affected Series") in effect immediately
prior to such issuance, then the Conversion Price of each Affected Series in
effect immediately prior to such issuance shall forthwith (except as otherwise
provided in this clause (i)) be adjusted to a price determined by multiplying
such Conversion Price of the Affected Series by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance (including shares of Common Stock deemed to be issued
pursuant to subsection 4.2.4(d)(i)(E)(1) or (2)) plus the number of shares of
Common Stock that the aggregate consideration received by this corporation for
such issuance would purchase at such Conversion Price; and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance (including shares of Common Stock deemed to be issued
pursuant to subsection 4.2.4(d)(i)(E)(1) or (2)) plus the number of shares of
such Additional Stock.
(B) No adjustment of the Conversion Price for the
Series A Stock, Series B Stock or Series C Stock shall be made in an amount less
than one cent per share, provided that any adjustments that are not required to
be made by reason of this sentence shall be carried forward and shall be either
taken into account in any subsequent adjustment to the Conversion Price of the
Affected Series made prior to three (3) years from the date of the event giving
rise to the adjustment being carried forward, or shall be made at the end of
three (3) years from the date of the event giving rise to the adjustment being
carried forward. Except to the limited extent provided for in subsections (E)(3)
and (E)(4), no adjustment of such Conversion Price of the Series A Stock, Series
B Stock or Series C Stock pursuant to this subsection 4.2.4(d)(i) shall have the
effect of increasing the Conversion Price of the Affected Series above the
Conversion Price in effect immediately prior to such adjustment.
8
<PAGE>
(C) In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed, paid
or incurred by this corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
(D) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether before, on or
after the Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this subsection 4.2.4(d)(i) and subsection 4.2.4(d)(ii).
(1) The aggregate maximum number of shares of Common
Stock deliverable upon exercise (assuming the satisfaction of any conditions to
exercisability, including, without limitation, the passage of time, but without
taking into account potential antidilution adjustments) 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 subsections
4.2.4(d)(i)(C) and (d)(i)(D)), if any, received by this corporation upon the
issuance of such options or rights plus the minimum exercise price provided in
such options or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
(2) The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange (assuming the satisfaction
of any conditions to convertibility or exchangeability, including, without
limitation, the passage of time, but without taking into account potential
antidilution adjustments) 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, if any, received by this corporation for any such securities
and related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional consideration, if
any, to be received by this corporation (without taking into account potential
antidilution adjustments) 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 subsections 4.2.4(d)(i)(C) and
(d)(i)(D)).
(3) In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to this
9
<PAGE>
corporation upon exercise of such options or rights or upon conversion of or in
exchange for such convertible or exchangeable securities, including, but not
limited to, a change resulting from the antidilution provisions thereof (unless
such options or rights or convertible or exchangeable securities were merely
deemed to be included in the numerator and denominator for purposes of
determining the number of shares of Common Stock outstanding for purposes of
subsection 4.2.4(d)(i)(A)), the Conversion Price of the Series A Stock, Series B
Stock or Series C Stock, to the extent in any way affected by or computed using
such options, rights or securities, shall be recomputed to reflect such change,
but no further adjustment shall be made for the actual issuance of Common Stock
or any payment of such consideration upon the exercise of any such options or
rights or the conversion or exchange of such securities.
(4) Upon 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 convertible or exchangeable
securities, the Conversion Price of the Series A Stock, Series B Stock or Series
C Stock, to the extent in any way affected by or computed using such options,
rights or securities or options or rights related to such securities (unless
such options or rights were merely deemed to be included in the numerator and
denominator for purposes of determining the number of shares of Common Stock
outstanding for purposes of subsection 4.2.4(d)(i)(A)), shall be recomputed to
reflect the issuance of only the number of shares of Common Stock (and
convertible or exchangeable securities that remain in effect) actually issued
upon the exercise or such options or rights, upon the conversion or exchange of
such securities or upon the exercise of the options or rights related to such
securities.
(5) The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to subsections
4.2.4(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either subsection
4.2.4(d)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection
4.2.4(d)(i)(E)) by this corporation after the Purchase Date other than:
(A) Common Stock issuable or issued pursuant to a
transaction described in subsection 4.2.4(d)(iii) hereof;
(B) shares of Common Stock issuable or issued to
employees, consultants or directors of this corporation directly or pursuant to
a stock option plan or restricted stock plan approved by the Board of Directors
of this corporation;
(C) shares of Common Stock issuable or issued in a
firm commitment underwritten public offering before or in connection with which
all outstanding shares of Series A Stock, Series B Stock and Series C Stock will
be converted to Common Stock;
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<PAGE>
(D) shares of Common Stock issuable or issued upon
conversion of the Series A Stock, Series B Stock or Series C Stock or other
already outstanding convertible securities (including shares issuable or issued
as a result of the antidilution provisions thereof), or as dividends or
distributions on the Series A Stock, Series B Stock or Series C Stock;
(E) shares of Common Stock issuable or issued upon
exercise of warrants issued to banks or equipment lessors, which warrants were
approved by the Board of Directors; or
(F) shares of Common Stock issuable or issued in
connection with business combinations or corporate partnering agreements
approved by the Board of Directors.
(iii) In the event this corporation should at any time or
from time to time after the Purchase Date fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series A Stock, Series B Stock and Series C Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be increased in proportion to such
increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents.
(iv) If the number of shares of Common Stock outstanding
at any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Series A Stock, Series B Stock and
Series C Stock shall be appropriately increased so that the number of shares of
Common Stock issuable on conversion of each share of such series shall be
decreased in proportion to such decrease in outstanding shares.
(e) Other Distributions. In the event this corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4.2.4(d)(iii),
then, in each such case for the purpose of this subsection 4.2.4(e), the holders
of the Series A Stock, Series B Stock and Series C Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders of
the number of shares of Common Stock of this corporation into which their shares
of Series A Stock, Series B Stock and Series
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C Stock are convertible as of the record date fixed for the determination of the
holders of Common Stock of this corporation entitled to receive such
distribution.
(f) Recapitalizations. If at any time or from time to time there
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shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4.2.4 or in Section 4.2.2) provision shall be made so that the
holders of the Series A Stock, Series B Stock and Series C Stock shall
thereafter be entitled to receive upon conversion of the Series A Stock, Series
B Stock and Series C Stock the number of shares of stock or other securities or
property of this corporation or otherwise to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4.2.4 with respect to the rights of the holders of
the Series A Stock, Series B Stock and Series C Stock after the recapitalization
to the end that the provisions of this Section 4.2.4 (including adjustment of
the Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series A Stock, Series B Stock and Series C Stock) shall be
applicable after that event as nearly equivalent as may be practicable.
(g) No Impairment. This corporation will not, by amendment of
-------------
its Amended and Restated Articles of Incorporation or through any
reorganization, recapitalization, 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 this corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4.2.4 and in
the taking of all such action as may be necessary or appropriate in order to
protect the Conversion Rights of the holders of the Series A Stock, Series B
Stock and Series C Stock against impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
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(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A Stock, Series B Stock or
Series C Stock, and the number of shares of Common Stock to be issued shall be
determined by rounding to the nearest whole share. Such conversion shall be
determined on the basis of the total number of shares of Series A Stock, Series
B Stock and Series C Stock the holder is at the time converting into Common
Stock and such rounding shall apply to the number of shares of Common Stock
issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of the Series A Stock, Series B Stock or
Series C Stock pursuant to this Section 4.2.4, this corporation, at its expense,
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of the Affected Series a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. This corporation
shall, upon the written request at any time of any holder of Series A Stock,
Series B Stock or Series C Stock, furnish or cause to be
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furnished to such holder a like certificate setting forth (A) such adjustment
and readjustment, (B) the Conversion Price for such series of Convertible
Preferred Stock at the time in effect and (C) the number of shares of Common
Stock and the amount, if any, of other property that at the time would be
received upon the conversion of a share of Series A Stock, Series B Stock or
Series C Stock, as the case may be.
(i) Notices of Record Date. In the event of any taking by this
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Stock, Series B Stock and
Series C Stock, at least twenty (20) days prior to the date specified therein, a
notice specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character of
such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Stock, Series B Stock and Series C
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 the Series A
Stock, Series B Stock and Series C 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 the Series A Stock, Series B
Stock and Series C Stock, in addition to such other remedies as shall be
available to the holder of such Series A Stock, Series B Stock and Series C
Stock, this 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 purposes,
including, without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to this Certificate of
Incorporation.
(k) Notices. Any notice required by the provisions of this
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Section 4.2.4 to be given to the holders of shares of Series A Stock, Series B
Stock or Series C Stock shall be deemed given if deposited in the United States
mail, postage prepaid, and addressed to each holder of record at his, her or its
address appearing on the books of this corporation.
(l) Special Mandatory Conversion.
----------------------------
(i) (i) If (A) this corporation consummates a financing (a
"Financing") pursuant to which any holders of Series A Stock, Series B Stock and
Series C Stock are entitled to exercise the first right of refusal (the "First
Right of Refusal") set forth in Section 2.4 of the Second Amended and Restated
Investors' Rights Agreement, dated on or about November 1, 1999, by and among
this corporation and certain investors and persons, and as it may be further
amended from time to time
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(the "Rights Agreement"); (B) the Board of Directors of this corporation shall
have determined that holders of Series A Stock, Series B Stock and Series C
Stock of this corporation must participate in the Financing (a "Mandatory
Offering") and have determined the aggregate dollar amount to be invested by all
holders of Series A Stock, Series B Stock and Series C Stock (the "Aggregate
Preferred Stock Investment Amount"), which amount may be more than or less than
the holders' right to participate in the Financing pursuant to the First Right
of Refusal contained in the Rights Agreement and which amount shall not exceed
twenty-five million dollars ($25,000,000); (C) this corporation shall have
delivered a notice ("Notice") to the holders of Series A Stock, Series B Stock
and Series C Stock: (1) stating this corporation's bona fide intention to
consummate the Financing, (2) indicating the number of securities to be offered,
(3) indicating the price and terms upon which it proposes to offer such
securities, (4) identifying the Pro Rata Share (as defined below) of each holder
of Series A Stock, Series B Stock and Series C Stock of the Aggregate Preferred
Stock Investment Amount and (5) offering each holder of Series A Stock, Series B
Stock and Series C Stock the right to purchase such holder's Pro Rata Share of
the Aggregate Preferred Stock Investment Amount within the time periods set
forth in the Notice; and (D) a holder (a "Non-Participating Holder") does not
acquire or does not cause an affiliate to acquire at least its Pro Rata Share of
the Aggregate Preferred Stock Investment Amount within the time periods set
forth in the Notice, then that percentage of each Non-Participating Holder's
shares of Series A Stock, Series B Stock and Series C Stock equal to the
percentage of such Non-Participating Holder's Pro Rata share of the Aggregate
Preferred Stock Investment Amount not acquired by such Non-Participating Holder
shall automatically and without further action on the part of such holder be
converted effective upon, subject to, and concurrently with, the consummation of
the Mandatory Offering (the "Mandatory Offering Date") into shares of Common
Stock of this corporation at a Conversion Price equal to the Original Series A
Issue Price or the Original Series B Issue Price or the Original Series C Issue
Price, as applicable (as adjusted for any stock dividends, combinations or
splits). For purposes of this subsection 4.2.4(I)(i), each holder's Pro Rata
Share of the Aggregate Preferred Stock Investment Amount shall be an amount
determined by multiplying the Aggregate Preferred Stock Investment Amount by a
fraction, the numerator of which shall be the number of shares of Common Stock
issuable upon conversion of shares of Series A Voting Stock, Series B Voting
Stock and Series C Voting Stock (as each term is defined below) then held by
such holder and the denominator of which shall be the total number of shares of
Common Stock issuable upon conversion of shares of Series A Voting Stock, Series
B Voting Stock and Series C Voting Stock then outstanding. For purposes of
calculating a holder's Pro Rata Share, the applicable number of shares of Common
Stock issuable upon conversion of the shares of Series A Voting Stock, Series B
Voting Stock and Series C Voting Stock shall be calculated based on the number
of shares outstanding immediately preceding the closing of the Mandatory
Offering, but assuming a conversion price based on full participation of all of
the holders of Preferred Stock in such Mandatory Offering. The foregoing
notwithstanding, under no circumstances shall any holder of Series A Stock,
Series B Stock or Series C Stock or Common Stock be required to make any
additional investment in a Financing if any of the securities offered in such a
Financing would be rendered non-voting by
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application of the Legal Limitations (as defined below) or if any Series A
Voting Stock, Series B Voting Stock, Series C Voting Stock or Voting Common
Stock (as each term is defined below) held by such holder prior to investment in
such Financing would be rendered non-voting by application of the Legal
Limitations as a result of such additional investment in the Financing.
(ii) The holder of any shares of Series A Stock, Series
B Stock or Series C Stock converted pursuant to this subsection 4.2.4(l) shall
deliver to this corporation during regular business hours at the office of any
transfer agent of this corporation for the Series A Stock, Series B Stock or
Series C Stock, or at such other place as may be designated by this corporation,
the certificate or certificates for the shares so converted, duly endorsed or
assigned in blank or to this corporation. As promptly as practicable thereafter,
this corporation shall issue and deliver to such holder, at the place designated
by such holder, a certificate or certificates for the number of full shares of
the Common Stock to be issued and such holder shall be deemed to have become a
stockholder of record of Common Stock on the Mandatory Offering Date, unless the
transfer books of this corporation are closed on that date, in which event he,
she or it shall be determined to have become a stockholder of record of Common
Stock on the next succeeding date on which the transfer books are open.
(iii) In the event that a holder of Series A Stock,
Series B Stock or Series C Stock converts any Series A Stock, Series B Stock or
Series C Stock into Common Stock pursuant to subsection 4.2.4(a) hereof within
ninety (90) days prior to the date of closing of a Mandatory Offering, such
holder shall be deemed to have converted such shares pursuant to this subsection
4.2.4(l).
4.2.5 Voting Rights.
(a) Voting In General. Subject to any restrictions set forth
-----------------
herein or as otherwise required by applicable law, the holder of each share of
Series A Stock, Series B Stock and Series C Stock shall have the right to one
vote for each share of Common Stock into which each such share of Series A
Stock, Series B Stock and Series C Stock could then be converted, and with
respect to such vote, such holder shall have full voting rights and powers equal
to the voting rights and powers of the holders of Common Stock, and shall be
entitled, notwithstanding any provision hereof, to notice of any stockholders'
meeting in accordance with the bylaws of this corporation, and shall be entitled
to vote, together with holders of Common Stock, as a single class on an as-
converted basis and not as separate series, with respect to any question upon
which holders of Common Stock have the right to vote.
(b) Voting Limitations. The foregoing notwithstanding, a
------------------
holder of Common Stock, Series A Stock, Series B Stock or Series C Stock shall
not, at any time, be entitled to vote any shares of this corporation held by it
to the extent that such voting would contravene the provisions of Regulation Y
of the Board of Governors of the Federal Reserve System (12 C.F.R. Part 225), or
any successor to such regulation, or any other law, regulation, rule or other
requirement of any governmental authority as from time to time in effect (the
"Legal Limitations"). The number of shares held by a
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<PAGE>
holder which are rendered non-voting under the preceding sentence may vary
depending upon the circumstances to which the Legal Limitations are being
applied, and the number of other shares entitled to vote in such circumstance.
In the event that only a portion of a holder's holdings of Common Stock, Series
A Stock, Series B Stock or Series C Stock must be rendered non-voting in order
to achieve compliance with the Legal Limitations, then the holder's holdings of
Series C Stock, then Series B Stock, then Series A Stock, and then Common Stock
shall be rendered non-voting, in that order, until compliance with the Legal
Limitations is achieved. Shares of Series A Stock, Series B Stock, Series C
Stock and Common Stock which are not rendered non-voting under this subsection
4.2.5(b) are referred to in certain sections and subsections herein as "Series A
Voting Stock," "Series B Voting Stock," "Series C Voting Stock" and "Voting
Common Stock," respectively. This corporation shall be entitled to rely, without
independent verification, upon the representation of any holder that it is
entitled under applicable law to vote the shares held by it, and in no event
shall the corporation be liable to any such holder or any third party arising
from any such vote whether or not permitted by applicable law. A holder of any
shares of Common Stock, Series A Stock, Series B Stock or Series C Stock which
are rendered non-voting in order to comply with the Legal Limitations may not
sell such shares (other than to a purchaser taking such shares subject to the
Legal Limitations) unless:
(i) such sale will take place in a dispersed public
distribution in which no purchaser or group of related purchasers acquires
shares representing more than two percent of a class of voting shares of this
corporation;
(ii) such sale is to this corporation; or
(iii) this corporation is notified of such holder's intent
to sell such shares and such sale is to one or more purchasers acceptable to it.
(c) Fractional Shares. Fractional votes shall not be permitted
-----------------
and any fractional voting rights available on an as-converted basis (after
aggregating all shares into which shares of Convertible Preferred Stock held by
each holder could be converted) shall be rounded to the nearest whole number
(with one-half being rounded upward).
4.2.6 Protective Provisions.
(a) So long as an aggregate of at least 30,000,000 shares of
Series A Voting Stock, Series B Voting Stock and Series C Voting Stock remain
outstanding, this corporation shall not take any of the following actions
without first obtaining the approval (by vote or written consent, as provided by
law) of the holders of at least fifty-one percent (51%) of the then outstanding
shares of Series A Voting Stock, Series B Voting Stock and Series C Voting
Stock, voting together as a single class on an as-converted basis and not as
separate series:
(i) authorize or issue, or obligate itself to issue, any
other equity security, including any other security convertible into or
exercisable for any equity
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security, having a preference over or being on a parity with any of the Series A
Stock, Series B Stock or the Series C Stock with respect to rights of
redemption, liquidation preference, voting or dividends;
(ii) sell, convey, or otherwise dispose of all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly-owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of this corporation is disposed of; or
(iii) declare or pay any dividends on its Common Stock or
redeem, purchase or otherwise acquire (or pay into or set aside for a sinking
fund for such purpose) any share or shares of Series A Stock, Series B Stock,
Series C Stock or Common Stock; provided, however, that this restriction shall
not apply to the repurchase of shares of Common stock from employees, officers,
directors, consultants or other persons performing services for this corporation
or any subsidiary pursuant to agreements under which this corporation has the
option to repurchase such shares at cost or at cost upon the occurrence of
certain events, such as the termination of employment.
(b) In addition, so long as an aggregate of at least 30,000,000
shares of Series A Voting Stock, Series B Voting Stock and Series C Voting Stock
remain outstanding and unless unanimously approved by the Board of Directors of
this corporation, this corporation shall not take any of the following actions
without first obtaining the approval (by vote or written consent, as provided by
law) of the holders of at least fifty-one percent (51%) of the then outstanding
shares of Series A Voting Stock, Series B Voting Stock and Series C Voting
Stock, voting together as a single class on an as-converted basis and not as
separate series:
(i) make any loans or advances to its employees or any
members of their immediate families, other than travel advances and other
advances made in the ordinary course of business or loans to employees made
pursuant to promissory notes issued for the purchase of shares under a stock
option plan or restricted stock plan approved by the Board of Directors of this
corporation;
(ii) guarantee any indebtedness or obligation of any other
party other than in the ordinary course of business;
(iii) create or suffer to be imposed any lien, mortgage,
security interest or other charge on or against all or substantially all of the
properties or assets of this corporation or any subsidiary; or
(iv) acquire, or permit any subsidiary to acquire, any
stock or other securities of any corporation, partnership or entity unless
immediately following such acquisition such corporation, partnership or entity
would be wholly owned by this corporation or a subsidiary of this corporation.
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(c) In addition, this corporation shall not take any of the
following actions which would have the following effects on any of the Series A
Stock, Series B Stock or the Series C Stock (the series so affected being
referred to as the "Subject Series") without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least fifty-
one percent (51%) of the then outstanding shares of the Subject Series voting as
a separate class:
(i) alter or change the rights, preferences or privileges
of the shares of the Subject Series so as to affect such shares adversely; or
(ii) increase or decrease (other than by redemption or
conversion) the total number of authorized shares of the Subject Series.
4.2.7 Status of Converted Stock. In the event any shares of Series A
Stock, Series B Stock or Series C Stock shall be converted pursuant to Section
4.2.4 hereof, the shares so converted shall be canceled and shall not be
issuable by this corporation. The Amended and Restated Articles of Incorporation
of this corporation shall be appropriately amended to effect the corresponding
reduction in this corporation's authorized capital stock.
4.3 Common Stock.
4.3.1 Dividend Rights. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of this corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
4.3.2 Liquidation Rights. Upon the liquidation, dissolution or winding
up of this corporation, the assets of this corporation shall be distributed as
provided in Section 4.2.2 hereof.
4.3.3 Voting Rights. The holder of each share of Voting Common Stock
shall have the right to one vote, and shall be entitled to notice of any
stockholders' meeting in accordance with the bylaws of this corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provided by law.
4.4 Issuance of Certificates. The Board of Directors shall have the
authority to issue shares of the capital stock of this corporation and the
certificates therefor subject to such transfer restrictions and other
limitations as it may deem necessary to promote compliance with applicable
federal and state securities laws, and to regulate the transfer thereof in such
manner as may be calculated to promote such compliance or to further any other
reasonable purpose.
4.5 Cumulative Voting. Shareholders of this corporation shall not have the
right to cumulate votes for the election of directors.
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4.6 No Preemptive Rights; Exception. No shareholder of this corporation
shall have, solely by reason of being a shareholder, any preemptive or
preferential right or subscription right to any stock of this corporation or to
any obligations convertible into stock of this corporation, or to any warrant or
option for the purchase thereof, except to the extent provided by resolution or
resolutions of the Board of Directors establishing a series of preferred stock
or by written agreement with this corporation
4.7 Quorum for Meeting of Shareholders. A quorum shall exist at any
meeting of shareholders if a majority of the votes entitled to be cast is
represented in person or by proxy. In the case of any meeting of shareholders
that is adjourned more than once because of the failure of a quorum to attend,
those who attend the third convening of such meeting, although less than a
quorum, shall nevertheless constitute a quorum for the purpose of electing
directors, provided that the percentage of shares represented at the third
convening of such meeting shall not be less than one-third of the shares
entitled to vote.
4.8 Execution of Consent by Less Than Unanimous Consent of Shareholders.
To the extent permitted by the Act, the taking of action by shareholders without
a meeting by less than unanimous written consent of all shareholders entitled to
vote on the action shall be permitted. Notice of the taking of such action shall
be given to those shareholders entitled to vote on the action who have not
consented in writing (and, if the Act would otherwise require that notice of a
meeting of shareholders to consider the action be given to nonvoting
shareholders, to all nonvoting shareholders), in writing, describing with
reasonable clarity the general nature of the action, and accompanied by the same
material that, under the Act, would have been required to be sent to
nonconsenting (or nonvoting) shareholders in a notice of meeting at which the
action would have been submitted for shareholder action. Such notice shall be
either (i) by deposit in the U.S. mail before the action becomes effective, with
first-class postage thereon prepaid, correctly addressed to each shareholder
entitled thereto at the shareholder's address as it appears on the current
record of shareholders of the Corporation; or (ii) by personal delivery, courier
service, wire or wireless equipment, telegraphic or other facsimile
transmission, or any other electronic means which transmits a facsimile of such
communication correctly addressed to each shareholder entitled thereto at the
shareholder's physical address, electronic mail address, or facsimile number, as
it appears on the current record of shareholders of the Corporation. Notice
under clause (i) shall be given at least seventy-two (72) hours, and notice
under clause (ii) shall be given at least twenty-four (24) hours before the
action becomes effective.
4.9 Contracts with Interested Shareholders. Subject to the limitations set
forth in RCW 23B.19.040, to the extent applicable:
(a) The corporation may enter into contracts and otherwise
transact business as vendor, purchaser, lender, borrower, or otherwise with its
shareholders and with corporations, associations, firms, and entities in which
they are or may be or become interested as directors, officers, shareholders,
members, or otherwise.
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(b) Any such contract or transaction shall not be affected or
invalidated or give rise to liability by reason of the shareholder's having an
interest in the contract or transaction.
4.10 Ratification by Shareholder Vote. Subject to the requirements of RCW
23B.08.730 and 23B.19.040, any contract, transaction, or act of the corporation
or of any director or officer of the corporation that shall be authorized,
approved, or ratified by the affirmative vote of a majority of shares
represented at a meeting at which a quorum is present shall, insofar as
permitted by law, be as valid and as binding as though ratified by every
shareholder of the corporation.
4.11 Calling of Special Meeting of Shareholders. Special meetings of the
shareholders for any purpose or purposes may be called at any time only by the
President, the Secretary, a majority of the Board of Directors, or one or more
shareholders holding not less than twenty-five percent (25%) of all the shares
entitled to be cast on any issue proposed to be considered at that meeting.
4.12 Shareholder Voting on Extraordinary Actions. Pursuant to the authority
granted under Sections 23B.10.030, 23B.11.030, 23B.12.020, and 23B.14.020 of the
Act, the vote of shareholders of this corporation required in order to approve
amendments to the Articles of Incorporation, a plan of merger or share exchange,
the sale, lease, exchange, or other disposition of all or substantially all of
the property of the corporation not in the usual and regular course of business,
or dissolution of the corporation shall be a majority of all of the votes
entitled to be cast by each voting group entitled to vote thereon.
Article 5
DIRECTORS
5.1 Number of Directors. Except as may be provided in these articles of
incorporation as amended from time to time, the number of directors of the
corporation shall be fixed as provided in the Bylaws and may be changed from
time to time by amending the Bylaws.
5.2 Authority of Board of Directors to Amend Bylaws. Subject to the
limitation(s) of RCW 23B.10.210, and subject to the power of the shareholders of
the corporation to change or repeal the Bylaws, the Board of Directors is
expressly authorized to make, amend, or repeal the Bylaws of the corporation
unless the shareholders in amending or repealing a particular bylaw provide
expressly that the Board of Directors may not amend or repeal that bylaw.
5.3 Contracts with Interested Directors. Subject to the limitations set
forth in RCW 23B.08.700 through 23B.08.730:
(a) The corporation may enter into contracts and otherwise
transact business as vendor, purchaser, lender, borrower, or otherwise with its
directors
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and with corporations, associations, firms, and entities in which they are or
may be or become interested as directors, officers, shareholders, members, or
otherwise.
(b) Any such contract or transaction shall not be affected or
invalidated or give rise to liability by reason of the director's having an
interest in the contract or transaction.
5.4 Indemnification of Directors, Officers, Employees and Agents. The
capitalized terms in this Section 5.4 shall have the meanings set forth in RCW
23B.08.500.
(a) The Corporation shall indemnify and hold harmless each
individual who is or was serving as a Director or officer of the Corporation or
who, while serving as a Director or officer of the Corporation, is or was
serving at the request of the Corporation as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise,
against any and all Liability incurred with respect to any Proceeding to which
the individual is or is threatened to be made a Party because of such service,
and shall make advances of reasonable Expenses with respect to such Proceeding,
to the fullest extent permitted by law, without regard to the limitations in RCW
23B.08.510 through 23B.08.550; provided that no such indemnity shall indemnify
any Director or officer from or on account of (1) acts or omissions of the
Director or officer finally adjudged to be intentional misconduct or a knowing
violation of law; (2) conduct of the Director or officer finally adjudged to be
in violation of RCW 23B.08.310; or (3) any transaction with respect to which it
was finally adjudged that such Director or officer personally received a benefit
in money, property, or services to which the Director or officer was not legally
entitled.
(b) The Corporation may purchase and maintain insurance on
behalf of an individual who is or was a director, officer, employee, or agent of
the Corporation or, who, while a director, officer, employee, or agent of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise against Liability asserted against or incurred by the individual in
that capacity or arising from the individual's status as a director, officer,
employee, or agent, whether or not the Corporation would have power to indemnify
the individual against such Liability under RCW 23B.08.510 or 23B.08.520.
(c) If, after the effective date of this Section 5.4, the Act is
amended to authorize further indemnification of Directors or officers, then
Directors and officers of the Corporation shall be indemnified to the fullest
extent permitted by the Act.
(d) To the extent permitted by law, the rights to
indemnification and advance of reasonable Expenses conferred in this Section 5.4
shall not be exclusive of any other right which any individual may have or
hereafter acquire under any statute, provision of the Bylaws, agreement, vote of
shareholders or disinterested
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directors, or otherwise. The right to indemnification conferred in this Section
5.4 shall be a contract right upon which each Director or officer shall be
presumed to have relied in determining to serve or to continue to serve as such.
Any amendment to or repeal of this Section 5.4 shall not adversely affect any
right or protection of a Director or officer of the Corporation for or with
respect to any acts or omissions of such Director or officer occurring prior to
such amendment or repeal.
(e) If any provision of this Section 5.4 or any application
thereof shall be invalid, unenforceable, or contrary to applicable law, the
remainder of this Section 5.4, and the application of such provisions to
individuals or circumstances other than those as to which it is held invalid,
unenforceable, or contrary to applicable law, shall not be affected thereby.
5.5 Limitation of Directors' Liability. To the fullest extent permitted by
the Act, as it exists on the date hereof or may hereafter be amended, a director
of this corporation shall not be personally liable to the corporation or its
shareholders for monetary damages for conduct as a director. Any amendment to or
repeal of this Section 5.5 shall not adversely affect a director of this
corporation with respect to any conduct of such director occurring prior to such
amendment or repeal.
Article 6
OTHER MATTERS
6.1 Registered Agent and Office. The street address of the registered
agent of the corporation shall be 1001 Fourth Avenue Plaza, Suite 4500, Seattle,
WA 98154-1065; and the registered agent at that office shall be CorpServe, Inc.
6.2 Amendments to Articles of Incorporation. Except as otherwise provided
in these Articles, as amended from time to time, the corporation reserves the
right to amend, alter, change, or repeal any provisions contained in these
Articles in any manner now or hereafter prescribed or permitted by statute. All
rights of shareholders of the corporation are subject to this reservation. A
shareholder of the corporation does not have a vested property right resulting
from any provision of these Articles of Incorporation.
6.3 Correction of Clerical Errors. The corporation shall have authority to
correct clerical errors in any documents filed with the Secretary of State of
Washington, including these Articles or any amendments hereto, without the
necessity of special shareholder approval of such corrections.
22
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EXHIBIT 3.2
-----------
AMENDED AND RESTATED
BYLAWS
OF
AIRSPAN NETWORKS INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I SHAREHOLDERS.............................................. 1
1.1 Annual Meeting............................................... 1
1.1.1 Time and Place of Meeting............................. 1
1.1.2 Business Conducted at Meeting......................... 1
1.2 Special Meetings............................................. 2
1.3 Notice of Meetings........................................... 2
1.3.1 Notice of Special Meeting............................. 3
1.3.2 Proposed Articles of Amendment, Merger, Exchange, Sale
Lease or Disposition.................................. 3
1.3.3 Proposed Dissolution.................................. 3
1.3.4 Declaration of Mailing................................ 3
1.3.5 Waiver of Notice...................................... 3
1.4 Quorum; Vote Requirement..................................... 4
1.5 Adjourned Meetings........................................... 4
1.6 Fixing Record Date........................................... 4
1.7 Shareholders' List for Meeting............................... 5
1.8 Ratification................................................. 5
1.9 Telephonic Meetings.......................................... 5
1.10 Action By Less than Unanimous Consent........................ 5
ARTICLE II BOARD OF DIRECTORS........................................ 6
2.1 Responsibility of Board of Directors......................... 6
2.2 Number of Directors; Qualification........................... 6
2.3 Vacancies.................................................... 6
2.4 Removal...................................................... 7
2.5 Resignation.................................................. 7
2.6 Annual Meeting............................................... 7
2.7 Regular Meetings............................................. 7
2.8 Special Meetings............................................. 7
2.9 Notice of Meeting............................................ 7
</TABLE>
i
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TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
2.10 Quorum of Directors......................................... 8
2.11 Dissent by Directors........................................ 9
2.12 Action by Directors Without a Meeting....................... 9
2.13 Telephonic Meetings......................................... 9
2.14 Compensation................................................ 9
2.15 Committees.................................................. 9
ARTICLE III OFFICERS................................................. 10
3.1 Appointment................................................. 10
3.2 Qualification............................................... 10
3.3 Officers Enumerated......................................... 10
3.3.1 Chairman of the Board................................ 10
3.3.2 President............................................ 11
3.3.3 Vice Presidents...................................... 11
3.3.4 Secretary............................................ 11
3.3.5 Treasurer............................................ 12
3.4 Delegation.................................................. 12
3.5 Resignation................................................. 13
3.6 Removal..................................................... 13
3.7 Vacancies................................................... 13
3.8 Other Officers and Agents................................... 13
3.9 Compensation................................................ 13
ARTICLE IV CONTRACTS, CHECKS AND DRAFTS............................. 13
4.1 Contracts................................................... 13
4.2 Checks, Drafts, Etc......................................... 14
4.3 Deposits.................................................... 14
ARTICLE V STOCK.................................................... 14
5.1 Issuance of Shares.......................................... 14
5.2 Certificates of Stock....................................... 14
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
5.3 Stock Records............................................. 15
5.4 Restrictions on Transfer.................................. 15
5.5 Transfers................................................. 16
ARTICLE VI RECORDS OF CORPORATE MEETINGS.......................... 16
ARTICLE VII FINANCIAL MATTERS...................................... 17
ARTICLE VIII DISTRIBUTIONS.......................................... 17
ARTICLE IX CORPORATE SEAL......................................... 17
ARTICLE X MISCELLANY............................................. 17
10.1 Communications by Facsimile............................... 17
10.2 Inspector of Elections.................................... 18
10.3 Rules of Order............................................ 18
10.4 Construction.............................................. 19
10.5 Severability.............................................. 19
ARTICLE XI AMENDMENT OF BYLAWS.................................... 19
ARTICLE XII AUTHENTICATION......................................... 19
</TABLE>
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An extra section break has been inserted above this paragraph. Do not
delete this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.
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AMENDED AND RESTATED
BYLAWS OF
AIRSPAN NETWORKS INC.
These Amended and Restated Bylaws are promulgated pursuant to the
Washington Business Corporation Act, as set forth in Title 23B of the Revised
Code of Washington (the "Act").
ARTICLE I
SHAREHOLDERS
------------
1.1 Annual Meeting.
--------------
1.1.1 Time and Place of Meeting. The annual meeting of the
-------------------------
shareholders of the corporation for the election of Directors and for the
transaction of such other business as may properly come before the meeting shall
be held each year at a place, day, and time to be set by the Board of Directors.
1.1.2 Business Conducted at Meeting.
-----------------------------
(a) At an annual meeting of shareholders, an item of business
may be conducted, and a proposal may be considered and acted upon, only if such
item or proposal is brought before the meeting (i) by, or at the direction of,
the Board of directors, or (ii) by any shareholder of the corporation who is
entitled to vote at the meeting and who complies with the procedures set forth
in the remainder of this Section 1.1.2. This Section 1.1.2 shall not apply to
matters of procedure that, pursuant to Section 10.3(a) of these Bylaws, are
subject to the authority of the chairman of the meeting.
(b) For an item of business or proposal to be brought before an
annual meeting by a shareholder, the shareholder must have given timely notice
thereof in writing to the Secretary of the corporation. To be timely, a
shareholder's notice must be delivered to, or mailed and received by the
Secretary not fewer than sixty (60) days nor more than ninety (90) days prior to
the date determined pursuant to Section 1.1.1 for such annual meeting (or if
less than sixty (60) days notice of the date of the annual meeting is given or
made to the shareholders, not later than the tenth day following the day on
which the notice of the date of the annual meeting was mailed.) Any shareholder
notice shall set forth (i) the name and address of the shareholder at proposing
such business; (ii) a representation that the shareholder is entitled to vote at
such meeting and a statement of the number of shares of the corporation which
are beneficially owned by the shareholder; (iii) a representation that the
shareholder intends to appear in person or by proxy at the meeting to propose
such business; and (iv) as to
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each matter the shareholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting, the language of the
proposal (if appropriate), and any material interest of the shareholder in such
business. No business shall be conducted at any annual meeting of shareholders
except in accordance with this Section 1.1.2(b). If the facts warrant, the Board
of Directors, or the chairman of the annual meeting of shareholders, may declare
that business was not properly brought before the meeting in accordance with the
provisions of this Section 1.1.2(b) and, if it is so determined, any such
business not properly brought before the meeting shall not be transacted. The
procedures set forth in this Section 1.1.2(b) for business to be properly
brought before an annual meeting by a shareholder are in addition to, and not in
lieu of, the requirements set forth in Rule 14a-8 promulgated under Section 14
of the Securities Exchange Act of 1934, or any successor provision.
(c) Business at Special Meetings. At any special meeting of
----------------------------
the shareholders, only such business as is specified in the notice of such
special meeting given by or at the direction of the person or persons calling
such meeting, in accordance with Section 1.2, shall come before such meeting.
(d) Notice to Corporation. Any written notice required to be
---------------------
delivered by a shareholder to the corporation pursuant to Section 1.1.2 must be
given, either by personal delivery or by registered or certified mail, postage
prepaid, to the Secretary at the corporation's principal executive office.
1.2 Special Meetings. Special meetings of the shareholders for any
----------------
purpose or purposes may be called at any time by the Board of Directors, the
President or the Secretary or by one or more shareholders holding not less than
twenty-five percent (25%) of all the shares entitled to be cast on any issue
proposed to be considered at that meeting, to be held at such time and place as
the Board or the Chairman (if one be appointed) or the President may prescribe.
1.3 Notice of Meetings. Except as otherwise provided below, the
------------------
Secretary, Assistant Secretary, or any transfer agent of the corporation shall
give, in any manner permitted by law, not less than ten (10) nor more than sixty
(60) days before the date of any meeting of shareholders, written notice stating
the place, day, and time of the meeting to each shareholder of record entitled
to vote at such meeting. If mailed, notice to a shareholder shall be effective
when mailed, with first-class postage thereon prepaid, correctly addressed to
the shareholder at the shareholder's address as it appears on the current record
of shareholders of the corporation. Otherwise, written notice shall be effective
at the earliest of the following: (a) when received, (b) five (5) days after its
deposit in the United States mail, as evidenced by the postmark, if mailed with
first-class postage, prepaid, and correctly addressed, or (c) on the date shown
on the return receipt, if sent by registered or certified mail, return receipt
requested, and the receipt is signed by or on behalf of the addressee.
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1.3.1 Notice of Special Meeting. In the case of a special meeting, the
-------------------------
written notice shall also state with reasonable clarity the purpose or purposes
for which the meeting is called and the general nature of the business proposed
to be transacted at the meeting. No business other than that within the purpose
or purposes specified in the notice may be transacted at a special meeting.
1.3.2 Proposed Articles of Amendment, Merger, Exchange, Sale, Lease or
----------------------------------------------------------------
Disposition. If the business to be conducted at any meeting includes any
- -----------
proposed amendment to the Articles of Incorporation or any proposed merger or
exchange of shares, or any proposed sale, lease, exchange, or other disposition
of all or substantially all of the property and assets (with or without the
goodwill) of the corporation not in the usual or regular course of its business,
then the written notice shall state that the purpose or one of the purposes is
to consider the proposed amendment or plan of merger, exchange of shares, sale,
lease, exchange, or other disposition, as the case may be, shall describe the
proposed action with reasonable clarity, and shall be accompanied by a copy of
the proposed amendment or plan. Written notice of such meeting shall be given to
each shareholder of record, whether or not entitled to vote at such meeting, not
less than twenty (20) days before such meeting, in the manner provided in
Section 1.3 above.
1.3.3 Proposed Dissolution. If the business to be conducted at any
--------------------
meeting includes the proposed voluntary dissolution of the corporation, then the
written notice shall state that the purpose or one of the purposes is to
consider the advisability thereof. Written notice of such meeting shall be given
to each shareholder of record, whether or not entitled to vote at such meeting,
not less than twenty (20) days before such meeting, in the manner provided in
Section 1.3 above.
1.3.4 Declaration of Mailing. A declaration of the mailing or other
----------------------
means of giving any notice of any shareholders' meeting, executed by the
Secretary, Assistant Secretary, or any transfer or other agent of the
corporation giving the notice, shall be prima facie evidence of the giving of
such notice.
1.3.5 Waiver of Notice. A shareholder may waive notice of any meeting
----------------
at any time, either before or after such meeting. Except as provided below, the
waiver must be in writing, be signed by the shareholder entitled to the notice,
and be delivered to the corporation for inclusion in the minutes or filing with
the corporate records. A shareholder's attendance at a meeting in person or by
proxy waives objection to lack of notice or defective notice of the meeting
unless the shareholder at the beginning of the meeting objects to holding the
meeting or transacting business at the meeting on the ground that the meeting is
not lawfully called or convened. In the case of a special meeting, or an annual
meeting at which fundamental corporate changes are considered, a shareholder
waives objection to consideration of a particular matter that is not within the
purpose or purposes described in the meeting notice unless the shareholder
objects to considering the matter when it is presented.
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1.4 Quorum; Vote Requirement. A quorum shall exist at any meeting of
------------------------
shareholders if a majority of the votes entitled to be cast is represented in
person or by proxy. Once a share is represented for any purpose at a meeting
other than solely to object to holding the meeting or transacting business at
the meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is or
must be set for that adjourned meeting. Subject to the foregoing, the
determination of the voting groups entitled to vote (as required by law), and
the quorum and voting requirements applicable thereto, must be made separately
for each matter being considered at a meeting. In the case of any meeting of
shareholders that is adjourned more than once because of the failure of a quorum
to attend, those who attend the third convening of such meeting, although less
than a quorum, shall nevertheless constitute a quorum for the purpose of
electing directors, provided that the percentage of shares represented at the
third convening of such meeting shall not be less than one-third of the shares
entitled to vote.
If a quorum exists, action on a matter (other than the election of
directors) is approved by a voting group if the votes cast within the voting
group favoring the action exceed the votes cast within the voting group opposing
the action unless a greater number of affirmative votes is required by law or by
the Articles of Incorporation.
1.5 Adjourned Meetings. An adjournment or adjournments of any
------------------
shareholders' meeting, whether by reason of the failure of a quorum to attend or
otherwise, may be taken to such date, time, and place as the chairman of the
meeting may determine without new notice being given if the date, time, and
place are announced at the meeting at which the adjournment is taken. However,
if the adjournment is for more than thirty (30) days from the date set for the
original meeting, a new record date for the adjourned meeting shall be fixed and
a new notice of the adjourned meeting shall be given to each shareholder of
record entitled to vote at the adjourned meeting, in accordance with the
provisions of Section 1.3 of these Bylaws. At any adjourned meeting, the
corporation may transact any business which might have been transacted at the
original meeting. Any meeting at which directors are to be elected shall be
adjourned only from day to day until such directors are elected.
1.6 Fixing Record Date. For the purpose of determining shareholders
------------------
entitled to notice of or to vote at any meeting of shareholders (or, subject to
Section 1.5 above, any adjournment thereof), the Board of Directors may fix in
advance a date as the record date for any such determination of shareholders,
such date in any case to be not more than seventy (70) days prior to the
meeting. If no such record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, then the day
before the first notice is delivered to shareholders shall be the record date
for such determination of shareholders. If no notice is given because all
shareholders entitled to notice have waived notice, then the record date for the
determination of shareholders entitled to notice of or to vote at a meeting
shall be the date on which the last such waiver of notice was obtained. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as
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<PAGE>
provided in this section, such determination shall apply to any adjournment
thereof, except as provided in Section 1.5 of these Bylaws. If no notice is
given because shareholders holding of record or otherwise entitled to vote in
the aggregate not less than the minimum number of votes necessary in order to
take such action by written consent have signed a consent, the record date for
determining shareholders entitled to take action without a meeting is the date
the first shareholder signs the consent.
1.7 Shareholders' List for Meeting. The corporation shall cause to be
------------------------------
prepared an alphabetical list of the names of all of its shareholders on the
record date who are entitled to notice of a shareholders' meeting or any
adjournment thereof. The list must be arranged by voting group (and within each
voting group by class or series of shares) and show the address of and the
number of shares held by each shareholder. The shareholders' list must be
available for inspection by any shareholder, beginning ten (10) days prior to
the meeting and continuing through the meeting, at the principal office of the
corporation or at a place identified in the meeting notice in the city where the
meeting will be held. Such list shall be produced and kept open at the time and
place of the meeting. During such ten-day period, and during the whole time of
the meeting, the shareholders' list shall be subject to the inspection of any
shareholder, or the shareholder's agent or attorney. In cases where the record
date is fewer than ten (10) days prior to the meeting because notice has been
waived by all shareholders, the Secretary shall keep such record available for a
period from the date the first waiver of notice was delivered to the date of the
meeting. Failure to comply with the requirements of this section shall not
affect the validity of any action taken at the meeting.
1.8 Ratification. Subject to the requirements of RCW 23B.08.730 and
------------
23B.19.040, any contract, transaction, or act of the corporation or of any
director or officer of the corporation that shall be authorized, approved, or
ratified by the affirmative vote of a majority of shares represented at a
meeting at which a quorum is present shall, insofar as permitted by law, be as
valid and as binding as though ratified by every shareholder of the corporation.
1.9 Telephonic Meetings. Shareholders may participate in a meeting by any
-------------------
means of communication by which all persons participating in the meeting can
hear each other during the meeting, and participation by such means shall
constitute presence in person at a meeting.
1.10 Action By Less than Unanimous Consent. To the extent permitted by the
-------------------------------------
Act, the taking of action by shareholders without a meeting by less than
unanimous written consent of all shareholders entitled to vote on the action
shall be permitted. Notice of the taking of such action shall be given to those
shareholders entitled to vote on the action who have not consented in writing
(and, if the Act would otherwise require that notice of a meeting of
shareholders to consider the action be given to nonvoting shareholders, to all
nonvoting shareholders), in writing, describing with reasonable clarity the
general nature of the action, and accompanied by the same material that, under
the Act, would have been required to be sent to nonconsenting (or nonvoting)
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shareholders in a notice of meeting at which the action would have been
submitted for shareholder action. Such notice shall be either (i) by deposit in
the U.S. mail before the action becomes effective, with first-class postage
thereon prepaid, correctly addressed to each shareholder entitled thereto at the
shareholder's address as it appears on the current record of shareholders of the
Corporation; or (ii) by personal delivery, courier service, wire or wireless
equipment, telegraphic or other facsimile transmission, or any other electronic
means which transmits a facsimile of such communication correctly addressed to
each shareholder entitled thereto at the shareholder's physical address,
electronic mail address, or facsimile number, as it appears on the current
record of shareholders of the Corporation. Notice under clause (i) shall be
given at least seventy-two (72) hours, and notice under clause (ii) shall be
given at least twenty-four (24) hours before the action becomes effective.
ARTICLE II
BOARD OF DIRECTORS
------------------
2.1 Responsibility of Board of Directors. The business and affairs and
------------------------------------
property of the corporation shall be managed under the direction of a Board of
Directors. A director shall discharge the duties of a director, including duties
as a member of a committee, in good faith, with the care an ordinarily prudent
person in a like position would exercise under similar circumstances, and in a
manner the director reasonably believes to be in the best interests of the
corporation.
2.2 Number of Directors; Qualification. The Board shall consist of five
----------------------------------
(5) to seven (7) directors. The exact number of directors of the corporation
shall be five (5) until amended in accordance with these Bylaws. No reduction of
the authorized number of directors shall have the effect of removing any
director before that director's term of office expires. If a greater or lesser
number of directors than is specified as the range of the size of the Board in
this section is elected by the shareholders, then election of that number shall
automatically be deemed to constitute an amendment to these Bylaws. No director
need be a shareholder of the corporation or a resident of Washington. Each
director must be at least eighteen (18) years of age.
2.3 Vacancies. Except as otherwise provided by law, any vacancy occurring
---------
in the Board of Directors (whether caused by resignation, death, or otherwise)
may be filled by the affirmative vote of a majority of the directors present at
a meeting of the Board at which a quorum is present, or, if the directors in
office constitute less than a quorum, by the affirmative vote of a majority of
all of the directors in office. Notice shall be given to all of the remaining
directors that such vacancy will be filled at the meeting. However, if the
vacant office was held by a director elected by a voting group composed of less
than all of the voting shareholders, then the Board of Directors shall not have
the power to fill such vacancy. A director elected to fill any vacancy shall
hold office until the next meeting of shareholders at which directors are
elected, and until his or her successor shall have been elected and qualified.
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2.4 Removal. One or more members of the Board of Directors (including the
-------
entire Board) may be removed, with or without cause, at a special meeting of
shareholders called expressly for that purpose. A director (or the entire Board)
may be removed if the number of votes cast in favor of removing such director
(or the entire Board) exceeds the number of votes cast against removal; provided
that, if a director (or the entire Board) has been elected by one or more voting
groups, only those voting groups may participate in the vote as to removal.
However, if the Articles of Incorporation grant shareholders the right to
cumulate their votes in the election of directors, a director may not be removed
if a number of votes sufficient to elect such director under cumulative voting
(computed on the basis of the number of votes actually cast at the meeting on
the question of removal) is cast against such director's removal.
2.5 Resignation. A director may resign at any time by delivering written
-----------
notice to the Board of Directors, its Chairman, the President, or the Secretary.
A resignation is effective when the notice is delivered unless the notice
specifies a later effective date.
2.6 Annual Meeting. The first meeting of each newly elected Board of
--------------
Directors shall be known as the annual meeting thereof and shall be held without
notice immediately after the annual shareholders' meeting or any special
shareholders' meeting at which a Board is elected. Such meeting shall be held at
the same place as such shareholders' meeting unless some other place shall be
specified by resolution of the shareholders.
2.7 Regular Meetings. Regular meetings of the Board of Directors may be
----------------
held at such place, day, and time as shall from time to time be fixed by
resolution of the Board without notice other than the delivery of such
resolution as provided in Section 2.10 below.
2.8 Special Meetings. Special meetings of the Board of Directors may be
----------------
called by the President or the Chairman of the Board (if one be appointed) or
any two or more directors, to be held at such place, day, and time as specified
by the person or persons calling the meeting.
2.9 Notice of Meeting. Notice of the place, day, and time of any meeting
-----------------
of the Board of Directors for which notice is required shall be given, at least
two (2) days preceding the day on which the meeting is to be held, by the
Secretary or an Assistant Secretary, or by the person calling the meeting, in
any manner permitted by law, including orally. Any oral notice given by
personal communication over the telephone or otherwise may be communicated
either to the director or to a person at the office of the director who, the
person giving the notice has reason to believe, will promptly communicate it to
the director. Notice shall be deemed to have been given on the earliest of (a)
the day of actual receipt, (b) five (5) days after the day on which written
notice is deposited in the United States mail, as evidenced by the postmark,
with first-class postage prepaid, and correctly addressed, or (c) on the date
shown on the return
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receipt, if sent by registered or certified mail, return receipt requested, and
the receipt is signed by or on behalf of the addressee.
No notice of any regular meeting need be given if the place, day, and time
thereof have been fixed by resolution of the Board of Directors and a copy of
such resolution has been given to each director, either by personally delivering
the copy to the director at least two (2) days, or by depositing the copy in the
United States mail with first class postage prepaid and correctly addressed to
the director at the director's address as it appears on the records of the
corporation at least five (5) days (as evidenced by the postmark), prior to the
day of the first meeting held in pursuance thereof.
Notice of a meeting of the Board of Directors need not be given to any
director if it is waived by the director in writing, whether before or after
such meeting is held. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Board of Directors need be specified
in the notice or waiver of notice of such meeting unless required by law, the
Articles of Incorporation, or these Bylaws.
A director's attendance at or participation in a meeting shall constitute a
waiver of notice of such meeting except when a director attends or participates
in a meeting for the express purpose of objecting on legal grounds prior to or
at the beginning of the meeting (or promptly upon the director's arrival) to the
holding of the meeting or the transaction of any business and does not
thereafter vote for or assent to action taken at the meeting. Any meeting of the
Board of Directors shall be a legal meeting without any notice thereof having
been given if all of the directors have received valid notice thereof, are
present without objecting, or waive notice thereof, or any combination thereof.
2.10 Quorum of Directors. Except in particular situations where a lesser
-------------------
number is expressly permitted by law, and unless a greater number is required by
the Articles of Incorporation, a majority of the number of directors specified
in or fixed in accordance with these Bylaws shall constitute a quorum for the
transaction of business, and the affirmative vote of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors. If the number of directors in office at any time is less than the
number specified in or fixed in accordance with these Bylaws, then a quorum
shall consist of a majority of the number of directors in office; provided that
in no event shall a quorum consist of fewer than one-third of the number
specified in or fixed in accordance with these Bylaws.
Directors at a meeting of the Board of Directors at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, provided such withdrawal does not reduce the number of
directors attending the meeting below the level of a quorum.
A majority of the directors present, whether or not constituting a quorum,
may adjourn any meeting of the Board of Directors to another time and place. If
the meeting
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is adjourned for more than forty-eight (48) hours, then notice of the time and
place of the adjourned meeting shall be given before the adjourned meeting takes
place, in the manner specified in Section 2.10 of these Bylaws, to the directors
who were not present at the time of the adjournment.
2.11 Dissent by Directors. Any director who is present at any meeting of
--------------------
the Board of Directors at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless the director objects at the
beginning of the meeting (or promptly upon the director's arrival) to the
holding of, or the transaction of business at, the meeting; or unless the
director's dissent or abstention shall be entered in the minutes of the meeting;
or unless the director delivers written notice of the director's dissent or
abstention to the presiding officer of the meeting before the adjournment
thereof or to the corporation within a reasonable time after the adjournment of
the meeting. Such right to dissent or abstention shall not be available to any
director who votes in favor of such action.
2.12 Action by Directors Without a Meeting. Any action required by law to
-------------------------------------
be taken or which may be taken at a meeting of the Board of Directors may be
taken without a meeting if one or more consents in writing, setting forth the
action so taken, shall be signed either before or after the action so taken by
all of the directors and delivered to the corporation for inclusion in the
minutes or filing with the corporate records. Such consent shall have the same
effect as a meeting vote. Action taken under this section is effective when the
last director signs the consent, unless the consent specifies a later effective
date.
2.13 Telephonic Meetings. Except as may be otherwise restricted by the
-------------------
Articles of Incorporation, members of the Board of Directors may participate in
a meeting of the Board by any means of communication by which all directors
participating in the meeting may simultaneously hear each other during the
meeting. Participation by such means shall constitute presence in person at a
meeting.
2.14 Compensation. By resolution of the Board of Directors, the directors
------------
may be paid their expenses, if any, and may be paid a fixed sum or a stated
salary as a director, for attendance at each meeting of the Board. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
2.15 Committees. The Board of Directors, by resolution adopted by the
----------
greater of (a) a majority of all of the directors in office, or (b) the number
of directors required by the Articles of Incorporation or these Bylaws to take
action may from time to time create, and appoint individuals to, one or more
committees, each of which must have at least two (2) members. If a committee is
formed for the purpose of exercising functions of the Board, the committee must
consist solely of directors. If the only function of a committee is to study and
make recommendations for action by the full Board, the committee need not
consist of directors. Committees of directors may exercise the
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authority of the Board of Directors to the extent specified by such resolution
or in the Articles of Incorporation or these Bylaws. However, no committee
shall:
(a) authorize or approve a distribution (as defined in RCW 23B.01.400)
except according to a general formula or method prescribed by the Board of
Directors;
(b) approve or propose to shareholders action that by law is required
to be approved by shareholders;
(c) fill vacancies on the Board of Directors or on any of its
committees;
(d) amend the Articles of Incorporation;
(e) adopt, amend, or repeal Bylaws;
(f) approve a plan of merger not requiring shareholder approval; or
(g) authorize or approve the issuance or sale or contract for sale of
shares, or determine the designation and relative rights, preferences, and
limitations of a class or series of shares, except that the Board of Directors
may authorize a committee of directors (or a senior executive officer of the
corporation) to do so within limits specifically prescribed by the Board of
Directors.
Committees shall be governed by the same provisions as govern the meetings,
actions without meetings, notice and waiver of notice, quorum and voting
requirements, and standards of conduct of the Board of Directors. The Executive
Committee (if one be established) shall meet periodically between meetings of
the full Board. All committees shall keep regular minutes of their meetings and
shall cause them to be recorded in books kept for that purpose at the office of
the corporation.
ARTICLE III
OFFICERS
--------
3.1 Appointment. The officers of the corporation shall be appointed
-----------
annually by the Board of Directors at its annual meeting held after the annual
meeting of the shareholders. If the appointment of officers is not held at such
meeting, such appointment shall be held as soon thereafter as a Board meeting
conveniently may be held. Except in the case of death, resignation, or removal,
each officer shall hold office until the next annual meeting of the Board and
until his or her successor is appointed and qualified.
3.2 Qualification. None of the officers of the corporation need be a
-------------
director, except as specified below. Any two or more of the corporate offices
may be held by the same person.
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3.3 Officers Enumerated. Except as otherwise provided by resolution of
-------------------
the Board of Directors, the officers of the corporation and their respective
powers and duties shall be as follows:
3.3.1 Chairman of the Board. The Chairman of the Board (if such an
---------------------
officer be appointed) shall be a director and shall perform such duties as shall
be assigned to him or her by the Board of Directors and in any employment
agreement. The Chairman shall preside at all meetings of the shareholders and at
all meetings of the Board at which he or she is present. The Chairman may sign
deeds, mortgages, bonds, contracts, and other instruments, except when the
signing thereof has been expressly delegated by the Board or by these Bylaws to
some other officer or agent of the corporation or is otherwise required by law
to be signed by some other officer or in some other manner. If the President
dies or becomes unable to act, the Chairman shall perform the duties of the
President, except as may be limited by resolution of the Board of Directors,
with all the powers of and subject to all the restrictions upon the President.
3.3.2 President. Subject to such supervisory powers as may be given
---------
by the Board of Directors to the Chairman of the Board (if such an officer be
appointed), the President shall be the chief executive officer of the
corporation unless some other officer is so designated by the Board and, subject
to the control of the Board and the Executive Committee (if one be established),
shall supervise and control all of the assets, business, and affairs of the
corporation. The President may sign certificates for shares of the corporation,
deeds, mortgages, bonds, contracts, and other instruments, except when the
signing thereof has been expressly delegated by the Board or by these Bylaws to
some other officer or agent of the corporation or is otherwise required by law
to be signed by some other officer or in some other manner. The President shall
vote the shares owned by the corporation in other corporations, domestic or
foreign, unless otherwise prescribed by law or resolution of the Board. In
general, the President shall perform all duties incident to the office of
President and such other duties as may be prescribed by the Board from time to
time. In the absence of the Chairman of the Board, the President, if a director,
shall preside over all meetings of the shareholders and over all meetings of the
Board of Directors. The President shall have the authority to appoint one or
more Assistant Secretaries and Assistant Treasurers, as he or she deems
necessary.
3.3.3 Vice Presidents. If no Chairman of the Board has been
---------------
appointed, in the absence or disability of the President, the Vice Presidents,
if any, in order of their rank as fixed by the Board of Directors or, if not
ranked, a Vice President designated by the Board shall perform all the duties of
the President and when so acting shall have all the powers of, and be subject to
all the restrictions upon, the President; provided that no such Vice President
shall assume the authority to preside as Chairman of meetings of the Board
unless such Vice President is a member of the Board. The Vice Presidents shall
have such other powers and perform such other duties as from time to time may be
respectively prescribed for them by the Board, these Bylaws, the President, or
the Chairman of the Board (if one be appointed).
11
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3.3.4 Secretary. The Secretary shall:
---------
(a) have responsibility for preparing minutes of meetings of
the shareholders and the Board of Directors and for authenticating records of
the corporation;
(b) see that all notices are duly given in accordance with the
provisions of Sections 1.3, 1.5, 2.8, and 2.10 of these Bylaws and as required
by law;
(c) be custodian of the corporate records and seal of the
corporation, if one be adopted;
(d) keep a register of the post office address of each
shareholder and director;
(e) attest certificates for shares of the corporation;
(f) have general charge of the stock transfer books of the
corporation;
(g) when required by law or authorized by resolution of the
Board of Directors, sign with the President, or other officer authorized by the
President or the Board, deeds, mortgages, bonds, contracts, and other
instruments; and
(h) in general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned by the
President or the Board of Directors.
In the absence of the Secretary, an Assistant Secretary may perform the
duties of the Secretary.
3.3.5 Treasurer. If required by the Board of Directors, the Treasurer
---------
shall give a bond for the faithful discharge of his or her duties in such sum
and with such surety or sureties as the Board shall determine. The Treasurer
shall:
(a) have charge and custody of and be responsible for all
funds and securities of the corporation;
(b) receive and give receipts for moneys due and payable to
the corporation from any source whatsoever and deposit all such moneys in the
name of the corporation in banks, trust companies, or other depositories
selected in accordance with the provisions of these Bylaws; and
(c) in general, perform all of the duties incident to the
office of Treasurer and such other duties as from time to time may be assigned
by the President or the Board of Directors.
12
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In the absence of the Tresurer, an Assistant Treasurer may perform the
duties of the Treasurer.
3.4 Delegation. In case of the absence or inability to act of any
----------
officer of the corporation and of each person herein authorized to act in his or
her place, the Board of Directors may from time to time delegate the powers and
duties of such officer to any other officer or other person whom it may select.
3.5 Resignation. Any officer may resign at any time by delivering
-----------
notice to the corporation. Any such resignation shall take effect at the time
the notice is delivered unless the notice specifies a later effective date.
Unless otherwise specified therein, acceptance of such resignation by the
corporation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract to which the officer is a party.
3.6 Removal. Any officer or agent may be removed by the Board with or
-------
without cause. An officer empowered to appoint another officer or assistant
officer also has the power with or without cause to remove any officer he or she
would have the power to appoint whenever in his or her judgment the best
interests of the corporation would be served thereby. The removal of an officer
or agent shall be without prejudice to the contract rights, if any, of the
corporation or the person so removed. Appointment of an officer or agent shall
not of itself create contract rights.
3.7 Vacancies. A vacancy in any office because of death, resignation,
---------
removal, disqualification, creation of a new office, or any other cause may be
filled by the Board of Directors for the unexpired portion of the term or for a
new term established by the Board.
3.8 Other Officers and Agents. One or more Vice Presidents and such
-------------------------
other officers and assistant officers as may be deemed necessary or advisable
may be appointed by the Board of Directors or, to the extent provided in Section
3.3.2 above, by the President. Such other officers and assistant officers shall
hold office for such periods, have such authorities, and perform such duties as
are provided in these Bylaws or as may be provided by resolution of the Board.
Any officer may be assigned by the Board any additional title that the Board
deems appropriate. The Board may delegate to any officer or agent the power to
appoint any such assistant officers or agents and to prescribe their respective
terms of office, authorities, and duties.
3.9 Compensation. Compensation, if any, for officers and other agents
------------
and employees of the corporation shall be determined by the Board of Directors,
or by a committee or officer appointed by the Board. No officer shall be
prevented from receiving compensation in such capacity by reason of the fact
that he or she is also a director of the corporation.
13
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ARTICLE IV
CONTRACTS, CHECKS AND DRAFTS
----------------------------
4.1 Contracts. The Board of Directors may authorize any officer or
---------
officers or agent or agents to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation. Such authority
may be general or confined to specific instances.
Subject to the limitations set forth in RCW 23B.08.700 through 23B.08.730
and 23B.19.040, to the extent applicable:
(a) The corporation may enter into contracts and otherwise transact
business as vendor, purchaser, lender, borrower, or otherwise with its directors
and shareholders and with corporations, associations, firms, and entities in
which they are or may be or become interested as directors, officers,
shareholders, members, or otherwise.
(b) Any such contract or transaction shall not be affected or invalidated
or give rise to liability by reason of the director's or shareholder's having an
interest in the contract or transaction.
4.2 Checks, Drafts, Etc. All checks, drafts, and other orders for the
-------------------
payment of money, notes, and other evidences of indebtedness issued in the name
of the corporation shall be signed by such officer or officers or agent or
agents of the corporation and in such manner as may be determined from time to
time by resolution of the Board of Directors.
4.3 Deposits. All funds of the corporation not otherwise employed
--------
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies, or other depositories as the Treasurer, subject to the
direction of the Board of Directors, may select.
ARTICLE V
STOCK
-----
5.1 Issuance of Shares. No shares of the corporation shall be issued
------------------
unless authorized by the Board of Directors, which authorization shall include
the maximum number of shares to be issued, the consideration to be received for
each share, and, if the consideration is in a form other than cash, the
determination of the value of the consideration.
5.2 Certificates of Stock. All shares of the corporation shall be
---------------------
represented by certificates in such form, not inconsistent with the Articles of
Incorporation, as the Board of Directors may from time to time prescribe.
Certificates of stock shall be issued in
14
<PAGE>
numerical order, and each shareholder shall be entitled to a certificate signed
by the President or a Vice President, attested to by the Secretary or an
Assistant Secretary, and sealed with the corporate seal, if any. If any
certificate is manually signed by a transfer agent or a transfer clerk and by a
registrar, the signatures of the President, Vice President, Secretary or
Assistant Secretary upon that certificate may be facsimiles that are engraved or
printed. If any person who has signed or whose facsimile signature has been
placed on a certificate no longer is an officer when the certificate is issued,
the certificate may nevertheless be issued with the same effect as if the person
were still an officer at the time of its issue. Every certificate of stock shall
state:
(a) The state of incorporation;
(b) The name of the registered holder of the shares represented thereby;
(c) The number and class of shares, and the designation of the series, if
any, which such certificate represents;
(d) If the corporation is authorized to issue different classes of shares
or different series within a class, either a summary of (on the face or back of
the certificate), or a statement that the corporation will furnish to any
shareholder upon written request and without charge a summary of, the
designations, relative rights, preferences, and limitations applicable to each
class and the variations in rights, preferences and limitations determined for
each series, and the authority of the Board of Directors to determine variations
for future series; and
(e) If the shares are subject to transfer or other restrictions under
applicable securities laws or contracts with the corporation, either a complete
description of or a reference to the existence and general nature of such
restrictions on the face or back of the certificate.
5.3 Stock Records. The corporation or its agent shall maintain at the
-------------
registered office or principal office of the corporation, or at the office of
the transfer agent or registrar of the corporation, if one be designated by the
Board of Directors, a record of its shareholders, in a form that permits
preparation of a list of the names and addresses of all shareholders in
alphabetical order by class of shares showing the number and class of shares
held by each. The person in whose name shares stand on the books of the
corporation shall be deemed by the corporation to be the owner thereof for all
purposes.
5.4 Restrictions on Transfer. The Board of Directors shall have the
------------------------
authority to issue shares of the capital stock of this corporation and the
certificates therefor subject to such transfer restrictions and other
limitations as it may deem necessary to promote compliance with applicable
federal and state securities laws, and to regulate the transfer thereof in such
manner as may be calculated to promote such compliance or to further any other
reasonable purpose. Except to the extent that the corporation
15
<PAGE>
has obtained an opinion of counsel acceptable to the corporation that transfer
restrictions are not required under applicable securities laws, all certificates
representing shares of the corporation shall bear the following legend (or a
legend of substantially the same import) on the face of the certificate or on
the reverse of the certificate if a reference to the legend is contained on the
face:
NOTICE: RESTRICTIONS ON TRANSFER
The securities represented by this certificate have not been registered
under the Securities Act of 1933, or any state securities laws, and may not
be offered, sold, transferred, encumbered, or otherwise disposed of except
upon satisfaction of certain conditions. Information concerning these
restrictions may be obtained from the corporation or its legal counsel. Any
offer or disposition of these securities without satisfaction of said
conditions will be wrongful and will not entitle the transferee to register
ownership of the securities with the corporation.
5.5 Transfers. Shares of stock may be transferred by delivery of the
---------
certificates therefor, accompanied by:
(a) an assignment in writing on the back of the certificate, or an
assignment separate from certificate, or a written power of attorney to sell,
assign, and transfer the same, signed by the record holder of the certificate;
and
(b) such additional documents, instruments, and other items of
evidence as may be reasonably necessary to satisfy the requirements of any
transfer restrictions applicable to such shares, whether arising under
applicable securities or other laws, or by contract, or otherwise.
Except as otherwise specifically provided in these Bylaws, no shares of
stock shall be transferred on the books of the corporation until the outstanding
certificate therefor has been surrendered to the corporation. All certificates
surrendered to the corporation for transfer shall be canceled, and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and canceled, except that, in case of a lost,
destroyed, or mutilated certificate, a new one may be issued therefor upon such
terms (including indemnity to the corporation) as the Board of Directors may
prescribe.
ARTICLE VI
RECORDS OF CORPORATE MEETINGS
-----------------------------
The corporation shall keep, as permanent records, minutes of all meetings
of its shareholders and Board of Directors, a record of all actions taken by the
shareholders or Board of Directors without a meeting, and a record of all
actions taken by a committee of the Board of Directors exercising the authority
of the Board of Directors on
16
<PAGE>
behalf of the corporation. The corporation shall keep at its principal office a
copy of the minutes of all shareholders' meetings that have occurred, and
records of all action taken by shareholders without a meeting, within the past
three (3) years. Any person dealing with the corporation may rely upon a copy of
any of the records of the proceedings, resolutions, or votes of the Board or
shareholders when certified by the President or Secretary.
ARTICLE VII
FINANCIAL MATTERS
-----------------
The corporation shall maintain appropriate accounting records at its
principal office and shall prepare the annual financial statements required by
RCW 23B.16.200. Except to the extent otherwise expressly determined by the
Board of Directors or otherwise required by law, the accounting records of the
corporation shall be kept and prepared in accordance with generally accepted
accounting principles applied on a consistent basis from period to period. The
fiscal year of the corporation shall be the calendar year unless otherwise
expressly determined by the Board of Directors.
ARTICLE VIII
DISTRIBUTIONS
-------------
The Board of Directors may from time to time authorize, and the corporation
may make, distributions (as defined in RCW 23B.01.400) to its shareholders to
the extent permitted by RCW 23B.06.400, subject to any limitation in the
Articles of Incorporation. A director who votes for or assents to a
distribution made in violation of RCW 23B.06.400 is personally liable to the
corporation for the amount of the distribution that exceeds that which could
have been distributed without violating RCW 23B.06.400 if it is established that
the director did not perform the director's duties in compliance with Section
2.1 above.
ARTICLE IX
CORPORATE SEAL
--------------
The Board of Directors may, but shall not be required to, adopt a corporate
seal for the corporation in such form and with such inscription as the Board may
determine. If such a corporate seal shall at any time be so adopted, the
application of or the failure to apply such seal to any document or instrument
shall have no effect upon the validity or invalidity of such document or
instrument under otherwise applicable principles of law.
ARTICLE X
MISCELLANY
----------
17
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10.1 Communications by Facsimile. Whenever these Bylaws require notice,
---------------------------
consent, or other communication to be delivered for any purpose, transmission by
phone, wire, wireless equipment or electronic mail which transmits a facsimile
of such communication shall constitute sufficient delivery for such purpose.
Such communication shall be deemed to have been received by or in the possession
of the addressee upon completion of the transmission.
10.2 Inspector of Elections. Before any annual meeting of shareholders,
----------------------
the Board of Directors may appoint an inspector of elections to act at the
meeting and any adjournment thereof. If no inspector of elections is so
appointed by the Board, then the chairman of the meeting may appoint an
inspector of elections to act at the meeting. If any person appointed as
inspector fails to appear or fails or refuses to act, then the chairman of the
meeting may, and upon the request of any shareholder or a shareholder's proxy
shall, appoint a person to fill that vacancy.
Such inspector of elections shall:
(a) determine the number of shares outstanding and the voting power of
each, the number of shares represented at the meeting, the existence of a
quorum, and, with the advice of legal counsel to the corporation, the
authenticity, validity, and effect of proxies pursuant to RCW 23B.07.220 and
23B.07.240 and any procedure adopted by the Board of Directors pursuant to RCW
23B.07.230;
(b) receive votes, ballots, or consents;
(c) hear and determine all challenges and questions in any way arising
in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine the result; and
(f) do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.
10.3 Rules of Order. The rules contained in the most recent edition of
--------------
Robert's Rules of Order, Revised, shall govern all meetings of shareholders and
directors where those rules are not inconsistent with the Articles of
Incorporation or Bylaws, subject to the following:
(a) The chairman of the meeting shall have absolute authority over
matters of procedure, and there shall be no appeal from the ruling of the
chairman. If the chairman in his or her absolute discretion deems it advisable
to dispense with the rules of parliamentary procedure for any meeting or any
part thereof, the chairman shall so state and shall clearly state the rules
under which the meeting or appropriate part thereof shall be conducted.
18
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(b) If disorder should arise which prevents continuation of the
legitimate business of the meeting, the chairman may quit the chair and announce
the adjournment of the meeting; upon so doing, the meeting shall be deemed
immediately adjourned, subject to being reconvened in accordance with Section
1.5 of these Bylaws, as the case may be.
(c) The chairman may ask or require that anyone not a bona fide
shareholder or proxy leave the meeting of shareholders.
(d) A resolution or motion at a meeting of shareholders shall be
considered for vote only if proposed by a shareholder or duly authorized proxy
and seconded by an individual who is a shareholder or duly authorized proxy
other than the individual who proposed the resolution or motion.
10.4 Construction. Within these Bylaws, words of any gender shall be
------------
construed to include any other gender, and words in the singular or plural
number shall be construed to include the plural or singular, respectively,
unless the context otherwise requires.
10.5 Severability. If any provision of these Bylaws or any application
------------
thereof shall be invalid, unenforceable, or contrary to applicable law, the
remainder of these Bylaws, and the application of such provisions to individuals
or circumstances other than those as to which it is held invalid, unenforceable,
or contrary to applicable law, shall not be affected thereby.
ARTICLE XI
AMENDMENT OF BYLAWS
-------------------
Subject to the requirements of RCW 23B.10.210 relating to supermajority
quorum provisions for the Board of Directors, the Bylaws of the corporation may
be amended or repealed, or new Bylaws may be adopted, by: (a) the shareholders,
even though the Bylaws may also be amended or repealed, or new Bylaws may also
be adopted, by the Board of Directors; or (b) subject to the power of the
shareholders of the corporation to change or repeal the Bylaws, the Board of
Directors, unless such power is reserved, by the Articles of Incorporation or by
law, exclusively to the shareholders in whole or in part or unless the
shareholders, in amending or repealing a particular bylaw, provide expressly
that the Board of Directors may not amend or repeal that bylaw. Any officer of
the corporation may authenticate a restatement of the Bylaws and all amendments
thereto adopted in the manner provided above.
ARTICLE XII
AUTHENTICATION
--------------
19
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The foregoing Bylaws were read, approved, and duly adopted by the Board of
Directors of Airspan Networks Inc. on the ____ day of _________________, 1999,
and the Chairman of the Board and Secretary of the corporation were empowered to
authenticate such Bylaws by their signatures below.
___________________________________________
Thomas S. Huseby, Chairman of the Board
___________________________________________
Joseph Caffarelli, Secretary
20
<PAGE>
EXHIBIT 4.1
COMMON STOCK COMMON STOCK
NUMBER AIRSPAN SHARES
AIRN ___ NETWORKS INC.(Logo) __________
AIRSPAN NETWORKS INC. CUSIP
INCORPORATED UNDER THE LAWS OF THE STATE OF WASHINGTON SEE REVERSE
FOR CERTAIN
DEFINITIONS
THIS CERTIFIES THAT:
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK
PAR VALUE $0.001 PER SHARE OF
AIRSPAN NETWORKS INC. (hereinafter called the Corporation), transferable on the
books of the Corporation by the holder hereof in person or by duly authorized
attorney, upon surrender of this Certificate properly endorsed. This
Certificate and the shares represented hereby are issued and shall be held
subject to all the provisions of the Certificate of Incorporation and Bylaws of
the Corporation and of the amendments from time to time made thereto (copies of
which are on file with the Transfer Agent and to legends, if any, appearing on
the reverse hereof or appended hereto, to all of which the holder by acceptance
hereof, assents.
This Certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
SIGNATURE TO COME SIGNATURE TO COME
SEAL TO COME
CHIEF EXECUTIVE OFFICER SECRETARY
COUNTERSIGNED AND REGISTERED:
ChaseMellon Shareholder Services, L.L.C.
TRANSFER AGENT
AND REGISTRAR
By
AUTHORIZED SIGNATURE
<PAGE>
AIRSPAN NETWORKS INC.
LEGEND:
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES, AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES
THEREOF OF THE CORPORATION AND THE QUALIFICATION, LIMITATIONS OR RESTRICTIONS OF
SUCH PREFERENCES AND/OR RIGHTS. SUCH REQUEST MAY BE MADE TO THE SECRETARY OF
THE CORPORATION.
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:
TEN COM--as tenants in common UNIF GIFT MIN ACT--____ Custodian_____
TEN ENT--as tenants by the enureties (Cust) (Minor)
JT TEN--as joint tenants with right of Under Uniform Gifts to Minors
survivorship and not as tenants in common Act___________________________
(state)
Additional abbreviations may also be used though not in the above list.
For Value Received, ___________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL OR
OTHER IDENTIFYING NUMBER
OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
______________________________________________________________________Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint
________________________________________________________________Attorney
to transfer the said shares on the books of the within-named Corporation with
full power of substitution in the premises.
Dated___________________
________________________________________________
________________________________________________
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 GUARANTEED:
_______________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE, MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
-2-
<PAGE>
Exhibit 10.1
Manufacturing Contract
This Manufacturing Agreement ("Agreement") is entered into this 27/th/ day of
August 1998 by and between Airspan Communications Limited having its place of
business at 5 New Square Feltham, Middlesex. TW14 8HA England. ("Customer") and
Flextronics International Sweden AB, Rombvagen 4, Verko, Karlskrona. Sweden
("Flextronics").
Customer has created a market for Customer's Products and is solely responsible
for the sales and marketing of the Products. Flextronics has developed
processes and practices for manufacturing products for many different electronic
applications and at Customer's request desires to manufacture Customer's
Products in accordance with Customer's specifications. Customer acknowledges
that Flextronics' expertise is manufacturing and that Flextronics'
responsibility related to the Customer's Products is limited to this extent.
The parties agree as follows:
1.0 WORK, LICENSE
Flextronics agrees to perform the work (hereinafter "Work") pursuant to purchase
orders or changes thereto issued by Customer and accepted by Flextronics. Work
shall mean to procure components, materials and other supplies and to
manufacture, test, and assemble products (hereinafter "Products") pursuant to
detailed written specifications for each such Product which are provided by
Customer and accepted by Flextronics and to deliver such Products to a Customer
designated location. For each Product or revision thereof, written
specifications shall include but are not limited to bill of materials,
schematics, assembly drawings, test specifications, current revision number, and
approved vendor list (hereinafter "Specifications") as attached hereto.
Flextronics is granted by Customer a non-exclusive license during the term of
this Agreement to use all of Customer's patents, trade secrets and other
intellectual property required to perform Flextronics' obligations under this
Agreement.
Flextronics shall retain all intellectual property rights in manufacturing
processes developed by Flextronics but shall grant to Airspan a license on a
royalty-free basis without limit of time for all improvements made to the
Product by Flextronics.
2.0 FORECASTS, ORDERS, MATERIAL PROCUREMENT
2.1 Forecast. Customer shall provide Flextronics, on a two weekly basis, a
rolling six (6) month Product Forecast (including a call-off schedule).
2.2 Purchase Orders. The first four (4) months in the latest issued Product
Forecast issued by Customer, as described in Section 2.1, shall be considered as
a Purchase Order subject to Section 3.2. Each Purchase Order shall reference
this Agreement, and the applicable written Specifications as described in
Section 1.0. Purchase Orders shall not to be unreasonably withheld be binding on
Flextronics until accepted by Flextronics at its discretion. Flextronics shall
notify Customer of rejection of any purchase order within five (5) working days
of receipt of such order.
Customer may use its standard Purchase Order form to release items, quantities,
prices, schedules, change notices, specifications, or other notice provided for
hereunder. The parties agree that the terms and conditions contained in this
Agreement shall prevail over any terms and conditions of any purchase order,
acknowledgment form or other instrument.
2.3 Material Procurement. Customer's accepted Purchase Orders will constitute
authorization for Flextronics to procure, using standard purchasing practices,
the components, materials and supplies necessary for the manufacture of Products
("Inventory") covered by such purchase orders.
In addition, Customer authorizes Flextronics to purchase, in amounts beyond the
amount necessary to fill accepted purchase orders, the components, materials,
and supplies: i) with lead times greater than ninety (90) days at the time the
order is placed ("Long Lead Time Components") plus 30 days to account for the
order, shipment, receipt and manufacturing time and, ii) purchased in
quantities above the required amount in order to achieve price targets
("Economic Order Inventory"), and iii) purchased in excess of requirements
because of minimum lot sizes available from manufacturers ("Minimum Order
Inventory"). Together these are called "Special Inventory".
Flextronics may purchase Long Lead Time Components sufficient to meet all
deliveries under the purchase orders and forecast in effect at the time the
order with the supplier is placed, and may reasonably purchase Minimum Order
Inventory
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even if greater than the amount necessary to meet purchase orders and
forecast. Economic Order Inventory shall be purchased by Flextronics only with
the prior approval of Customer. Flextronics may, from time to time, hold Long
Lead Time Components and finished goods in inventory to increase customer
flexibility. The components and quantities of all such inventory will be
documented in a separate letter and signed by both Flextronics and Customer.
Customer expects diligent stock handling and control procedures including cycle
counting where necessary to maintain stock accuracy and hence reduce liability
to customer.
3.0 SHIPMENTS, SCHEDULE CHANGE, CANCELLATION
3.1 Shipments. All Products delivered pursuant to the terms of this Agreement
shall be suitably packed for shipment in accordance with Customer's
Specifications, marked for shipment to Customer's destination specified in the
applicable purchase order and delivered to a carrier or forwarding agent.
Shipment will be F.C.A. at which time risk of loss and title will pass to
Customer. All freight, insurance and other shipping expenses, as well as any
special packing expenses not included in the original price quotation for the
Products will be paid by Customer.
3.2 Quantity Increases and Shipment Schedule Changes. For any accepted
purchase order, Customer may (i) increase the quantity of Products or (ii)
reschedule the quantity of Products and their shipment date as provided in the
table below:
<TABLE>
<S> <C>
1) Product in manufacture Change only by agreement
2) Product in preparation Reschedule with customer covering all
extraordinary costs by joint agreement
3) Product on schedule and no work in progress Reschedule within the bounds of component supply
</TABLE>
If there are extra costs, as demonstrated in Appendix 2 to meet any schedule
change Flextronics will inform the Customer for its approval in advance of the
change. Changes in quantity or shipment date causing excess inventory in more
than thirty (30) days may be subject to an inventory carrying charge.
Furthermore, any changes in quantity and shipment date, within 30 days from
originally scheduled, may not subsequently be rescheduled within the next 30 day
period to thereby avoid charges for excess inventory, without the prior approval
of Flextronics. The inventory carrying charge shall be 1.25% per month for
inventory and Special Inventory procured to support the original schedule.
Excess inventory, as described in this Section, which is subject to carrying
charge, shall, upon request from Customer, be reasonably provable by
Flextronics. Excess inventory held by Flextronics for more than six (6) months
shall be purchased by Customer or disposed according to Section 3.3. .
Allowable quantity changes are subject to material disposition. Flextronics
will use reasonable commercial efforts to meet quantity changes.
In order to meet the Customer's flexibility in demands, the Customer may request
and identify Special Inventory to be procured and held by Flextronics in excess
of inventory required to meet the Product Forecast. The inventory carrying
charge for such Special Inventory shall be 1.25% per month.
3.3 Cancellation. Customer may not cancel any portion of Product quantity of
an accepted purchase order without Flextronics' prior written approval, not to
be unreasonably withheld. If the parties agree upon a cancellation, Customer
will pay Flextronics for Products, Inventory, and Special Inventory affected by
the cancellation as follows: (i) 100% of the contract price for all finished
Products in Flextronics' possession, (ii) 106% of the cost of all Inventory and
Special Inventory in Flextronics' possession excluding unrepairable production
reject and not returnable to the vendor or usable for other customers, whether
in raw form or work in process, less the salvage value thereof, (iii) 105% of
the cancellation cost of all Inventory and Special Inventory on order and not
cancelable, (iv) any previously approved, between Customer and Flextronics,
vendor cancellation charges incurred with respect to Inventory and Special
Inventory accepted for cancellation or return by the vendor, and (v) expenses
incurred by Flextronics related to labor and equipment specifically put in place
to support Customer's purchase orders.
Flextronics will use reasonable commercial efforts to return unused Inventory
and Special Inventory and to cancel pending orders for such inventory, and to
otherwise mitigate the amounts payable by Customer.
If the forecast for any period is less than the previous forecast supplied over
the same period, that amount will be considered canceled and Customer will be
responsible for any Special Inventory purchased or ordered by Flextronics to
support the forecast.
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The customer may substitute a similar purchase order for the cancellation of an
existing purchase order by agreement of both parties.
3.4 Effect of Exchange Rates on material pricing. Variation in component
pricing due to currency fluctuations will be managed in good faith by Airspan
and Flextronics.
3.5 Backlog Recovery. Flextronics undertakes to provide suitable and timely
resources to accelerate the existing schedule to recover a backlog or lost time
position. Reasonable costs for such action will be allocated as follows:
a) Customer default and request Costs to be covered by the customer
b) Flextronics default Costs to be covered by Flextronics
4.0 ENGINEERING CHANGES
Customer may request, in writing, that Flextronics incorporate engineering
changes into the Product. Such request will include a description of the
proposed engineering change sufficient to permit Flextronics to evaluate its
feasibility and cost. Flextronics' evaluation shall be in writing and shall
state the costs and time of implementation and the impact on the delivery
schedule and pricing of the Product. If the change does not involve any company
outside of Flextronics Sweden then Flextronics will respond to the customer
within 3 working days. Flextronics will not be obligated to proceed with the
engineering change until the parties have agreed upon the changes to the
Product's Specifications, delivery schedule and pricing and upon the reasonable
implementation costs to be borne by the Customer including, without limitation,
the cost of Inventory and Special Inventory on-hand and on-order that becomes
obsolete. When the customer agrees to accept such costs detailed at that time,
Flextronics will implement the change immediately or in accordance to the
proposed schedule.
5.0 TOOLING, NON-RECURRING EXPENSES, SOFTWARE
Flextronics shall provide non-Product specific tooling at its expense. Customer
shall pay for or obtain and consign to Flextronics any Product specific tooling
and other reasonably necessary non-recurring expenses, to be set forth in
Flextronics' quotation. All software which Customer provides to Flextronics is
and shall remain the property of Customer. Customer grants Flextronics a
license to copy, modify and use such software required to perform Flextronics'
obligations under this Agreement. All software developed by Flextronics to
support the process tooling or otherwise shall be and remain the property of
Flextronics.
6.0 PRODUCT ACCEPTANCE AND WARRANTIES
6.1 Product Acceptance. The Products delivered by Flextronics will be
inspected and tested as required by Customer within thirty (30) days of receipt.
If Products are found to be defective in material or workmanship, Customer has
the right to reject such Products during said period. Products not rejected
during said period will be deemed accepted. Customer may return defective
Products, freight collect, after obtaining a return material authorization
number, not to be unreasonably withheld, from Flextronics to be displayed on the
shipping container and completing a failure report. Rejected Products will be
repaired or replaced at Flextronics' option and returned freight pre-paid. If
the Product is source inspected by Customer prior to shipment, Customer will
inspect goods within five (5) days of request date.
6.2 Express Warranty. Flextronics warrants that the Products will conform to
Customer's applicable Specifications and will be free from defects in
workmanship for a period of one hundred and eighty (180) days from the date of
shipment. Materials are warranted to the same extent that the original
manufacturer warrants the materials. This express warranty does not apply to
(a) materials consigned by Customer to Flextronics; (b) defects resulting from
Customer's design of the Products; or (c) Product that has been abused, damaged,
altered or misused by any person or entity after title passes to Customer. With
respect to first articles, prototypes, pre-production units, test units or other
similar Products, Flextronics makes no representations or warranties whatsoever.
Notwithstanding anything else in this Agreement, Flextronics assumes no
liability for or obligation related to the performance, accuracy,
specifications, failure to meet specifications or defects of or due to tooling,
designs or instructions produced or supplied by Customer and Customer shall be
liable for costs or expenses incurred by Flextronics related thereto. Upon any
failure of a Product to comply with the above warranty, Flextronics' sole
obligation, and Customer's sole remedy, is for Flextronics, at its option, to
promptly repair or replace such unit and return it to Customer freight collect.
Customer shall return Products covered by the warranty freight pre-paid after
completing a failure report and obtaining a return material authorization number
from Flextronics to be displayed on the shipping container.
FLEXTRONICS MAKES NO OTHER WARRANTIES OR CONDITIONS ON THE PRODUCTS, EXPRESS,
IMPLIED, STATUTORY, OR IN ANY OTHER PROVISION OF THIS AGREEMENT OR COMMUNICATION
WITH CUSTOMER,
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<PAGE>
AND FLEXTRONICS SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OR CONDITION OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
6.3 Production Yields. It is Flextronics intention to provide the customer with
a quality production service. Subject to agreement and a design for
manufacturability review Flextronics will trigger an investigation should solder
joint quality ppm figures exceed 150ppm.
7.0 PAYMENT AND DELIVERY TERMS, ADDITIONAL COSTS AND PRICE CHANGES
7.1 Price, Payment and Delivery Terms. The price for Products to be
manufactured will be set from time to time through purchase orders issued by
Customer and accepted by Flextronics. All prices quoted are exclusive of local
excise, sales, use and similar taxes, and any duties, and Customer shall be
responsible for all such items. Payment for any Products, services or other
costs to be paid by Customer hereunder is due thirty (30) days net from the date
of invoice and shall be made in SEK. If Customer is late with payments,
Flextronics may require prepayment or delay shipments or suspend work until
assurances of payment satisfactory to Flextronics are received. Customer shall
open, no later than 10 days after the signing of this document, a Bank
Guarantee, or such other guarantee acceptable to Flextronics, in an amount of
one and a quarter (1.25) million USD as separately detailed by and in favor of
Flextronics upon which this contract comes into force. The Delivery Terms are
Free Carrier (FCA) Flextronics factory in Karlskrona, Sweden, according to
INCOTERMS 1990.
Pricing will be calculated using the general model shown in Appendix 1,
demonstrating the negotiated 5% reduction in overall costs.
7.2 Additional Costs. Customer is responsible for (a) any expediting charges
reasonably necessary because of a change in Customer's requirements which
charges are preapproved, (b) any overtime or downtime charges incurred as a
result of delays in the normal production or interruption in the workflow
process and caused by: (1) Customer's change in the Specifications; or (2)
Customer's failure to provide sufficient quantities or a reasonable quality
level of consigned materials where applicable to sustain the production
schedule. Customer caused delays as a result of consigned inventory will result
in a special charge to the Customer of 1.25% of the sales price of the Product
for each month, or part thereof, delayed.
7.3 Price Changes. The price of Products to Customer may be increased by
Flextronics if the parties agree to the increase after good faith negotiation.
7.4 Cost Reductions. Flextronics agrees to seek ways to reduce the cost of
manufacturing Products by methods such as elimination of components, obtaining
alternate sources of materials,redefinition of Specifications, and improved
assembly or test methods. Upon implementation of such ways which have been
initiated by Flextronics, Flextronics will receive one hundred (100) percent of
the demonstrated cost reduction for a period of three (3) months and thereafter
fifty (50) percent of the demonstrated cost reduction for a further six (6)
months. Customer will receive one hundred percent of the demonstrated cost
reduction upon implementation of such ways initiated by Customer.
8.0 TERM AND TERMINATION
8.1 Term. The term of this Agreement shall commence on the date hereof above
and shall continue thereafter until terminated as provided in Section 8.2 or
10.9.
8.2 Termination. This Agreement may be terminated by either party for any
reason, with or without cause, upon one hundred and twenty (120) days
written notice to the other party. Termination of this Agreement shall not
affect the obligations of either party which exist as of the date of
termination. Upon termination for any reason whatsoever, Customer shall be
responsible for the finished Products, Inventory, and Special Inventory in
existence at the date of termination in the same manner as for
cancellations as set forth in section 3.3. Notwithstanding termination of
this Agreement, Sections 6.2, 9.0, and 10.1 shall survive said termination.
8.3 Insolvency In the event that one of the parties becomes insolvent, is
adjudicated bankrupt voluntarily or involuntarily files a petition of
bankruptcy , or becomes financially incapable of performing its obligations
in accordance with the terms of this agreement , and such involuntary
proceedings, insolvency or incapacity is not revoked ,stayed or discharged
within a thirty (30) day period , this agreement can be terminated without
notice.
8.4 Material Breach. In the event of a material breach of this agreement by
either party the aggrieved party shall by written notice to the other
party, give said party a thirty (30) day period in which to cure such
material breach. In
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<PAGE>
the event such material breach has not been cured within the thirty (30)
day period the aggrieved party can terminated this agreement without
notice.
9.0 LIABILITY LIMITATION
9.1 Patents, Copyrights, Trade Secrets, Other Proprietary Rights. Customer
shall defend, indemnify and hold harmless Flextronics from all claims, costs,
damages, judgments and attorney's fees resulting from or arising out of any
alleged and/or actual infringement or other violation of any patents, patent
rights, trademarks, trademark rights, trade names, trade name rights, registered
design rights, unregistered design rights, copyrights, trade secrets,
proprietary rights and processes or other such rights in connection with the
performance by Flextronics of its obligations under this Agreement. This
excludes infringements not attributable to Airspan. Flextronics shall promptly
notify Customer in writing of the initiation of any such claims.
THE FOREGOING STATES THE ENTIRE LIABILITY OF THE PARTIES TO EACH OTHER
CONCERNING INFRINGEMENT OF PATENT, COPYRIGHT, TRADE SECRET OR OTHER INTELLECTUAL
PROPERTY RIGHTS.
9.2 Product Liability. Customer agrees that, if notified promptly in writing
and given sole control of the defense and all related settlement negotiations,
it will defend Flextronics from any claim or action and will hold Flextronics
harmless from any loss, damage or injury, including death, which arises from any
alleged defect in design, workmanship or materials of any Products. Customer
shall, if requested by Flextronics, name Flextronics as an additional insured
under Customer's product liability policies for any Products.
9.3 Limitation of Liability
9.3.1 Each party's maximum liability under this Agreement shall be limited to
the sum of $5M in respect of physical damage to or loss of tangible property,
and $5M in respect of all other events or any one event or series of connected
events.
9.3.2 Each party acknowledges that this is a commercial contract and that,
except as expressly set forth in this Agreement, neither party shall be liable
to the other party or any person or entity claiming through or under that other
party, directly or indirectly, for any loss or damage (whether direct, indirect,
general, special or consequential) sustained for any cause or reason whatsoever
relating to or arising out of the Product.
9.3.3 For the avoidance of doubt the "loss or damage" referred to in clause
above includes:
(i) any:
(a) loss of profits;
(b) loss of sales;
(c) loss of turnover;
(d) loss of bargain; or
(e) loss of opportunity; or
(ii) any indirect or consequential loss or damage howsoever
caused.
9.3.4 Each party ("the Indemnifying Party") shall indemnify and hold harmless
and defend the other party ("the Indemnified Party") and its respective
officers, directors, employees, representatives and agents from and against all
claims, demands, actions, suits, proceedings, writs, judgements, orders and
decrees brought, made or rendered against them or any of them and all damages,
losses and expenses suffered or incurred by them or any of them howsoever
arising out of or related to the breach by the Indemnifying Party of any of the
terms of this Agreement.][The Indemnified Party shall notify the Indemnifying
Party forthwith of any claim, demand, action, suit, proceeding, writ, judgement,
order or decree falling within the scope of this Section 9.3 and shall permit
the Indemnifying Party sole conduct of the same and shall provide reasonable
assistance in relation thereto, subject to the payment by the Indemnifying Party
of the Indemnified Party's reasonable costs and expenses.]
10.0 MISCELLANEOUS
10.1 Confidentiality. Confidentiality is attached to all information
exchanged between the parties except anything that is already in the public
domain at the time of disclosure, or which subsequently becomes part of the
public domain
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otherwise than by breach of this agreement. The party which receives such
Confidential Information agrees not to disclose it directly or indirectly to any
third party without the prior written consent of the disclosing party.
Confidential Information disclosed pursuant to this Agreement shall be
maintained confidential for a period of three (3) years after the disclosure
thereof.
10.2 Entire Agreement. This Agreement constitutes the entire agreement between
the Parties with respect to the transactions contemplated hereby and supersedes
all prior agreements and understandings between the parties relating to such
transactions. Customer shall hold the existence and terms of this Agreement
confidential, unless it obtains Flextronics' express written consent otherwise.
In all respects, this Agreement shall govern, and any other documents including,
without limitation, preprinted terms and conditions on Customer's purchase
orders shall be of no effect.
10.3 Amendments. This Agreement may be amended only by written consent of both
parties.
10.4 Independent Contractor. Neither party shall, for any purpose, be deemed
to be an agent, partner, or part of a joint venture of the other party and the
relationship between the parties shall only be that of independent contractors.
Neither party shall have any right or authority to assume or create any
obligations or to make any representations or warranties on behalf of any other
party, whether express or implied, or to bind the other party in any respect
whatsoever.
10.5 Expenses. In the event a dispute between the parties hereunder with
respect to this Agreement must be resolved by litigation or other proceeding or
a party must engage an attorney to enforce its right hereunder, the prevailing
party shall be entitled to receive reimbursement for all associated reasonable
costs and expenses (including, without limitation, attorneys fees) from the
other party.
Security Interest. Flextronics retains title of all products delivered to
Customer until the purchase price and all other charges payable to Flextronics
hereunder have been received in full.
10.7 Governing Law. This Agreement shall be governed by and construed under
the rules of the laws International Chamber of Commerce in the Hague. All
disputes arising in connection with this agreement shall be finally settled
under the Rules of Conciliation and Arbitration of the International Chamber of
Commerce in the Netherlands by three arbitrators appointed in accordance with
the said rules. The language of all arbitration's proceedings under this
agreement shall be English.
Neither party shall have the right to assign or otherwise transfer its rights or
obligations under this Agreement except with the prior written consent of the
other party, not to be unreasonably withheld.
10.9 Force Majeure. In the event that either party is prevented from performing
or is unable to perform any of its obligations under this Agreement (other than
a payment obligation) due to any Act of God, fire, casualty, flood, earthquake,
war, strike, lockout, epidemic, destruction of production facilities, riot,
insurrection, material unavailability, or any other cause beyond the reasonable
control of the party invoking this section, and if such party shall have used
its best efforts to mitigate its effects, such party shall give prompt written
notice to the other party, its performance shall be excused, and the time for
the performance shall be extended for the period of delay or inability to
perform due to such occurrences. Regardless of the excuse of Force Majeure, if
such party is not able to perform within ninety (90) days after such event, the
other party may terminate the Agreement. Termination of this Agreement shall not
affect the obligations of either party which exist as of the date of
termination.
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10.10 Notices. All notices made or required to be given will be in writing and
will be mailed, postage prepaid via certified letter to the addresses shown
below
Airspan Communications Ltd. Flextronics International Sweden AB
5 New Square Rombvagen 4
Feltham Verko
Middlesex TW14 8HA Karlskrona
England Sweden
Attention:__________________ Attention:__________________
ACCEPTED AND AGREED TO:
CUSTOMER: FLEXTRONICS INTERNATIONAL SWEDEN AB:
__________________________ ___________________________________
By:_______________________ By:________________________________
Title:____________________ Title:_____________________________
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<PAGE>
EXHIBIT 10.2
Note: Portions of this exhibit indicated by "[*]" are subject to a confidential
treatment request, and have been omitted from this exhibit. Complete, unredacted
copies of this exhibit have been filed with the Securities and Exchange
Commission as part of this Company's confidential treatment request.
CONTRACT FOR THE SALE AND PURCHASE OF
EQUIPMENT AND ANCILLARY FACILITIES FOR THE
ESTABLISHMENT OF A WIRELESS ACCESS SYSTEM
AZ COMMUNICATIONS NETWORK, INC.
- and -
AIRSPAN COMMUNICATIONS LIMITED
October 25, 1999
CONTRACT NO. CN99-002
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1 DEFINITIONS
SECTION 2 SCOPE OF THE CONTRACT
SECTION 3 PRICE
SECTION 4 TERMS OF PAYMENT
SECTION 5 DELIVERY
SECTION 6 MARKING AND LABELING
SECTION 7 PACKING AND SHIPMENT
SECTION 8 TRANSFER OF RISK AND TITLE
SECTION 9 INSPECTION, TESTING AND
ACCEPTANCE
SECTION 10 WARRANTY
SECTION 11 FOR EXTENSION OF WARRANTY
SECTION 12 INSURANCE
SECTION 13 PATENTS
SECTION 14 TRADEMARKS
SECTION 15 CONFIDENTIALITY AND USE
OF INFORMATION
SECTION 16 LIQUIDATED DAMAGES
SECTION 17 LIMITATION OF LIABILITY
SECTION 18 FORCE MAJEURE
SECTION 19 CHANGES
SECTION 20 APPLICABLE DOCUMENTS
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
SECTION 21 ORDER OF PRECEDENCE
SECTION 22 SEVERABILITY
SECTION 23 SUCCESSION AND ASSIGNMENT
SECTION 24 TERMINATION
SECTION 25 ARBITRATION
SECTION 26 INTERPRETATION
SECTION 27 ADDRESSES
SECTION 28 EXECUTION IN COUNTERPARTS
SECTION 29 EFFECTIVITY OF THE CONTRACT
***
</TABLE>
3
<PAGE>
This Contract For The Sale and Purchase Of Equipment And Ancillary Facilities
For The Establishment of a Wireless Access System is entered into this 25/th/
day of October 1999, between the following parties:
AZ COMMUNICATIONS NETWORK INCORPORATED, a corporation organized and
existing under the laws of the Republic of the Philippines and having its
principal office at 8/th/ Floor DPC Place, 2322 Chino Roces Avenue, Makati
------------------------------------------------------
City, Philippines, represented in this act by its Director for Engineering,
-----------------
Felizardo P. dela Merced and hereinafter referred to as "AZCOM";
- a n d -
AIRSPAN COMMUNICATIONS LIMITED, a corporation organized and existing under
the laws of the United Kingdom and having its registered address at
Cambridge House, Oxford Road, Uxbridge Middlesex, UB8, 1UN, United Kingdom,
--------------------------------------------------------------------------
represented in this act by Henrik Smith-Petersen, Regional Sales Vice
President, and hereinafter referred to as "ACL".
(AZCOM and ACL may be individually referred to as a "Party" and
collectively the "Parties")
WHEREAS, ACL has represented itself to be a qualified and reliable supplier of
certain equipment, including spares, tools and test equipment and documentation
for the establishment of Wireless Access System Network and has offered to
supply the same to AZCOM.
WHEREAS, AZCOM is the holder of a valid franchise issued by the Congress of the
Republic of the Philippines and is duly authorized to provide telecommunications
services throughout the Philippines.
WHEREAS, pursuant to its authority to provide telecommunications services, AZCOM
has expressed its desire to acquire a wireless access system as contemplated by
this Contract.
WHEREAS, ACL has agreed to supply, and AZCOM is willing to purchase, the said
equipment under such terms and conditions mutually agreeable to the Parties.
NOW, THEREFORE, for and in consideration of the foregoing, this Contract is
entered into under the following terms and conditions:
4
<PAGE>
1 DEFINITIONS
-----------
For purposes of this Contract, the following terms shall have the meanings
indicated and the plural form of any term defined herein in the singular
shall merely express the grammatical plural of that defined term:
"Contract" refers to this Contract For The Sale and
Purchase Of Equipment And Ancillary Facilities
For The Establishment of a Wireless Access
System together with its annexes and the other
documents specifically considered its integral
parts.
"Acceptance Test Program" refers to the series of steps to be taken in
conducting the necessary tests and inspection of
a System to verify its compliance with the
Specifications, as determined by AZCOM.
"Cell Site" refers to the area of coverage around each base
station wherein it can provide reliable service
in accordance with the Specifications.
"Equipment" refers to the Wireless Access System (WAS)
comprising of the required hardware and software
which shall include base stations, subscriber
terminals, RF and indoor units, antennas and
feeders, and other related installation
materials as described in Annex A, which ACL is
required to deliver under this Contract, and to
install, test and commission under the Services
Contract.
"System Acceptance" refers to the issuance of a System Acceptance
certificate by AZCOM after the completion of the
System Acceptance Test to certify that the
System installed by ACL fully complies with the
Specifications.
"System Acceptance Test" refers to the test conducted by AZCOM in
accordance to an agreed Acceptance Test Program
to determine if the System installed fully
complies with the Specifications.
"Network" refers to the combination of Systems and
Equipment together with the required
infrastructure to provide the functionalities
and coverage defined in the Specifications.
"Price" refers to the total price to be paid by AZCOM to
ACL in consideration for the complete and
faithful performance by ACL of its duties and
responsibilities under this Contract.
"Project" refers to the undertaking or activity subject of
this Contract and the Services Contract.
"Schedule" refers to the timetable describing the
activities and the period within which to
complete each and every System, the Network and
the Project, as described in Annex B.
5
<PAGE>
"Services Contract" refers to Contract No. CN99-002/S between AZCOM
and ACL dated October 25, 1999, for the
performance of services relating to the
installation, testing and commissioning
supervision, technical assistance, and other
incidental services including in-land
transportation, insurance and warehousing of the
Equipment.
"Spares" refers to the items or materials to be used as
replacement or reserve for maintenance purposes
of the Equipment during and after the Warranty
Period, which shall likewise be subject to
acceptance testing.
"Specifications" refers to the technical specifications of the
Equipment as described in the Protocol (Annex
B).
"Warranty Period" refers to the period of time from System
Acceptance up to 18 months thereafter. The
Warranty Period shall be extended when the
requirements of the performance monitoring as
described in Annex B is not met.
6
<PAGE>
2 SCOPE OF THE CONTRACT
---------------------
2.1 ACL undertakes to deliver the Equipment listed in Annex A and takes
full responsibility of ensuring that the Equipment, when installed,
tested and commissioned in accordance with the terms and conditions of
the Services Contract, shall meet in all respects the Specifications.
2.2 The Parties agree that the enumeration or listing of the Equipment in
Annex A shall suffice the Year 2 requirements of AZCOM, i.e. 20 base
------
stations, 322 customer terminals, the network management system and
the required functionalities as described in the Specifications. It is
further agreed that Annex A is not restrictive or conclusive.
Accordingly, if the Equipment installed fail to meet the
Specifications on account of the non-inclusion of certain parts or
materials, or some of the listed parts or materials are inadequate,
ACL shall deliver or replace the required parts or materials without
additional cost or expense on the part of AZCOM.
2.3 In consideration for the performance by ACL of its obligations under
this Contract, AZCOM shall pay ACL the Price in accordance with the
terms of payment described in Section 4 hereof.
3 PRICE
-----
3.1 Subject to the compliance by ACL with the terms and conditions of this
Contract, AZCOM shall pay ACL the following:
[*]
3.2 The Price shall be firm up to the completion of the Project.
3.3 The Price covers all taxes, customs duties, license fees, brokerage
fees, forwarding fees and other charges which may be imposed on the
Equipment by authorities other than the Republic of the Philippines as
well as by authorities of other countries where the Equipment shall
originate. Should ACL be liable for any income tax in the Philippines
arising out of the Project or this Contract, the same shall be for
ACL's account.
3.4 In the event the full amounts provided for the cost of the Equipment
and Spares are not utilized ACL shall return the proportionate amount
representing the value of Equipment and Spares which were not utilized
in a manner to be described in a separate letter by AZCOM.
4 TERMS OF PAYMENT
----------------
4.1 Subject to the rules and regulations of the Bangko Sentral ng
Pilipinas, AZCOM shall pay the Price in accordance with the following
schedule:
_______________
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
7
<PAGE>
(a) The downpayment, which is equivalent to ten percent (10%) of the
Price, shall be paid within thirty one (31) calendar days from the
signing of this Contract and upon receipt of a correct invoice by
AZCOM from ACL. ACL is not obligated to ship the Equipment prior to
its receipt of the downpayment.
(b) Payment on Shipment
Twenty percent (20%) of the price of the shipped Equipment shall be
paid by AZCOM within thirty (30) calendar days from receipt of AZCOM
of appropriate shipping documentation and correct invoice from ACL.
(c) Progress Payments
c.1 Twenty percent (20%) of the price of the shipped Equipment shall
be paid by AZCOM to ACL within thirty (30) days after the System
Acceptance of the eighth (8/th/) base station or after one hundred
and twenty (120) days from the arrival of the Equipment at the
warehouse of ACL in the Philippines, which ever comes first.
c.2 Twenty percent (20%) of the price of the shipped Equipment shall
be paid by AZCOM to ACL within thirty (30) days after the System
Acceptance of the thirteenth (13/th/) base station or after two
hundred and forty (240) days from the arrival of the Equipment at
the warehouse of ACL in the Philippines, which ever comes first.
c.3 Twenty percent (20%) of the price of the shipped Equipment shall
be paid by AZCOM to ACL within thirty (30) days after the System
Acceptance of the seventeenth (17/th/) base station or after three
hundred and sixty five (365) days from the arrival of the
Equipment at the warehouse of ACL in the Philippines, which ever
comes first.
To secure the above progress payments, a letter of credit shall be
issued by AZCOM in favor of ACL. Any and all costs to be incurred
for the processing and issuance of the letter of credit shall be
for the account of ACL to the extent of 1.6% of the face value of
the letter of credit. In case the costs for such letter of credit
shall exceed 1.6% as above-mentioned, the Parties hereto agree
that they shall negotiate in good faith as to who shall bear the
excess cost thereof and to what extent.
Receipt by AZCOM of correct invoice from ACL is required for all
program payment.
(d) The balance of ten percent (10%) of the price of the shipped Equipment
shall be paid five hundred forty (540) days from the arrival of the
Equipment at the warehouse of ACL in the Philippines and the receipt
of correct invoice by AZCOM from ACL. Notwithstanding the foregoing,
AZCOM shall not be obliged to make the payment of the balance of ten
percent (10%) until all base stations have undergone System
Acceptance.
4.2 AZCOM shall be responsible for securing all the required authorizations
from the Bangko Sentral ng Pilipinas for the payments to be made under this
contract.
8
<PAGE>
4.3 ACL shall be responsible for the submission of all the required
billings/invoices under this Contract.
4.4 All bank charges, which may be incurred outside the Philippines on
account of the above-mentioned payments, shall be borne by ACL.
5 DELIVERY
--------
5.1 ACL shall deliver the Equipment on CIP Manila Port basis. Unless
otherwise provided for in this Contract, the delivery shall conform to
the latest provisions of INCOTERMS.
5.2 In the delivery of the Equipment, ACL shall faithfully comply with the
provisions of the Global Comprehensive Import Supervision Scheme of
the Bangko Sentral ng Pilipinas.
5.3 ACL shall submit all the required documents to SGS (at the country of
origin) at the time of inspection.
5.4 ACL shall send to AZCOM a copy of SGS inspection report duly signed by
the representatives of SGS and ACL.
6 MARKING AND LABELING
--------------------
Except as the Parties may otherwise decide, all labels, identification
markers, handbooks, drawings and other documents required to be submitted
by ACL under this Contract shall be in the English language.
7 PACKING AND SHIPMENT
--------------------
The packing and shipment of all the items and components of the Equipment
shall conform to the following conditions:
7.1 The packing shall be in accordance with the standard prevailing
practice for the export packing of each item, with shipping and
delivery marks made at the instructions of AZCOM.
7.2 All the items to be supplied by ACL shall be brand new. Under no
circumstances will second hand or used items be supplied by ACL.
7.3 The items or components, which do not meet the Specifications or are
below acceptance standards shall be rejected by AZCOM. The items or
components rejected by AZCOM, including those, which were damaged due
to inadequate or improper packing, shall be repaired or replaced by
ACL, at the discretion of, and at no cost to AZCOM. The expenses of
transportation of the damaged and replacement parts, including the
customs duties and other charges or fees that may be assessed for the
importation of the replacement parts, shall be borne by ACL.
9
<PAGE>
7.4 All items or components erroneously delivered to AZCOM must be claimed
by ACL from AZCOM within ten (10) from receipt of notice by ACL from
AZCOM.
7.5 AZCOM shall not be liable for any damage to or deterioration of any
part of the Equipment, which was erroneously delivered by ACL.
7.6 ACL shall notify AZCOM via fax of the estimated arrival date of the
vessel of any particular shipment and shall send to AZCOM copies of
the relevant documents enumerated in Section 7 hereof.
7.7 ACL, with the assistance of AZCOM, shall obtain the necessary customs
clearance for the Equipment and exert its best efforts to have the
period for customs clearance promptly accomplished after the arrival
of the Equipment at the Manila Port.
8 TRANSFER OF RISK AND TITLE
--------------------------
8.1 Notwithstanding any contrary provision in this Contract, title over
the Equipment shall pass to AZCOM upon arrival of Equipment at
designated Philippine Port and payment of AZCOM to ACL of 30%
(downpayment + payment on shipment) of the price of the shipped
Equipment as defined in 4.1 (a) and (b).
8.2 The risk of loss or damage to the Equipment shall be assumed by AZCOM
only after the System Acceptance.
9 INSPECTION, TESTING AND ACCEPTANCE
----------------------------------
9.1 Acceptance
9.1.1 The Acceptance Test Program shall be prepared by ACL and
submitted to AZCOM for its comments at least two (2) weeks before
the conduct of the acceptance testing. AZCOM shall give its
comments or signify its concurrence to the program within one (1)
week from the date of its submission by ACL. The Acceptance Test
Program shall not be implemented without the prior written
approval of AZCOM.
9.1.2 System Acceptance
(a) A System shall be considered complete and ready for Site
Acceptance Test when all the items and components of the
Equipment comply with the Specifications and is, in ACL's
judgment, in working order.
(b) ACL shall inform AZCOM in writing of the completion and
readiness for acceptance testing of a System at least five
(5) working days in advance of the scheduled testing.
The System Acceptance Test shall be conducted by AZCOM under
the supervision of ACL within a period of seven (7) calendar
days for each System and shall be conducted in accordance
with the test protocol. ACL
10
<PAGE>
shall immediately correct any defect for which it may be
responsible. Upon successful Site Acceptance Test, an Site
Acceptance Certificate shall be issued by AZCOM within five
(5) working days. In case the Network is put into commercial
operation by AZCOM before the Initial Acceptance without
ACL's written approval, the Site acceptance certificate
shall be deemed to have been issued by AZCOM at the time of
commencement of commercial operation.
9.1.3 Performance Monitoring
During the Warranty Period the Network shall, at AZCOM
discretion, be tested to ensure that the System Performance is in
line with the System Specifications.
These tests shall be as follows
. System Functionality Test
. Long Term BER Tests
. Output Power Measurements on the Base Station
Before any test is conducted, AZCOM shall notify ACL two weeks in
advance that a test is to be conducted. ACL shall have the option
of being present at any test. If a test is conducted while ACL is
not present and the result are a failure, AZCOM shall notify ACL
so that the test can be repeated after an investigation by ACL.
If the test fails again ACL shall be given 30 days to apply
corrective action. If after 30 days no corrective action has been
taken or a subsequent test again fails, the System under test
shall be deemed to have failed Performance Monitoring and the
Warranty Period shall be extended.
Once a system has failed Performance Monitoring ACL shall be
required to take corrective action, including the complete
replacement of the system in question.
The System Functionality test as defined by AZCOM may include,
but not limited to the following:
. System Installation and Service Provisioning
. System Connectivity: 64kbit/s and 128kbit/s Leased Line Data
Services
. Network Management System functionality test
The Long Term BER Test shall be:
. 168 hour BER. A pass shall be when the average BER is better
that 10/-7/
The Output Power Test shall be:
. CT Output Power is within 1.5dB of commissioned level.
(Commissioned values are defined within the Acceptance Test Protocol Result)
11
<PAGE>
9.1.5 In case the System fails to meet the acceptable performance
monitoring standards within two (2) years from the date of
Acceptance, the Parties shall confer within thirty (30) days
from the date such failure becomes apparent to discuss the
possible solutions to the problem which solutions shall
include, but not be limited to, the correction of any
defect, the repair or replacement of parts, the replacement
of the equipment with another which complies with the
required performance standards or the payment by ACL to
AZCOM of all costs necessary to enable the System to comply
with acceptable performance standards. Notwithstanding the
foregoing and in case the Parties reach no agreement within
sixty (60) days from their initial meeting, ACL shall
replace, at no cost to AZCOM, the equipment concerned with
another equipment which complies with the performance
standards. If at the end of the above-mentioned sixty (60)
days period no replacement equipment is available or the
replacement equipment is available or the replacement
equipment still does not comply with the performance
standards, then ACL shall pay AZCOM all the cost necessary
for AZCOM to undertake measures, on its own, to make the
System comply with acceptable performance standards.
9.1.6 The Spares, tools and test equipment shall be subject to
acceptance testing by AZCOM under the supervision of ACL
before their delivery at AZCOM's warehouse. AZCOM shall also
inspect the Spares, tools and test equipment delivered, and,
upon its determination that the same comply with the
Specifications, issue an acceptance certificate within two
(2) weeks after acceptance testing.
10 WARRANTY
--------
10.1 ACL warrants that:
10.1.1 Each item of the Equipment delivered shall be free from any
defect in design, material and workmanship during the
Warranty Period or any extensions thereof.
10.1.2 The supply of the Spares at reasonable costs shall be
available for a period of ten (10) years from the date of
the System Acceptance of the last System. If the manufacture
of any of the Spares ceases due to technical development,
ACL shall supply equivalent replacement parts together with
the accessories, if needed, at reasonable cost.
10.2 AZCOM agrees to promptly advise ACL, in writing, of any defect in the
Equipment or parts thereof as soon as they come to the attention of
AZCOM. ACL shall examine and remove the faults as soon as possible but
not to exceed two (2) weeks from the date the defects are made known
to ACL. During the Warranty Period, AZCOM shall have the right to
reject any part of the Equipment that is found defective due to faulty
design, inferior materials or inadequate workmanship, or found to be
not in accordance with the Specifications. ACL shall promptly replace
or repair the defective part at no cost to AZCOM. The Parties shall
mutually agree on whether the defective part(s) of the Equipment shall
be replaced or repaired by ACL. The replacement of the defective part
shall likewise be factory tested and approved for use in the
manufacturer's factory.
12
<PAGE>
10.3 All costs, Philippine customs duties, taxes and other local
impositions and charges which may be incurred in replacing the
imperfect, defective or unsuitable parts of the Equipment shall be for
the account of ACL. Replaced parts shall become ACL's property and
must be claimed from AZCOM within ten (10) days from the installation
of the replacement part. The obligations of ACL under Sections 10.1
and 10.2 hereof shall not cover ordinary wear and tear of the
Equipment or other defects traceable to circumstances beyond ACL's
control, such as unsuitable operating means, chemical, electro-
mechanical or electrical influences and damages, or were otherwise
caused by the unnecessary interference of AZCOM or any unauthorized
third party.
10.4 After the System Acceptance, the liability described in the
immediately preceding paragraph shall not cover consumable items, such
as lamps and fuses, except in cases of proven "batch" failure of the
said items.
10.5 Warranty Period for spares, tools, test equipment and subscriber
terminals delivered in accordance with Article 9.1.2 (d) above shall
start from date of Acceptance certificate.
11 BOND FOR EXTENSION OF WARRANTY
11.1 In the event that the Warranty Period of the equipment is extended due
to failure of the Equipment to satisfy the requirements of performance
monitoring as described in Annex B, ACL shall file a warranty bond in
favor of AZCOM in an amount equivalent to 10% of the price of the
affected equipment. The bond shall remain effective until the
requirements of system performance monitoring is satisfied, otherwise,
term of Section 9.1.3 shall apply.
11.2 The said warranty bond shall be denominated on US Dollars, in the form
of a letter of credit, and must be obtained only from banks or bonding
companies acceptable to AZCOM.
12 INSURANCE
---------
ACL shall, at its expense, obtain insurance coverage for the Equipment,
which shall be valid and effective until the System Acceptance of each
System. Upon request by AZCOM, ACL shall provide AZCOM a copy of the
insurance policy prior to the initial shipment of the Equipment.
13 PATENTS, TRADEMARKS AND OTHER INTELLECTUAL PROPERTY RIGHTS
----------------------------------------------------------
13.1 ACL shall exert all efforts to ensure that the Equipment will not
infringe any pending or existing patents, trademarks and other
intellectual property rights under which a third party may claim
damages from AZCOM with respect to the use of the Equipment.
13.2 In case such claims or actions are brought against AZCOM, ACL shall,
at its expense, defend AZCOM and/or any of its directors, officers or
employees from any complaint for infringement of patents, trademarks
and other intellectual property rights. In the event such third party
secures a favorable judgment for the payment of royalties or damages,
ACL shall pay such royalties or damages for and on behalf of AZCOM or
its directors, officers or employees. Additionally, ACL undertakes to
either alter the Equipment in such a way that it will no longer
infringe the patent, trademarks and other intellectual property rights
of
13
<PAGE>
such third party, or replace the Equipment with another equipment, of
an equal or greater functionality, which will not infringe the
aforesaid patent, trademarks and other intellectual property rights,
or procure for AZCOM the right to use the Equipment at no cost to
AZCOM. Any such alteration or replacement shall be made only after
prior written approval of AZCOM.
13.3 ACL shall not be responsible for infringement of patent, trademarks
and other intellectual property rights unless ACL has been notified in
writing by AZCOM without delay of such claim.
13.4 AZCOM undertakes to furnish ACL whatever information is available to
it to assist ACL in defending such proceedings and shall not, save
insofar as it may be necessary to comply with any applicable law or
government regulation, enter into any Contract with third parties or
take any legal action thereon without the prior consent of ACL.
13.5 AZCOM shall not contest the validity of any patent, trademarks and
other intellectual property rights owned or authorized to be used by
ACL nor lend support to any third party contesting such validity.
Furthermore, AZCOM shall not make any admission, which might be
prejudicial to any claim or action from such third party except in
compliance with the law, court order or any government rules and
regulations.
14 USE OF ACL TRADEMARKS
---------------------
AZCOM shall not, without ACL's written permission, use in advertising,
publicity, or similar actions any of ACL's tradename, trademark, trade
device, service mark, symbol, code or any abbreviation, contraction or
simulation thereof nor shall AZCOM claim any ownership thereof. However,
AZCOM is not prohibited from representing that the Equipment was obtained
from ACL.
15 CONFIDENTIALITY AND USE OF INFORMATION
--------------------------------------
15.1 All business and technical information and data including all software
provided by either Party and related documentation, in whatever form
provided, recorded or unrecorded (hereinafter collectively referred to
as "Information"), which the Parties may furnish or have furnished
each other in anticipation of this Contract shall:
(a) be used solely for the purpose for which it was furnished;
(b) be treated in strictest confidence and protected;
(c) not be reproduced, except as necessary for its authorized use;
and
(d) if in tangible form, shall be returned together with all copies
thereof, including the promotional materials, when demanded by
either Party or no longer needed.
15.2 The obligations of confidentiality and restricted use are not
applicable to those portions of the Information that, free from any
obligation to maintain confidential, were previously known to, or that
fall into public knowledge without the fault of either Party, or which
the Parties have agreed in writing need not be kept confidential.
14
<PAGE>
16 LIQUIDATED DAMAGES
------------------
16.1 AZCOM shall have the right to claim liquidated damages from ACL in
case ACL fails to meet the scheduled date of System Acceptance of a
System.
16.2 In case of failure to meet the scheduled date of System Acceptance of
a System, ACL shall pay AZCOM in United States Dollars, liquidated
damages in an amount equivalent to 0.10% of the Price for each day of
delay, Sundays and Holidays included.
16.3 Where the right to claim liquidated damages exists, the liquidated
damages payable per affected System shall be as follows:
. For the sites to be completed in November : 16%
. For the sites to be completed in December : 16%
. For the sites to be completed in January : 16%
. For the sites to be completed in February : 10%
In addition, ACL must replace the affected System with a part of an
equal or greater functionality.
16.4 In consideration of the aggressive schedule of the Project
Implementation as shown in Annex B, ACL shall be allowed extra time to
meet the schedule date of completion as follows:
. For the sites to be completed in November : 60 days
. For the sites to be completed in December : 60 days
. For the sites to be completed in January : 30 days
. For the sites to be completed in February : 15 days
The above means that liquidated damages can only be claimed by AZCOM
against ACL after the above extension time has been exceeded.
16.5 The claim of AZCOM for liquidated damages against ACL shall not
prejudice the exercise of AZCOM of its other right and privileges
under the contract.
16.6 Any deferment on the part of AZCOM to remit the downpayment within ten
(10) days of Contract signing shall allow ACL an extension equivalent
to the number of days AZCOM has delayed in the remittance of the
downpayment from the said ten (10) day period.
17 LIMITATION OF LIABILITY
-----------------------
The Parties shall be liable only for damages directly caused through their
own fault or negligence.
15
<PAGE>
18 FORCE MAJEURE
-------------
18.1 The Parties shall not be liable for the non-performance of any of its
obligations under this Contract when such inability is due solely to
an event of force majeure which (a) directly affects the performance
of a Party's obligations under this Contract and (b) the occurrence of
which event is not traceable to the fault or negligence of the said
Party.
18.2 The events of force majeure shall include, but not be limited to: (a)
earthquakes, floods, typhoons, or epidemics; (b) war, rebellion,
insurgency, riots, or invasion of the Philippines by another country;
(c) strikes, lockouts, boycotts or other forms of work stoppage; and
(d) government embargo, restriction, or commandeering of the vessel
carrying the Equipment.
18.3 In case an event of force majeure happens, the affected Party shall
exert its best efforts to comply with its obligations under this
Contract. If an event of force majeure prevents the carrying out of
only a portion of the Project and that portion is not critical to the
accomplishment of the Project as a whole, the affected Party shall
continue to perform its obligations on the portion not affected by the
event of force majeure.
18.4 The Party invoking an event of force majeure must immediately notify
in writing the other Party and specify which of its obligations it is
prevented from complying with by the event of force majeure, and give
an estimate of the period during which it is likely that it shall be
prevented from complying with the said obligations. After the
occurrence of the event of force majeure is proven, the Schedule and
the performance bond may, after discussions in good faith, be amended
by Contract of the Parties.
18.5 The amendment of the Schedule pursuant to Section 18.4 shall not give
ACL the right to seek or demand an adjustment or modification of the
Price.
19 CHANGES
-------
ACL may, after prior approval of AZCOM, alter or modify the technology of
the Equipment, provided that the alteration or modification is of an equal
or greater functionality to the original. In case an increase or decrease
in the Price results as a consequence of any alteration or modification of
the Equipment, the appropriate adjustment of the Price, and where
necessary, the Schedule, or both, shall be undertaken by the Parties.
20 APPLICABLE DOCUMENTS
--------------------
The following annexes shall, by this reference, form an integral part of
this Contract:
Annex A - Equipment List and Price Schedule
Annex B - AZCOM-ACL Protocol dated October 25, 1999
Annex C - Joint Order No. 1-91 (Comprehensive Import Supervision
Scheme)
16
<PAGE>
21 ORDER OF PRECEDENCE
-------------------
In case of any conflict in the interpretation of the terms and conditions
of the various documents cited in this Contract, the order of precedence
shall be: this Contract; Equipment List and Price Schedule (Annex A);
Protocol (Annex B); Joint Order No. 1-91 (Annex C); and Services Contract.
22 SEVERABILITY
------------
If any part, term or provision of this Contract shall become invalid or
unenforceable, the validity or enforceability of the remaining portions or
provisions shall not be affected, and the rights and obligations of the
parties shall be construed as if this Contract did not contain the
particular invalid or unenforceable part, term or provision.
23 SUCCESSION AND ASSIGNMENT
-------------------------
This Contract shall be binding upon the successors and assigns of the
Parties and shall not be assigned in whole or in part by a Party without
the prior written consent of the other party, and which consent shall not
be unreasonably withheld.
24 TERMINATION
-----------
24.1 If either Party violates any provision of this Contract and if such
default or violation continues for sixty (60) days after receipt of
the Party in default of a written notice from the aggrieved Party, the
aggrieved Party may terminate this Contract for any breach hereof by
written notice to the other Party at least thirty (30) days prior to
the intended date of termination.
24.2 In the case of default on the part of ACL, AZCOM shall be entitled to
retain and apply the balance, which may otherwise be due to ACL under
this Contract to pay for the cost to complete the Project. If the said
balance is not sufficient to cover the cost of the inoperative or non-
functional Equipment or System, the additional cost needed to make the
Equipment operative or functional shall be paid by ACL to AZCOM, upon
termination of Contract.
24.3 In the case of default on the part of AZCOM, AZCOM shall pay ACL the
value of delivered Equipment.
25 ARBITRATION
-----------
25.1 In the event of any dispute or difference of opinion arising out of or
relating to this Contract or breach thereof, the parties shall exert
their best efforts to settle such dispute or difference amicably.
25.2 If such dispute or difference is not amicably settled within sixty
(60) calendar days from its occurrence, the matter shall be settled
through arbitration by a panel of three (3) arbitrators, one to be
named by each Party and the third arbitrator shall be chosen by the
two earlier designated arbitrators. In case they fail to select a
third arbitrator within fifteen (15)
17
<PAGE>
calendar days from the date they commenced the discussion of the said
selection, the third arbitrator shall be appointed by the chairpersons
of the National Bar Associations of the countries of the Parties. No
one shall be nominated or act as an arbitrator who is in any way
financially interested in this Contract or in the business affairs of
any of the parties.
25.3 If any Party is dissatisfied with the decision of the arbitrators, the
Party concerned shall, within ten (10) calendar days from receipt of
the decision, notify the arbitrators that it disputes the same and the
matter shall thereupon be settled under the Rules of Conciliation and
Arbitration of the International Chamber of Commerce. The arbitration
proceedings shall be conducted in Geneva, Switzerland in the English
Language. The resulting award shall be final and binding on the
parties.
26 INTERPRETATION
--------------
26.1 The table of contents and headings of the sections are included for
convenience of reference only. They shall not affect the construction
and interpretation of any provision of this Contract. The word
"hereof" is used in this Contract to refer to this Contract as a whole
and not to any individual section or part of this Contract. Reference
to sections are to sections of this Contract.
26.2 To interpret the commercial terms and abbreviations used in this
Contract, which have not been otherwise defined, the provisions of the
latest issue of INCOTERMS shall be used. All the other terms and
conditions of this Contract shall be interpreted in accordance with
the laws of New York State, USA provided that nothing in this Section
26 shall be construed to authorize the amendment or modification of
the annexes cited in Section 20 hereof.
26.3 Any granting of time and other indulgence or waiver of obligation on
the part of one party to the other shall be isolated or peculiar to
that particular occasion or purpose and shall be without prejudice to
future compliance with the terms and conditions of this Contract.
27 ADDRESSES
---------
27.1 AZCOM and ACL specify their respective addresses as follows:
For AZCOM:
AZCOM CORPORATION
8/F DPC Place, 2322 Chino Roces Avenue
Makati City, Philippines
Attention: Felizardo P. dela Merced
18
<PAGE>
For ACL:
AIRSPAN COMMUNICATIONS LIMITED
Cambridge House, Oxford Road
Uxbridge Middlesex, UB8 1UN UK
Attention: Henrik Smith-Petersen
27.2 Any letter or notice sent to these addresses shall be considered
delivered upon its actual receipt by the addressee. In the event any
party changes its address, it shall notify the other party of the
change of address in writing within five (5) calendar days from the
date the change of address took effect.
28 EXECUTION IN COUNTERPARTS
-------------------------
This Contract may be executed in counterparts by both Parties and shall
become effective upon receipt by either Party of a copy of this Contract
duly executed by the other.
29 EFFECTIVITY OF THE CONTRACT
---------------------------
This Contract shall become effective after it is signed by AZCOM and ACL.
IN WITNESS WHEREOF, the parties have affixed their signatures on the date and
place first above written.
AZ COMMUNICATIONS AIRSPAN COMMUNICATIONS LIMITED
NETWORK INCORPORATED
By: By:
________________________ ____________________________
Witnessed By:
________________________ ____________________________
19
<PAGE>
Exhibit 10.3
Note: Portions of this exhibit indicated by "[*]" are subject to a confidential
treatment request, and have been omitted from this exhibit. Complete,
unredacted copies of this exhibit have been filed with the Securities and
Exchange Commission as part of this Company's confidential treatment request.
CONTRACT FOR THE ENGINEERING, PROJECT
MANAGEMENT, FACTORY INSPECTION, TRAINING AND
TECHNICAL ASSISTANCE SERVICES FOR THE
ESTABLISHMENT OF A WIRELESS ACCESS SYSTEM
AZ COMMUNICATIONS NETWORK, INC.
- and -
AIRSPAN COMMUNICATIONS LIMITED
October 25, 1999
CONTRACT NO. CN99-002/S
1
<PAGE>
TABLE OF CONTENTS
SECTION 1 DEFINITIONS
SECTION 2 SCOPE OF THE CONTRACT
SECTION 3 SERVICES TO BE RENDERED BY ACL
SECTION 4 SERVICES TO BE RENDERED BY AZCOM
SECTION 5 PRICE
SECTION 6 TERMS OF PAYMENT
SECTION 7 SCHEDULE
SECTION 8 ACCEPTANCE
SECTION 9 CONFIDENTIALITY AND USE
OF INFORMATION
SECTION 10 LIQUIDATED DAMAGES
SECTION 11 LIMITATION OF LIABILITY
SECTION 12 FORCE MAJEURE
SECTION 13 CHANGES
SECTION 14 APPLICABLE DOCUMENTS
2
<PAGE>
SECTION 15 ORDER OF PRECEDENCE
SECTION 16 SEVERABILITY
SECTION 17 SUCCESSION AND ASSIGNMENT
SECTION 18 TERMINATION
SECTION 19 ARBITRATION
SECTION 20 INTERPRETATION
SECTION 21 ADDRESSES
SECTION 22 EXECUTION IN COUNTERPARTS
SECTION 23 EFFECTIVITY OF THE CONTRACT
***
3
<PAGE>
This Contract For The Engineering, Project Management, Factory Inspection,
Training and Technical Assistance Services For The Establishment of a Wireless
Access System is entered into this 25/th/ day of October 1999 between the
following parties:
AZ COMMUNICATIONS NETWORK, INCORPORATED, a corporation organized and
existing under the laws of the Republic of the Philippines and having its
principal office in 8/th/ Floor DPC Place, 2322 Chino Roces Avenue, Makati
------------------------------------------------------
City, Philippines, represented in this act by its Director for Engineering,
------------------
Felizardo P. dela Merced, and hereinafter referred to as "AZCOM";
- a n d -
AIRSPAN COMMUNICATIONS LIMITED, a corporation organized and existing under
the laws of the United Kingdom and having its registered address at
Cambridge House, Oxford Road, Uxbridge Middlesex, UB8, 1UN, United Kingdom,
---------------------------------------------------------------------------
represented in this act by Henrik Smith-Petersen, Regional Sales Vice
President, and hereinafter referred to as "ACL".
(AZCOM and ACL may be individually referred to as a "Party" and
collectively the "Parties")
WHEREAS, ACL has represented itself to be a qualified and reliable provider of
services needed by AZCOM for the engineering, project management, factory
inspection, training and technical assistance services, for the establishment of
Wireless Access System Network and has offered to supply the same to AZCOM.
WHEREAS, AZCOM is the holder of a valid franchise issued by the Congress of the
Republic of the Philippines and is duly authorized to provide telecommunications
services throughout the Philippines.
WHEREAS, pursuant to its authority to provide telecommunications services, AZCOM
has expressed its desire to acquire a wireless access system as contemplated by
this Contract.
WHEREAS, AZCOM is interested in acquiring the said services offered by ACL for
the said Project.
WHEREAS, ACL has agreed to provide, and AZCOM is willing to purchase the said
services under such terms and conditions mutually agreeable to the Parties.
NOW, THEREFORE, for and in consideration of the foregoing, this Contract is
entered into under the following terms and conditions:
4
<PAGE>
1 DEFINITIONS
-----------
For purposes of this Contract, the following terms shall have the meanings
indicated and the plural form of any term defined herein in the singular
shall merely express the grammatical plural of that defined term:
"Contract" refers to this Contract For The Engineering,
Project Management, Factory Inspection,
Training and Technical Assistance Services
For The Establishment of a Wireless Access
System together with its annexes and the
other documents specifically considered its
integral parts.
"Acceptance Test Program" refers to the series of steps to be taken in
conducting the necessary tests and inspection
of a System to verify its compliance with the
Specifications, as determined by AZCOM.
"Cell Site" refers to the area of coverage around a base
station wherein it can provide reliable
service in accordance with the
Specifications.
"Equipment" refers to the equipment i.e., Wireless Access
System (WAS) Equipment, including base
stations, subscriber terminals, RF and indoor
units, antennas and feeders, and other
related installation materials as described
in Annex A, which ACL is required to deliver
under this Contract, and to install, test and
commission under the Services Contract.
"System Acceptance" refers to the issuance of a System Acceptance
certificate by AZCOM after the completion of
the System Acceptance Test to certify that
the System installed by ACL fully complies
with the Specifications.
"System Acceptance Test" refers to test conducted by AZCOM in
accordance to an agreed Acceptance Test
Program to determine if the System installed
fully complies with the Specifications.
"Network" refers to the complete point-to-point or
point-to-multipoint configuration of the
Equipment configured in accordance with the
Specifications to provide the WAS; it shall
be composed of multiple Systems.
"Price" refers to the total price to be paid by AZCOM
to ACL in consideration for the complete and
faithful performance by ACL of its duties and
responsibilities under this Contract.
"Project" refers to the undertaking or activity subject
of this Contract and the Services Contract.
5
<PAGE>
"Schedule" refers to the timetable describing the
activities and the period within which to
complete each and every System, the Network
and the Project, as described in Annex B.
"Supply Contract" refers to Contract No. CN99-002 between AZCOM
and ACL dated October 25, 1999, for the sale
and purchase of equipment and ancillary
facilities for the establishment of a
wireless access system.
"Spares" refers to the items or materials to be used
as replacement or reserve for maintenance
purposes of the Equipment during and after
the Warranty Period, which shall likewise be
subject to acceptance testing.
"Specifications" refers to the technical specifications of the
Equipment as described in the Protocol (Annex
B).
"System" refers to a part or segment of the Network,
which can be put into workable commercial
operation. Each system shall be comprised of
a base station, subscriber terminals, network
management station, antennae, radio frequency
amplifiers and other related equipment to
complete point-to-point or point-to-
multipoint connectivity under a single Cell
Site.
"Warranty Period" refers to the period of time from System
Acceptance up to 18 months thereafter. The
Warranty Period shall be extended when the
requirements of the performance monitoring as
described in Annex B are not met.
"Work" refers to all the services to be performed by
ACL under the Contract.
6
<PAGE>
2 SCOPE OF THE CONTRACT
---------------------
2.1 ACL undertakes to provide the complete engineering, installation and
commissioning, project management, factory inspection, training and
technical assistance services and the other services stipulated in
this Contract, and takes full responsibility of ensuring that the
System shall comply in all respects with the Specifications.
2.2 In consideration for the performance by ACL of its obligations under
this Contract, AZCOM shall pay ACL the Price in accordance with the
terms of payment described in Section 6 hereof.
3 SERVICES TO BE RENDERED BY ACL
------------------------------
ACL shall perform the following services:
3.1 Engineering Design
3.1.1 ACL shall undertake the design and engineering of the complete
network and other associated installation and erection
materials to be established in accordance with the
Specifications and shall assume full and overall responsibility
over the System in regard to:
- engineering and operational consistency
- functional integration of the network
- operational and functional interconnection with AZCOM's
frame relay network
3.1.2 The design or engineering services shall include the following
activities:
- site survey
- preparation of plans, such as, installation drawings,
system description, etc.
- radio frequency planning and management
- detailed engineering
3.1.3 Prior to the installation of the Equipment, the detailed
working plans shall be submitted by ACL to AZCOM, except for
the first five (5) sites, one (1) week prior to the start of
the installation for its comments or concurrence.
Notwithstanding any comments made by AZCOM on the said plans,
the responsibility of accomplishing the objectives of the
Project shall remain with ACL.
7
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3.2 Installation and Commissioning
3.2.4 ACL shall perform the installation work in accordance with the
installation plan as agreed with AZCOM.
3.2.5 ACL shall provide the necessary personnel with knowledge and
skill in the installation of telecommunication equipment.
3.2.6 ACL shall provide the installation and test personnel for the
entire period of the Project in accordance with the agreed
Schedule.
3.2.7 The installation of the Equipment shall be undertaken in
accordance with the installation documents, the appropriate
Philippine government regulations, and the instructions of ACL.
The comments or recommendations of AZCOM on the installation
shall be taken into consideration by ACL as much as possible.
The installation shall include, but not be limited to
the following.- Mechanical installation of the System
- Interconnection of the Equipment and internal
cabling
- Interconnection of the Equipment to power supply
and ground terminals
- Interconnection to AZCOM's network
- Termination to MDF/DDF
3.2.8 The Equipment shall be tested after its installation. The
quantity and type of measurement shall be agreed upon by the
parties prior to the measuring activities and shall be stated
in the Acceptance Test Program.
3.3 Project Management
3.3.1 ACL shall provide, during the entire period of the Project, the
personnel who will coordinate with AZCOM in the performance of
its planning, engineering, installation, testing and
commissioning services.
3.3.2 ACL shall arrange the time schedule of the performance of its
services and inform AZCOM immediately of any changes in the
said schedule. ACL shall coordinate with AZCOM on matters
regarding shipment, availability of installation and testing
personnel, tools, test equipment, vehicles and the on-time
availability of the building and power supply equipment.
3.3.3 ACL shall submit, except for the first five (5) sites, a weekly
report of its accomplishments to AZCOM using a format to be
agreed upon by the parties at least one (1) month before the
start of the installation.
8
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3.4 Installation Planning
3.4.1 ACL shall supply all the documents needed for the installation,
testing and maintenance, and whatever information that may be
essential for the proper installation of the Equipment. All the
said documents shall be written in the English language.
3.4.2 The documents to be provided by ACL for each station/switch
location shall include, but not be limited to, the following:
- Equipment layout plans
- Floor layout plans
- MDF/DDF and terminal block wiring plans
- Network configuration plan
- Power distribution plans
- Cabling plans
- Grounding plans
- Installation instructions
- Interface configuration
3.4.3 ACL shall deliver the plans and drawings to AZCOM before the
commencement of the installation work. A prerequisite for the
installation planning is the punctual delivery of the building
plans by AZCOM.
3.5 Submission of Installation Documents
ACL shall submit the installation documents to AZCOM for its comments
or concurrence, except for the first five (5) sites, one (1) week
prior to the start of the installation as stated in the installation
schedule. Notwithstanding any comments made by AZCOM in the said plan,
the responsibility of accomplishing the objectives of the Project
shall remain with ACL.
3.6 ACL's Personnel
3.6.1 ACL shall provide sufficient and qualified manpower to carry
out the Work within the period stated in Annex B.
3.6.2 ACL shall replace any of its personnel whom AZCOM may consider
undesirable.
3.6.3 No employer-employee relationship shall exist between AZCOM and
ACL's personnel, it being clearly understood that the said
personnel are the employees of ACL.
3.7 Tools and Test Equipment
3.7.1 ACL shall make available the quantity and types of tools and
test equipment
9
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needed for the testing and acceptance work to be done under
this Contract. This excludes specialized tools and equipment
required by AZCOM to perform Performance Monitoring.
3.7.2 All the costs and expenses, including customs duties and re-
export bond, which may be incurred in connection with the re-
export of the tools and test equipment to their place of origin
shall be for the account of ACL.
3.8 Training Courses
ACL shall provide training to AZCOM's personnel in accordance with
Annex B.
3.9 Technical Assistance
ACL shall provide technical assistance service during the Warranty
Period, as described in Annex B.
3.10 Inland Transportation and Warehousing
ACL shall bear the cost of warehousing, unloading, loading and
transportation to the Job Site(s) of the Equipment as provided for
under this Contract.
3.11 Other Services
ACL shall provide all the other services stipulated in this Contract.
4 SERVICES TO BE RENDERED BY AZCOM
--------------------------------
AZCOM shall provide the drawings of the equipment room which may be
necessary for the installation design of the Equipment. AZCOM shall provide
the technically-clarified design drawings of the equipment room of the
buildings upon request by ACL. These drawings shall include the plans of
the equipment rooms with data about positions for the Equipment as well as
outlets for central main current grounding connection.
10
<PAGE>
5 PRICE
-----
5.1 Subject to the compliance by ACL with the terms and conditions of this
Contract, AZCOM shall pay ACL the following:
The sum of [*] as full and complete payment of the Work. The breakdown
of the Price shall be in accordance with Annex A and summarized as
follows:
PRICE
(US$)
5.1.1 Engineering [*]
5.1.2 Installation and Commissioning [*]
5.1.3 Project Management [*]
5.1.4 Inland Transportation and Warehousing [*]
5.1.5 Factory Inspection/Training [*]
5.1.6 Technical Assistance [*]
-----------------
TOTAL [*]
5.2 The Price shall be firm up to the completion of the Project.
5.3 The Price covers all taxes, customs duties, license fees, and other charges
which may be imposed on foreign services by authorities other than the
government of the Republic of the Philippines. All taxes, fees and other
charges which may be levied in the Philippines in connection with or
incidental to this Contract shall be for the account of AZCOM.
5.4 In the event the full amounts provided for the cost of the Work are not
utilized or in case of termination of this Contract under Section 19
hereof, ACL shall return the proportionate amount representing the value of
Work which were not utilized in a manner to be described in a separate
letter by AZCOM.
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
11
<PAGE>
6 TERMS OF PAYMENT
----------------
6.1 Subject to the rules and regulations of the Bangko Sentral ng
Pilipinas, AZCOM shall pay the Price in accordance with the following
schedule:
6.1.1 For Engineering Services
6.1.1.1 The downpayment, which is equivalent to fifteen
percent (15%) of the full value of engineering
services shall be paid by AZCOM within thirty (30)
calendar days from the signing of this Contract and
upon receipt of complete and correct invoice.
6.1.1.2 Subject to the rules and regulations of the Bangko
Sentral ng Pilipinas, AZCOM shall pay ACL the Price
from the proceeds of the financing agreement/s to be
concluded by AZCOM, with the assistance of ACL, with
international credit institutions to defray the cost
of the Project. AZCOM shall pay the Price in
accordance with the following schedule.
The balance, or eighty five percent (85%) of the value
of the said services, shall be paid in eight (8) equal
monthly installments, the first payment of which shall
be due thirty (30) calendar days after the payment of
the downpayment, and upon receipt of complete and
correct invoice.
6.1.2 For Installation and Commissioning Services
6.1.2.1 The downpayment, which is equivalent to fifteen
percent (15%) of the value of the installation,
testing and commissioning services, shall be paid by
AZCOM within thirty (30) calendar days from the
signing of this Contract and upon receipt of complete
and correct invoice.
6.1.2.2 Subject to the rules and regulations of the Bangko
Sentral ng Pilipinas, AZCOM shall pay ACL the Price by
means of a telegraphic transfer in accordance with the
following schedule:
(a) Seventy five percent (75%) of the value of the
said services for each System shall be paid
within thirty (30) calendar days from the time
ACL informs AZCOM in writing that a System is
ready for System Acceptance Test and upon receipt
of complete and correct invoice.
(b) The balance, or ten percent (10%) of the value of
the said services, shall be paid within thirty
(30) calendar days from the issuance of the
System acceptance certificate of the last System
and upon receipt of complete and correct invoice.
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<PAGE>
For purposes of determining the value of the
installation for each System, the following formula
shall be used :
A = (B/C) * D
where :
A = amount for installation, testing,
commissioning and engineering services
for each System
B = C/20
C = total Equipment amount for all Systems
D = total amount for installation, testing,
commissioning and engineering services
6.1.3 For Project Management and Inland Transportation and
Warehousing
6.1.3.1 The downpayment, which is equivalent to fifteen
percent (15%) of the full value of project management
services, shall be paid by AZCOM within thirty (30)
calendar days from the signing of this Contract and
upon receipt of complete and correct invoice.
6.1.3.2 Subject to the rules and regulations of the Bangko
Sentral ng Pilipinas, AZCOM shall pay ACL the Price
from the proceeds of the financing agreement/s to be
concluded by AZCOM, with the assistance of ACL, with
international credit institutions to defray the cost
of the Project. AZCOM shall pay the Price in
accordance with the following schedule.
Seventy five percent (75%) of the full value of the
said services shall be paid within eighteen (18) equal
monthly installments, the first payment of which shall
be due thirty (30) days from the payment of the
downpayment, and receipt of complete and correct
invoice provided, that if, after the tenth (10th)
installment, the percentage accomplishment in the
installation is not commensurate to the progress
billings for project management services already paid
and provided that such non-accomplishment is ACL's
responsibility. AZCOM shall have the right to suspend
the payment of the project management services until
after the work progress matches the billings.
Thereafter the monthly billings shall take into
account the actual percentage in work accomplishments.
The balance, or ten percent (10%) of the full value of
the said services, shall be paid within thirty (30)
calendar days from the issuance of the
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<PAGE>
System acceptance certificate of the last System and
upon receipt of complete and correct invoice.
6.1.4 For Training and Factory Inspection
Free of charge.
6.1.5 For Emergency Technical Assistance
6.1.5.1 The downpayment, which is equivalent to fifteen
percent (15%) of the value of the emergency technical
assistance services, shall be paid by AZCOM within
thirty (30) calendar days from the signing of this
Contract and upon receipt of complete and correct
invoice.
6.1.5.2 Subject to the rules and regulations of the Bangko
Sentral ng Pilipinas, AZCOM shall pay ACL the Price
from the proceeds of the financing agreement/s to be
concluded by AZCOM, with the assistance of ACL, with
international credit institutions to defray the cost
of the Project. AZCOM shall pay the Price in
accordance with the following schedule.
The balance, or eighty five percent (85%) of the value
of the said services, shall be paid in twenty four
(24) equal monthly installments, the first payment of
which shall be due thirty (30) calendar days from the
payment of the downpayment and upon receipt of
complete and correct invoice.
6.2 AZCOM shall be responsible for securing all the required
authorizations from the Bangko Sentral ng Pilipinas for the payments
to be made under this Contract.
6.3 ACL shall be responsible for the submission of all the required
billings/invoices under this Contract.
6.4 All bank charges, which may be incurred outside the Philippines on
account of the above-mentioned payments, shall be borne by ACL.
7 SCHEDULE
--------
ACL acknowledges that time is of the essence in this Contract and therefore
it shall undertake to complete the Work within the periods described in
Annex B.
8 ACCEPTANCE
----------
8.1 The Acceptance Test Program shall be prepared by ACL and submitted to
AZCOM for its comments at least two (2) weeks before the conduct of
the acceptance testing. AZCOM
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<PAGE>
shall give its comments or signify its concurrence to the program
within one (1) week from the date of its submission by ACL. The
Acceptance Test Program shall not be implemented by ACL without the
prior written approval of AZCOM.
8.2 System Acceptance
(a) A System shall be considered complete and ready for System
Acceptance Test when all the items and components of the
Equipment installed by ACL are in ACL's judgment, in working
order.
(b) ACL shall inform AZCOM in writing of the completion and readiness
for System acceptance testing of a System at least two (2) weeks
in advance of the scheduled testing.
(c) The System Acceptance Test shall be conducted by AZCOM under the
supervision of ACL within a period of seven (7) calendar days for
each System. ACL shall immediately correct any defect for which
it may be responsible. Upon successful System Acceptance Test, a
system acceptance certificate shall be issued by AZCOM within two
(2) weeks therefrom. In case the System is put into commercial
operation by AZCOM before the System Acceptance without ACL's
written approval, the System acceptance certificate shall be
deemed to have been issued by AZCOM at the time of commencement
of commercial operation.
(d) The system acceptance certificate shall not be withheld because
of minor defects which do not substantially affect the normal
operation of the System as described in detail in Annex B.
8.3 Performance Monitoring
After the System Acceptance, the System concerned shall undergo
performance monitoring in accordance with the pertinent provisions of
Annex B. The performance monitoring shall continue until the System
Acceptance. If, prior to the System Acceptance, the results of the
performance monitoring show that the performance standards described
in Annex B have not been met, ACL shall promptly undertake the
necessary correction/s at no cost to AZCOM to bring the performance of
the System to the agreed performance level.
Consequently, the Warranty Period shall be extended by a period of
time which corresponds to the length of time it took ACL to bring the
System to the acceptable performance standards, as described in Annex
B.
9 CONFIDENTIALITY AND USE OF INFORMATION
--------------------------------------
9.4 All business and technical information and data including all software
provided by either Party and related documentation, in whatever form
provided, recorded or unrecorded (hereinafter collectively referred to
as "Information"), which the Parties may furnish or
15
<PAGE>
have furnished each other in anticipation of this Contract shall:
(a) be used solely for the purpose for which it was furnished;
(b) be treated in strictest confidence and protected;
(c) not be reproduced, except as necessary for its authorized use;
and
(d) if in tangible form, shall be returned together with all copies
thereof, including the promotional materials, when demanded by
either Party or no longer needed.
9.5 The obligations of confidentiality and restricted use are not
applicable to those portions of the Information that, free from any
obligation to maintain confidential, were previously known to, or that
fall into public knowledge without the fault of either Party, or which
the Parties have agreed in writing need not be kept confidential.
10 LIQUIDATED DAMAGES
------------------
10.1 AZCOM shall have the right to claim liquidated damages from ACL in
case ACL fails to meet the scheduled date of System Acceptance of a
System.
10.2 In case of failure to meet the scheduled date of System Acceptance of
a System, ACL shall pay AZCOM in United States Dollars, liquidated
damages in an amount equivalent to 0.10% of the Price for each day of
delay, Sundays and Holidays included.
10.3 Where the right to claim liquidated damages exists, the liquidated
damages payable shall not exceed eight percent (8%) of the price of
the affected System. In addition, ACL must replace the affected System
with a part of an equal or greater functionality
10.4 In consideration of the aggressive schedule of the Project
Implementation as shown in Annex B, ACL shall be allowed extra time to
meet the schedule date of completion as follows:
. For the sites to be completed in November : 60 days
. For the sites to be completed in December : 60 days
. For the sites to be completed in January : 30 days
. For the sites to be completed in February : 15 days
The above means that liquidated damages can only be claimed by AZCOM
against ACL after the above extension time has likewise been exceeded.
10.5 The claim of AZCOM for liquidated damages against ACL shall not
prejudice the exercise of AZCOM of its other right and privileges
under the contract.
10.6 Any deferment on the part of AZCOM to remit the downpayment within ten
(10) days of Contract signing shall allow ACL an extension equivalent
to the number of days AZCOM has delayed in the remittance of the
downpayment from the said ten (10) day period.
16
<PAGE>
11 LIMITATION OF LIABILITY
-----------------------
The Parties shall be liable only for damages directly caused through their
own fault or negligence.
12 FORCE MAJEURE
-------------
12.1 The Parties shall not be liable for the non-performance of any of its
obligations under this Contract when such inability is due solely to
an event of force majeure which (a) directly affects the performance
of a Party's obligations under this Contract and (b) the occurrence of
which event is not traceable to the fault or negligence of the said
Party.
12.2 The events of force majeure shall include, but not be limited to: (a)
earthquakes, floods, typhoons, or epidemics; (b) war, rebellion,
insurgency, riots, or invasion of the Philippines by another country;
(c) strikes, lockouts, boycotts or other forms of work stoppage; and
(d) government embargo, restriction, or commandeering of the vessel
carrying the Equipment.
12.3 In case an event of force majeure happens, the affected Party shall
exert its best efforts to comply with its obligations under this
Contract. If an event of force majeure prevents the carrying out of
only a portion of the Project and that portion is not critical to the
accomplishment of the Project as a whole, the affected Party shall
continue to perform its obligations on the portion not affected by the
event of force majeure.
12.4 The Party invoking an event of force majeure must immediately notify
in writing the other Party and specify which of its obligations it is
prevented from complying with by the event of force majeure, and give
an estimate of the period during which it is likely that it shall be
prevented from complying with the said obligations. After the
occurrence of the event of force majeure is proven, the Schedule and
the performance bond may, after discussions in good faith, be amended
by Contract of the Parties.
12.5 The amendment of the Schedule pursuant to Section 12.4 shall not give
ACL the right to seek or demand an adjustment or modification of the
Price.
13 CHANGES
-------
13.1 Any request by AZCOM for a change in the Work or any part thereof
shall be subject to the conformity of ACL. Such request shall be
subject to later written confirmation by AZCOM. The additional cost
and expenses which may arise on account of such changes, if any, shall
be borne by AZCOM, and the date of completion of the Work may be
extended by agreement of the parties.
13.2 ACL may, with the consent of AZCOM, make minor adjustments in the Work
as, in its sole discretion, may appear necessary for the proper
accomplishment of its obligations under this Contract. The said
adjustments shall be subject to the following conditions: (a) the
general configuration, general characteristics and quality of the Work
are maintained;
17
<PAGE>
(b) the Schedule is not changed or modified; (c) any additional costs
or expenses which may arise as a consequence of such adjustments shall
be for the account of ACL; and (d) such adjustments shall be reported
in writing to AZCOM.
14. APPLICABLE DOCUMENTS
--------------------
The following annexes shall, by this reference, form an integral part of
this Contract:
Annex A - Equipment List and Price Schedule
Annex B - AZCOM-ACL Protocol dated October 25, 1999
Annex C - Joint Order No. 1-91 (Comprehensive Import Supervision
Scheme)
15. ORDER OF PRECEDENCE
-------------------
In case of any conflict in the interpretation of the terms and conditions
of the various documents cited in this Contract, the order of precedence
shall be: this Contract; Equipment List and Price Schedule (Annex A);
Protocol (Annex B); Joint Order No. 1-91 (Annex C); and Supply Contract.
16 SEVERABILITY
------------
If any part, term or provision of this Contract shall become invalid or
unenforceable, the validity or enforceability of the remaining portions or
provisions shall not be affected, and the rights and obligations of the
parties shall be construed as if this Contract did not contain the
particular invalid or unenforceable part, term or provision.
17 SUCCESSION AND ASSIGNMENT
-------------------------
17.1 This Contract shall be binding upon the successors and assigns of the
Parties and shall not, except as otherwise provided in Section 18.2
hereof, be assigned in whole or in part by a Party without the prior
written consent of the other party, and which consent shall not be
unreasonably withheld.
17.2 ACL may assign or sub-contract to its subsidiary or associated company
in the Philippines or any other local entity its rights and
obligations which ACL decides may be more appropriately performed by
its subsidiary or associated company in the Philippines or other local
entity. Before any such assignment or sub-contracting is entered into
by ACL, it shall seek the comments of AZCOM on such intended course of
action. However, AZCOM's comments shall not relieve or diminish ACL's
obligations and responsibilities under this Contract. ACL shall
continue to be responsible for the workmanship and quality of the work
of the assignee or sub-contractee, including all acts of default or
negligence of such
18
<PAGE>
assignee or sub-contractee, its employees or personnel, as if they
were the acts of default or negligence of ACL. There is no employer-
employee relationship between the employees of ACL and AZCOM and vice-
versa.
18 TERMINATION
-----------
18.1 In case of default on the part of ACL:
18.1.1 If ACL fails to comply with any of the terms and conditions of
this Contract after proper written notice by AZCOM, AZCOM
shall have the right to terminate this Contract thirty (30)
days after a notice of termination has been served on ACL.
18.1.2 In the event of such termination, AZCOM shall be entitled to
retain and apply the balance, which may otherwise be due to
ACL under this Contract to pay for the cost to complete the
Project. If the said balance is not sufficient to cover the
cost of the inoperative or non-functional Equipment or System,
the additional cost needed to make the Equipment operative or
functional shall be paid by ACL to AZCOM
18.2 In case of default on the part of AZCOM:
18.2.1 If AZCOM fails to comply with any of the terms and conditions
of this Contract after proper written notice by ACL, ACL shall
have the right to terminate this Contract thirty (30) days
after a notice of termination has been served on AZCOM.
18.2.2 In case of such termination, AZCOM shall pay ACL the value of
the delivered Equipment and release the performance bond
submitted by ACL.
19 ARBITRATION
-----------
19.1 In the event of any dispute or difference of opinion arising out of or
relating to this Contract or breach thereof, the parties shall exert
their best efforts to settle such dispute or difference amicably.
19.2 If such dispute or difference is not amicably settled within sixty
(60) calendar days from its occurrence, the matter shall be settled
through arbitration by a panel of three (3) arbitrators, one to be
named by each Party and the third arbitrator shall be chosen by the
two earlier designated arbitrators. In case they fail to select a
third arbitrator within fifteen (15) calendar days from the date they
commenced the discussion of the said selection, the third arbitrator
shall be appointed by the chairpersons of the National Bar
Associations of the countries of the Parties. No one shall be
nominated or act as an arbitrator who is in any way financially
interested in this Contract or in the business affairs of any of the
parties.
19.3 If any Party is dissatisfied with the decision of the arbitrators, the
Party concerned shall, within ten (10) calendar days from receipt of
the decision, notify the arbitrators that it
19
<PAGE>
disputes the same and the matter shall thereupon be settled under the
Rules of Conciliation and Arbitration of the International Chamber of
Commerce. The arbitration proceedings shall be conducted in Geneva,
Switzerland in the English Language. The resulting award shall be
final and binding on the parties.
20 INTERPRETATION
--------------
20.1 The table of contents and headings of the sections are included for
convenience of reference only. They shall not affect the construction
and interpretation of any provision of this Contract. The word
"hereof" is used in this Contract to refer to this Contract as a whole
and not to any individual section or part of this Contract. Reference
to sections are to sections of this Contract.
20.2 To interpret the commercial terms and abbreviations used in this
Contract, which have not been otherwise defined, the provisions of the
latest issue of INCOTERMS shall be used. All the other terms and
conditions of this Contract shall be interpreted in accordance with
the laws of New York State, USA provided that nothing in this Section
20 shall be construed to authorize the amendment or modification of
the annexes cited in Section 14 hereof.
20.3 Any granting of time and other indulgence or waiver of obligation on
the part of one party to the other shall be isolated or peculiar to
that particular occasion or purpose and shall be without prejudice to
future compliance with the terms and conditions of this Contract.
21 ADDRESSES
---------
21.1 AZCOM and ACL specify their respective addresses as follows:
For AZCOM:
AZ COMMUNICATIONS NETWORK INCORPORATED
8/F DPC Place, 2322 Chino Roces Avenue
Makati City, Philippines
Attention: Felizardo P. dela Merced
For ACL:
AIRSPAN COMMUNICATIONS LIMITED
Cambridge House, Oxford Road
Uxbridge Middlesex, UB8 1UN UK
Attention: Henrik Smith-Petersen
20
<PAGE>
21.2 Any letter or notice sent to these addresses shall be considered
delivered upon its actual receipt by the addressee. In the event any
party changes its address, it shall notify the other party of the
change of address in writing within five (5) calendar days from the
date the change of address took effect.
22 EXECUTION IN COUNTERPARTS
-------------------------
This Contract may be executed in counterparts by both Parties and shall
become effective upon receipt by either Party of a copy of this Contract
duly executed by the other.
23 EFFECTIVITY OF THE CONTRACT
---------------------------
This Contract shall become effective after it is signed by AZCOM and ACL.
IN WITNESS WHEREOF, the parties have affixed their signatures on the date and
place first above written.
AZ COMMUNICATIONS AIRSPAN COMMUNICATIONS LIMITED
NETWORK INCORPORATED
By: By:
_________________________ ______________________
Witnessed By:
_________________________ _____________________
<PAGE>
i
Exhibit 10.4
CONTRACT
between
SUNTEL PRIVATE LTD
and
AIRSPAN COMMUNICATIONS LTD
for
Purchase Order No
LP/0442/99
April 26, 1999
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This Contract is entered into between:
Suntel (Private) Ltd. ("The Purchaser")
of the one part
and
Airspan Communications Ltd ("Contractor")
of the other part.
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Contract
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Table Of Contents
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<TABLE>
Introduction
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Clause 1 Definitions
Clause 2 Contractor's Scope of Supply
Clause 3 Contractor's Subcontractors
3.1 General
3.2 Technical information
Clause 4 Specifications
4.1 General
4.2 Technical Specification
4.3 System Description
4.4 Design, construction and manufacture
4.5 Information from The Purchaser
Clause 5 The Purchaser's Share of Responsibilities
Clause 6 Changes
6.1 General
6.2 Changes demanded by The Purchaser
6.3 Changes proposed by the Contractor
6.4 Contractor's obligation to propose changes
6.5 The Purchaser's approval of changes
6.6 Supplementary agreement
6.7 Variations in prices
6.7.1 Increase or decrease in prices
6.7.2 Reimbursements to The Purchaser for increased costs
Clause 7 Project Group, Progress Report, Time Schedule and Delays
7.1 Project group
7.2 Progress report
7.3 Time schedule
7.4 Delays
Clause 8 Inspection
8.1 General
8.2 No prejudice
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<TABLE>
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8.3 Subcontractors
Clause 9 Acceptance Procedure and Actual Date of Delivery
9.1 General
9.2 Quality assurance
9.3 System test (or Site Acceptance Test)
9.4 Acceptance test (or System Acceptance Test)
9.5 Actual Date of Delivery
Clause 10 Warranties and Certain Consequences in the Event of Breaches of
Warranties
10.1 Warranty period
10.2 Corrective Measures Activity
10.3 Warranty of Corrective Measures
10.4 Notification of defects
10.7 Warranty regarding replaced or corrected parts
10.8 Warranty of Reliability and Maintainability
10.9 Warranty of Documentation
10.9.1 Sufficient and adequate for Operation and Maintenance
10.9.2 Additional Documentation
10.10 Spares Warranty
10.11 Warranty of right to use and reproduce etc.
10.12 Repairs Warranty
10.13 Warranty for production
10.15 Title and intellectual property rights
10.16 Exceptions from warranties
10.17 Records of events
Clause 11 Delivery
11.1 Equipment and Software
11.1.1 Contractual Date of Delivery
11.1.2 Passing of Title
11.1.3 Software license
11.2 Installation
11.3 Training
11.4 Documentation
11.5 Spare parts
11.6 Test Instruments
11.7 Marking
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11.8 Packing
11.9 Order Procedure
Clause 12 Liquidated Damages in the Event of Delays in Delivery
12.1 General
12.2 WLL System, training, documentation, spare parts and test
instruments
12.3 Delays caused by The Purchaser or Force Majeure Events
Clause 13 Prices
Clause 14 Payments
14.1 General
14.2.1 Equipment and Software
14.4.1 Invoicing
14.4.2 Interest
Clause 15 Liability for Accidents, Damage and Loss
15.1 Liability before passing of risk
15.2 Other indemnification
15.3 Gross misconduct
15.4 Limitation of The Purchaser's liability
15.5 Obligations to limit damages and loss
Clause 16 Patents and Other. Intellectual and Industrial Property Rights
Clause 17 Force Majeure
Clause 18 Optional Orders
18.1 WLL System
18.2 Terms and conditions
18.3 Exercise of option
Clause 19 Network and Maintenance
Clause 20 Non Waiver
Clause 21 Language
Clause 22 The Purchaser's Approval
Clause 23 Compliance with the Law
Clause 24 Assignment
Clause 25 Termination
Clause 26 Cancellation
26.1 General
26.2 Cancellation due to Contractor
26.3 Cancellation with reference to Force Majeure
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26.4 Consequences of cancellation according to 26.2
26.5 Consequences of cancellation according to 26.3
26.6 Ownership to Equipment etc.
26.7 Survival of Clauses
Clause 27 Entire Agreement Modifications of the Contract
Clause 28 Order of Priority
Clause 29 Applicable Law
Clause 30 Confidentiality
Clause 31 Disputes
Clause 32 Notices
Clause 33 Support Bond
Clause 34 Contract Period
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List of Annexes to the Contract Document
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Annex 1 Technical Specifications
Annex 2 Compliance List to the Technical Specifications
Annex 3 System Description
Annex 4 Price Summary
Annex 5 Price Lists
Annex 6 Discount Table
Annex 7 Equipment and Software
Annex 8 Optional Equipment and Software
Annex 9 Turn-key services
Annex 10 Training
Annex 11 Documentation
Annex 12 Spare Parts
Annex 13 Test Equipment
Annex 14 Logistics
Annex 15 Quality
Annex 16 System Requirements
Annex 17 Acceptance Procedure
Annex 18 Time Schedule
Annex 19 Share of Responsibilities
Annex 20 Subcontractors and Local Support
Annex 21 Network Operations and Maintenance
Annex 22 Vendor Financing
Annex 23 Insurance
Annex 24 Availability
Annex 25 Definition of Service Effecting Errors
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Annex 26 Software License
Annex 27 Project Organisation
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Clause 1- Definitions
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For the purpose of this Contract the following words and abbreviations shall
have the meaning herein assigned to them unless the subject matter or context
would obviously require otherwise:
"Actual Date of Delivery" with respect to the WLL System shall mean the date
defined in Clause 9.5. And applies to the first phase of the project as defined
in Annex 18.
"Delivery" shall be delivery of equipment that is not part of the phase 1.
"The Purchaser's Share of Responsibility" shall mean all buildings, facilities
and equipment as well as all labour and services to be or caused to be provided
by The Purchaser under this Contract as further set out in Clause 5.
"Contract" shall mean this Contract between the Purchaser and the Contractor,
including all Annexes as amended from time to time and incorporated herein and
all documents to which reference may properly be made in order to ascertain the
right and obligations of the parties.
"Contract Price" shall mean that the sum so named in the Contract together with
any additions thereto or deductions therefrom as are agreed in writing under the
Contract.
"Contractor's Scope of Supply" shall mean all Equipment, Software,
Documentation, Installation, spare parts, test instruments, services and other
activities to be supplied by the Contractor.
"Contractual Date of Delivery" with respect to the WLL System shall mean the
date defined in Clause 11.1.1.
"Day" shall mean calendar day.
"CIP" as defined in INCOTERMS 1990.
"Documentation" shall mean all necessary written and drawn information about the
WLL System for operation, maintenance and training.
"Equipment" shall mean the hardware including standard software (except
documentation other than documentation included in Software) collectively
(including spare parts) that is to be supplied by the Contractor under this
Contract.
"WLL System" shall mean all Equipment and Software to be supplied by the
Contractor meeting all the requirements of this Contract including the details
set out in Annexes 7-13 and 21, when properly installed, interfaced and used in
conjunction with the Contractor's Scope of Supply obligations defined in the
Technical Specification.
"Installation" shall mean assembling and testing.
"Latest Version" shall mean the last maintained release of software issued to
The Purchaser and in use on the System.
"Licence" shall mean the Licence grated to The Purchaser by Supplier.
"Month" shall mean calendar month.
"Object Code" shall mean Software either written directly or translated from
Source Code, which when presented on a suitable medium may be directly executed
by and through computer hardware and/or firmware and which code may be stored on
any storage medium whatsoever.
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"Premises" shall mean the place or places other than the Contractor's premises
to which the Equipment and Software are to be delivered or where Contractor's
Scope of Supply obligations are to be carried out.
"Software" shall mean all operating systems, application, programs, compilers,
utilities, service software and other programs and associated documentation
provided by the Contractor for inclusion in the WLL System.
"Software Release" shall mean revisions to Software containing new features or
enhancements.
"Source Code" shall mean Software in assembly language or any higher-level
language and all available appropriate documentation.
"Specifications" shall have the meaning set out in Clause 4.1 and shall include
Technical Specifications.
"System" shall be as described in Annex 3.
"Technical Specifications" shall have the meaning as set out in Subclause 4.1.
"Tender" means the tender published by Suntel.
"Time Schedule" shall have the meaning appearing in Subclause 7.3.
"Week" shall mean calendar week.
"Limited commercial traffic" is defined as commercial service provided with
subscriber terminals used and provided for site and system acceptance (which are
supplied in the first phase of this contract).
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Clause 2 - Contractor's Scope of Supply
---------------------------------------
The Contractor undertakes to supply and shall deliver to The Purchaser in
accordance with the terms and conditions of this Contract the WLL System, all of
which shall meet the requirements set out in this Contract.
In the performance of its undertakings under this Contract the Contractor shall
provide (if purchased) the Purchaser with a WLL System consisting of
- - Equipment and Software set out in Annex 7
- - Optional Equipment and Software set out in Annex 8
- - Turn-Key Services set out in Annex 9
- - Training set out in Annex 10
- - Documentation set out in Annex 11
- - Spare parts set out in Annex 12
- - Test Equipment set out in Annex 13
- - Network operations and maintenance set out in Annex 21
all on the terms and conditions set out in this Contract.
The Contractor shall consequently, with regard to the Contractor's Scope of
Supply and services unless otherwise specifically stated in this Contract, bear
the responsibility for providing:
all design, engineering, labour, materials, equipment, software, services, tools
and instruments, Documentation, information, manufacture, assembling, technical
marking, packing, transportation, action, unloading, Installation,
commissioning, inspection, testing, delivery, training and maintenance support
with respect to the WLL System
and undertakes - without extra costs to The Purchaser - to provide hardware,
software, documentation, services or other activities which are necessary to
fulfil the Contractor's obligations as set forth in this Contract.
Concerning design responsibility the Contractor shall be solely responsible for
the design and adequacy of the System and shall not claim any additional payment
nor be relieved from any obligation imposed on it by this Contract on grounds of
misunderstanding or insufficient information received from and/or supplied by
The Purchaser and/or its representatives on any matter whatsoever related to
this Contract.
The Contractor's responsibility for the design of the System shall not in any
way be diminished nor shall its design approach be restricted or limited by The
Purchaser's acceptance of the Contractor's guidance or recommendations as to
engineering standards
and design specifications or by The Purchaser's suggestions or recommendations
on any aspect of the said design.
The System shall be commercially functional and fully available for at least
99.50 % of the time, 24 hours a day, throughout the full calendar year. The
definition and calculation for availability is given Annex 24 Availability.
Failure to meet the above parameters will be deemed as breach of performance and
shall be referred to the project group, which shall determine the impact of
extent of any penalty, according to the terms and conditions within the
contract.
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Clause 3 - Contractor's Subcontractors
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3.1 General
- ------------
Subject to any expressed provision to the contrary contained in this
Contract, The Purchaser hereby agrees that the Contractor in the
performance of this Contract may enter into subcontract and purchase
arrangements with subcontractors with respect to the services, work at site
units of the Equipment and Software, therein referred to, provided that any
subcontracting by Contractor is subject to the prior written consent of The
Purchaser on a case by case basis. This consent of The Purchaser shall in
no way affect the Contractor or relieve the Contractor from its
responsibilities or obligations under this Contract nor create any
contractual or employer - employee relationship between The Purchaser and
any subcontractor or supplier of the Contractor.
The Contractor may substitute individual subcontractors, provided that the
Equipment offered by another subcontractor can be integrated in the WLL
System and in particular that it and its spare parts are pin-to-pin
compatible with the substituted ones, while maintaining the full
responsibility of the Contractor for all requirements and guarantees
specified.
Contractor's subcontractors, their names, addresses and equipment or
services to be supplied, are set out in Annex 20.
3.2 Technical information
- --------------------------
The Contractor shall without charge furnish The Purchaser with such
technical information as The Purchaser may from time to time require - in
order to be able to make reliable evaluations and to operate, maintain,
repair and replace - with respect to any materials and components that the
Contractor will purchase from other sources as well as materials and
components that the above subcontractors and suppliers will employ in the
performance of the Contract, provided that the said information is or can
reasonably be made available to the Contractor.
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Clause 4 - Specifications
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4.1 General
- ------------
In satisfying its obligations under this Contract the Contractor shall
incorporate into the Contractor's Scope of Supply the standards and
specifications defined in Subclauses 4.2 - 4.3 (inclusive), all of
which will hereinafter collectively be referred to as the
"Specifications". The said term shall also include any subsequent
amendment or addition to the said standards or specifications.
4.2 Technical Specification
- ----------------------------
The Contractor's Scope of Supply shall in all respects satisfy those
technical and performance specifications that are set out in Annex 1,
and 2 hereto.
4.3 System Description
- -----------------------
The Contractor's Scope of Supply shall in all respects satisfy those
descriptions that are set out in Annex 3 hereto.
4.4 Design, Construction and Manufacture
- -----------------------------------------
The WLL System shall
(i) be designed, constructed, manufactured and assembled so as to achieve
reliability in accordance with the provisions set out in Annex 1, 2 and 3
and Annex 15 and otherwise in accordance with good engineering and
manufacturing practices, and
(ii) be such as to ensure that the WLL System will function properly, both
separately and as an integrated and reliable part of the networks to which
it is connected. The Contractor shall always take into account the
importance that The Purchaser attaches to the requirements that the WLL
System shall be easy to handle with respect to operation and maintenance.
The Contractor shall execute the Contract with the care, skill and
diligence expected from a competent contractor.
4.5 Information from The Purchaser
- -----------------------------------
To the extent the Contractor has not obtained from The Purchaser all
necessary information already prior to the signing of this Contract (and
has not been provided by The Purchaser under Clause 5), the Contractor
undertakes to take all such actions as are necessary to obtain all
information regarding technical features and characteristics of as well as
other circumstances relating to the relevant networks, The Purchaser'
equipment and information regarding WLL recommendations released by ETSI
(that are defined below) to enable the Contractor to fulfil its
undertakings under this Contract and to provide The Purchaser with
Contractor's Scope of Supply fulfilling all the requirements set out in the
Specifications or otherwise in this Contract.
To the extent the Contractor so requests in writing The Purchaser shall
furnish the Contractor with such information as is referred to above that
is readily available to The Purchaser or, if the information is not so
available, advise the Contractor of such knowledge (if any) as The
Purchaser may have readily available, on how to obtain the required
information.
Relevant WLL ETSI Recommendations
---------------------------------
ETS 301 055 - Transmission and Multiplexing (TM);
Digital Radio Relay Systems (DRRS);
Direct Sequence Code Division Multiple Access (DS-CDMA)
point-to-multipoint DRRS in frequency bands
in the band 1 GHz to 3 GHz
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Clause 5 - The Purchaser's Share of Responsibilities
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The Purchaser's shall provide or cause to be provided the facilities,
equipment, labour and services that are set out in Annex 19.
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Clause 6 - Changes
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6.1 General
- ------------
The parties recognise that changes to the Contractor's Scope of Supply or
otherwise of this Contract may be necessary or desired after the date of
signing of the Contract. The following provisions shall apply to The
Purchaser and the Contractor's rights and obligations with respect to such
changes. To be deemed to be a change under this Clause 6, the change shall
have been demanded by The Purchaser or proposed by the Contractor, as the
case may be.
Any new or changed Software and Equipment shall be considered as an
integrated part of the WLL System and shall fall under the conditions
of this Contract.
6.2 Changes Demanded by The Purchaser
- ---------------------------------------
The Purchaser shall have the right at any time to request reasonable
changes in the Specifications and other changes in the Contractor's Scope
of Supply. The Contractor agrees to effect all such reasonable changes as
The Purchaser may request, subject to changing price as provided in Clause
6.7.1 and reasonable other conditions.
6.3 Changes Proposed by the Contractor
- ---------------------------------------
The Contractor shall inform The Purchaser about any possible change,
possible improvement or development regarding the WLL System and
related technology that comes to the Contractor's knowledge during the
validity of this Contract and that is not already known to The
Purchaser.
The Contractor may propose such changes of the Contractor's Scope of Supply
as the Contractor deems appropriate.
6.4 The Contractor's Obligation to Propose Changes
- ---------------------------------------------------
The Contractor shall be obliged to propose such changes to the Contractor's
Scope of Supply as are necessary or advisable in order to
(i) achieve technical improvements of the WLL System, or otherwise
implement technical or economical improvements or new technology or
experiences;
(ii) obtain consents necessary from authorities Sri Lanka or
(iii) otherwise minimise the cost of day-to-day operation and maintenance
of the WLL System.
6.5 The Purchaser's Approval of Changes
- ----------------------------------------
The Contractor may not, without the prior written consent of The Purchaser,
make any change to any part of the Contractor's Scope of Supply, - even if
after such change Contractor's Scope of Supply still complies with the
Specifications.
6.6 Supplementary Agreement
- ----------------------------
For each change, whether proposed by the Contractor or The Purchaser, the
Contractor shall provide The Purchaser with a written offer. Such
offer shall set forth in detail the change of the Contractor's Scope
of Supply and shall contain information on possible changes of
- Equipment
- Software
- Documentation
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- Training
- Turn-key Services
- Spare parts
- Test Equipment
- Prices
- Contractual Date of Delivery
- Other Dates according to Time Schedule
Warranties
and on other changes of The Purchaser's Scope of Supply resulting from the
change in question as well as on any other terms and conditions that
according to the Contractor shall govern the change. The information
on prices shall be split on the various items that The Purchaser
reasonably requires and be accompanied by all necessary drawings and
specifications including a description of the consequences for the WLL
System, the environments, the reliability, the maintainability, the
training of The Purchaser's staff, the Contractor's Scope of Supply
and The Purchaser's Share of Responsibility etc. sufficiently detailed
so as to permit The Purchaser to judge on the reasonableness of the
prices and other terms and conditions.
If the change has been proposed by The Purchaser the offer shall be
submitted by the Contractor as soon as practicable, however, in no
case later than thirty (30) days after receipt of The Purchaser's
proposal. The Contractor shall be bound by any offer referred to
herein for such a period of time as is required to enable The
Purchaser to evaluate and make decision on the basis of the offer.
Any change according to Subclauses 6.2, 6.3 and 6.6 above has to be agreed
by The Purchaser in' the form of a written numbered change order or
supplementary order ("Supplementary Agreement"). The Contractor shall
not commence any work relating to such a change until The Purchaser
has authorised the same and all the related terms and conditions.
However, if The Purchaser so requests in writing, the Contractor shall
be obliged to commence and carry out minor or urgent changes,
notwithstanding that all of the terms and conditions have not at that
time been agreed to by The Purchaser.
6.7 Variations in Prices
- -------------------------
6.7.1 Increase or decrease in Prices
------------------------------------
In the event that a change referred to in Clause 6 would result in
(i) a material increase of the Contractor's costs for the Contractor's
performance under this Contract or
(ii) a material decrease of the Contractor's costs for the Contractor's
performance under this Contract
then the parties shall mutually in writing agree upon, in good faith, such
price increase or decrease as the case may be.
In the ascertainment and determination of such an increase or decrease,
rates and prices specified in this Contract shall as far as possible serve
as a guide. Where this is not possible, the increase or decrease shall be
an amount that is reasonable in view of all the circumstances.
6.7.2 Reimbursements to The Purchaser for increased costs
- ---------------------------------------------------------
6.7.2.1 It is expressly agreed that The Purchaser shall in no event bear
any increase of Contract Prices resulting from changes required in
order to make the WLL System meet the requirements set out in this
Contract.
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6.7.2.2 Any costs or expenses incurred by The Purchaser due to such a
change shall be reimbursed by the Contractor on demand and may be
set off by The Purchaser against any payment The Purchaser shall
make to the Contractor under this Contract.
6.7.2.3 In the event that any change would require a change of The
Purchaser's Share of Responsibility or of any other equipment
belonging to The Purchaser, and the Contractor has failed to
inform The Purchaser of this fact prior to the conclusion of the
Supplementary Agreement referred to in Subclause 6.6 above, the
Contractor shall reimburse The Purchaser for all such increase of
costs that The Purchaser will incur due to such a change and the
provisions of set-off in Subclause 6.7.2.2 above shall apply.
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Clause 7 - Project Group, Progress Report, Time Schedule and Delays
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7.1 Project Group
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For the supervision of the parties' performance under this Contract, the
Contractor and The Purchaser shall on The Purchaser's request form a joint
project group consisting of representatives from each party ("Project
Group") which shall decide when and where to meet. Each party shall bear
all costs for its own representatives. Minutes of meetings shall be kept
and signed by one representative of each party authorized to this effect.
When considered necessary representatives of subcontractors and experts of
the parties shall attend the meetings. It is incumbent upon the Contractor
to see to it that representatives of the Contractor's subcontractors will
attend, if so required. The costs for such experts shall be borne by the
party in question. The costs for representatives of the subcontractors of a
party shall be borne by the party in question or subcontractor, as they may
have agreed separately.
At the meetings the Project Group shall discuss the progress of the
Contractor's Scope of Supply and The Purchaser's Share of Responsibility
and review the operation and maintenance facilities of the WLL System.
The Project Group shall supervise the test procedures for Acceptance Tests
set out in Annex 17.
The Project Group is authorized to make decisions within the technical
scope of the Contract . A technical change or correction which entails
increased costs or extension of the delivery time shall promptly, but
latest at the next meeting be notified in writing by the Contractor. If
such notice is not made, the Contractor has no right to demand compensation
for such increased costs or to demand acceptance by The Purchaser of
prolongation of the delivery time.
A decision binding on the parties shall be deemed to have been made only if
all the representatives of both parties agree and the decision is contained
in duly signed minutes. The Project Group shall, however, not be authorized
to make decisions that will affect Contract Price(s) or the Contractual
Date of Delivery or otherwise decisions resulting in modifications of the
Contract. In the event that any of the representatives deem a question to
fall outside the authority or competence of the Project Group the question
shall be referred for resolution to the Engineering Vice Presidents or
their equivalents of each party.
A detailed description of the Project Organisation, including names of the
persons participating and their experiences in the field is set out in
Annex 27.
7.2 Progress Report
- --------------------
The Contractor shall every week submit to The Purchaser a Progress Report
in three copies up until System Acceptance is achieved. The Progress Report
shall contain, as a minimum, a report of all activities related to the
Contract that have taken place since the last report, as well as
information regarding future activities and the progress of the
Contractor's Scope of Supply. After System Acceptance progress reports
shall be issued at a frequency mutually agreed.
The Progress Report shall furthermore contain a complete review of the
status of accomplishments, developments and implementation of the
Contractor's Scope of Supply obligations against the Time Schedule.
7.3. Time Schedule
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As an integral part of this Contract is attached as Annex 18 a Time
Schedule indicating crucial milestone dates. The Contractor and The
Purchaser undertake to fulfil their undertakings under this Contract in
accordance with the Time Schedule. Time is of the essence of this Contract.
7.4 Delays
- -----------
Without prejudice to the provisions of Clause 17, each party to this
Contract shall promptly notify the other party in writing where the
notifying party has a reasonable belief that circumstances exist or are
likely to occur that would be reasonably expected to prevent the Contractor
(or any of its subcontractors or suppliers) or The Purchaser (or any of its
assignees) from fulfilling its obligations under this Contract according to
the Time Schedule.
In a case where any party, at any time, reasonably believes that any other
party is unable to fulfil its obligations on the respective date set out in
the Time Schedule, the parties shall meet to determine what action is
required. Any notification and/or action that might be determined as a
consequence hereof shall be without prejudice to any right or remedy the
parties may have under this Contract.
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Clause 8 - Inspection
---------------------
8.1 General
- ------------
At such times and in such manner as The Purchaser shall deem appropriate
for the purpose of inspecting or testing the contractual work in
progress and activities under this Contract, including the
Contractor's own tests and results thereof, representatives of The
Purchaser shall be given notices of the testing and shall have access
to the Contractor's and its subcontractor's works as well as other
places where activities under this Contract are in preparation or
progress. The Purchaser shall have full access to and on request be
provided with all test records relating to the Contractor's Scope of
Supply. Any inspection or test carried out by The Purchaser or its
representatives shall not unduly delay the Contractor.
The Purchaser shall at all reasonable times have access to the Contractor's
Scope of Supply, and the Contractor shall provide appropriate
facilities for such access and for the purpose of inspection and
testing. The Purchaser shall also have full access to all relevant
plants, offices and Contractor's Scope of Supply sites of the
Contractor and any of its Subcontractors to enable The Purchaser to
inspect the Contractor's Scope of Supply and monitor progress.
The Contractor shall permit The Purchaser or its designated representatives
to carry out the following inspection activities at any time: (i) to
audit the Contractor's quality assurance system and its application to
the Contractor's Scope of Supply including, without limitation, to the
manufacture, development, and/or provision of raw materials and
components; and (ii) to inspect all parts of the Contractor's Scope of
Supply to the extent reasonably practicable to ensure that their
quality meets the requirements of the Contract.
The factory inspection or audit of parts of the System in accordance with
this Clause shall not in any way prejudice any right or remedy which
The Purchaser may have against the Contractor, or relieve the
Contractor of any of its liabilities, and in particular it is without
prejudice to the Contractor's obligations relating to the performance
of the System under Clause 4.
Any approval given by or on behalf of The Purchaser in respect of any
aspect of the Contractor's Scope of Supply carried out or proposed by
the Contractor, or in respect of any part of the System, shall not
relieve the Contractor of any obligations under the Contract.
The Purchaser or its representatives may request that the Contractor
performs such reasonable tests and repeated tests (in addition to and
apart from such tests as are referred to in Clause 9) as The Purchaser
(or its representatives) will consider necessary to be assured that
the result of the activities will comply with the requirements of this
Contract. The Contractor shall, without extra costs to The Purchaser,
provide with all labour, facilities, test equipment and other things
and services necessary for this purpose.
In the event that Software or Equipment is in the course of the inspection
found to be defective or otherwise not in conformity with the
Specifications, the Contractor shall within shortest possible time
take all necessary action to repair all faults, defects or non-
conformance.
8.2 Subcontractors
- -------------------
The Contractor shall ensure that the provisions of this Clause 8 also apply
to all subcontracts or orders made or placed by the Contractor with any one
of its subcontractors and that the provisions of this Clause 8 are held
good by the said subcontractors.
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Clause 9 Acceptance Procedure and Actual Date of Delivery
---------------------------------------------------------
9.1 General
- ------------
The Acceptance Procedure falls into the following main events:
- Quality assurance
- Visual Inspection
- System test (known as Site Acceptance)
- Acceptance test (known as System Acceptance)
- TEC tests
Except to the extent otherwise specifically provided in this Contract the
Contractor shall be responsible for the performance of the quality
surveillance, inspections, tests (including repeated tests, if any)
which are required for the completion of Contractor's Scope of Supply
and for the demonstration of its compliance with the Specifications
and other requirements set out in this Contract. For the purpose of
achieving this object the Contractor shall except to the extent
otherwise specifically provided in this Contract be obliged at its
own expense
(i) to carry out the said surveillance and perform and supervise the
tests;
(ii) provide with or place at The Purchaser's disposal, as the case may
be, all equipment, tools, programs (software), labour, supplies, and
services required for the performance of the said surveillance and
tests; and
(iii) to issue reports, keep and provide records, and issue certificates as
to the results of the surveillance and tests. The said surveillance and all the
tests shall be performed at the Contractor's risk.
CONTRACT
between
SUNTEL PRIVATE LTD
and
AIRSPAN COMMUNICATIONS LTD
for
Purchase Order No
LP/0442/99
April 26, 1999
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This Contract is entered into between:
Suntel (Private) Ltd. ("The Purchaser")
of the one part
and
Airspan Communications Ltd ("Contractor")
of the other part.
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Contract
--------
Table Of Contents
-----------------
<TABLE>
<CAPTION>
Introduction
<S> <C>
Clause 1 Definitions
Clause 2 Contractor's Scope of Supply
Clause 3 Contractor's Subcontractors
3.1 General
3.2 Technical information
Clause 4 Specifications
4.1 General
4.2 Technical Specification
4.3 System Description
4.4 Design, construction and manufacture
4.5 Information from The Purchaser
Clause 5 The Purchaser's Share of Responsibilities
Clause 6 Changes
6.1 General
6.2 Changes demanded by The Purchaser
6.3 Changes proposed by the Contractor
6.8 Contractor's obligation to propose changes
6.9 The Purchaser's approval of changes
6.10 Supplementary agreement
6.11 Variations in prices
6.11.1 Increase or decrease in prices
6.11.2 Reimbursements to The Purchaser for increased costs
Clause 7 Project Group, Progress Report, Time Schedule and Delays
7.1 Project group
7.2 Progress report
7.3 Time schedule
7.4 Delays
Clause 8 Inspection
8.1 General
8.2 No prejudice
</TABLE>
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<TABLE>
<S> <C>
8.3 Subcontractors
Clause 9 Acceptance Procedure and Actual Date of Delivery
9.1 General
9.2 Quality assurance
9.3 System test (or Site Acceptance Test)
9.4 Acceptance test (or System Acceptance Test)
9.5 Actual Date of Delivery
Clause 10 Warranties and Certain Consequences in the Event of Breaches of
Warranties
10.1 Warranty period
10.2 Corrective Measures Activity
10.3 Warranty of Corrective Measures
10.4 Notification of defects
10.7 Warranty regarding replaced or corrected parts
10.8 Warranty of Reliability and Maintainability
10.9 Warranty of Documentation
10.9.1 Sufficient and adequate for Operation and Maintenance
10.9.2 Additional Documentation
10.10 Spares Warranty
10.11 Warranty of right to use and reproduce etc.
10.12 Repairs Warranty
10.13 Warranty for production
10.15 Title and intellectual property rights
10.16 Exceptions from warranties
10.17 Records of events
Clause 11 Delivery
11.1 Equipment and Software
11.1.1 Contractual Date of Delivery
11.1.2 Passing of Title
11.1.3 Software license
11.4 Installation
11.5 Training
11.4 Documentation
11.5 Spare parts
11.6 Test Instruments
11.7 Marking
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<TABLE>
<S> <C>
11.8 Packing
11.9 Order Procedure
Clause 12 Liquidated Damages in the Event of Delays in Delivery
12.1 General
12.2 WLL System, training, documentation, spare parts and test
instruments
12.3 Delays caused by The Purchaser or Force Majeure Events
Clause 13 Prices
Clause 14 Payments
14.1 General
14.2.2 Equipment and Software
14.4.3 Invoicing
14.4.4 Interest
Clause 15 Liability for Accidents, Damage and Loss
15.1 Liability before passing of risk
15.2 Other indemnification
15.3 Gross misconduct
15.4 Limitation of The Purchaser's liability
15.5 Obligations to limit damages and loss
Clause 16 Patents and Other. Intellectual and Industrial Property Rights
Clause 17 Force Majeure
Clause 18 Optional Orders
18.4 WLL System
18.5 Terms and conditions
18.6 Exercise of option
Clause 19 Network and Maintenance
Clause 20 Non Waiver
Clause 21 Language
Clause 22 The Purchaser's Approval
Clause 23 Compliance with the Law
Clause 24 Assignment
Clause 25 Termination
Clause 26 Cancellation
26.1 General
26.2 Cancellation due to Contractor
26.3 Cancellation with reference to Force Majeure
</TABLE>
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26.4 Consequences of cancellation according to 26.2
26.5 Consequences of cancellation according to 26.3
26.6 Ownership to Equipment etc.
26.7 Survival of Clauses
Clause 27 Entire Agreement Modifications of the Contract
Clause 28 Order of Priority
Clause 29 Applicable Law
Clause 30 Confidentiality
Clause 31 Disputes
Clause 32 Notices
Clause 33 Support Bond
Clause 34 Contract Period
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List of Annexes to the Contract Document
----------------------------------------
Annex 1 Technical Specifications
Annex 2 Compliance List to the Technical Specifications
Annex 3 System Description
Annex 4 Price Summary
Annex 5 Price Lists
Annex 6 Discount Table
Annex 7 Equipment and Software
Annex 8 Optional Equipment and Software
Annex 9 Turn-key services
Annex 10 Training
Annex 11 Documentation
Annex 12 Spare Parts
Annex 13 Test Equipment
Annex 14 Logistics
Annex 15 Quality
Annex 16 System Requirements
Annex 17 Acceptance Procedure
Annex 18 Time Schedule
Annex 19 Share of Responsibilities
Annex 20 Subcontractors and Local Support
Annex 21 Network Operations and Maintenance
Annex 22 Vendor Financing
Annex 23 Insurance
Annex 24 Availability
Annex 25 Definition of Service Effecting Errors
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Annex 26 Software License
Annex 27 Project Organisation
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Clause 1- Definitions
---------------------
For the purpose of this Contract the following words and abbreviations shall
have the meaning herein assigned to them unless the subject matter or context
would obviously require otherwise:
"Actual Date of Delivery" with respect to the WLL System shall mean the date
defined in Clause 9.5. And applies to the first phase of the project as defined
in Annex 18.
"Delivery" shall be delivery of equipment that is not part of the phase 1.
"The Purchaser's Share of Responsibility" shall mean all buildings, facilities
and equipment as well as all labour and services to be or caused to be provided
by The Purchaser under this Contract as further set out in Clause 5.
"Contract" shall mean this Contract between the Purchaser and the Contractor,
including all Annexes as amended from time to time and incorporated herein and
all documents to which reference may properly be made in order to ascertain the
right and obligations of the parties.
"Contract Price" shall mean that the sum so named in the Contract together with
any additions thereto or deductions therefrom as are agreed in writing under the
Contract.
"Contractor's Scope of Supply" shall mean all Equipment, Software,
Documentation, Installation, spare parts, test instruments, services and other
activities to be supplied by the Contractor.
"Contractual Date of Delivery" with respect to the WLL System shall mean the
date defined in Clause 11.1.1.
"Day" shall mean calendar day.
"CIP" as defined in INCOTERMS 1990.
"Documentation" shall mean all necessary written and drawn information about the
WLL System for operation, maintenance and training.
"Equipment" shall mean the hardware including standard software (except
documentation other than documentation included in Software) collectively
(including spare parts) that is to be supplied by the Contractor under this
Contract.
"WLL System" shall mean all Equipment and Software to be supplied by the
Contractor meeting all the requirements of this Contract including the details
set out in Annexes 7-13 and 21, when properly installed, interfaced and used in
conjunction with the Contractor's Scope of Supply obligations defined in the
Technical Specification.
"Installation" shall mean assembling and testing.
"Latest Version" shall mean the last maintained release of software issued to
The Purchaser and in use on the System.
"Licence" shall mean the Licence grated to The Purchaser by Supplier.
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"Month" shall mean calendar month.
"Object Code" shall mean Software either written directly or translated from
Source Code, which when presented on a suitable medium may be directly executed
by and through computer hardware and/or firmware and which code may be stored on
any storage medium whatsoever.
"Premises" shall mean the place or places other than the Contractor's premises
to which the Equipment and Software are to be delivered or where Contractor's
Scope of Supply obligations are to be carried out.
"Software" shall mean all operating systems, application, programs, compilers,
utilities, service software and other programs and associated documentation
provided by the Contractor for inclusion in the WLL System.
"Software Release" shall mean revisions to Software containing new features or
enhancements.
"Source Code" shall mean Software in assembly language or any higher-level
language and all available appropriate documentation.
"Specifications" shall have the meaning set out in Clause 4.1 and shall include
Technical Specifications.
"System" shall be as described in Annex 3.
"Technical Specifications" shall have the meaning as set out in Subclause 4.1.
"Tender" means the tender published by Suntel.
"Time Schedule" shall have the meaning appearing in Subclause 7.3.
"Week" shall mean calendar week.
"Limited commercial traffic" is defined as commercial service provided with
subscriber terminals used and provided for site and system acceptance (which are
supplied in the first phase of this contract).
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Clause 2 - Contractor's Scope of Supply
---------------------------------------
The Contractor undertakes to supply and shall deliver to The Purchaser in
accordance with the terms and conditions of this Contract the WLL System, all of
which shall meet the requirements set out in this Contract.
In the performance of its undertakings under this Contract the Contractor shall
provide (if purchased) the Purchaser with a WLL System consisting of
- - Equipment and Software set out in Annex 7
- - Optional Equipment and Software set out in Annex 8
- - Turn-Key Services set out in Annex 9
- - Training set out in Annex 10
- - Documentation set out in Annex 11
- - Spare parts set out in Annex 12
- - Test Equipment set out in Annex 13
- - Network operations and maintenance set out in Annex 21
all on the terms and conditions set out in this Contract.
The Contractor shall consequently, with regard to the Contractor's Scope of
Supply and services unless otherwise specifically stated in this Contract, bear
the responsibility for providing:
all design, engineering, labour, materials, equipment, software, services, tools
and instruments, Documentation, information, manufacture, assembling, technical
marking, packing, transportation, action, unloading, Installation,
commissioning, inspection, testing, delivery, training and maintenance support
with respect to the WLL System
and undertakes - without extra costs to The Purchaser - to provide hardware,
software, documentation, services or other activities which are necessary to
fulfil the Contractor's obligations as set forth in this Contract.
Concerning design responsibility the Contractor shall be solely responsible for
the design and adequacy of the System and shall not claim any additional payment
nor be relieved from any obligation imposed on it by this Contract on grounds of
misunderstanding or insufficient information received from and/or supplied by
The Purchaser and/or its representatives on any matter whatsoever related to
this Contract.
The Contractor's responsibility for the design of the System shall not in any
way be diminished nor shall its design approach be restricted or limited by The
Purchaser's acceptance of the Contractor's guidance or recommendations as to
engineering standards
and design specifications or by The Purchaser's suggestions or recommendations
on any aspect of the said design.
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The System shall be commercially functional and fully available for at least
99.50 % of the time, 24 hours a day, throughout the full calendar year. The
definition and calculation for availability is given Annex 24 Availability.
Failure to meet the above parameters will be deemed as breach of performance and
shall be referred to the project group, which shall determine the impact of
extent of any penalty, according to the terms and conditions within the
contract.
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Clause 3 - Contractor's Subcontractors
--------------------------------------
3.1 General
- ------------
Subject to any expressed provision to the contrary contained in this
Contract, The Purchaser hereby agrees that the Contractor in the
performance of this Contract may enter into subcontract and purchase
arrangements with subcontractors with respect to the services, work at site
units of the Equipment and Software, therein referred to, provided that any
subcontracting by Contractor is subject to the prior written consent of The
Purchaser on a case by case basis. This consent of The Purchaser shall in
no way affect the Contractor or relieve the Contractor from its
responsibilities or obligations under this Contract nor create any
contractual or employer - employee relationship between The Purchaser and
any subcontractor or supplier of the Contractor.
The Contractor may substitute individual subcontractors, provided that the
Equipment offered by another subcontractor can be integrated in the WLL
System and in particular that it and its spare parts are pin-to-pin
compatible with the substituted ones, while maintaining the full
responsibility of the Contractor for all requirements and guarantees
specified.
Contractor's subcontractors, their names, addresses and equipment or
services to be supplied, are set out in Annex 20.
3.2 Technical information
- --------------------------
The Contractor shall without charge furnish The Purchaser with such
technical information as The Purchaser may from time to time require - in
order to be able to make reliable evaluations and to operate, maintain,
repair and replace - with respect to any materials and components that the
Contractor will purchase from other sources as well as materials and
components that the above subcontractors and suppliers will employ in the
performance of the Contract, provided that the said information is or can
reasonably be made available to the Contractor.
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Clause 4 - Specifications
-------------------------
4.1 General
- ------------
In satisfying its obligations under this Contract the Contractor shall
incorporate into the Contractor's Scope of Supply the standards and
specifications defined in Subclauses 4.2 - 4.3 (inclusive), all of
which will hereinafter collectively be referred to as the
"Specifications". The said term shall also include any subsequent
amendment or addition to the said standards or specifications.
4.2 Technical Specification
- ----------------------------
The Contractor's Scope of Supply shall in all respects satisfy those
technical and performance specifications that are set out in Annex 1,
and 2 hereto.
4.3 System Description
- -----------------------
The Contractor's Scope of Supply shall in all respects satisfy those
descriptions that are set out in Annex 3 hereto.
4.4 Design, Construction and Manufacture
- -----------------------------------------
The WLL System shall
(i) be designed, constructed, manufactured and assembled so as to achieve
reliability in accordance with the provisions set out in Annex 1, 2 and 3
and Annex 15 and otherwise in accordance with good engineering and
manufacturing practices, and
(ii) be such as to ensure that the WLL System will function properly, both
separately and as an integrated and reliable part of the networks to which
it is connected. The Contractor shall always take into account the
importance that The Purchaser attaches to the requirements that the WLL
System shall be easy to handle with respect to operation and maintenance.
The Contractor shall execute the Contract with the care, skill and
diligence expected from a competent contractor.
4.5 Information from The Purchaser
- -----------------------------------
To the extent the Contractor has not obtained from The Purchaser all
necessary information already prior to the signing of this Contract (and
has not been provided by The Purchaser under Clause 5), the Contractor
undertakes to take all such actions as are necessary to obtain all
information regarding technical features and characteristics of as well as
other circumstances relating to the relevant networks, The Purchaser'
equipment and information regarding WLL recommendations released by ETSI
(that are defined below) to enable the Contractor to fulfil its
undertakings under this Contract and to provide The Purchaser with
Contractor's Scope of Supply fulfilling all the requirements set out in the
Specifications or otherwise in this Contract.
To the extent the Contractor so requests in writing The Purchaser shall
furnish the Contractor with such information as is referred to above that
is readily available to The Purchaser or, if the information is not so
available, advise the Contractor of such knowledge (if any) as The
Purchaser may have readily available, on how to obtain the required
information.
Relevant WLL ETSI Recommendations
---------------------------------
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ETS 301 055 - Transmission and Multiplexing (TM);
Digital Radio Relay Systems (DRRS);
Direct Sequence Code Division Multiple Access (DS-CDMA)
point-to-multipoint DRRS in frequency bands
in the band 1 GHz to 3 GHz
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Clause 5 - The Purchaser's Share of Responsibilities
----------------------------------------------------
The Purchaser's shall provide or cause to be provided the facilities, equipment,
labour and services that are set out in Annex 19.
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Clause 6 - Changes
------------------
6.1 General
- ------------
The parties recognise that changes to the Contractor's Scope of Supply or
otherwise of this Contract may be necessary or desired after the date of
signing of the Contract. The following provisions shall apply to The
Purchaser and the Contractor's rights and obligations with respect to such
changes. To be deemed to be a change under this Clause 6, the change shall
have been demanded by The Purchaser or proposed by the Contractor, as the
case may be.
Any new or changed Software and Equipment shall be considered as an
integrated part of the WLL System and shall fall under the conditions
of this Contract.
6.2 Changes Demanded by The Purchaser
- --------------------------------------
The Purchaser shall have the right at any time to request reasonable
changes in the Specifications and other changes in the Contractor's Scope
of Supply. The Contractor agrees to effect all such reasonable changes as
The Purchaser may request, subject to changing price as provided in Clause
6.7.1 and reasonable other conditions.
6.3 Changes Proposed by the Contractor
- ---------------------------------------
The Contractor shall inform The Purchaser about any possible change,
possible improvement or development regarding the WLL System and
related technology that comes to the Contractor's knowledge during the
validity of this Contract and that is not already known to The
Purchaser.
The Contractor may propose such changes of the Contractor's Scope of Supply
as the Contractor deems appropriate.
6.4 The Contractor's Obligation to Propose Changes
- ---------------------------------------------------
The Contractor shall be obliged to propose such changes to the Contractor's
Scope of Supply as are necessary or advisable in order to
(i) achieve technical improvements of the WLL System, or otherwise
implement technical or economical improvements or new technology or
experiences;
(ii) obtain consents necessary from authorities Sri Lanka or
(iii) otherwise minimise the cost of day-to-day operation and maintenance
of the WLL System.
6.5 The Purchaser's Approval of Changes
- ----------------------------------------
The Contractor may not, without the prior written consent of The Purchaser,
make any change to any part of the Contractor's Scope of Supply, - even if
after such change Contractor's Scope of Supply still complies with the
Specifications.
6.6 Supplementary Agreement
- ----------------------------
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For each change, whether proposed by the Contractor or The Purchaser, the
Contractor shall provide The Purchaser with a written offer. Such
offer shall set forth in detail the change of the Contractor's Scope
of Supply and shall contain information on possible changes of
- Equipment
- Software
- Documentation
- Training
- Turn-key Services
- Spare parts
- Test Equipment
- Prices
- Contractual Date of Delivery
- Other Dates according to Time Schedule
Warranties
and on other changes of The Purchaser's Scope of Supply resulting from the
change in question as well as on any other terms and conditions that
according to the Contractor shall govern the change. The information
on prices shall be split on the various items that The Purchaser
reasonably requires and be accompanied by all necessary drawings and
specifications including a description of the consequences for the WLL
System, the environments, the reliability, the maintainability, the
training of The Purchaser's staff, the Contractor's Scope of Supply
and The Purchaser's Share of Responsibility etc. sufficiently detailed
so as to permit The Purchaser to judge on the reasonableness of the
prices and other terms and conditions.
If the change has been proposed by The Purchaser the offer shall be
submitted by the Contractor as soon as practicable, however, in no
case later than thirty (30) days after receipt of The Purchaser's
proposal. The Contractor shall be bound by any offer referred to
herein for such a period of time as is required to enable The
Purchaser to evaluate and make decision on the basis of the offer.
Any change according to Subclauses 6.2, 6.3 and 6.6 above has to be agreed
by The Purchaser in' the form of a written numbered change order or
supplementary order ("Supplementary Agreement"). The Contractor shall
not commence any work relating to such a change until The Purchaser
has authorised the same and all the related terms and conditions.
However, if The Purchaser so requests in writing, the Contractor shall
be obliged to commence and carry out minor or urgent changes,
notwithstanding that all of the terms and conditions have not at that
time been agreed to by The Purchaser.
6.7 Variations in Prices
- -------------------------
6.7.1 Increase or decrease in Prices
-------------------------------------
In the event that a change referred to in Clause 6 would result in
(iii) a material increase of the Contractor's costs for the Contractor's
performance under this Contract or
(iv) a material decrease of the Contractor's costs for the Contractor's
performance under this Contract
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then the parties shall mutually in writing agree upon, in good faith,
such price increase or decrease as the case may be.
In the ascertainment and determination of such an increase or decrease,
rates and prices specified in this Contract shall as far as possible
serve as a guide. Where this is not possible, the increase or decrease
shall be an amount that is reasonable in view of all the circumstances.
6.7.2 Reimbursements to The Purchaser for increased costs
- -----------------------------------------------------------
6.7.2.1 It is expressly agreed that The Purchaser shall in no event
bear any increase of Contract Prices resulting from changes
required in order to make the WLL System meet the requirements
set out in this Contract.
6.7.2.2 Any costs or expenses incurred by The Purchaser due to such a
change shall be reimbursed by the Contractor on demand and may
be set off by The Purchaser against any payment The Purchaser
shall make to the Contractor under this Contract.
6.7.2.3 In the event that any change would require a change of The
Purchaser's Share of Responsibility or of any other equipment
belonging to The Purchaser, and the Contractor has failed to
inform The Purchaser of this fact prior to the conclusion of
the Supplementary Agreement referred to in Subclause 6.6 above,
the Contractor shall reimburse The Purchaser for all such
increase of costs that The Purchaser will incur due to such a
change and the provisions of set-off in Subclause 6.7.2.2 above
shall apply.
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Clause 7 - Project Group, Progress Report, Time Schedule and Delays
-------------------------------------------------------------------
7.1 Project Group
- ------------------
For the supervision of the parties' performance under this Contract, the
Contractor and The Purchaser shall on The Purchaser's request form a joint
project group consisting of representatives from each party ("Project
Group") which shall decide when and where to meet. Each party shall bear
all costs for its own representatives. Minutes of meetings shall be kept
and signed by one representative of each party authorized to this effect.
When considered necessary representatives of subcontractors and experts of
the parties shall attend the meetings. It is incumbent upon the Contractor
to see to it that representatives of the Contractor's subcontractors will
attend, if so required. The costs for such experts shall be borne by the
party in question. The costs for representatives of the subcontractors of a
party shall be borne by the party in question or subcontractor, as they may
have agreed separately.
At the meetings the Project Group shall discuss the progress of the
Contractor's Scope of Supply and The Purchaser's Share of Responsibility
and review the operation and maintenance facilities of the WLL System.
The Project Group shall supervise the test procedures for Acceptance Tests
set out in Annex 17.
The Project Group is authorized to make decisions within the technical
scope of the Contract. A technical change or correction which entails
increased costs or extension of the delivery time shall promptly, but
latest at the next meeting be notified in writing by the Contractor. If
such notice is not made, the Contractor has no right to demand compensation
for such increased costs or to demand acceptance by The Purchaser of
prolongation of the delivery time.
A decision binding on the parties shall be deemed to have been made only if
all the representatives of both parties agree and the decision is contained
in duly signed minutes. The Project Group shall, however, not be authorized
to make decisions that will affect Contract Price(s) or the Contractual
Date of Delivery or otherwise decisions resulting in modifications of the
Contract. In the event that any of the representatives deem a question to
fall outside the authority or competence of the Project Group the question
shall be referred for resolution to the Engineering Vice Presidents or
their equivalents of each party.
A detailed description of the Project Organisation, including names of the
persons participating and their experiences in the field is set out in
Annex 27.
7.2 Progress Report
- --------------------
The Contractor shall every week submit to The Purchaser a Progress Report
in three copies up until System Acceptance is achieved. The Progress Report
shall contain, as a minimum, a report of all activities related to the
Contract that have taken place since the last report, as well as
information regarding future activities and the progress of the
Contractor's Scope of Supply. After System Acceptance progress reports
shall be issued at a frequency mutually agreed.
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The Progress Report shall furthermore contain a complete review of the
status of accomplishments, developments and implementation of the
Contractor's Scope of Supply obligations against the Time Schedule.
7.3. Time Schedule
- ------------------
As an integral part of this Contract is attached as Annex 18 a Time
Schedule indicating crucial milestone dates. The Contractor and The
Purchaser undertake to fulfil their undertakings under this Contract in
accordance with the Time Schedule. Time is of the essence of this Contract.
7.4 Delays
- -----------
Without prejudice to the provisions of Clause 17, each party to this
Contract shall promptly notify the other party in writing where the
notifying party has a reasonable belief that circumstances exist or are
likely to occur that would be reasonably expected to prevent the Contractor
(or any of its subcontractors or suppliers) or The Purchaser (or any of its
assignees) from fulfilling its obligations under this Contract according to
the Time Schedule.
In a case where any party, at any time, reasonably believes that any other
party is unable to fulfil its obligations on the respective date set out in
the Time Schedule, the parties shall meet to determine what action is
required. Any notification and/or action that might be determined as a
consequence hereof shall be without prejudice to any right or remedy the
parties may have under this Contract.
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Clause 8 - Inspection
---------------------
8.1 General
- ------------
At such times and in such manner as The Purchaser shall deem appropriate
for the purpose of inspecting or testing the contractual work in
progress and activities under this Contract, including the
Contractor's own tests and results thereof, representatives of The
Purchaser shall be given notices of the testing and shall have access
to the Contractor's and its subcontractor's works as well as other
places where activities under this Contract are in preparation or
progress. The Purchaser shall have full access to and on request be
provided with all test records relating to the Contractor's Scope of
Supply. Any inspection or test carried out by The Purchaser or its
representatives shall not unduly delay the Contractor.
The Purchaser shall at all reasonable times have access to the
Contractor's Scope of Supply, and the Contractor shall provide
appropriate facilities for such access and for the purpose of
inspection and testing. The Purchaser shall also have full access to
all relevant plants, offices and Contractor's Scope of Supply sites of
the Contractor and any of its Subcontractors to enable The Purchaser
to inspect the Contractor's Scope of Supply and monitor progress.
The Contractor shall permit The Purchaser or its designated representatives
to carry out the following inspection activities at any time: (i) to
audit the Contractor's quality assurance system and its application to
the Contractor's Scope of Supply including, without limitation, to the
manufacture, development, and/or provision of raw materials and
components; and (ii) to inspect all parts of the Contractor's Scope of
Supply to the extent reasonably practicable to ensure that their
quality meets the requirements of the Contract.
The factory inspection or audit of parts of the System in accordance with
this Clause shall not in any way prejudice any right or remedy which
The Purchaser may have against the Contractor, or relieve the
Contractor of any of its liabilities, and in particular it is without
prejudice to the Contractor's obligations relating to the performance
of the System under Clause 4.
Any approval given by or on behalf of The Purchaser in respect of any
aspect of the Contractor's Scope of Supply carried out or proposed by
the Contractor, or in respect of any part of the System, shall not
relieve the Contractor of any obligations under the Contract.
The Purchaser or its representatives may request that the Contractor
performs such reasonable tests and repeated tests (in addition to and
apart from such tests as are referred to in Clause 9) as The Purchaser
(or its representatives) will consider necessary to be assured that
the result of the activities will comply with the requirements of this
Contract. The Contractor shall, without extra costs to The Purchaser,
provide with all labour, facilities, test equipment and other things
and services necessary for this purpose.
In the event that Software or Equipment is in the course of the inspection
found to be defective or otherwise not in conformity with the
Specifications, the Contractor shall within shortest possible time
take all necessary action to repair all faults, defects or non-
conformance.
8.2 Subcontractors
- -------------------
The Contractor shall ensure that the provisions of this Clause 8 also apply
to all subcontracts or orders made or placed by the Contractor with any one
of its
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subcontractors and that the provisions of this Clause 8 are held good by
the said subcontractors.
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Clause 9 Acceptance Procedure and Actual Date of Delivery
----------------------------------------------------------
9.1 General
- ------------
The Acceptance Procedure falls into the following main events:
- Quality assurance
- Visual Inspection
- System test (known as Site Acceptance)
- Acceptance test (known as System Acceptance)
- TEC tests
Except to the extent otherwise specifically provided in this Contract the
Contractor shall be responsible for the performance of the quality
surveillance, inspections, tests (including repeated tests, if any)
which are required for the completion of Contractor's Scope of
Supply and for the demonstration of its compliance with the
Specifications and other requirements set out in this Contract. For
the purpose of achieving this object the Contractor shall except to
the extent otherwise specifically provided in this Contract be
obliged at its own expense
(i) to carry out the said surveillance and perform and supervise the
tests;
(ii) provide with or place at The Purchaser's disposal, as the case may
be, all equipment, tools, programs (software), labour, supplies, and
services required for the performance of the said surveillance and
tests; and
(iii) to issue reports, keep and provide records, and issue certificates
as to the results of the surveillance and tests. The said
surveillance and all the tests shall be performed at the
Contractor's risk.
All reasonable direct costs to which The Purchaser may be put by any repetition
of an inspection or a test shall be reimbursed by the Contractor on demand and
may be deducted by The Purchaser from any moneys to be paid by The Purchaser
under this Contract.
9.2 Quality Assurance
- ----------------------
The Contractor shall be responsible for carrying out a continuous quality
surveillance in accordance with the quality assurance procedure laid down
in Annex 15 in order to ensure that the Equipment and the Software in all
--
respects will meet all the requirements set out in this Contract.
9.3 System Test (or Site Acceptance Test)
- ------------------------------------------
The Contractor shall be responsible for carrying out a System test for each
site. Representatives of The Purchaser shall be present. The object of the
System test is to establish that each part of the WLL System will fulfil
all the functional and technical requirements set out in this Contract.
As soon as possible after completion of the System test, the Contractor
shall furnish to The Purchaser a report regarding the test. To the extent
an unsuccessful test so requires, the Contractor shall cure the discovered
deviation from the requirements and provide for repeated test.
Prior to the start of any System Acceptance Test the Contractor shall have
proved that the System tests have been successful and have cured to the
satisfaction of The Purchaser the deviation from the requirements or any
other defect or deficiency that
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has been observed in the course of the System test. If the Purchaser agrees
a System Acceptance Test can take place without all System Tests being
complete.
To the extent an unsuccessful test so requires, the Contractor shall cure
the discovered deviation from the requirements and provide for a repeated
test.
At the time when the Contractor has successfully completed a Systems Test
(Site Acceptance Test), the Purchaser shall accept the title and risk for
that part of the network that has been successfully tested. Alternatively,
provision of revenue producing traffic for more than one month will
constitute completion of System Test for a specific site.
9.4 Acceptance Test
- --------------------
When,
(i) the tests and inspections referred to above in this Clause 9 have
demonstrated that all Equipment and Software delivered by the
Contractor complies with all relevant requirements, standards and
Specifications;
(ii) such Equipment and Software as shall be installed by Contractor has
been installed on Premises ready for operation;
(iii) relevant training referred to in Clause 11 has been performed;
(iv) relevant documentation has been delivered in accordance with Clause
11,
and
(v) relevant Test Equipment have been delivered in accordance with
Clause 11, then The Purchaser shall perform an acceptance test
("System Acceptance Test"). The purpose of this Acceptance Test is
to establish whether the Equipment and the Software complies with
all the relevant requirements and Specifications when operated and
otherwise handled by The Purchaser personnel duly trained by the
Contractor utilising the Documentation supplied by the Contractor.
The detailed test procedure and criteria of a successful Acceptance
Test shall be agreed upon in accordance with Clause 7.1.
9.5 Actual Date of Delivery
- ----------------------------
The Acceptance Test shall be deemed to have been successfully performed
when it has been demonstrated that all relevant requirements of this
Contract are met or when the Purchaser has carried commercial traffic for a
period of more than 90 days.
The Actual date of Delivery is when all defects, deficiencies, or
deviations from the requirements discovered in connection with the
Acceptance test, or prior thereto, have been cured to the satisfaction of
The Purchaser, and a successful Acceptance Test has shown that Contractor's
Scope of Supply with respect to WLL System meets all the requirements of
this Contract.
It is recognised by the parties that even after the Acceptance Test, some
minor defects and deficiencies that are non-essential for the proper
operation or
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maintenance of the WLL System might exist. The parties shall by agreement
enter these defects or deficiencies into a list of defects which shall also
include a time schedule for the taking by Contractor of the necessary
corrective measures. The stipulations of this Contract as regards warranty
obligations contained in Clause 10 below shall apply to Contractor's duty
to take such corrective measures.
If the Purchaser fails to make any or all sites available for Installation
of the equipment one hundred and twenty days (120) after the contract
signature, the Purchaser shall by default accept the equipment, for that
part of the network that cannot be installed, and make all relevant
payments applicable to Site and System Acceptance. At this time, title and
risk for the equipment that cannot be installed shall pass from the
Contractor to the Purchaser.
If the System Acceptance Test (required before Actual Date of Delivery can
be achieved) is delayed because of the Purchaser's failure to make sites
"ready for installation", the System Acceptance Test shall be conducted
only on those sites that have passed Site Acceptance.
The Time Schedule and Milestones for the implementation and preparation of
the Sites by the Purchaser shall be defined in Annex 18.
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Clause 10 Warranties and Certain Consequences in the Event of
---------------------------------------------------------------
Breaches of Warranties
----------------------
10.1 Warranty Period
- ----------------------
The Contractor warrants that the WLL System installed and ready for
operation and Spare Parts delivered to The Purchaser, at all times during
a warranty period of eighteen (18) months from the Actual Date of
Delivery of the WLL System will conform to all the requirements set out
in the Specifications. Subject to the provisions of Subclause 10.2 and
10.3 any lack of conformity that is in existence, or will occur, or will
appear prior to or during the warranty period, and any other defect,
deficiency, or malfunction that is due to construction, manufacture,
workmanship, materials, programming, transportation or installation which
appear prior to the expiration of the warranty period shall be considered
such a defect will be covered by Contractors warranty obligations. Design
faults shall be warranted for twenty-four (24) months from the Actual
Date of Delivery.
10.2 Corrective Measures Activity
- -----------------------------------
In case of breach of warranty obligations defined in Subclause 10.1 above
the Contractor shall at its own risk and expense cure the defect by
repair, replacement, modification, adjustment, delivery and installation
of additional Equipment or Software, or performance of additional work or
implement any other adequate corrective measures (all such measures
collectively referred to as "Corrective Measures").
10.3 Warranty of Corrective Measures
- --------------------------------------
The Contractor shall be obliged to take the necessary Corrective Measures
and other actions referred to in this Clause 10 within the shortest
practicable time, however not later than at such a final date for the
Corrective Measures specified by The Purchaser taking into account the
breach to be cured, the work to be done and The Purchaser operational and
maintenance requirements. The Contractor shall at the request of The
Purchaser render such assistance, advice or instruction that in the
Contractor's reasonable opinion would be sufficient to remedy the defect.
If the Contractor or The Purchaser would deem it necessary to arrange
that the Corrective Measures are taken by the Contractor's personnel, the
Contractor shall make such personnel available as fast as possible but no
longer than forty eight (48) hours from the moment when The Purchaser has
dispatched a request.
If the Corrective Measures will be in the form of replacement and The
Purchaser does not have the relevant spare part available the Contractor
shall make the spare part available as soon as the circumstances permit,
but in no case later than forty eight (48) hours from the moment when The
Purchaser has dispatched a request for such a spare part.
Major Service effecting errors shall be corrected within 5 working days
from the moment The Purchaser has dispatched a request for correcting
such an error and the Contractor has acknowledge this request.
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Minor Service effecting errors and Non Service effecting errors shall be
corrected within eight (8) weeks from the moment The Purchaser has
dispatched a request for correcting such an error and the Contractor has
acknowledge this request.
Major, Minor and Non Service Effecting errors are defined in Annex 25.
If the Contractor in spite of proper notification should not be able to
carry out his duties within the agreed period of time, The Purchaser
shall have the right to correct the defects) or have it (them) corrected
by others.
If spare parts purchased by The Purchaser have been used for replacement
of defective parts or any interim repair of the defective parts has been
made, the Contractor shall at his own expense repair the replaced part or
make the final repair thereof, as the case may be, or deliver spare parts
in replacement. The Purchaser shall bear the risk and costs of transport
to the Premises of Contractor and the Contractor shall bear the risk and
costs of the return transport for such defective parts as well as of
repaired parts and parts supplied in replacement.
10.4 Notification of Defects
- ------------------------------
The Purchaser shall notify the Contractor of a defect not later than
thirty (30) days from The Purchaser's discovery thereof. Notice of
defects and requests for Corrective Measures shall, at the discretion of
The Purchaser, be made by fax, letter or hand delivery.
The Purchaser shall also be entitled for the purpose hereof to avail
itself of any guarantee or other security provided by the Contractor in
accordance with this Contract.
10.7 Warranty Regarding Replaced or Corrected Parts
- -----------------------------------------------------
In the event that any part of the WLL System has been corrected,
repaired, replaced, modified or adjusted pursuant to a warranty
obligation, a fresh warranty period of the same duration as set forth in
Subclause 10.1 shall apply to such a part or if replaced to the new part.
This fresh period shall start to run as from the date when The Purchaser
confirms that the repair, replacement, modification or adjustment has
been successfully completed.
10.8 Warranty of Reliability and Maintainability
- --------------------------------------------------
Without prejudice to the provision of Subclause 10.1 above Contractor
warrants that the reliability and maintainability of the WLL System will
comply with the provisions set out in the Specifications, so that the
respective values which can be derived from the parameters contained in
Annex 15 will be obtained during the warranty period of eighteen (18)
months. The compliance with the parameters shall be demonstrated with the
methods set out in Annex 15.
In the event the WLL System does not fulfil the reliability and
maintainability specified in the Specifications the Contractor shall be
obliged to take such Corrective Measures at its own risk and expense as
are necessary to have the WLL System to fulfil the Specifications with
regard to the aforesaid parameters.
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10.9 Warranty of Documentation
- --------------------------------
10.9.1 Sufficient and Adequate for Operation and Maintenance
--------------------------------------------------------------
The Contractor warrants for the technical life time of the WLL
System that the information contained in the Documentation, will
be continuously updated, will be provided in a timely manner and
will be sufficient and adequate for the proper operation and
maintenance of the WLL System.
To any damage or defect caused or revealed by lack of documents
stated in Subclause 10.9.1 the provisions of Subclause 10.2
shall apply, notwithstanding whether the damage or defect
existed or appeared prior to the expiration of the respective
warranty period set out in Subclause 10.1.
10.9.2 Additional Documentation
---------------------------------
The Purchaser may wish to develop certain additional
documentation with respect to the functioning of the WLL System.
The Contractor shall be obliged to check the accuracy and
completeness of such documentation and within a reasonable
period of time from The Purchaser's request to such effect
submit in writing to The Purchaser its approval or disapproval
of the said documents. In the event of disapproval Contractor
shall specify in what respect the documentation is incorrect or
incomplete and what measures should be taken to make the
documentation correct and complete. Any compensation for
Contractor's work referred to in this Subclause 10.9.2 shall for
each case be agreed upon between the parties.
10.10 Spares Warranty
- ----------------------
The Contractor warrants that it is able to supply The Purchaser with
spares, or equivalent replacement parts, or substitute parts with an
equal or greater level of functionality that maintains backwards
compatibility for repair and maintenance of Equipment delivered for a
period up to ten (10) years from Actual Date of Delivery. Such parts
shall be provided at reasonable prices and delivery times.
If the Contractor after the above mentioned period intends to stop the
manufacturing of a type of spares or equivalent replacement parts, the
Contractor shall inform The Purchaser about his intention at least twelve
(12) months in advance.
10.11 Warranty of Right to Use and Reproduce Etc.
- -------------------------------------------------
The Contractor warrants that The Purchaser shall have the right to use
all and any Software as well as of all and any Documentation (and parts
thereof) that the Contractor has supplied without thereby infringing any
right of the Contractor, its subcontractors or employees, or a third
party, or being obliged to pay any compensation to the Contractor, its
subcontractors or employees, or to any third party. The Purchaser's right
to reproduce, change or modify software and documents is limited to the
rights defined in the software license that is granted by the Contractor
for use by The Purchaser in the WLL System delivered by the Contractor to
The Purchaser. This is defined in Annex 26.
10.12 Repairs Warranty
- -----------------------
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The Contractor warrants that it, during a period of at least up to ten
(10) years from Actual Date of Delivery or from the date of
discontinuation of commercial availability of the related equipment,
whichever comes the latest, is capable of and will, at The Purchaser's
request, repair defective material in Equipment delivered under this
Contract.
Contractor warrants that if The Purchaser so wishes it shall enter into
Annual Operations and Maintenance Contract with The Purchaser in forms
set out in Annex 21 and be bound to all conditions there is in the
License included without limitation to conditions as to price and for as
long as The Purchaser requires for a period of up to ten years.
10.13 Warranty for Production of Equipment and Software
- --------------------------------------------------------
The Contractor warrants to ensure the supply to The Purchaser of
Equipment and Software in every respect for upgrading, extensions, and
maintenance of the WLL System at least for a period up to ten (10) years
after the Actual Date of Delivery., at prices and within reasonable
delivery times and on other reasonable conditions. In the event that the
Contractor intends to cease to supply Equipment and Software for the WLL
System, the Contractor shall inform The Purchaser thereof at least twelve
(12) months in advance. The Contractor shall at the request of The
Purchaser -without charge supply all drawings and other technical
information and documents that will be required or of assistance in the
provision, operation and maintenance of the WLL System. Equipment and
Software purchased pursuant to this Subclause 10.13 shall be subject to
the same warranties as set out in this Clause 10.
10.15 Title and Intellectual Property Rights
- ---------------------------------------------
The Contractor warrants that Contractor will deliver to The Purchaser
good title to all of the items falling within Contractor's Scope of
Supply and each such item shall be free of any claim, encumbrance or lien
whatsoever.
For the technical life time of the WLL System the Contractor warrants in
accordance with Clause 16 and furthermore that it shall not be necessary
for The Purchaser to obtain any license or any similar grant under a
patent or any other industrial or intellectual property right for the WLL
System either from the Contractor or any other person in order to be able
to interface the WLL System, with equipment of design, construction or
makes other than the Contractor's or its subcontractors'.
In the event of breach of this warranty the provisions of Clause 16 shall
apply.
10.16 Exceptions from Warranties
- ---------------------------------
The Contractor will have no liability or responsibility arising out of
(i) deviations from the requirements of this Contract that are caused
by such damage to or loss of the WLL System as is accidental and
occurs after the time when the risk of loss and damage has passed
to The Purchaser;
(ii) deviations from requirements of this Contract that are caused by
The Purchaser or any other person for which the Contractor is not
responsible, or any changes, repairs or replacements made by The
Purchaser or said other
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person, provided that The Purchaser or such other person has acted
contrary to instructions contained in manuals or other
documentation provided by the Contractor under this Contract;
(iii) breaches of warranties of which The Purchaser has not notified the
Contractor during the respective warranty period, or before thirty
(30) days have elapsed after-the expiry of the said period
provided, however, that this exemption from liability and
responsibility shall not apply if the Contractor, or any of its
representatives, nevertheless knew of the breach;
(iv) deviations from the requirements of this Contract that are caused
by non-fulfilment of The Purchaser's undertakings of The
Purchaser's Share of Responsibility
Notwithstanding the foregoing of this Subclause 10.16 the Contractor
shall be obliged to cure at the expense of The Purchaser also deviations
from the requirements for which the Contractor has no liability or
responsibility, if The Purchaser so requests.
10.17 Records of Events
- ------------------------
The Purchaser will during the warranty period in Subclause 10.1 keep
records of events that might be of importance for determining the type of
defect, the time of its occurrence, the notification and curing thereof
etc. These records shall prevail unless proved to be inaccurate in any
specific respect. The Purchaser shall keep the records available to the
Contractor on request.
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Clause 11 - Delivery
--------------------
11.1 Equipment and Software
- -----------------------------
11.1.1 Contractual Date of Delivery
-----------------------------------
The WLL System shall have been delivered and successfully tested
according to Subclauses 9.4 on the date set out in the Time
Schedule (Annex 18). The said date is in this Contract referred to
as the Contractual Date of Delivery.
The schedule and quantities of material shown in Annex 18 is an
estimate and is not a binding commitment by The Purchaser. The
Purchaser considers this list to be the Tender's minimum delivery
obligation.
11.1.2 Passing of Title
-----------------------
The title to as well as the risk of damage to and loss of the WLL
System, for that part of the system in question, shall pass to The
Purchaser on completion of a successful Site Acceptance test.
The Purchaser shall be responsible for the operation and
maintenance of the WLL System from the date of Site Acceptance.
This shall not limit or compromise any claim which The Purchaser
may have against the Contractor under any warranty or other
provision of the Contract. Prior to the Site Acceptance, The
Purchaser's responsibility for the operation of the WLL System
shall be confined to such responsibility as follows from The
Purchaser's performance of the tests referred to in Clause 9.
11.1.3 Software
---------------
11.1.3.1
The Purchaser is granted a non-exclusive perpetual restricted royalty-
free license to use the Software, but only in conjunction with The
Purchaser's use and maintenance of WLL System in accordance with this
Contract, and not otherwise.
Use of this Software shall not include the right to copy, reproduce
and modify the software.
The Purchaser agrees that the Software provided to it by the
Contractor under this Contract or any renewals, extensions, or
expansions thereof, or in implementation of any of the foregoing,
shall, as between the parties hereto, be treated as the exclusive
property of the Contractor and as proprietary and a trade secret of
Contractor. The Purchaser shall:
(a) not provide or make the Software or any portions or aspects
thereof available to any person except to its employees or agents
on a "need to know" basis;
(b) not modify the Software without the prior written consent of
Contractor.
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If Contractor modifies or changes the Software to permit
additional features or services, such Software will at The
Purchaser request be made available to The Purchaser on prices
based on a predetermined methodology. In any case the Contractor
shall provide all such features and services free of charge
within the first twelve 12 months from the date of signing the
Contract.
Nothing in this Clause shall limit Contractor's warranties in
Clause 10.
The Purchaser and any successor to The Purchaser's title to the
WLL System shall have the right without further consent of
Contractor to assign this license to any other party which
acquires the WLL System, provided any such other party (either
assignee or sublicensee) agrees in writing to abide by the terms
and conditions of this license.
Notwithstanding anything in this Contract to the contrary, it is
understood that The Purchaser is receiving no title or ownership
rights to such Software, which rights shall remain with
Contractor.
11.1.3.2 As applicable and generally available to Contractor's customers,
Contractor shall license to The Purchaser a copy of any diagnostic
software utilized by Contractor with respect to the installation and
maintenance services of the Software and System.
11.1.3.3 The Contractor shall offer and The Purchaser at its discretion may
accept a new Software Release containing new facilities on a regular
basis (at least once per year) for a period of ten (10) years after
Actual Delivery Date of the Contractor's Scope of Supply. The new
release shall indicate what modifications are required on
implementation to the Software and hardware used by The Purchaser. In
the event that The Purchaser chooses not to accept the installation
of new Software Releases, the Contractor shall continue to support
the Latest Version of Software including the correction of any faults
or bugs.
11.1.3.4 During a period of five (5) years after acceptance of a version of
Software, the Contractor shall provide without charge at The
Purchaser's request, maintenance releases correcting software faults
identified in the Latest Version by The Purchaser, or by the
Contractor or by its other customers.
11.1.3.5 New releases and maintenance releases shall be subject to acceptance
tests to be agreed upon by the parties.
11.1.3.6 Unless the parties have agreed otherwise in writing, new releases and
maintenance releases shall not alter the applications or the uses to
which the System or parts of the System can be put, whether or not in
conjunction with existing files, and shall in all respects be
compatible with the Latest Version of the Software. Software updates
shall be backward compatible to existing hardware, features, and
functionalities, unless mutually agreed otherwise.
11.1.3.7 The Contractor shall fully disclose and supply and keep supplied in
confidence to The Purchaser the Latest Version of all Documentation
and the Software, with relevant information about their release
status.
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11.1.3.8 The Contractor shall ensure that the Documentation supplied to The
Purchaser fully describes the Software accepted and licensed for the
System under Clause 11.1.3.1 of this Contract. Documentation will
fully describe new features, functionalities, errors corrected and
new errors detected.
11.1.3.9 At the request of The Purchaser, the Contractor shall provide all
necessary interfaces, interface specifications and standard protocols
for systems or products provided by The Purchaser or other parties,
including the physical components of such interfaces, and the proper
functioning of these interfaces, and all relevant documentation.
11.1.3.10 If the System delivered by the Contractor fails to function properly
in conjunction with a third party product in use by The Purchaser,
the Contractor shall, at the request of The Purchaser consult with
the relevant contractors and cooperate closely with them in tracing
and repairing the cause of the malfunction.
11.1.3.11 In the event that third party Software supplied by the Contractor
under this Contract becomes unavailable or essential modifications
cannot be carried out for any reason whatsoever, the Contractor shall
at no charge to The Purchaser, procure and supply to The Purchaser
suitable alternative third party Software to enable the continued
operation and Contractor's Scope of Supply ability of the System.
11.1.3.12 In the situations referred to in Sub-clause 11.1.3.11 The Purchaser
shall have an unlimited license to use the Software and shall have
the right to make modifications to the Software (or have them made)
only for use with the System.
The obligations of The Purchaser under this Clause shall survive the
termination of this Contract for any reason.
11.2 Turn-key Services
- ------------------------
The turn-key services of the WLL System shall be done to the satisfaction
of The Purchaser.
No service or work by the Contractor may, without The Purchaser's written
approval thereof, commence earlier than on the date of start of service
set out in the Time Schedule. The scope of work regarding Turn-key
services is set out in Annex 9.
11.3 Training
- ---------------
The Contractor shall provide The Purchaser's personnel with the training
required for the proper operation and maintenance of the WLL System. The
scope of Contractor's undertaking in this respect, as well as the terms
and other conditions applicable thereto are set out in Annex 10.
11.4 Documentation
- --------------------
The Contractor shall have provided The Purchaser with the Documentation
set out in Annex 11 on or before the dates set out in the Time Schedule.
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11.5 Spare Parts
- ------------------
The Contractor shall have provided The Purchaser with the spare parts set
out in Annex 12 on the dates set out in the Time Schedule.
11.6 Test Equipment
- ---------------------
The Test Equipment set out in Annex 13 shall have been delivered at
Premises on or before the dates set forth in the Time Schedule.
11.7 Marking
- --------------
All Equipment, parts thereof, and spare parts shall be clearly and
durably marked with the Contractor's code number and - if any - status
revision which shall make it possible to identify all Equipment, parts
thereof and spare parts for the purpose of warranty. The Contractor shall
well in advance before dispatch of the Equipment or spare parts furnish
The Purchaser with a packing list indicating the Contractor's code
numbers applicable to the respective parts.
11.8 Packing
- --------------
All Equipment and Spare parts shall be packed in a manner that is
suitable for the transportation and for the storing in The Purchaser's
premises.
11.9 Order Procedure
- ----------------------
The deliveries shall be executed in accordance with the provisions stated
in Annex 14. In order to state the extent of each delivery a suborder
specification shall be sent to the Contractor as a firm order. The
suborder specifications shall contain information regarding quantities of
Equipment and Spare Parts to be delivered, delivery dates, delivery
address and invoice address.
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Clause 12 - Liquidated Damages in the Event of Delays in Delivery
-----------------------------------------------------------------
12.1 General
- ----------------
The parties acknowledge that the Contractor's fulfillment of its undertakings
set out in the Time Schedule (Annex 18) is of utmost importance to The
Purchaser. The parties also acknowledge that delays will cause severe damage to
The Purchaser and that such damage may, from a practical point of view, be
difficult to quantify. In the event of delay, the parties agree that The
Purchaser shall receive liquidated damages in accordance with the following
provisions without The Purchaser being obligated to prove that it has suffered
damage or to prove the amount of damage. The Purchaser's right to receive
liquidated damages shall be without prejudice to any other right that it may
have under this Contract or otherwise.
Any liquidated damages to which The Purchaser is entitled shall be paid by the
Contractor upon demand and The Purchaser shall be entitled to wholly or partly
set off liquidated damages against any amount that The Purchaser shall pay to
the Contractor under this Contract.
12.1.1 Liquidated Damages for Delay
- -------------------------------------
Should the service start date of the System, or any material portion of
the System be delayed for any reason except for events excepted under
this Contract, where the delay is fully or substantially attributable
to the fault of default of the Contractor (including its sub-
contractors), Contractor shall pay liquidated damages equal to one
percent (1%) of the value of that part of the network that The
Purchaser is unable to use for each week or fraction of a week of delay
beyond Actual Date of Delivery as specified in Annex 18. A grace period
of two weeks shall be given before the first week of delay is counted.
Upon the lapse of the second week of delay, however, the full delay
shall be counted in computing the liquidated damages.
12.2 WLL System, Training, Documentation, Spare Parts and Test Instruments
- ------------------------------------------------------------------------------
In the event that Contractor does not fulfil any of its undertakings
with respect to WLL System, training, Documentation, spare parts or
test instruments on the respective dates set out in the Time Schedule,
the Contractor shall pay liquidated damages to The Purchaser for each
whole day of delay amounting to (0.1%) of the respective Contract
Price.
Maximum liquidated damages according to these Clauses 12.1.1 and 12.2
shall in no case exceed ten per cent (10 %) of the Total Contract
Price.
12.3 Delays Caused by The Purchaser or Force Majeure Events
- ---------------------------------------------------------------
The Purchaser shall not be entitled to liquidated damages according to
the above provisions of this Clause 12 to the extent the delay in
question is caused by failure solely on part of The Purchaser to fulfil
any part of its Share of Responsibility or by a Force Majeure Event
defined in Clause 17.
In the event that The Purchaser delays in carrying out any of its
undertakings under this Contract the Contractor shall nevertheless be
obliged to fulfil its obligations within the time agreed on, to the
extent that the fulfilment of The Purchaser's obligations is not
necessary to enable the Contractor or its subcontractors and suppliers
to fulfil their obligations. In the event that it can reasonably be
assumed
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that the Contractor will be delayed with respect to any of its
undertakings under this Contract, The Purchaser shall have the right to
postpone the performance of any of its undertakings to the extent such
performance is not necessary to enable the Contractor to fulfil its
obligations.
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Clause 13 - Prices
------------------
13.1 The Contract Prices given shall be fixed until 18th August 2002 and shall
include obligations of Contractor hereunder. The Contract Prices for the
WLL System and work and services to be provided by the Contractor under
this Contract shall be the prices set out in Annex 5. The prices
-------
represent the Contract Prices for the respective items and the sum of all
the Contract Prices constitutes the total price of the Contractor's Scope
of Supply. This total price is called the Total Contract Price.
--------------------
13.2 The prices shall be CIP Colombo.
13.3 Change of any law relating to the Contract items, except those affecting
the customs duties, import taxes, VAT, shall not affect the price of
these items.
13.5 All sums of money stated or referred to in this Contract are exclusive of
VAT. The Purchaser shall only pay VAT, if applicable in Sri Lanka.
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Clause 14 - Payments
--------------------
14.1 General
- --------------
The Purchaser shall pay to the Contractor the Contract Prices referred
to in Clause 13 above in accordance with the following provisions. The
terms of payments are as follows:
Phase One - Infrastructure, Network Management, Subscriber Terminals
required for Acceptance Testing, and Services
. 20% on signing of the contract
. 5% on Site Acceptance for the completion of each site (9 Sites)
. 30% on Actual date of Delivery (System Acceptance)
. 5% 6 months after the Actual date of Delivery
Phase Two - Subscriber Terminals for Commercial Service
. 20% on signing of the contract
. 40% on delivery of equipment
. 40% 90 days after delivery of equipment
Phase Three - Subscriber Terminals for Commercial Service
. 20% on signing of the contract
. 40% on delivery of equipment
. 40% 90 days after delivery of equipment
Phase Four - Subscriber Terminals for Commercial Service
. 20% on signing of the contract
. 40% on delivery of equipment
. 40% 90 days after delivery of equipment
A bridge finance option will be provided to Suntel for all payments beyond the
Contract signature payment (20%) for 1999. This option will allow Suntel to
remit only the interest due (as defined in Clause 14.5) on the first day of the
month following the date of payment due for all outstanding payments. The
payment of the principle will be due on January 5th, 2000 for all payments
covered through bridge financing.
14.2 Terms and Conditions
- ---------------------------
Orders shall be placed through a single "purchase order" issued by buyer.
14.3 Bank Guarantee
- ---------------------
The Contractor is required to put up a Bank Guarantee equal in Value to all
payments made before Systems Acceptance
14.4 Invoicing
- ----------------
Payment shall be effected by The Purchaser's receipt of the Contractor's
invoice in triplicate for the amount in question that The Purchaser will
approve of, provided, however, that The Purchaser shall not be obliged to
make any payment earlier than
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the date following from sub-clause 14.1 above. Any value added tax, or
other taxes to which Contractor is subject to within Sri Lanka and which
shall be paid by The Purchaser under this Contract shall be invoiced as a
separate item.
Invoice address:
Attn: Accounts Payable
Airspan Communications Limited
Oxford Road, Uxbridge
Middlesex
United Kingdom
14.5 Interest
- --------------
The rate per annum of the interest referred to in Subclause 26.4 shall be
defined during negotiations.
14.6 Keeping Records
- ---------------------
14.6.1 For all items specified. in this Contract, the Contractor
shall keep and maintain such books, records, vouchers and
accounts with respect to its billing of chase items to The
Purchaser for ten (10) years tram the date of Final
Acceptance.
14.6.2 For any item quoted can a cost incurred basis, the
Contractor shall keep and maintain such books, records.
vouchers and accounts of all costs with respect to the
engineering provision and installation of facilities of the
System for ten (10) years from the date of fulfillment of
a11 Contractor's Scope of Supply obligations.
14.6.3 The Contractor shall obtain from his Subcontractors such
supporting rewords for other than the cost of feed cost
items, subject to the conditions of Sub-Clause 14.6.2, as
flay be reasonably required, and shall maintain such records
for a period of ten (10) years from the date of fulfillment
of all costs required to be kept, maintained and obtained
pursuant to this Clause.
14.6.4 The Contractor shall afford the Purchaser the right to
review the said books, records, vouchers and accounts of all
costs required to be kept, maintained and obtained pursuant
to this Clause.
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Clause 15 - Liability for Accidents, Damage and Loss
----------------------------------------------------
15.1 Liability Regarding Before Passing of Risk
- -------------------------------------------------
Without prejudice to provision of Clause 5 any damage to the WLL
System or Documentation supplied or to be supplied by the Contractor
occurring before the relevant time according to Clause 11 when the
risk of damage to or loss of the WLL System and Documentation passes
to The Purchaser shall be remedied by the Contractor at its own
expense, provided that the damage or loss has not been caused by
negligent act or omission by The Purchaser or anybody employed by The
Purchaser (other than the Contractor or its Subcontractors). If the
damage or loss has been so caused by The Purchaser the Contractor
shall nevertheless, if The Purchaser so request, remedy the damage and
loss, at the expense of The Purchaser at a reasonable price to be
agreed between the Contractor and The Purchaser.
15.2 Other Indemnification
- ----------------------------
The Contractor shall indemnify and hold The Purchaser and its
officers, servants and employees harmless from any loss, damage,
liability or expense on account of damage to property and injury,
including death, to all persons, including but not limited to
employees of the Contractor, arising out of or resulting from any act
or omission of the Contractor, its Subcontractors, or anybody employed
by the Contractor or its Subcontractors, or anybody else for which the
Contractor or its Subcontractors is responsible. With respect to the
Contractor's Scope of Supply this Subclause 15.2 shall apply only
after the risk of damage or loss has passed to The Purchaser; until
that time Subclause 15.1 shall prevail.
15.3 Fraud or Gross Misconduct
- --------------------------------
Without prejudice to any further responsibilities or liabilities of
the Contractor under law, if the Contractor, or any of its
Subcontractors, or anybody employed by the Contractor or its
Subcontractors, or anybody else for which the Contractor or its
Subcontractors is responsible, has been guilty of fraud, actions
against good faith, or "Gross Misconduct" the Contractor shall -
notwithstanding any provision of this Contract to the contrary - be
liable for any loss or damage (whether direct, indirect, incidental or
consequential) suffered by as a result thereof, whether it be defects
(as defined in Clause 10) in, damage to, or loss of the Contractor's
Scope of Supply, or injuries to persons, or any other breach of this
Contract.
Contractor's liability for the said defects shall extend also to
defects which have not appeared prior to the expiration of the
warranty period in question and to defects which have not for any
other reason been notified by The Purchaser in accordance with the
provisions of Clause 10. "Gross Misconduct" means any act or omission
implying neglect to take into consideration such serious effects as a
careful Contractor normally would have been able to foresee, or a
deliberate disregard of the consequences of such an act or omission.
15.4 Limitation of The Purchaser's Liability
- ----------------------------------------------
The Purchaser shall not be liable for any damage to or loss of the WLL
System and documentation, save as to the extent provided for in
Subclause 15.1.
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The Purchaser shall not be liable for any direct, indirect, incidental
or consequential damage or loss, including loss of income or loss of
profit, suffered by the Contractor or its subcontractors as a result
of such a damage, loss or breach or as a result of any breach by The
Purchaser of this Contract, unless expressly otherwise provided for in
this Contract.
15.5 Obligations to Limit Damages and Loss
- -----------------------------------------------
The party suffering loss or damage shall always be obliged to take all
reasonable measures to mitigate the damage or loss occurred.
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Clause 16 - Patents and Other Intellectual
and Industrial Property Rights
------------------------------
The Contractor undertakes to fully indemnify and hold The Purchaser, its
officers, employees, representatives and customers harmless from and fully
indemnify them for any and all cost expenses, damages and liabilities therefore
against any claim for an infringement or alleged infringement of any
intellectual property right relating to use of the Equipment and Software
delivered under this Contract.
In particular the Contractor undertakes to defend at its own expense any claim,
suit or proceeding based upon any claim that the Contractor's Scope of Supply,
or the use or maintenance thereof infringes any licence or any right of a third
person to patent, copyright, design or any intellectual or industrial property
rights or application therefore, as well as to hold The Purchaser, its officers,
employees, and representatives harmless from and fully indemnify them for any
and all costs, expenses, damages and liabilities therefor. In the event that the
WLL System or the use of the WLL System or documentation would be held in a suit
to constitute infringement and its further use would be enjoined, the Contractor
will promptly at its own expense either
(i) procure for The Purchaser the right to continue the use, or
(ii) replace or modify the WLL System, or Documentation, so that it becomes non-
infringing while staying fully compliant with the Specifications. Any such
replacement or modification shall, however, be approved of by The Purchaser
in advance, which approval shall not be unreasonably withheld. The
Purchaser shall without delay inform the Contractor of any claim that has
come to the notice of The Purchaser and shall proceed in dealing with such
claims in agreement with the Contractor.
The Purchaser shall be at all times kept informed by Contractor of the
institution or assertion of any IPR claims or proceedings and shall without
prejudice to its rights be entitled but not obligated to participate in such
claims, suits or proceedings.
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Clause 17 - Force Majeure
-------------------------
Should Force Majeure Event occur after the signing of this Contract which
prevents the performance of any obligation of either party on the date or dates
provided for in this Contract, the performance of the obligation may be
postponed for such time, on a day by day basis, as the performance necessarily
has had to be delayed on account thereof, it being understood that such
postponement shall not be deemed a change of the Time Schedule or of any day
defined by reference to the Time Schedule.
The term of Force Majeure Event shall mean events such as war or warlike
hostilities, mobilisation or general military call-up, acts of Government
including refusal issue of required export licenses (but shall exclude failure
to obtain security clearance for own employees), civil war, revolution,
rebellion, insurrection or riots, sabotage and any strike or labour action and
other circumstances of a similar exceptional character and farreaching
influence, provided that any such event is beyond the control of the party, its
subcontractors and suppliers. It is expressly understood that no circumstance
shall be considered Force Majeure Event which the party or the subcontractor or
the supplier invoking the event of Force Majeure reasonably ought to have taken
into account at the date of signing of this Contract.
Immediately upon becoming aware of the commencement of any Force Majeure Event
causing a delay, and immediately upon becoming aware of the termination of such
an event of Force Majeure, the party desiring to invoke it as cause for
postponement shall advise the other party of the said event, failing which its
right to demand an extension of the time of performance shall be definitely
barred. To avail itself of the right to invoke any Force Majeure Event as a
cause for postponement the party shall also as soon as practicable after the
termination of the event submit to the other party reasonable proof of the
nature of such Force Majeure Event and its effect upon the performance
timetable. Each parties shall make all reasonable efforts to reduce to a minimum
and mitigate the effect of any delay occasioned by a Force Majeure Event. The
obligation of Contractor in this respect shall particularly include the
repairing or causing the repair of such damage as may have been done to its or
its subcontractor's manufacturing facilities or to Contractor's Scope of Supply.
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Clause 18 - Optional Orders
---------------------------
18.1 WLL System
- ---------------
The Purchaser shall during a period of time commencing on the date of signing of
this Contract by both parties up to 3 years or the end of year 2002 (whichever
the latest) have the right (but not the obligation) to order on fair and
reasonable terms from the Contractor Equipment, Software, Spare Parts,
Documentation and Services set out in Annexes 7, 8, 9, 10, 11, 12 and 13.
18.2 Other Terms and Conditions
- -------------------------------
In addition to the terms and conditions referred to in Subclauses 18.1 - 18.3
(inclusive) the provisions contained in this Contract including the Annexes
thereto (as amended by the parties subsequent to the conclusion of this
Contract) shall apply between the parties.
18.3 Exercise of Option
- -----------------------
The options referred to in this Clause 18 shall be exercised by a written
numbered order to the Contractor signed by one or more authorised officers or
representatives of The Purchaser. Such order shall be lodged with the Contractor
not later than on the date referred in Subclause 18.1 and shall be accompanied
by a proposed time schedule.
It is incumbent upon Contractor to acknowledge receipt of the order not later
than thirty (30) days thereafter.
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Clause 19 - Network and Maintenance
-----------------------------------
The Contractor undertakes to supply to The Purchaser, Network and Maintenance of
the WLL System in accordance with the prices and conditions set out in Annex 21
during a period of five (5) years from expiry of the warranty period.
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CLAUSE 20 - Non Waiver
----------------------
The failure of either party to insist upon strict adherence to any term or
condition of this Contract on any occasion shall not be considered a waiver of
any right thereafter to insist upon strict adherence to that term or condition
or any other term or condition of this Contract.
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Clause 21 - Language
--------------------
All manuals, other documentation and training to be provided by Contractor under
this Contract as well as all notices and other communications between the
parties hereunder shall be in English unless the parties in any specific case
agree otherwise.
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Clause 22 - The Purchaser's Approval
------------------------------------
To the extent provided in the Contract, the Specifications, design,
calculations, construction, materials and technical arrangements used in the WLL
System may be subject to The Purchaser's approval. No such approval shall affect
the Contractor's obligations hereunder or at any time limit The Purchaser's
right to demand that the Contractor's Scope of Supply in all respects shall
satisfy the Specifications and other requirements of the Contract.
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Clause 23 - Compliance with the Law
-----------------------------------
The Contractor and its subcontractors shall abide by all applicable laws,
regulations and ordinances of the Country of Sweden and shall obtain from
competent authorities all necessary permits, licenses, and authorisations
required to complete the Contractor's Scope of Supply. The Contractor and its
Subcontractors shall establish such standards and procedures on the Premises as
are necessary to comply with regulations governing employment with special
reference to safety regulations issued from time to time by any competent
authority in Sri Lanka or by The Purchaser. If it comes to the knowledge of The
Purchaser that any such regulations are not being observed, it shall immediately
inform the Contractor and, in such event, The Purchaser shall be entitled to
refuse admission to the Premises of any person who is responsible for such
contravention. Before commencing installation, the Contractor shall give The
Purchaser a full description of those risks or dangerous procedures which may
be, respectively, encountered or utilised in the course of installation.
If and to the extent requested to do so, The Purchaser will assist the
Contractor in obtaining the required information of any such laws, regulations
and ordinances, including safety regulations, as are referred to in this Clause
23. It is recognised by the parties that the presence on the Premises of any of
the Contractor's or its subcontractor's personnel might require the approval of
The Purchaser or any other authority and that such personnel might also be
required to undertake an obligation to observe secrecy with respect to
information received or obtained when present on the Premises and to sign
documents to such an effect. The Purchaser shall not be responsible for any
acts, default or unsatisfactory performance, neglect or omissions of the
Contractor that violate the laws, statutes, orders, rules, decrees, or
regulations of any jurisdiction in which the Contractor's Scope of Supply
obligations are carried out.
In any event, if any third party should nevertheless make a direct claim against
The Purchaser because of such act, default, unsatisfactory performance or
omission of Contractor, The Purchaser shall notify the Contractor as soon as
possible, and the Contractor shall be entitled to undertake and manage any legal
proceedings involving the Contractor. The Contractor shall upon the request of
The Purchaser assist The Purchaser in defending themselves against such claim
and indemnify and hold The Purchaser harmless against any and all costs,
charges, expenses, compensations and other payments made by The Purchaser in
respect of such third party claim.
The Contractor shall be deemed to have satisfied itself that it has obtained all
necessary information with respect to the Contractor's Scope of Supply and the
Contract including but not limited to the matters such as: (i) fees, pilotage
and any dues payable to port authorities, (ii) conditions affecting labour
including Contractor's Scope of Supply permits, and (iii) rules and regulations
of governments and/or port authorities.
The Contractor shall be deemed to have fully examined and independently verified
all documents and drawings, specifications, schedules, terms and conditions of
the Order, regulations and other information in relation to the Contract and to
have fully understood and satisfied himself as to all information which is
relevant as to the risks whether political or otherwise, contingencies, costs,
and other circumstances which could affect the Contract. The Purchaser, its
servants, and agents shall have no liability in law or equity or in Contract or
in tort or pertinent to any other cause of action with respect to any such
information, risks, contingencies or other circumstances.
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Clause 24 - Assignment and Sub-contracted Contractor's Scope of Supply
----------------------------------------------------------------------
The Purchaser may assign this Contract or any of its rights or obligations
hereunder to any corporation being the successor of The Purchaser.
24.1 The Contractor may also, without prior written consent of The Purchaser,
assign a contract, sub-contract, or any significant part of the
Contractor's Scope of Supply/. In any event, the Contractor shall not be
relieved from responsibility under this Contract for such parts of the
Contractor's Scope of Supply that are sub-contracted, and the Contractor
shall be responsible and liable for the acts, defaults or unsatisfactory
performance of any Subcontractor or its employees, servants and agents, as
fully as if they were the acts or defaults of the Contractor or of the
Contractor's employees, servants and agents.
24.2 The Contractor shall ensure that any sub-contracts entered into by the
Contractor shall contain such provisions of this Contract as should be made
applicable to such sub-contracts.
24.3 Any assignment, mortgage, charge, encumbrance or sub-contract in
contravention of this Clause shall, as against The Purchaser, be void and
of no effect.
24.4 The Contractor shall protect, defend, indemnify and keep indemnified The
Purchaser against all claims, demands, actions, suits, proceedings, writs,
judgements, orders, decrees, damages, losses and expenses suffered or
incurred by The Purchaser arising out of or related to any assignment,
mortgage, charge, encumbrance or sub-contract, whether permitted or not.
24.5 The assignment of any part of the Contractor's Scope of Supply to any
Subcontractors will be performed according to the Contract and will not
affect the Contractor's Scope of Supply.
24.6 The Parties agree that no contractual relationship is created between The
Purchaser and any of the Contractors Subcontractors, suppliers or agents.
The Contractor shall indemnify The Purchaser for any expenses or damages
caused to The Purchaser as a result of any claim or demand against The
Purchaser by any Subcontractor, supplier or agent.
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CLAUSE 25 - Termination
-----------------------
This Contract, or any individual order under this Contract, may be terminated at
any time by written notice from The Purchaser. Such notice shall specify the
effective date of termination and the actions to be taken by the Contractor in
connection with the termination. If such termination is not due to the
Contractor's failure to fulfil his obligations, which would entitle The
Purchaser to cancel the Contract, or any part of it, The Purchaser shall pay a
proportional price for all work in progress, equipment on order for the
Purchaser, equipment that has been manufactured for the Purchaser and resides in
finished goods, work performed, for material, administration, and profit on the
amount of work performed under the Contract, and refund any other direct cost
incurred due the termination, deducting amounts previously paid. The title to
the work performed under this Contract prior to the termination shall vest in
The Purchaser upon payment of the proportional price.
The compensation to be paid to the Contractor under this Clause shall be tried
to be determined by negotiations, however, the amount shall under no
circumstances exceed the Contract Price.
In case of termination, the Contractor shall make every effort to reduce the
costs incurred.
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Clause 26 Cancellation
----------------------
26.1 General
- ------------
Without prejudice to any other rights or remedies The Purchaser may have,
The Purchaser may cancel this Contract according to the following
provisions. The Purchaser may also cancel an order under this Contract,
without thereby cancelling any part of this Contract, according to the same
provisions.
26.2 Cancellation Due to the Contractor
- ---------------------------------------
The Purchaser may cancel this Contract, in its entirety or with respect to any
portion thereof or an order under the Contract, with immediate effect by written
notice to that effect:
(i) Insolvency etc.
--------------
if Contractor has become voluntarily or involuntarily declared
bankrupt or otherwise is insolvent or has entered into liquidation or
has enter into composition proceedings with its creditors or if the
Contractor has taken any action in furtherance of any such
proceedings or has disposed or contemplates to dispose of all or the
major part of its assets;
(ii) Material breach of Contract
---------------------------
if the Contractor commits a material breach of any of its obligations
under this Contract other than delay in the performance of its
undertaking referred to in (iii) below and fails to cure such breach
within thirty (30) days after having received The Purchaser's notice
thereof;
(iii) Delays
------
if due to any circumstance for which the Contractor or any of its
subcontractors or suppliers are responsible the Actual Date of
Delivery is delayed for more than an aggregate period of ninety (90)
days;
(iv) Non-compliance with the requirements
------------------------------------
if the Contractor's Scope of Supply in any important respect does not
meet the requirements set out in this Contract and the Contractor has
not cured the defect within the times specified in the Contract, or,
if no specification is made, within a reasonable time, such
reasonable time not to exceed thirty (30) days and fails to cure the
defect within an additional reasonable period of time, not exceeding
sixty (60) days unless otherwise agreed by The Purchaser, from
receipt of The Purchaser's notice to that effect as has been fixed by
The Purchaser in said notice.
26.3 Cancellation With Reference to Force Majeure etc.
------------------------------------------------
The Purchaser may cancel this Contract with immediate effect by written
notice if any Force Majeure Event according to Clause 17 (whether
preventing the Contractor or The Purchaser) causes the Actual Date of
Delivery to be delayed or can reasonably be anticipated to be delayed for
more than two hundred and twenty (150) days. The Purchaser shall exercise
its right to cancel the Contract according to this Subclause 26.3 not later
than sixty (60) days after having received the Contractor's notice of the
of the Force Majeure Event in question.
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26.4 Consequences of Cancellation According to 26.2
----------------------------------------------
In the event that The Purchaser cancels the Contract according to any of
the provisions of Subclause 26.2 the Contractor shall immediately upon The
Purchaser's demand refund to The Purchaser all amounts paid by The
Purchaser under this Contract prior to the effective date of the
cancellation plus interest on the said amounts from the respective dates of
The Purchaser's payment up to the date of refundment (all dates inclusive)
at the rate set out in Subclause 14.5. The Purchaser shall make available
to the Contractor for restitution, dismantling and removal at the
Contractor's own risk and expense what the Contractor may have delivered to
The Purchaser under this Contract. This Contract shall cease to have any
force or effect except that Contractor shall hold The Purchaser harmless in
respect of all direct costs loss and damage suffered by The Purchaser on
account of such a cancellation, including without limitation The
Purchaser's total costs for completing all the Contractor's undertakings,
whether performed by The Purchaser itself or other contractors engaged by
The Purchaser for the purpose, to the extent these costs plus any
compensation to the Contractor as set forth below in this Subclause 26.4
exceed the Total Contract Price according to this Contract. The Purchaser
shall make all reasonable efforts to mitigate such loss, damage and costs.
In the event that The Purchaser decides to complete the WLL System or parts
thereof either itself or by engaging other contractors, The Purchaser shall
have the right to acquire - against compensation and on terms and
conditions with respect to warranties and other matters that are reasonable
in the circumstances - such Equipment, Software, Documentation, services
and other items within the Contractor's Scope of Supply as well as the
Contractor's rights under subcontracts and supply agreements as can be used
for the completion, operation and maintenance of the WLL System.
26.5 Consequences of Cancellation According to 26.3
----------------------------------------------
In the event that The Purchaser cancels the Contract pursuant to Subclause
26.3 the Contract shall cease to have any force or effect and the
Contractor shall immediately upon The Purchaser's demand refund to The
Purchaser all amounts paid by The Purchaser under this Contract. The
Purchaser shall make available to the Contractor for restitution,
dismantling and removal at the Contractor's own risk and expense what the
Contractor has delivered to The Purchaser under this Contract prior to the
effective date of the cancellation.
In the event that The Purchaser decides to complete the WLL System or parts
thereof either itself or by engaging other contractors, The Purchaser shall
have the right to acquire against a compensation and on terms and
conditions with respect to warranties and other matters that are reasonable
in the circumstances - such Equipment, Software, documentation, services
and other items within the Contractor's Scope of Supply as can be used for
the completion, operation and maintenance of the WLL System.
The Purchaser may require the Contractor to promptly remove at its own
expense any and all of Equipment, or parts thereof, that may have been
delivered to or installed and not acquired by The Purchaser.
26.6 Ownership to Equipment etc.
---------------------------
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The ownership to such Equipment, Software, materials, Documentation and
work within the Contractor's Scope of Supply for which the Contractor is
entitled to compensation according to Subclauses 26.4 or 26.5 shall
immediately upon the cancellation pass to or notwithstanding the
cancellation rest with The Purchaser, as the case may be. The Purchaser
shall be free to use the same without incurring any liability to the
Contractor or any third party. It is agreed that The Purchaser may exercise
its rights to cancel the Contract, or an order under the Contract
notwithstanding whether Equipment, Software, documentation and work
installed, delivered, and performed by the Contractor can be restituted in
substantially the same condition as delivered by the Contractor. In the
event of cancellation pursuant to Subclause 26.2, Equipment, Software and
Documentation of which the value has decreased due to negligence on part of
The Purchaser or anybody for which The Purchaser is responsible shall be
acquired by The Purchaser according to provisions agreed upon by the
parties.
26.7 Survival of Clauses
-------------------
The provisions of Subclause 11.1.3 and Clause 16, to the extent applicable,
and of Clause 29, 30 and 31 shall survive the cancellation or termination
of this Contract.
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Clause 27 - Entire Agreement. Modifications of the Contract
-----------------------------------------------------------
The parties state that with respect to the subject matter hereof this Contract
Document and the Annexes, thereto, which form an integral part of the Contract,
constitute the sole and exclusive understanding of the parties in respect of the
subject matter hereof and supersede all prior agreements, arrangements or
understandings relating to the subject matter, including any bid, tender,
quotation, offer or proposal, general sales conditions or terms or provisions
that the Contractor has submitted.
No change or modification of this Contract may be made except in writing and
executed by the respective duly authorised representatives of each of the
parties hereto.
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Clause 28 - Order of Priority
-----------------------------
In the event of any discrepancy between any data, stipulation or provision given
in any of the Clauses of this main Contract Document, on the one hand, and data,
stipulation or provision given in any of the Annexes, on the other hand, the
data, stipulation or provision contained in a Clause of this Contract Document
shall prevail. In the event of any discrepancy between the Technical
Specifications and the Product Description the Technical Specification shall
prevail over the Product Description, except to such an extent as the Product
Description is more advantageous to The Purchaser, in which latter case the
Product Description shall prevail.
To the extent the Technical Specifications or the Product Description contains
something that is not dealt with in any provisions of the Clauses of this
Contract Document, the Technical Specifications and the Product Description, as
the case may be, shall prevail notwithstanding the foregoing.
To the extent the Technical Specifications or the Product Description contains
anything that is not dealt with in the other of them, the one containing the
data, stipulation, provision or whatever might be concerned shall prevail over
the other.
The Purchaser shall have the right to decide what document, data, stipulation or
provision that shall prevail if such a decision is notified to the Contractor
well in advance of the commencement of the manufacturing process in question.
In the event that the Contractor and The Purchaser have different opinions as to
the interpretation of the Specifications, the opinion of The Purchaser shall
always prevail, notwithstanding the foregoing, provided that The Purchaser's
opinion is not unreasonable. The Contractor shall as soon as possible inform The
Purchaser of any inconsistency, ambiguity or incompletion found in the
Specifications.
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Clause 29 - Applicable Law
--------------------------
This Contract shall be governed by and construed in accordance with the law of
Sweden.
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Clause 30 Confidentiality
-------------------------
Each party (as "Receiving party" hereunder) shall keep in confidence, with the
same degree of care as used for its own confidential information, any
information which is disclosed to it by the other party (as "Disclosing party"
hereunder) in writing or other tangible form and clearly marked or identified in
writing as "confidential" or by similar legend, for a period of three years from
the date of first disclosure to the receiving party hereunder of such
information, except that the foregoing obligations shall not apply or cease to
apply, to any information which:
(i) is publicly known at the time of disclosure or becomes thereafter
publicly available through no fault of the receiving party;
(ii) was already known to the receiving party free from confidentiality
restrictions, prior to receiving it from the disclosing party;
(iii) is disclosed to the receiving party by any third party without
confidentiality restrictions;
(iv) is independently developed by the receiving party;
(v) is necessary to disclose to any lawful authorities for obtaining any type
approval of the hardware/software goods covered hereunder;
(vi) is inherently disclosed or is necessary to be disclosed by The Purchaser
by or for the proper installation, operation, use, maintenance and/or
repair of the goods procured hereunder or the provisions of services
thereby.
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Clause 31 - Arbitration
-----------------------
31.1 The Contractor and The Purchaser shall endeavour to settle any difference
of opinion which may arise during the execution of this Contract in an
amicable manner.
31.2 Any difference of opinion concerning any matters under this Contract shall
be referred for resolution by arbitration to an expert sitting as a single
arbitrator to be agreed upon by the parties hereunder or failing such
Contract to a single arbitrator to be named by the President of the [_],
upon the request of any party to this Contract. Arbitration proceedings
shall take place in Stockholm Upon the request of any party the arbitration
shall be in English. The arbitrator from time to time acting hereunder
shall have all the powers conferred on arbitrators by the [_] Arbitration
Law 1968 or any statutory modification thereof for the time being in force.
Judgment upon any award rendered by the arbitrator may be entered in any
court in Sweden having jurisdiction or application may be made to such
court for a judicial acceptance of the award and an order of enforcement,
as the case may be. The arbitrator shall not be bound by the rules of
evidence and procedure, but shall be bound by the substantive law of the
Sweden and shall be obliged to disclose the reason for his award.
31.3 The fact that a dispute is brought before a court or before a duly
appointed expert does not release the Contractor from its obligations to
fulfil its commitments as provided by this Contract.
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Clause 32 - Notices
-------------------
Any and all notices or information other than information or proposal of pure
technical nature shall be given by any party by prepaid mail or by fax or hand
delivery to the other party at the following address:
If to The Purchaser
Jan Campbell, 110 Sir James Peiris Mawatha, Colombo, Sri Lanka
If to Contractor
Steve Mallinson, Cambridge House, Oxford Road, Uxbridge, UK.
Notices, information or proposals of pure a technical nature shall be forwarded
to the following address:
If to The Purchaser
Mahinda Ramasundera, 110 Sir James Peiris Mawatha, Colombo, Sri Lanka
If to Contractor
Paul Senior, Cambridge House, Oxford Road, Uxbridge, UK.
The aforementioned addresses of either party may be changed at any time by
giving fifteen (15) days prior notice to the other party in accordance with the
foregoing. Either party may also by fifteen (15) days prior notice to the other
party give further specification as to which address notice, information or
proposals of various nature shall be forwarded.
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Clause 33 - Support Bond
------------------------
In addition to the other clauses within this Contract, The Contractor agrees to
placing of a Support Bond.
The Guarantor for this bond shall be as follows:
Lloyd Bank Plc.
Guarantees, International Services Centre
P.O. Box 63
Two Brindley Place, Birmingham
B1 2AB
United Kingdom
The following wording will be used:
The Guarantor hereby issues an irrevocable Guarantee No. ______ in the following
terms:
The Beneficiary shall the Purchaser known as Suntel Private Ltd.
The Principal shall be the Contractor, known as Airspan Communication Limited.
Failure of the Contractor's performance obligations in respect of the supply of
equipment for Telecommunications Network Infrastructure under Contract for
Purchase Order No. LP/0442/99 dated April 26, 1999 due to the end of its
activities, due to its winding up, appointment of receiver(s) or entering into a
company voluntary arrangement, or closure of the product line used within this
supply of the contract.
The Support Bond shall be posed within 1 month after The Contractor receives the
principal and interest payment from milestones through System Acceptance (Actual
Date of Delivery) and receipt by The Contractor of all and any other associated
payments for deliveries covered under the bridging phase.
The Support Bond shall have value equal to 60% of contract value in the first
year after the Actual date of Delivery (Phase 1), 50% of contract value in the
second year after the Actual date of Delivery (Phase 1), and 40% of contract
value in the third year after the Actual date of Delivery (Phase 1).
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Clause 34 - Contract Period
---------------------------
This Contract comes into force when signed by both parties and shall remain in
force as long as any of the parties has any obligation under the Contract to
fulfil.
This Contract has been made in duplicate and each of the parties has taken one
copy.
<TABLE>
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<S> <C>
Place: LONDON Place: COLOMBO
Date: Date:
Eric Stonestrom J. Campbell
Managing Director Managing Director
Airspan Communications Limited Suntel (Private) Ltd.
The Contractor The Purchaser
</TABLE>
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(
All reasonable direct costs to which The Purchaser may be put by any
repetition of an inspection or a test shall be reimbursed by the
Contractor on demand and may be deducted by The Purchaser from any
moneys to be paid by The Purchaser under this Contract.
9.2 Quality Assurance
- -----------------------
The Contractor shall be responsible for carrying out a continuous quality
surveillance in accordance with the quality assurance procedure laid down
in Annex _15 in order to ensure that the Equipment and the Software in all
respects will meet all the requirements set out in this Contract.
9.3 System Test (or Site Acceptance Test)
- -------------------------------------------
The Contractor shall be responsible for carrying out a System test for
each site. Representatives of The Purchaser shall be present. The object
of the System test is to establish that each part of the WLL System will
fulfil all the functional and technical requirements set out in this
Contract.
As soon as possible after completion of the System test, the Contractor
shall furnish to The Purchaser a report regarding the test. To the extent
an unsuccessful test so requires, the Contractor shall cure the discovered
deviation from the requirements and provide for repeated test.
Prior to the start of any System Acceptance Test the Contractor shall have
proved that the System tests have been successful and have cured to the
satisfaction of The Purchaser the deviation from the requirements or any
other defect or deficiency that has been observed in the course of the
System test. If the Purchaser agrees a System Acceptance Test can take
place without all System Tests being complete.
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To the extent an unsuccessful test so requires, the Contractor shall cure
the discovered deviation from the requirements and provide for a repeated
test.
At the time when the Contractor has successfully completed a Systems Test
(Site Acceptance Test), the Purchaser shall accept the title and risk for
that part of the network that has been successfully tested. Alternatively,
provision of revenue producing traffic for more than one month will
constitute completion of System Test for a specific site.
9.4 Acceptance Test
- ---------------------
When,
(i) the tests and inspections referred to above in this Clause 9 have
demonstrated that all Equipment and Software delivered by the Contractor
complies with all relevant requirements, standards and Specifications;
(ii) such Equipment and Software as shall be installed by Contractor has
been installed on Premises ready for operation;
(iii) relevant training referred to in Clause 11 has been performed;
(iv) relevant documentation has been delivered in accordance with Clause
11,
and
(v) relevant Test Equipment have been delivered in accordance with
Clause 11, then The Purchaser shall perform an acceptance test ("System
Acceptance Test"). The purpose of this Acceptance Test is to establish
whether the Equipment and the Software complies with all the relevant
requirements and Specifications when operated and otherwise handled by The
Purchaser personnel duly trained by the Contractor utilising the
Documentation supplied by the Contractor. The detailed test procedure and
criteria of a successful Acceptance Test shall be agreed upon in
accordance with Clause 7.1.
9.5 Actual Date of Delivery
- -----------------------------
The Acceptance Test shall be deemed to have been successfully performed
when it has been demonstrated that all relevant requirements of this
Contract are met or when the Purchaser has carried commercial traffic for
a period of more than 90 days.
The Actual date of Delivery is when all defects, deficiencies, or
deviations from the requirements discovered in connection with the
Acceptance test, or prior thereto, have been cured to the satisfaction of
The Purchaser, and a successful Acceptance Test has shown that
Contractor's Scope of Supply with respect to WLL System meets all the
requirements of this Contract.
It is recognised by the parties that even after the Acceptance Test, some
minor defects and deficiencies that are non-essential for the proper
operation or maintenance of the WLL System might exist. The parties shall
by agreement enter these defects or deficiencies into a list of defects
which shall also include a time schedule for the taking by Contractor of
the necessary corrective measures. The
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stipulations of this Contract as regards warranty obligations contained in
Clause 10 below shall apply to Contractor's duty to take such corrective
measures.
If the Purchaser fails to make any or all sites available for Installation
of the equipment one hundred and twenty days (120) after the contract
signature, the Purchaser shall by default accept the equipment, for that
part of the network that cannot be installed, and make all relevant
payments applicable to Site and System Acceptance. At this time, title and
risk for the equipment that cannot be installed shall pass from the
Contractor to the Purchaser.
If the System Acceptance Test (required before Actual Date of Delivery can
be achieved) is delayed because of the Purchaser's failure to make sites
"ready for installation", the System Acceptance Test shall be conducted
only on those sites that have passed Site Acceptance.
The Time Schedule and Milestones for the implementation and preparation of
the Sites by the Purchaser shall be defined in Annex 18.
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Clause 10 Warranties and Certain Consequences in the Event of
---------------------------------------------------------------
Breaches of Warranties
----------------------
10.1 Warranty Period
- ----------------------
The Contractor warrants that the WLL System installed and ready for
operation and Spare Parts delivered to The Purchaser, at all times during
a warranty period of eighteen (18) months from the Actual Date of
Delivery of the WLL System will conform to all the requirements set out
in the Specifications. Subject to the provisions of Subclause 10.2 and
10.3 any lack of conformity that is in existence, or will occur, or will
appear prior to or during the warranty period, and any other defect,
deficiency, or malfunction that is due to construction, manufacture,
workmanship, materials, programming, transportation or installation which
appear prior to the expiration of the warranty period shall be considered
such a defect will be covered by Contractors warranty obligations. Design
faults shall be warranted for twenty-four (24) months from the Actual
Date of Delivery.
10.2 Corrective Measures Activity
- -----------------------------------
In case of breach of warranty obligations defined in Subclause 10.1 above
the Contractor shall at its own risk and expense cure the defect by
repair, replacement, modification, adjustment, delivery and installation
of additional Equipment or Software, or performance of additional work or
implement any other adequate corrective measures (all such measures
collectively referred to as "Corrective Measures").
10.3 Warranty of Corrective Measures
- --------------------------------------
The Contractor shall be obliged to take the necessary Corrective Measures
and other actions referred to in this Clause 10 within the shortest
practicable time, however not later than at such a final date for the
Corrective Measures specified by The Purchaser taking into account the
breach to be cured, the work to be done and The Purchaser operational and
maintenance requirements. The Contractor shall at the request of The
Purchaser render such assistance, advice or instruction that in the
Contractor's reasonable opinion would be sufficient to remedy the defect.
If the Contractor or The Purchaser would deem it necessary to arrange
that the Corrective Measures are taken by the Contractor's personnel, the
Contractor shall make such personnel available as fast as possible but no
longer than forty eight (48) hours from the moment when The Purchaser has
dispatched a request.
If the Corrective Measures will be in the form of replacement and The
Purchaser does not have the relevant spare part available the Contractor
shall make the spare part available as soon as the circumstances permit,
but in no case later than forty eight (48) hours from the moment when The
Purchaser has dispatched a request for such a spare part.
Major Service effecting errors shall be corrected within 5 working days
from the moment The Purchaser has dispatched a request for correcting
such an error and the Contractor has acknowledge this request.
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Minor Service effecting errors and Non Service effecting errors shall be
corrected within eight (8) weeks from the moment The Purchaser has
dispatched a request for correcting such an error and the Contractor has
acknowledge this request.
Major, Minor and Non Service Effecting errors are defined in Annex 25.
If the Contractor in spite of proper notification should not be able to
carry out his duties within the agreed period of time, The Purchaser
shall have the right to correct the defects) or have it (them) corrected
by others.
If spare parts purchased by The Purchaser have been used for replacement
of defective parts or any interim repair of the defective parts has been
made, the Contractor shall at his own expense repair the replaced part or
make the final repair thereof, as the case may be, or deliver spare parts
in replacement. The Purchaser shall bear the risk and costs of transport
to the Premises of Contractor and the Contractor shall bear the risk and
costs of the return transport for such defective parts as well as of
repaired parts and parts supplied in replacement.
10.4 Notification of Defects
- ------------------------------
The Purchaser shall notify the Contractor of a defect not later than
thirty (30) days from The Purchaser's discovery thereof. Notice of
defects and requests for Corrective Measures shall, at the discretion of
The Purchaser, be made by fax, letter or hand delivery.
The Purchaser shall also be entitled for the purpose hereof to avail
itself of any guarantee or other security provided by the Contractor in
accordance with this Contract.
10.7 Warranty Regarding Replaced or Corrected Parts
- -----------------------------------------------------
In the event that any part of the WLL System has been corrected,
repaired, replaced, modified or adjusted pursuant to a warranty
obligation, a fresh warranty period of the same duration as set forth in
Subclause 10.1 shall apply to such a part or if replaced to the new part.
This fresh period shall start to run as from the date when The Purchaser
confirms that the repair, replacement, modification or adjustment has
been successfully completed.
10.8 Warranty of Reliability and Maintainability
- --------------------------------------------------
Without prejudice to the provision of Subclause 10.1 above Contractor
warrants that the reliability and maintainability of the WLL System will
comply with the provisions set out in the Specifications, so that the
respective values which can be derived from the parameters contained in
Annex 15 will be obtained during the warranty period of eighteen (18)
months. The compliance with the parameters shall be demonstrated with the
methods set out in Annex 15.
In the event the WLL System does not fulfil the reliability and
maintainability specified in the Specifications the Contractor shall be
obliged to take such Corrective Measures at its own risk and expense as
are necessary to have the WLL System to fulfil the Specifications with
regard to the aforesaid parameters.
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10.9 Warranty of Documentation
- --------------------------------
10.9.1 Sufficient and Adequate for Operation and Maintenance
--------------------------------------------------------------
The Contractor warrants for the technical life time of the WLL
System that the information contained in the Documentation, will
be continuously updated, will be provided in a timely manner and
will be sufficient and adequate for the proper operation and
maintenance of the WLL System.
To any damage or defect caused or revealed by lack of documents
stated in Subclause 10.9.1 the provisions of Subclause 10.2
shall apply, notwithstanding whether the damage or defect
existed or appeared prior to the expiration of the respective
warranty period set out in Subclause 10.1.
10.9.2 Additional Documentation
---------------------------------
The Purchaser may wish to develop certain additional
documentation with respect to the functioning of the WLL System.
The Contractor shall be obliged to check the accuracy and
completeness of such documentation and within a reasonable
period of time from The Purchaser's request to such effect
submit in writing to The Purchaser its approval or disapproval
of the said documents. In the event of disapproval Contractor
shall specify in what respect the documentation is incorrect or
incomplete and what measures should be taken to make the
documentation correct and complete. Any compensation for
Contractor's work referred to in this Subclause 10.9.2 shall for
each case be agreed upon between the parties.
10.10 Spares Warranty
- ----------------------
The Contractor warrants that it is able to supply The Purchaser with
spares, or equivalent replacement parts, or substitute parts with an
equal or greater level of functionality that maintains backwards
compatibility for repair and maintenance of Equipment delivered for a
period up to ten (10) years from Actual Date of Delivery. Such parts
shall be provided at reasonable prices and delivery times.
If the Contractor after the above mentioned period intends to stop the
manufacturing of a type of spares or equivalent replacement parts, the
Contractor shall inform The Purchaser about his intention at least twelve
(12) months in advance.
10.11 Warranty of Right to Use and Reproduce Etc.
- --------------------------------------------------
The Contractor warrants that The Purchaser shall have the right to use
all and any Software as well as of all and any Documentation (and parts
thereof) that the Contractor has supplied without thereby infringing any
right of the Contractor, its subcontractors or employees, or a third
party, or being obliged to pay any compensation to the Contractor, its
subcontractors or employees, or to any third party. The Purchaser's right
to reproduce, change or modify software and documents is limited to the
rights defined in the software license that is granted by the Contractor
for use by The Purchaser in the WLL System delivered by the Contractor to
The Purchaser. This is defined in Annex 26.
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10.12 Repairs Warranty
- -----------------------
The Contractor warrants that it, during a period of at least up to ten
(10) years from Actual Date of Delivery or from the date of
discontinuation of commercial availability of the related equipment,
whichever comes the latest, is capable of and will, at The Purchaser's
request, repair defective material in Equipment delivered under this
Contract.
Contractor warrants that if The Purchaser so wishes it shall enter into
Annual Operations and Maintenance Contract with The Purchaser in forms
set out in Annex 21 and be bound to all conditions there is in the
License included without limitation to conditions as to price and for as
long as The Purchaser requires for a period of up to ten years.
10.13 Warranty for Production of Equipment and Software
- --------------------------------------------------------
The Contractor warrants to ensure the supply to The Purchaser of
Equipment and Software in every respect for upgrading, extensions, and
maintenance of the WLL System at least for a period up to ten (10) years
after the Actual Date of Delivery, at prices and within reasonable
delivery times and on other reasonable conditions. In the event that the
Contractor intends to cease to supply Equipment and Software for the WLL
System, the Contractor shall inform The Purchaser thereof at least twelve
(12) months in advance. The Contractor shall at the request of The
Purchaser -without charge supply all drawings and other technical
information and documents that will be required or of assistance in the
provision, operation and maintenance of the WLL System. Equipment and
Software purchased pursuant to this Subclause 10.13 shall be subject to
the same warranties as set out in this Clause 10.
10.15 Title and Intellectual Property Rights
- ---------------------------------------------
The Contractor warrants that Contractor will deliver to The Purchaser
good title to all of the items falling within Contractor's Scope of
Supply and each such item shall be free of any claim, encumbrance or lien
whatsoever.
For the technical life time of the WLL System the Contractor warrants in
accordance with Clause 16 and furthermore that it shall not be necessary
for The Purchaser to obtain any license or any similar grant under a
patent or any other industrial or intellectual property right for the WLL
System either from the Contractor or any other person in order to be able
to interface the WLL System, with equipment of design, construction or
makes other than the Contractor's or its subcontractors'.
In the event of breach of this warranty the provisions of Clause 16 shall
apply.
10.16 Exceptions from Warranties
- ---------------------------------
The Contractor will have no liability or responsibility arising out of
(c) (i) deviations from the requirements of this Contract that are
caused by such damage to or loss of the WLL System as is
accidental and occurs after the time when the risk of loss and
damage has passed to The Purchaser;
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(d) deviations from requirements of this Contract that are caused by
The Purchaser or any other person for which the Contractor is not
responsible, or any changes, repairs or replacements made by The
Purchaser or said other person, provided that The Purchaser or
such other person has acted contrary to instructions contained in
manuals or other documentation provided by the Contractor under
this Contract;
(e) breaches of warranties of which The Purchaser has not notified
the Contractor during the respective warranty period, or before
thirty (30) days have elapsed after-the expiry of the said period
provided, however, that this exemption from liability and
responsibility shall not apply if the Contractor, or any of its
representatives, nevertheless knew of the breach;
(f) deviations from the requirements of this Contract that are caused
by non-fulfilment of The Purchaser's undertakings of The
Purchaser's Share of Responsibility
Notwithstanding the foregoing of this Subclause 10.16 the Contractor
shall be obliged to cure at the expense of The Purchaser also deviations
from the requirements for which the Contractor has no liability or
responsibility, if The Purchaser so requests.
10.17 Records of Events
- -------------------------
The Purchaser will during the warranty period in Subclause 10.1 keep
records of events that might be of importance for determining the type
of defect, the time of its occurrence, the notification and curing
thereof etc. These records shall prevail unless proved to be inaccurate
in any specific respect. The Purchaser shall keep the records available
to the Contractor on request.
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Clause 11 - Delivery
--------------------
11.1 Equipment and Software
11.1.1 Contractual Date of Delivery
The WLL System shall have been delivered and successfully
tested according to Subclauses 9.4 on the date set out in the
Time Schedule (Annex 18). The said date is in this Contract
referred to as the Contractual Date of Delivery.
The schedule and quantities of material shown in Annex 18 is an
estimate and is not a binding commitment by The Purchaser. The
Purchaser considers this list to be the Tender's minimum
delivery obligation.
11.1.2 Passing of Title
The title to as well as the risk of damage to and loss of the
WLL System, for that part of the system in question, shall pass
to The Purchaser on completion of a successful Site Acceptance
test.
The Purchaser shall be responsible for the operation and
maintenance of the WLL System from the date of Site Acceptance.
This shall not limit or compromise any claim which The
Purchaser may have against the Contractor under any warranty or
other provision of the Contract. Prior to the Site Acceptance,
The Purchaser's responsibility for the operation of the WLL
System shall be confined to such responsibility as follows from
The Purchaser's performance of the tests referred to in Clause
9.
11.1.3 Software
11.1.3.1
The Purchaser is granted a non-exclusive perpetual restricted royalty-
free license to use the Software, but only in conjunction with The
Purchaser's use and maintenance of WLL System in accordance with this
Contract, and not otherwise.
Use of this Software shall not include the right to copy, reproduce
and modify the software.
The Purchaser agrees that the Software provided to it by the
Contractor under this Contract or any renewals, extensions, or
expansions thereof, or in implementation of any of the foregoing,
shall, as between the parties hereto, be treated as the exclusive
property of the Contractor and as proprietary and a trade secret of
Contractor. The Purchaser shall:
(g) not provide or make the Software or any portions or aspects
thereof available to any person except to its employees or
agents on a "need to know" basis;
(h) not modify the Software without the prior written consent of
Contractor.
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If Contractor modifies or changes the Software to permit additional
features or services, such Software will at The Purchaser request be
made available to The Purchaser on prices based on a predetermined
methodology. In any case the Contractor shall provide all such
features and services free of charge within the first twelve 12 months
from the date of signing the Contract.
Nothing in this Clause shall limit Contractor's warranties in Clause
10.
The Purchaser and any successor to The Purchaser's title to the WLL
System shall have the right without further consent of Contractor to
assign this license to any other party which acquires the WLL System,
provided any such other party (either assignee or sublicensee) agrees
in writing to abide by the terms and conditions of this license.
Notwithstanding anything in this Contract to the contrary, it is
understood that The Purchaser is receiving no title or ownership
rights to such Software, which rights shall remain with Contractor.
11.1.3.2
As applicable and generally available to Contractor's customers, Contractor
shall license to The Purchaser a copy of any diagnostic software utilized
by Contractor with respect to the installation and maintenance services of
the Software and System.
11.1.3.3
The Contractor shall offer and The Purchaser at its discretion may accept a
new Software Release containing new facilities on a regular basis (at least
once per year) for a period of ten (10) years after Actual Delivery Date of
the Contractor's Scope of Supply. The new release shall indicate what
modifications are required on implementation to the Software and hardware
used by The Purchaser. In the event that The Purchaser chooses not to
accept the installation of new Software Releases, the Contractor shall
continue to support the Latest Version of Software including the correction
of any faults or bugs.
11.1.3.4
During a period of five (5) years after acceptance of a version of
Software, the Contractor shall provide without charge at The Purchaser's
request, maintenance releases correcting software faults identified in the
Latest Version by The Purchaser, or by the Contractor or by its other
customers.
11.1.3.5
New releases and maintenance releases shall be subject to acceptance tests
to be agreed upon by the parties.
11.1.3.6
Unless the parties have agreed otherwise in writing, new releases and
maintenance releases shall not alter the applications or the uses to which
the System or parts of the System can be put, whether or not in conjunction
with existing files, and shall in all respects be compatible with the
Latest Version of the Software. Software updates shall be backward
compatible to existing hardware, features, and functionalities, unless
mutually agreed otherwise.
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11.1.3.7
The Contractor shall fully disclose and supply and keep supplied in
confidence to The Purchaser the Latest Version of all Documentation and the
Software, with relevant information about their release status.
11.1.3.8
The Contractor shall ensure that the Documentation supplied to The
Purchaser fully describes the Software accepted and licensed for the System
under Clause 11.1.3.1 of this Contract. Documentation will fully describe
new features, functionalities, errors corrected and new errors detected.
11.1.3.9
At the request of The Purchaser, the Contractor shall provide all necessary
interfaces, interface specifications and standard protocols for systems or
products provided by The Purchaser or other parties, including the physical
components of such interfaces, and the proper functioning of these
interfaces, and all relevant documentation.
11.1.3.10
If the System delivered by the Contractor fails to function properly in
conjunction with a third party product in use by The Purchaser, the
Contractor shall, at the request of The Purchaser consult with the relevant
contractors and cooperate closely with them in tracing and repairing the
cause of the malfunction.
11.1.3.11
In the event that third party Software supplied by the Contractor under
this Contract becomes unavailable or essential modifications cannot be
carried out for any reason whatsoever, the Contractor shall at no charge to
The Purchaser, procure and supply to The Purchaser suitable alternative
third party Software to enable the continued operation and Contractor's
Scope of Supply ability of the System.
11.1.3.12
In the situations referred to in Sub-clause 11.1.3.11 The Purchaser shall
have an unlimited license to use the Software and shall have the right to
make modifications to the Software (or have them made) only for use with
the System
The obligations of The Purchaser under this Clause shall survive the
termination of this Contract for any reason.
11.2 Turn-key Services
- ----------------------
The turn-key services of the WLL System shall be done to the satisfaction
of The Purchaser.
No service or work by the Contractor may, without The Purchaser's written
approval thereof, commence earlier than on the date of start of service set
out in the Time Schedule. The scope of work regarding Turn-key services is
set out in Annex 9.
11.3 Training
- -------------
The Contractor shall provide The Purchaser's personnel with the training
required for the proper operation and maintenance of the WLL System. The
scope of Contractor's undertaking in this respect, as well as the terms and
other conditions applicable thereto are set out in Annex 10.
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11.4 Documentation
- ------------------
The Contractor shall have provided The Purchaser with the Documentation set
out in Annex 11 on or before the dates set out in the Time Schedule.
11.5 Spare Parts
- ----------------
The Contractor shall have provided The Purchaser with the spare parts set
out in Annex 12 on the dates set out in the Time Schedule.
11.6 Test Equipment
- -------------------
The Test Equipment set out in Annex 13 shall have been delivered at
Premises on or before the dates set forth in the Time Schedule.
11.7 Marking
- ------------
All Equipment, parts thereof, and spare parts shall be clearly and durably
marked with the Contractor's code number and - if any - status revision
which shall make it possible to identify all Equipment, parts thereof and
spare parts for the purpose of warranty. The Contractor shall well in
advance before dispatch of the Equipment or spare parts furnish The
Purchaser with a packing list indicating the Contractor's code numbers
applicable to the respective parts.
11.8 Packing
- ------------
All Equipment and Spare parts shall be packed in a manner that is suitable
for the transportation and for the storing in The Purchaser's premises.
11.9 Order Procedure
- --------------------
The deliveries shall be executed in accordance with the provisions stated
in Annex 14. In order to state the extent of each delivery a suborder
specification shall be sent to the Contractor as a firm order. The suborder
specifications shall contain information regarding quantities of Equipment
and Spare Parts to be delivered, delivery dates, delivery address and
invoice address.
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Clause 12 - Liquidated Damages in the Event of Delays in Delivery
-----------------------------------------------------------------
12.1 General
- --------------
The parties acknowledge that the Contractor's fulfillment of its undertakings
set out in the Time Schedule (Annex 18) is of utmost importance to The
Purchaser. The parties also acknowledge that delays will cause severe damage to
The Purchaser and that such damage may, from a practical point of view, be
difficult to quantify. In the event of delay, the parties agree that The
Purchaser shall receive liquidated damages in accordance with the following
provisions without The Purchaser being obligated to prove that it has suffered
damage or to prove the amount of damage. The Purchaser's right to receive
liquidated damages shall be without prejudice to any other right that it may
have under this Contract or otherwise.
Any liquidated damages to which The Purchaser is entitled shall be paid by the
Contractor upon demand and The Purchaser shall be entitled to wholly or partly
set off liquidated damages against any amount that The Purchaser shall pay to
the Contractor under this Contract.
12.1.1 Liquidated Damages for Delay
- -----------------------------------
Should the service start date of the System, or any material portion of
the System be delayed for any reason except for events excepted under
this Contract, where the delay is fully or substantially attributable to
the fault of default of the Contractor (including its sub-contractors),
Contractor shall pay liquidated damages equal to one percent (1%) of the
value of that part of the network that The Purchaser is unable to use for
each week or fraction of a week of delay beyond Actual Date of Delivery
as specified in Annex 18. A grace period of two weeks shall be given
before the first week of delay is counted. Upon the lapse of the second
week of delay, however, the full delay shall be counted in computing the
liquidated damages.
12.2 WLL System, Training, Documentation, Spare Parts and Test Instruments
- ----------------------------------------------------------------------------
In the event that Contractor does not fulfil any of its undertakings with
respect to WLL System, training, Documentation, spare parts or test
instruments on the respective dates set out in the Time Schedule, the
Contractor shall pay liquidated damages to The Purchaser for each whole
day of delay amounting to (0.1%) of the respective Contract Price.
Maximum liquidated damages according to these Clauses 12.1.1 and 12.2
shall in no case exceed ten per cent (10%) of the Total Contract Price.
12.3 Delays Caused by The Purchaser or Force Majeure Events
- -------------------------------------------------------------
The Purchaser shall not be entitled to liquidated damages according to
the above provisions of this Clause 12 to the extent the delay in
question is caused by failure solely on part of The Purchaser to fulfil
any part of its Share of Responsibility or by a Force Majeure Event
defined in Clause 17.
In the event that The Purchaser delays in carrying out any of its
undertakings under this Contract the Contractor shall nevertheless be
obliged to fulfil its obligations within the time agreed on, to the
extent that the fulfilment of The Purchaser's obligations is not
necessary to enable the Contractor or its subcontractors and suppliers to
fulfil their obligations. In the event that it can reasonably be assumed
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that the Contractor will be delayed with respect to any of its
undertakings under this Contract, The Purchaser shall have the right to
postpone the performance of any of its undertakings to the extent such
performance is not necessary to enable the Contractor to fulfil its
obligations.
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Clause 13 - Prices
------------------
13.1 The Contract Prices given shall be fixed until 18th August 2002 and
shall include obligations of Contractor hereunder. The Contract Prices for
the WLL System and work and services to be provided by the Contractor under
this Contract shall be the prices set out in Annex 5. The prices represent
-------
the Contract Prices for the respective items and the sum of all the
Contract Prices constitutes the total price of the Contractor's Scope of
Supply. This total price is called the Total Contract Price.
--------------------
13.2 The prices shall be CIP Colombo.
13.3 Change of any law relating to the Contract items, except those
affecting the customs duties, import taxes, VAT, shall not affect the price
of these items.
13.5 All sums of money stated or referred to in this Contract are exclusive
of VAT. The Purchaser shall only pay VAT, if applicable in Sri Lanka.
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Clause 14 - Payments
--------------------
14.1 General
- ------------
The Purchaser shall pay to the Contractor the Contract Prices referred to
in Clause 13 above in accordance with the following provisions. The terms
of payments are as follows:
Phase One - Infrastructure, Network Management, Subscriber Terminals
required for Acceptance Testing, and Services
. 20% on signing of the contract
. 5% on Site Acceptance for the completion of each site (9 Sites)
. 30% on Actual date of Delivery (System Acceptance)
. 5% 6 months after the Actual date of Delivery
Phase Two - Subscriber Terminals for Commercial Service
. 20% on signing of the contract
. 40% on delivery of equipment
. 40% 90 days after delivery of equipment
Phase Three - Subscriber Terminals for Commercial Service
. 20% on signing of the contract
. 40% on delivery of equipment
. 40% 90 days after delivery of equipment
Phase Four - Subscriber Terminals for Commercial Service
. 20% on signing of the contract
. 40% on delivery of equipment
. 40% 90 days after delivery of equipment
A bridge finance option will be provided to Suntel for all payments beyond the
Contract signature payment (20%) for 1999. This option will allow Suntel to
remit only the interest due (as defined in Clause 14.5) on the first day of the
month following the date of payment due for all outstanding payments. The
payment of the principle will be due on January 5th, 2000 for all payments
covered through bridge financing.
14.2 Terms and Conditions
- -------------------------
Orders shall be placed through a single "purchase order" issued by buyer.
14.3 Bank Guarantee
- -------------------
The Contractor is required to put up a Bank Guarantee equal in Value to all
payments made before Systems Acceptance
14.4 Invoicing
- --------------
Payment shall be effected by The Purchaser's receipt of the Contractor's
invoice in triplicate for the amount in question that The Purchaser will
approve of, provided, however, that The Purchaser shall not be obliged to
make any payment earlier than
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the date following from sub-clause 14.1 above. Any value added tax, or
other taxes to which Contractor is subject to within Sri Lanka and which
shall be paid by The Purchaser under this Contract shall be invoiced as a
separate item.
Invoice address:
Attn: Accounts Payable
Airspan Communications Limited
Oxford Road, Uxbridge
Middlesex
United Kingdom
14.5 Interest
- -------------
The rate per annum of the interest referred to in Subclause 26.4 shall be
defined during negotiations.
14.6 Keeping Records
- --------------------
14.6.5 For all items specified. in this Contract, the Contractor
shall keep and maintain such books, records, vouchers and
accounts with respect to its billing of chase items to The
Purchaser for ten (10) years tram the date of Final
Acceptance.
14.6.6 For any item quoted can a cost incurred basis, the
Contractor shall keep and maintain such books, records.
vouchers and accounts of all costs with respect to the
engineering provision and installation of facilities of the
System for ten (10) years from the date of fulfillment of
a11 Contractor's Scope of Supply obligations.
14.6.7 The Contractor shall obtain from his Subcontractors such
supporting rewords for other than the cost of feed cost
items, subject to the conditions of Sub-Clause 14.6.2, as
flay be reasonably required, and shall maintain such records
for a period of ten (10) years from the date of fulfillment
of all costs required to be kept, maintained and obtained
pursuant to this Clause.
14.6.8 The Contractor shall afford the Purchaser the right to
review the said books, records, vouchers and accounts of all
costs required to be kept, maintained and obtained pursuant
to this Clause.
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Clause 15 - Liability for Accidents, Damage and Loss
----------------------------------------------------
15.1 Liability Regarding Before Passing of Risk
- -----------------------------------------------
Without prejudice to provision of Clause 5 any damage to the WLL System or
Documentation supplied or to be supplied by the Contractor occurring before
the relevant time according to Clause 11 when the risk of damage to or loss
of the WLL System and Documentation passes to The Purchaser shall be
remedied by the Contractor at its own expense, provided that the damage or
loss has not been caused by negligent act or omission by The Purchaser or
anybody employed by The Purchaser (other than the Contractor or its
Subcontractors). If the damage or loss has been so caused by The Purchaser
the Contractor shall nevertheless, if The Purchaser so request, remedy the
damage and loss, at the expense of The Purchaser at a reasonable price to
be agreed between the Contractor and The Purchaser.
15.2 Other Indemnification
- --------------------------
The Contractor shall indemnify and hold The Purchaser and its officers,
servants and employees harmless from any loss, damage, liability or expense
on account of damage to property and injury, including death, to all
persons, including but not limited to employees of the Contractor, arising
out of or resulting from any act or omission of the Contractor, its
Subcontractors, or anybody employed by the Contractor or its
Subcontractors, or anybody else for which the Contractor or its
Subcontractors is responsible. With respect to the Contractor's Scope of
Supply this Subclause 15.2 shall apply only after the risk of damage or
loss has passed to The Purchaser; until that time Subclause 15.1 shall
prevail.
15.3 Fraud or Gross Misconduct
- ------------------------------
Without prejudice to any further responsibilities or liabilities of the
Contractor under law, if the Contractor, or any of its Subcontractors, or
anybody employed by the Contractor or its Subcontractors, or anybody else
for which the Contractor or its Subcontractors is responsible, has been
guilty of fraud, actions against good faith, or "Gross Misconduct" the
Contractor shall - notwithstanding any provision of this Contract to the
contrary - be liable for any loss or damage (whether direct, indirect,
incidental or consequential) suffered by as a result thereof, whether it be
defects (as defined in Clause 10) in, damage to, or loss of the
Contractor's Scope of Supply, or injuries to persons, or any other breach
of this Contract.
Contractor's liability for the said defects shall extend also to defects
which have not appeared prior to the expiration of the warranty period in
question and to defects which have not for any other reason been notified
by The Purchaser in accordance with the provisions of Clause 10. "Gross
Misconduct" means any act or omission implying neglect to take into
consideration such serious effects as a careful Contractor normally would
have been able to foresee, or a deliberate disregard of the consequences of
such an act or omission.
15.4 Limitation of The Purchaser's Liability
- --------------------------------------------
The Purchaser shall not be liable for any damage to or loss of the WLL
System and documentation, save as to the extent provided for in Subclause
15.1.
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The Purchaser shall not be liable for any direct, indirect, incidental or
consequential damage or loss, including loss of income or loss of profit,
suffered by the Contractor or its subcontractors as a result of such a
damage, loss or breach or as a result of any breach by The Purchaser of
this Contract, unless expressly otherwise provided for in this Contract.
15.5 Obligations to Limit Damages and Loss
- ------------------------------------------
The party suffering loss or damage shall always be obliged to take all
reasonable measures to mitigate the damage or loss occurred.
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Clause 16 - Patents and Other Intellectual
and Industrial Property Rights
------------------------------
The Contractor undertakes to fully indemnify and hold The Purchaser, its
officers, employees, representatives and customers harmless from and fully
indemnify them for any and all cost expenses, damages and liabilities therefore
against any claim for an infringement or alleged infringement of any
intellectual property right relating to use of the Equipment and Software
delivered under this Contract.
In particular the Contractor undertakes to defend at its own expense any claim,
suit or proceeding based upon any claim that the Contractor's Scope of Supply,
or the use or maintenance thereof infringes any licence or any right of a third
person to patent, copyright, design or any intellectual or industrial property
rights or application therefore, as well as to hold The Purchaser, its officers,
employees, and representatives harmless from and fully indemnify them for any
and all costs, expenses, damages and liabilities therefor. In the event that the
WLL System or the use of the WLL System or documentation would be held in a suit
to constitute infringement and its further use would be enjoined, the Contractor
will promptly at its own expense either
(iii) procure for The Purchaser the right to continue the use, or
(iv) replace or modify the WLL System, or Documentation, so that it becomes
non-infringing while staying fully compliant with the Specifications.
Any such replacement or modification shall, however, be approved of by
The Purchaser in advance, which approval shall not be unreasonably
withheld. The Purchaser shall without delay inform the Contractor of
any claim that has come to the notice of The Purchaser and shall
proceed in dealing with such claims in agreement with the Contractor.
The Purchaser shall be at all times kept informed by Contractor of the
institution or assertion of any IPR claims or proceedings and shall without
prejudice to its rights be entitled but not obligated to participate in such
claims, suits or proceedings.
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Clause 17 - Force Majeure
-------------------------
Should Force Majeure Event occur after the signing of this Contract which
prevents the performance of any obligation of either party on the date or dates
provided for in this Contract, the performance of the obligation may be
postponed for such time, on a day by day basis, as the performance necessarily
has had to be delayed on account thereof, it being understood that such
postponement shall not be deemed a change of the Time Schedule or of any day
defined by reference to the Time Schedule.
The term of Force Majeure Event shall mean events such as war or warlike
hostilities, mobilisation or general military call-up, acts of Government
including refusal issue of required export licenses (but shall exclude failure
to obtain security clearance for own employees), civil war, revolution,
rebellion, insurrection or riots, sabotage and any strike or labour action and
other circumstances of a similar exceptional character and farreaching
influence, provided that any such event is beyond the control of the party, its
subcontractors and suppliers. It is expressly understood that no circumstance
shall be considered Force Majeure Event which the party or the subcontractor or
the supplier invoking the event of Force Majeure reasonably ought to have taken
into account at the date of signing of this Contract.
Immediately upon becoming aware of the commencement of any Force Majeure Event
causing a delay, and immediately upon becoming aware of the termination of such
an event of Force Majeure, the party desiring to invoke it as cause for
postponement shall advise the other party of the said event, failing which its
right to demand an extension of the time of performance shall be definitely
barred. To avail itself of the right to invoke any Force Majeure Event as a
cause for postponement the party shall also as soon as practicable after the
termination of the event submit to the other party reasonable proof of the
nature of such Force Majeure Event and its effect upon the performance
timetable. Each parties shall make all reasonable efforts to reduce to a minimum
and mitigate the effect of any delay occasioned by a Force Majeure Event. The
obligation of Contractor in this respect shall particularly include the
repairing or causing the repair of such damage as may have been done to its or
its subcontractor's manufacturing facilities or to Contractor's Scope of Supply.
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Clause 18 - Optional Orders
---------------------------
18.1 WLL System
- ---------------
The Purchaser shall during a period of time commencing on the date of signing of
this Contract by both parties up to 3 years or the end of year 2002 (whichever
the latest) have the right (but not the obligation) to order on fair and
reasonable terms from the Contractor Equipment, Software, Spare Parts,
Documentation and Services set out in Annexes 7, 8, 9, 10, 11, 12 and 13.
18.2 Other Terms and Conditions
- -------------------------------
In addition to the terms and conditions referred to in Subclauses 18.1 - 18.3
(inclusive) the provisions contained in this Contract including the Annexes
thereto (as amended by the parties subsequent to the conclusion of this
Contract) shall apply between the parties.
18.3 Exercise of Option
The options referred to in this Clause 18 shall be exercised by a written
numbered order to the Contractor signed by one or more authorised officers or
representatives of The Purchaser. Such order shall be lodged with the Contractor
not later than on the date referred in Subclause 18.1 and shall be accompanied
by a proposed time schedule.
It is incumbent upon Contractor to acknowledge receipt of the order not later
than thirty (30) days thereafter.
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Clause 19 - Network and Maintenance
-----------------------------------
The Contractor undertakes to supply to The Purchaser, Network and Maintenance of
the WLL System in accordance with the prices and conditions set out in Annex 21
during a period of five (5) years from expiry of the warranty period.
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CLAUSE 20 - Non Waiver
----------------------
The failure of either party to insist upon strict adherence to any term or
condition of this Contract on any occasion shall not be considered a waiver of
any right thereafter to insist upon strict adherence to that term or condition
or any other term or condition of this Contract.
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Clause 21 - Language
--------------------
All manuals, other documentation and training to be provided by Contractor under
this Contract as well as all notices and other communications between the
parties hereunder shall be in English unless the parties in any specific case
agree otherwise.
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Clause 22 - The Purchaser's Approval
------------------------------------
To the extent provided in the Contract, the Specifications, design,
calculations, construction, materials and technical arrangements used in the WLL
System may be subject to The Purchaser's approval. No such approval shall affect
the Contractor's obligations hereunder or at any time limit The Purchaser's
right to demand that the Contractor's Scope of Supply in all respects shall
satisfy the Specifications and other requirements of the Contract.
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Clause 23 - Compliance with the Law
-----------------------------------
The Contractor and its subcontractors shall abide by all applicable laws,
regulations and ordinances of the Country of Sweden and shall obtain from
competent authorities all necessary permits, licenses, and authorisations
required to complete the Contractor's Scope of Supply. The Contractor and its
Subcontractors shall establish such standards and procedures on the Premises as
are necessary to comply with regulations governing employment with special
reference to safety regulations issued from time to time by any competent
authority in Sri Lanka or by The Purchaser. If it comes to the knowledge of The
Purchaser that any such regulations are not being observed, it shall immediately
inform the Contractor and, in such event, The Purchaser shall be entitled to
refuse admission to the Premises of any person who is responsible for such
contravention. Before commencing installation, the Contractor shall give The
Purchaser a full description of those risks or dangerous procedures which may
be, respectively, encountered or utilised in the course of installation.
If and to the extent requested to do so, The Purchaser will assist the
Contractor in obtaining the required information of any such laws, regulations
and ordinances, including safety regulations, as are referred to in this Clause
23. It is recognised by the parties that the presence on the Premises of any of
the Contractor's or its subcontractor's personnel might require the approval of
The Purchaser or any other authority and that such personnel might also be
required to undertake an obligation to observe secrecy with respect to
information received or obtained when present on the Premises and to sign
documents to such an effect.
The Purchaser shall not be responsible for any acts, default or unsatisfactory
performance, neglect or omissions of the Contractor that violate the laws,
statutes, orders, rules, decrees, or regulations of any jurisdiction in which
the Contractor's Scope of Supply obligations are carried out.
In any event, if any third party should nevertheless make a direct claim against
The Purchaser because of such act, default, unsatisfactory performance or
omission of Contractor, The Purchaser shall notify the Contractor as soon as
possible, and the Contractor shall be entitled to undertake and manage any legal
proceedings involving the Contractor. The Contractor shall upon the request of
The Purchaser assist The Purchaser in defending themselves against such claim
and indemnify and hold The Purchaser harmless against any and all costs,
charges, expenses, compensations and other payments made by The Purchaser in
respect of such third party claim.
The Contractor shall be deemed to have satisfied itself that it has obtained all
necessary information with respect to the Contractor's Scope of Supply and the
Contract including but not limited to the matters such as: (i) fees, pilotage
and any dues payable to port authorities, (ii) conditions affecting labour
including Contractor's Scope of Supply permits, and (iii) rules and regulations
of governments and/or port authorities.
The Contractor shall be deemed to have fully examined and independently verified
all documents and drawings, specifications, schedules, terms and conditions of
the Order, regulations and other information in relation to the Contract and to
have fully understood and satisfied himself as to all information which is
relevant as to the risks whether political or otherwise, contingencies, costs,
and other circumstances which could affect the Contract. The Purchaser, its
servants, and agents shall have no liability in law or equity or in Contract or
in tort or pertinent to any other cause of action with respect to any such
information, risks, contingencies or other circumstances.
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Clause 24 - Assignment and Sub-contracted Contractor's Scope of Supply
----------------------------------------------------------------------
The Purchaser may assign this Contract or any of its rights or obligations
hereunder to any corporation being the successor of The Purchaser.
24.1 The Contractor may also, without prior written consent of The Purchaser,
assign a contract, sub-contract, or any significant part of the
Contractor's Scope of Supply/. In any event, the Contractor shall not be
relieved from responsibility under this Contract for such parts of the
Contractor's Scope of Supply that are sub-contracted, and the Contractor
shall be responsible and liable for the acts, defaults or unsatisfactory
performance of any Subcontractor or its employees, servants and agents, as
fully as if they were the acts or defaults of the Contractor or of the
Contractor's employees, servants and agents.
24.2 The Contractor shall ensure that any sub-contracts entered into by the
Contractor shall contain such provisions of this Contract as should be made
applicable to such sub-contracts.
24.3 Any assignment, mortgage, charge, encumbrance or sub-contract in
contravention of this Clause shall, as against The Purchaser, be void and
of no effect.
24.4 The Contractor shall protect, defend, indemnify and keep indemnified The
Purchaser against all claims, demands, actions, suits, proceedings, writs,
judgements, orders, decrees, damages, losses and expenses suffered or
incurred by The Purchaser arising out of or related to any assignment,
mortgage, charge, encumbrance or sub-contract, whether permitted or not.
24.5 The assignment of any part of the Contractor's Scope of Supply to any
Subcontractors will be performed according to the Contract and will not
affect the Contractor's Scope of Supply.
24.6 The Parties agree that no contractual relationship is created between The
Purchaser and any of the Contractors Subcontractors, suppliers or agents.
The Contractor shall indemnify The Purchaser for any expenses or damages
caused to The Purchaser as a result of any claim or demand against The
Purchaser by any Subcontractor, supplier or agent.
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CLAUSE 25 - Termination
-----------------------
This Contract, or any individual order under this Contract, may be terminated at
any time by written notice from The Purchaser. Such notice shall specify the
effective date of termination and the actions to be taken by the Contractor in
connection with the termination. If such termination is not due to the
Contractor's failure to fulfil his obligations, which would entitle The
Purchaser to cancel the Contract, or any part of it, The Purchaser shall pay a
proportional price for all work in progress, equipment on order for the
Purchaser, equipment that has been manufactured for the Purchaser and resides in
finished goods, work performed, for material, administration, and profit on the
amount of work performed under the Contract, and refund any other direct cost
incurred due the termination, deducting amounts previously paid. The title to
the work performed under this Contract prior to the termination shall vest in
The Purchaser upon payment of the proportional price.
The compensation to be paid to the Contractor under this Clause shall be tried
to be determined by negotiations, however, the amount shall under no
circumstances exceed the Contract Price.
In case of termination, the Contractor shall make every effort to reduce the
costs incurred.
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Clause 26 Cancellation
----------------------
26.1 General
- ---- -------
Without prejudice to any other rights or remedies The Purchaser may have,
The Purchaser may cancel this Contract according to the following
provisions. The Purchaser may also cancel an order under this Contract,
without thereby cancelling any part of this Contract, according to the same
provisions.
26.2 Cancellation Due to the Contractor
- ---- ----------------------------------
The Purchaser may cancel this Contract, in its entirety or with respect to any
portion thereof or an order under the Contract, with immediate effect by written
notice to that effect:
(v) Insolvency etc.
--------------
if Contractor has become voluntarily or involuntarily declared
bankrupt or otherwise is insolvent or has entered into liquidation or
has enter into composition proceedings with its creditors or if the
Contractor has taken any action in furtherance of any such proceedings
or has disposed or contemplates to dispose of all or the major part of
its assets;
(ii) Material breach of Contract
---------------------------
if the Contractor commits a material breach of any of its obligations
under this Contract other than delay in the performance of its
undertaking referred to in (iii) below and fails to cure such breach
within thirty (30) days after having received The Purchaser's notice
thereof;
(vi) Delays
------
if due to any circumstance for which the Contractor or any of its
subcontractors or suppliers are responsible the Actual Date of
Delivery is delayed for more than an aggregate period of ninety (90)
days;
(vii) Non-compliance with the requirements
------------------------------------
if the Contractor's Scope of Supply in any important respect does not
meet the requirements set out in this Contract and the Contractor has
not cured the defect within the times specified in the Contract, or,
if no specification is made, within a reasonable time, such reasonable
time not to exceed thirty (30) days and fails to cure the defect
within an additional reasonable period of time, not exceeding sixty
(60) days unless otherwise agreed by The Purchaser, from receipt of
The Purchaser's notice to that effect as has been fixed by The
Purchaser in said notice.
26.3 Cancellation With Reference to Force Majeure etc.
------------------------------------------------
The Purchaser may cancel this Contract with immediate effect by
written notice if any Force Majeure Event according to Clause 17
(whether preventing the Contractor or The Purchaser) causes the Actual
Date of Delivery to be delayed or can reasonably be anticipated to be
delayed for more than two hundred and twenty (150) days. The Purchaser
shall exercise its right to cancel the Contract according to this
Subclause 26.3 not later than sixty (60) days after having received
the Contractor's notice of the of the Force Majeure Event in question.
26.4 Consequences of Cancellation According to 26.2
----------------------------------------------
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In the event that The Purchaser cancels the Contract according to any of
the provisions of Subclause 26.2 the Contractor shall immediately upon The
Purchaser's demand refund to The Purchaser all amounts paid by The
Purchaser under this Contract prior to the effective date of the
cancellation plus interest on the said amounts from the respective dates of
The Purchaser's payment up to the date of refundment (all dates inclusive)
at the rate set out in Subclause 14.5. The Purchaser shall make available
to the Contractor for restitution, dismantling and removal at the
Contractor's own risk and expense what the Contractor may have delivered to
The Purchaser under this Contract. This Contract shall cease to have any
force or effect except that Contractor shall hold The Purchaser harmless in
respect of all direct costs loss and damage suffered by The Purchaser on
account of such a cancellation, including without limitation The
Purchaser's total costs for completing all the Contractor's undertakings,
whether performed by The Purchaser itself or other contractors engaged by
The Purchaser for the purpose, to the extent these costs plus any
compensation to the Contractor as set forth below in this Subclause 26.4
exceed the Total Contract Price according to this Contract. The Purchaser
shall make all reasonable efforts to mitigate such loss, damage and costs.
In the event that The Purchaser decides to complete the WLL System or parts
thereof either itself or by engaging other contractors, The Purchaser shall
have the right to acquire - against compensation and on terms and
conditions with respect to warranties and other matters that are reasonable
in the circumstances - such Equipment, Software, Documentation, services
and other items within the Contractor's Scope of Supply as well as the
Contractor's rights under subcontracts and supply agreements as can be used
for the completion, operation and maintenance of the WLL System.
26.5 Consequences of Cancellation According to 26.3
----------------------------------------------
In the event that The Purchaser cancels the Contract pursuant to Subclause
26.3 the Contract shall cease to have any force or effect and the
Contractor shall immediately upon The Purchaser's demand refund to The
Purchaser all amounts paid by The Purchaser under this Contract. The
Purchaser shall make available to the Contractor for restitution,
dismantling and removal at the Contractor's own risk and expense what the
Contractor has delivered to The Purchaser under this Contract prior to the
effective date of the cancellation.
In the event that The Purchaser decides to complete the WLL System or parts
thereof either itself or by engaging other contractors, The Purchaser shall
have the right to acquire against a compensation and on terms and
conditions with respect to warranties and other matters that are reasonable
in the circumstances - such Equipment, Software, documentation, services
and other items within the Contractor's Scope of Supply as can be used for
the completion, operation and maintenance of the WLL System.
The Purchaser may require the Contractor to promptly remove at its own
expense any and all of Equipment, or parts thereof, that may have been
delivered to or installed and not acquired by The Purchaser.
26.6 Ownership to Equipment etc.
---------------------------
The ownership to such Equipment, Software, materials, Documentation and
work within the Contractor's Scope of Supply for which the Contractor is
entitled to compensation according to Subclauses 26.4 or 26.5 shall
immediately upon the
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86
cancellation pass to or notwithstanding the cancellation rest with The
Purchaser, as the case may be. The Purchaser shall be free to use the same
without incurring any liability to the Contractor or any third party. It is
agreed that The Purchaser may exercise its rights to cancel the Contract,
or an order under the Contract notwithstanding whether Equipment, Software,
documentation and work installed, delivered, and performed by the
Contractor can be restituted in substantially the same condition as
delivered by the Contractor. In the event of cancellation pursuant to
Subclause 26.2, Equipment, Software and Documentation of which the value
has decreased due to negligence on part of The Purchaser or anybody for
which The Purchaser is responsible shall be acquired by The Purchaser
according to provisions agreed upon by the parties.
26.7 Survival of Clauses
-------------------
The provisions of Subclause 11.1.3 and Clause 16, to the extent applicable,
and of Clause 29, 30 and 31 shall survive the cancellation or termination
of this Contract.
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Clause 27 - Entire Agreement. Modifications of the Contract
-----------------------------------------------------------
The parties state that with respect to the subject matter hereof this Contract
Document and the Annexes, thereto, which form an integral part of the Contract,
constitute the sole and exclusive understanding of the parties in respect of the
subject matter hereof and supersede all prior agreements, arrangements or
understandings relating to the subject matter, including any bid, tender,
quotation, offer or proposal, general sales conditions or terms or provisions
that the Contractor has submitted.
No change or modification of this Contract may be made except in writing and
executed by the respective duly authorised representatives of each of the
parties hereto.
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Clause 28 - Order of Priority
-----------------------------
In the event of any discrepancy between any data, stipulation or provision given
in any of the Clauses of this main Contract Document, on the one hand, and data,
stipulation or provision given in any of the Annexes, on the other hand, the
data, stipulation or provision contained in a Clause of this Contract Document
shall prevail. In the event of any discrepancy between the Technical
Specifications and the Product Description the Technical Specification shall
prevail over the Product Description, except to such an extent as the Product
Description is more advantageous to The Purchaser, in which latter case the
Product Description shall prevail.
To the extent the Technical Specifications or the Product Description contains
something that is not dealt with in any provisions of the Clauses of this
Contract Document, the Technical Specifications and the Product Description, as
the case may be, shall prevail notwithstanding the foregoing.
To the extent the Technical Specifications or the Product Description contains
anything that is not dealt with in the other of them, the one containing the
data, stipulation, provision or whatever might be concerned shall prevail over
the other.
The Purchaser shall have the right to decide what document, data, stipulation or
provision that shall prevail if such a decision is notified to the Contractor
well in advance of the commencement of the manufacturing process in question.
In the event that the Contractor and The Purchaser have different opinions as to
the interpretation of the Specifications, the opinion of The Purchaser shall
always prevail, notwithstanding the foregoing, provided that The Purchaser's
opinion is not unreasonable. The Contractor shall as soon as possible inform The
Purchaser of any inconsistency, ambiguity or incompletion found in the
Specifications.
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Clause 29 - Applicable Law
--------------------------
This Contract shall be governed by and construed in accordance with the law of
Sweden.
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Clause 30 Confidentiality
-------------------------
Each party (as "Receiving party" hereunder) shall keep in confidence, with the
same degree of care as used for its own confidential information, any
information which is disclosed to it by the other party (as "Disclosing party"
hereunder) in writing or other tangible form and clearly marked or identified in
writing as "confidential" or by similar legend, for a period of three years from
the date of first disclosure to the receiving party hereunder of such
information, except that the foregoing obligations shall not apply or cease to
apply, to any information which:
(i) is publicly known at the time of disclosure or becomes thereafter publicly
available through no fault of the receiving party;
(ii) was already known to the receiving party free from confidentiality
restrictions, prior to receiving it from the disclosing party;
(iii) is disclosed to the receiving party by any third party without
confidentiality restrictions;
(iv) is independently developed by the receiving party;
(v) is necessary to disclose to any lawful authorities for obtaining any type
approval of the hardware/software goods covered hereunder;
(vi) is inherently disclosed or is necessary to be disclosed by The Purchaser
by or for the proper installation, operation, use, maintenance and/or
repair of the goods procured hereunder or the provisions of services
thereby.
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Clause 31 - Arbitration
-----------------------
31.1 The Contractor and The Purchaser shall endeavour to settle any difference
of opinion which may arise during the execution of this Contract in an
amicable manner.
31.2 Any difference of opinion concerning any matters under this Contract shall
bereferred for resolution by arbitration to an expert sitting as a single
arbitrator to be agreed upon by the parties hereunder or failing such
Contract to a single arbitrator to be named by the President of the [],
upon the request of any party to this Contract. Arbitration proceedings
shall take place in Stockholm Upon the request of any party the arbitration
shall be in English. The arbitrator from time to time acting hereunder
shall have all the powers conferred on arbitrators by the [ ] Arbitration
Law 1968 or any statutory modification thereof for the time being in force.
Judgment upon any award rendered by the arbitrator may be entered in any
court in Sweden having jurisdiction or application may be made to such
court for a judicial acceptance of the award and an order of enforcement,
as the case may be. The arbitrator shall not be bound by the rules of
evidence and procedure, but shall be bound by the substantive law of the
Sweden and shall be obliged to disclose the reason for his award.
31.3 The fact that a dispute is brought before a court or before a duly
appointed expert does not release the Contractor from its obligations to
fulfil its commitments as provided by this Contract.
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Clause 32 - Notices
-------------------
Any and all notices or information other than information or proposal of pure
technical nature shall be given by any party by prepaid mail or by fax or hand
delivery to the other party at the following address:
If to The Purchaser
Jan Campbell, 110 Sir James Peiris Mawatha, Colombo, Sri Lanka
If to Contractor
Steve Mallinson, Cambridge House, Oxford Road, Uxbridge, UK.
Notices, information or proposals of pure a technical nature shall be forwarded
to the following address:
If to The Purchaser
Mahinda Ramasundera, 110 Sir James Peiris Mawatha, Colombo, Sri Lanka
If to Contractor
Paul Senior, Cambridge House, Oxford Road, Uxbridge, UK.
The aforementioned addresses of either party may be changed at any time by
giving fifteen (15) days prior notice to the other party in accordance with the
foregoing. Either party may also by fifteen (15) days prior notice to the other
party give further specification as to which address notice, information or
proposals of various nature shall be forwarded.
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Clause 33 - Support Bond
------------------------
In addition to the other clauses within this Contract, The Contractor agrees to
placing of a Support Bond.
The Guarantor for this bond shall be as follows:
Lloyd Bank Plc.
Guarantees, International Services Centre
P.O. Box 63
Two Brindley Place, Birmingham
B1 2AB
United Kingdom
The following wording will be used:
The Guarantor hereby issues an irrevocable Guarantee No. ______ in the following
terms:
The Beneficiary shall the Purchaser known as Suntel Private Ltd.
The Principal shall be the Contractor, known as Airspan Communication Limited.
Failure of the Contractor's performance obligations in respect of the supply of
equipment for Telecommunications Network Infractructure under Contract for
Purchase Order No. LP/0442/99 dated April 26, 1999 due to the end of its
activities, due to its winding up, appointment of receiver(s) or entering into a
company voluntary arrangement, or closure of the product line used within this
supply of the contract.
The Support Bond shall be posed within 1 month after The Contractor receives the
principal and interest payment from milestones through System Acceptance (Actual
Date of Delivery) and receipt by The Contractor of all and any other associated
payments for deliveries covered under the bridging phase.
The Support Bond shall have value equal to 60% of contract value in the first
year after the Actual date of Delivery (Phase 1), 50% of contract value in the
second year after the Actual date of Delivery (Phase 1), and 40% of contract
value in the third year after the Actual date of Delivery (Phase 1).
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Clause 34 - Contract Period
---------------------------
This Contract comes into force when signed by both parties and shall remain in
force as long as any of the parties has any obligation under the Contract to
fulfil.
This Contract has been made in duplicate and each of the parties has taken one
copy.
Place: LONDON Place: COLOMBO
Date: Date:
Eric Stonestrom J. Campbell
Managing Director Managing Director
Airspan Communications Limited Suntel (Private) Ltd.
The Contractor The Purchaser
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<PAGE>
Exhibit 10.5
Note: Portions of this exhibit indicated by"[*]" are subject to a confidential
treatment request, and have been omitted from this exhibit. Complete, unredacted
copies of this exhibit have been filed with the Securities and Exchange
Commission as part of this Company's confidential treatment request.
Distributor Agreement
---------------------
This Distributor Agreement (the "Agreement") is made effective as of the 31st
day of March, 2000 (the "Effective Date"), by and between Airspan Networks
Incorporated, a company incorporated under the laws of the State of Washington
having its principal office at 777 108th Avenue NE, Suite 1895, Bellevue,
Washington 98004 ("Airspan") and GLS LLC, ("Distributor") a limited liability
company incorporated under the laws of the State of South Dakota having its
principal office at 501 Fourth Street, Sergeant Bluff, IA 51054.
WITNESSETH:
WHEREAS, Airspan is engaged in the design and manufacture of various
telecommunications product lines, including, among others, those product lines
more completely described in Schedule I hereto (the product lines described in
Schedule I, as from time to time amended in accordance with the provisions of
this Agreement, are hereinafter called the "Airspan Products") the hardware
components thereof are sometimes referred to separately as "Equipment," the
software components thereof are sometimes referred to separately as "Software"
as defined in Section 11.1, and an arrangement of Equipment which, when
interfaced with Software, is operable to perform predetermined functions, is
referred to as a "System");
WHEREAS, Distributor is engaged in the promotion of sales of telecommunications
products; and
WHEREAS, Airspan desires to appoint Distributor as a Distributor for the Airspan
Products for the territory described in Schedule II hereto (the "Territory").
NOW, THEREFORE, in consideration of the mutual promises herein contained, it is
hereby agreed as follows:
1. APPOINTMENT.
-----------
1.1 Subject to the provisions of this Agreement, Airspan hereby appoints
Distributor as an independent, exclusive distributor to assist Airspan in
marketing the Airspan Products to customers in the Territory, and Distributor
hereby accepts such appointment as of the Effective Date of this Agreement.
Distributor's appointment as a distributor of the Airspan Products grants to
Distributor only a license to resell the
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Airspan Products to Distributor's customers in the Territory, and does not
transfer any right, title, or interest in any of the Airspan Software to
Distributor.
1.2 Distributor's relationship to Airspan is that of an independent
contractor, and nothing in this Agreement shall constitute Distributor as the
agent or employee of Airspan. Distributor shall have no authority to accept any
order or make any offer (except as herein stated), or execute any instrument or
make any commitment on behalf of Airspan. Specifically, without in any way
limiting the generality of the foregoing, Distributor agrees not to make any
representation, guarantee, or warranty on Airspan's behalf concerning the
Airspan Products, but will refer customers to Airspan's printed literature.
Nothing contained in this Agreement is to be construed as a limitation or
restriction upon Airspan in the sale or other disposition of any of its products
to any person, firm, or corporation inside or outside of the Territory. Airspan
will pay no commissions under this Agreement. Distributor's compensation is to
be obtained solely by the difference between the price Distributor pays to
Airspan and the price Distributor charges its customers. The parties also
acknowledge that this Agreement is not intended to create a joint venture or
partnership between Airspan and Distributor.
1.3 Distributor will use its best efforts to maintain and support the
Airspan Products within the Territory by devoting such attention, time, and
effort as may be reasonably necessary to fully develop the available market
potential. During the term of this Agreement, and for a period of three (3)
months following the expiration or termination of this Agreement, Distributor
agrees that neither it nor any organization or entity controlled or directed by
it will, without Airspan's prior, written consent, represent a manufacturer or
supplier of products similar in design or performance to or which are of such a
nature as to be competitive with any products contained in the Airspan Products,
nor will Distributor market or otherwise promote the sale of such products.
Distributor will give Airspan thirty (30) days' prior, written notice of each
new potential representation role being considered by Distributor, and
Distributor will not undertake such representation without Airspan's prior,
written consent, such consent not to be unreasonably withheld. Except as
provided above, in no event will Airspan consent to Distributor's consultation
for or representation of a manufacturer or supplier, which is directly or
indirectly, a competitor of Airspan.
1.4 Distributor shall maintain a place of business at the location
specified in Section 21.10 where Distributor can be contacted by Airspan,
customers, and prospective customers during regular business hours with a
permanent mailing address and an accessible cellular telephone, and will provide
Airspan with written notice promptly upon any change in address. Distributor
agrees to assume all of the expenses of this place of business, including rent,
stenographic services, and all other expenses except as specifically assumed in
writing by Airspan.
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1.5 Airspan will provide Distributor with such commercial and technical
assistance and training as may reasonably be necessary, in Airspan's sole
judgment, to enable Distributor to effectively carry out its activities under
this Agreement and, in connection therewith, to provide such sales promotional
materials, as Airspan may deem appropriate. Airspan will provide such technical
support as is reasonable and necessary to maintain the product line as a viable
competitor in the market.
2. REPRESENTATIONS AND WARRANTIES.
Distributor hereby represents and warrants as follows:
a. Distributor has been duly registered in accordance with any and all
relevant legislation, has received any and all necessary governmental
authorizations to enter into and perform its obligations under this Agreement,
and that its entry into and performance under this Agreement will not violate
applicable legislation;
b. Distributor is duly registered with all necessary tax authorities and
is in compliance with all payment obligations in accordance with applicable
legislation. No claims against or investigations of Distributor with respect to
its tax obligations exist;
c. Distributor is not currently involved in any litigation, arbitration,
or other legal proceedings in which claims are being asserted against
Distributor which might affect its ability to perform its obligations under this
Agreement, nor is Distributor aware of any unasserted claims against Distributor
of this nature; and
d. Distributor's bank accounts have been established and operated in
accordance with applicable legislation. All transactions of Distributor
required to be carried out through authorized banks have been so carried out.
Distributor is not, has not, and warrants that it will not breach any currency
regulation or currency control legislation. Distributor further warrants that
it is not, has not, and will not breach any bank secrecy act, rules or
regulations.
3. SERVICES.
3.1 In addition to the above, the Distributor will perform the following
services under this Agreement:
a. In cooperation with Airspan, identify potential customers and project
opportunities within the Territory that will lead to sales/licenses of
Airspan Products and services;
b. Prepare reports on the opportunities that will include: (1) description
of the project; (2) assessment of the appropriate fit to Airspan Products
and
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services; (3) dollar size and timing of the project; (4) competitive
assessment; and (5) identification of key decision makers and other
technical and commercial contacts;
c. Assist and advise Airspan in the preparation and delivery of appropriate
marketing and sales programs;
d. Initiate and coordinate meetings at all levels for the appropriate
Airspan employees to evaluate the identified projects;
e. Initiate and assist in the preparation of sales and technical meetings
with customers, and where appropriate, attend these meetings with Airspan
personnel and provide administrative support and translation services;
3.2 Distributor will use its best efforts to vigorously and aggressively
promote the sale of Airspan Products within the Territory. Such efforts
shall include, but shall not be limited to, that advertising within the
Territory which is reasonably necessary. All such advertising shall follow
the general statements made in advertising prepared by Airspan. All
advertising shall contain a prominent reference to Airspan, indicating the
actual commercial origin of Airspan Products so advertised. Distributor
shall not make any claims in its advertising which exceed or contradict
claims made by Airspan in its printed materials.
3.3 Distributor will train and maintain a sufficient number of technical
and sales personnel in order to: (a) serve the demands and needs of its
customers for Airspan Products, service, and support; and (b) carry out the
obligations of Distributor under this Agreement.
3.4 Distributor and its staff will be conversant with the technical
language related to Airspan Products and will develop sufficient knowledge
of the industry, Airspan Products, and products competitive with Airspan
Products (including specifications, features, and benefits) so as to be
able to explain in detail to customers the differences between Airspan
Products and competitive products. Distributor will conduct or provide for
any training of its personnel which may be necessary to impart such
knowledge.
3.5 Distributor and its staff will research the technical requirements and
specifications of the market for Airspan Products in the Territory and make
information known to Airspan such that Airspan may, at its discretion,
implement appropriate technical changes to the Products to enable them to
be sold in the Territory. Airspan acknowledges that, subject to a further
and separate Agreement, such changes may be implemented in the future by
Distributor, with the assistance of Airspan.
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3.6 Distributor agrees to purchase and stock a comprehensive inventory of
spare parts based upon the recommended list set forth in Schedule III to
this Agreement.
3.7 Distributor agrees to provide to its customers' installation services
for all Airspan Products. All such installation services shall be
performed by Distributor in accordance with Airspan's latest installation
standards as provided by Airspan.
3.8 Distributor agrees to train and have readily available a maintenance
staff to efficiently and expeditiously maintain or upgrade all Airspan
Products purchased or licensed by Distributor from Airspan. Maintenance
shall be performed in accordance with Airspan's latest maintenance
standards for Airspan Products, as provided by Airspan, by Distributor's
own personnel and may not be subcontracted or delegated to any other person
or entity without Airspan's prior, written authorization.
3.9 Distributor agrees to provide and maintain those facilities adequate
to meet the obligations set forth in this section and of the Agreement.
Distributor further agrees to provide all of the sales and support
functions set forth in this section at no charge to Airspan.
3.10 Distributor agrees not to actively seek to promote, rent, lease, sell,
sublicense or authorize the rental, sale or sublicense of Airspan Products
outside of the Territory [without the prior written approval of Airspan],
but nothing in this Agreement shall prevent Distributor from renting,
selling or sublicensing the Airspan Products to customers outside of the
Territory in response to an unsolicited request from such customer.
3.11 During the term of this Agreement Distributor agrees that neither it
nor any organization or entity controlled or directed by it will, without
Airspan's prior, written consent, represent a manufacturer or supplier of
products similar in design or performance to or which are of such a nature
as to be competitive with any products contained in the Airspan Products.
3.12 The parties mutually agree that by April 30, 2000, the parties will
negotiate and execute a National Accounts Consulting Agreement whereby the
Distributor will receive consulting fees and commissions for the sale and
deployment of Airspan's products on a national basis. It is the intent of
the parties to jointly pursue the sale of products to said companies and to
enter into and complete contracts for the deployment of products in this
manner.
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4. ORDERING PROCEDURE.
4.1 The following procedures shall be followed with respect to each
purchase order issued by Distributor:
a. During the Term, Distributor will inform Airspan of its intent to
purchase Equipment and Installation Services (but only if Airspan expressly
agrees to perform such Installation Services) and to license Software, by
sending to Airspan a written order. This written order (the "Purchase
Order") will state the type of Equipment, System, or Installation Services
that Distributor wants to purchase and the Software Distributor wants to
license, the price of the ordered items (the "Contract Price") as set forth
in Schedule IV, "Price List" (which is hereby incorporated by reference)
and the proposed delivery and installation dates, if applicable.
b. Each Purchase Order shall specifically incorporate by reference the
terms and conditions of this Agreement, and no additional or different
terms and conditions stated in a Purchase Order, any letter, or otherwise
shall be binding unless expressly referred and agreed to by Airspan in
writing. In the event of a conflict between the terms and conditions of
this Agreement and of any Purchase Order issued hereunder, or if the
Purchase Order does not reference the terms and conditions of this
Agreement, the terms and conditions of this Agreement shall control.
4.2 If a Purchase Order is accepted by Airspan, Airspan will issue an
order acknowledgment to Distributor within five (5) business days of
Airspan's receipt of the written Purchase Order from Distributor.
5. RECORDS AND REPORTING.
5.1 At Airspan's request, within fifteen (15) days of the end of each
calendar month, Distributor will provide to Airspan a written report
showing, for the just-ended calendar month: (a) Distributor's shipments of
Airspan Products by dollar volume, both in the aggregate and for such
categories as Airspan may designate from time to time; (b) forecasts of
Distributor's anticipated orders by product; (c) Distributor's current
inventory levels of Airspan Products, in the aggregate and by product; and
(d) any other information which Airspan may reasonably request.
5.2 Distributor will promptly advise Airspan concerning any market
information which comes to Distributor's attention regarding Airspan,
Airspan Products, Airspan's market position, or the continued
competitiveness of Airspan Products in the marketplace. Distributor will
confer with Airspan from
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time to time, at Airspan's request, on matters relating to market
conditions, distribution forecasting, and product planning.
5.3 For at least two (2) years after termination of this Agreement,
Distributor will maintain its records, contracts, and accounts relating to
distribution of Airspan Products, and will permit examination thereof by
authorized representatives of Airspan at all reasonable times.
6. CONTRACT PRICE
6.1 The Contract Price for each item of Equipment, Installation Services,
or Software is as specified in Schedule IV and shall be paid to Airspan in
US Dollars (US$) free of any withholding tax and of any currency controls
or other restrictions. The Contract Price includes:
a. The price of the Equipment;
b. The fee for the licensing of the Software;
c. If Installation Services are ordered and such order is accepted
by Airspan, the charges for installing and testing each unit of
Equipment or Software;
d. The charges for the warranty of the Equipment and Software in
accordance with Sections 14 and 15; and
e. Costs in accordance with delivery obligations set forth in
Sections 8.1 and 8.2.
[*]
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
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Airspan warrants that during the term of this Agreement, the prices at
which Airspan sells to Distributor products supplied under this Agreement
shall be no less favorable to the Distributor than those prices at which
Airspan sells, at substantially the same time in the United States, similar
products and pursuant to similar terms and conditions as those by which
Airspan sells Products to the Distributor under this Agreement. Products
shall only be deemed similar if they provide like functionality. The terms
and conditions shall only be deemed similar if the product is supplied
pursuant to an agreement or arrangement of similar duration and commitment,
provides for similar warranties and after service commitments, involves
similar spare part and support commitments, has the same payment and other
financial terms, and otherwise has similar terms and conditions.
6.2 The Contract Price is shown in Schedule IV and shall include
applicable duties, taxes or imposts, including all export or import duties.
Sales taxes and contractor's excise taxes shall be itemized on all Purchase
Orders. The parties agree that the Contract Price in Schedule IV shall be
firm for a minimum period of twenty-four (24) months from the Effective
Date. After the above period of twenty-four (24) months, Exhibit B may be
revised by Airspan giving thirty (30) days written notice to Distributor.
7. PAYMENT TERMS.
7.1 Airspan will issue an invoice (the "Invoice") to Distributor in
accordance with the payment terms below. The Invoice specifically will
identify the Equipment, Software, or other items shipped, and the Contract
Price of such items. Any Installation Services or other services provided
by Airspan will be invoiced separately following completion of such
services. The Invoice also shall state the total due to Airspan from
Distributor (the "Invoice Total"), which shall include the Contract Price,
and any applicable taxes, duties, and other fees due pursuant to Section 6
of this Agreement. Payment of the Invoice Total is due (without any right
of set-off) Net forty-five (45) days after the date of invoice.
7.2 If Distributor disputes any invoice or part thereof, Distributor
must notify Airspan in writing within twenty-five (25) days of the invoice
date giving details of the reason for such dispute.
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Distributor and Airspan agree to work together in good faith to resolve the
dispute as quickly as possible. Distributor may withhold payment of such
disputed amounts until resolution of the dispute. Any parts of the invoice
not under dispute shall be paid net forty-five (45) days after the date of
invoice. On resolution of the dispute, Distributor shall immediately pay
any amounts due in full.
7.3 Distributor will make payment by wire or telegraphic transfer to
the bank account set forth below or, on receipt of written notification
from Airspan, to another designated bank within the United States.
Bank: Seafirst Bank, 10555 N.E. 8th, Bellevue, WA98004, USA.
Account name: Airspan Networks Inc.
Account number: 68777507
Routing Number: 125 - 0000 - 24
Further instructions: "Reference (Distributor's name), Purchase Order
number, Payment of Invoice number"
Payment will be deemed to have been made upon receipt of funds in Airspan's
bank.
7.4 If the cost to Airspan of performing this Agreement increases as a
result of any change to the law or increase in import duty or freight duty,
Airspan may, at any time, add such increase to the Contract Price by
notifying Distributor in writing of such increase.
8. DELIVERY, TITLE AND RISK OF LOSS.
8.1 All Equipment and Software will be delivered by Airspan CIP (as
defined in Incoterms 2000) to an airport in South Dakota that completes
international customs clearances and shipped to a location within the city
limits of the above arrival airport, such airport and delivery location are
to be agreed upon in writing by the parties for each Purchase Order.
Airspan will be responsible for and pay all packing, shipping, freight, and
insurance charges to the agreed upon location within the city limits. If
requested by Distributor, Airspan may arrange for shipment to be made to
Distributor's identified warehouse facilities or freight forwarder outside
of the city limits, subject to approval in writing by Airspan and agreement
to any additional charges in advance of shipment. Unless specified in the
Purchase Order, Airspan will select the mode of shipment and the carrier.
In this Agreement, "Incoterms" means the most recent international rules
for the interpretation of trade terms published by the International
Chamber of Commerce as in force on the Effective Date. Unless the context
otherwise requires, any term or expression which is defined in or given a
particular meaning by the provisions of the Incoterms shall have the same
meaning in this
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Agreement, but if there is any conflict between the provisions of the
Incoterms and this Agreement, the latter shall prevail.
8.2 All risk of loss or damage to the Equipment and Software will pass to
Distributor on collection by the freight forwarder from Airspan. However,
Airspan will insure the Equipment against loss or damage in transit to the
agreed to location as set forth in the Purchase Order within the city
limits of the arrival airport as set forth in Paragraph 8.1.
8.3 Title to the Equipment shall pass to Distributor on collection by the
freight forwarder from Airspan.
8.4 If Distributor has any Airspan owned Equipment in its possession:
a. Distributor shall ensure that Equipment is clearly marked as the
property of Airspan, and if asked, shall inform any third parties that the
Equipment is the property of Airspan;
b. Distributor shall not purport to create any security, mortgage, lien
or pledge over the Equipment, or otherwise deal with the Equipment without
Airspan's written consent;
c. In the event of any threatened seizure of the Equipment by any third
parties, and on termination or expiration of this Agreement, or any
Contract made pursuant to it, Airspan shall have the right, without
prejudice to any other remedy, to enter without prior notice any premises
and to repossess and take away or otherwise deal with the Equipment.
8.5 The Software shall at all times remain the exclusive property of
Airspan, subject to the uses provided herein.
8.6 Unless Distributor clearly advises Airspan to the contrary in
writing, Airspan may make partial deliveries on account of Purchase Orders.
Delay in delivery of any installment shall not relieve Distributor of its
obligation to accept said installment, provided that said delay does not
exceed sixty (60) days from Airspan's scheduled ship date and unless
Distributor has clearly advised Airspan to cancel the delayed installment
in writing at least fifteen (15) days prior to its revised planned shipment
date or its actual shipment date by Airspan.
8.7 Airspan will use reasonable efforts to meet Distributor's requested
delivery schedules for Equipment and Software, but Airspan reserves the
right to refuse, or delay delivery to Distributor when Distributor's credit
is impaired,
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when Distributor is delinquent in payments or fails to meet other credit or
financial requirements reasonably established by Airspan, or when
Distributor has failed to perform its obligations under this Agreement.
8.8 Should orders for Equipment and Software exceed Airspan's available
inventory, Airspan will allocate its available inventory and make
deliveries on a basis that Airspan deems equitable, in its sole discretion,
and without liability to Distributor on account of the method of allocation
chosen or its implementation. In any event, Airspan shall not be liable
for any direct, indirect, consequential, or special losses or damages
(including, but not limited to, loss of income or profit and loss of data)
that may be suffered by the Distributor or by any other person for failure
to deliver or for any delay or error in delivery of Equipment or Software
for any reason whatsoever.
9. TRADEMARKS AND COPYRIGHTS.
9.1 Distributor acknowledges Airspan's exclusive right, title, and
interest in and to any trademarks, trade names, logos and designations which
Airspan may at any time have adopted, used, or registered in the United States
of America and in the Territory (the "Trademarks"), and will not at any time do
or cause to be done any act or thing contesting or in any way impairing or
tending to impair any part of said right, title, and interest. In connection
with any reference to the Trademarks, Distributor shall not in any manner
represent that it has an ownership interest in the Trademarks or registration(s)
thereof, and Distributor acknowledges that no action by it or on its behalf
shall create in Distributor's favor any right, title, or interest in or to the
Trademarks.
9.2 Distributor recognizes the validity of Airspan's copyright in any
written material to which Airspan shall have made a claim to copyright
protection, and Distributor specifically recognizes Airspan's exclusive right to
copyright protection and/or registration of any translation of any advertising,
promotional, or descriptive material furnished to Distributor by Airspan.
9.3 Whenever Distributor refers to the Trademarks in advertising or in
any other manner to identify the products, Distributor shall clearly indicate
Airspan's ownership of the Trademarks and before distributing or publishing any
advertising, descriptive, or promotional materials, Distributor shall
affirmatively provide Airspan with an opportunity to inspect and approve such
materials.
9.4 Distributor agrees that when referring to the Trademarks, it shall
diligently comply with all laws pertaining to the Trademarks at any time in
force in the Territory.
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9.5 Distributor shall promptly notify Airspan of any and all
infringements, imitations, illegal uses, or misuses of the Trademarks which come
to Distributor's attention. Distributor also agrees that it shall not at any
time take any action in the courts or before the administrative agencies of the
Territory or otherwise to prevent the infringement, imitation, illegal use, or
misuse of the Trademarks, it being clearly understood by Distributor that such
action falls wholly within the authority of Airspan as sole owner of the
Trademarks.
9.6 Distributor agrees to render to Airspan all assistance in connection
with any matter pertaining to the protection of the Trademarks, whether in the
courts or before the administrative agencies of the Territory or otherwise, and
to make promptly available to Airspan, its Distributors, and attorneys all of
Distributor's files, records, and other information pertaining to the
advertising, promotion, and sale of the Airspan Products. All assistance
requested by Distributor in this paragraph shall be at AIRSPAN's expense. This
Expense includes costs, attorneys' and consultants' fees, and reimbursement of
time spent by officers, agents and employees of Distributor.
9.7 Distributor agrees and undertakes that it will not at any time,
whether during the term of this Agreement or after its expiration or
termination, adopt, use, or register without Airspan's prior, written consent
any work or symbol or combination thereof which is similar to any of the
Trademarks.
9.8 In the advertising and sale of Airspan Products, Distributor may use
the Trademarks in relation to those Airspan Products. Distributor will not make
or permit the alteration or removal of any tags, labels, or other identifying
marks placed by Airspan on Airspan Products. Distributor will not use or give
any third party permission to use the Trademarks. Distributor will not use, or
give any third party permission to use, the names "Airspan Communications Ltd.",
"Airspan Networks Incorporated", "ACL", "ANI" or abbreviations or derivations
thereof in Distributor's corporate titles, or in any way which might result in
confusion as to Airspan and Distributor being separate and distinct entities.
Distributor admits Airspan's exclusive ownership of the name "Airspan Networks
Incorporated", "Airspan Communications Ltd.", "ANI", "ACL", and any
abbreviations or derivations thereof and all of Airspan's Trademarks (whether
registered or not). Distributor shall not take any action inconsistent with
Airspan's ownership of such Trademarks; therefore, Distributor shall treat all
of Airspan's items distinctively (as to typography) and shall only use exact
reproductions of all Airspan's symbols (including Airspan's logo). Distributor
shall not adopt or use any Trademark or product name which may be confusingly
similar to any Airspan Trademark. Distributor may use the Airspan logo as it
appears on Airspan's letterhead.
10. CONFIDENTIAL INFORMATION AND TRADE SECRETS.
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10.1 In this Agreement, the term "Confidential Information" shall mean
the information of Airspan disclosed to Distributor in connection with its
performance under this Agreement, which is in written, recorded, photographic,
machine-readable, or other physical form or oral information reduced to writing
as soon as practicable after disclosure to Distributor, and which is
conspicuously marked "Confidential", "Proprietary", "Private", or in any other
manner indicating its confidential and/or proprietary nature. Without
limitation, Confidential Information includes: (1) Airspan's software products,
materials, data reports, programs, documentation, diagrams, and all related
technical information; (2) all information relating to Airspan's business and
products which is critical to Airspan's position in the marketplace, including
future plans of Airspan relating to the fields of endeavor in which Distributor
performs services for Airspan, the nature of certain work projects to which
Distributor is exposed, and the identity of persons working on those projects;
and (3) any improvements, enhancements, or modifications to the above made by or
on behalf of Airspan during the performance under this Agreement which are
provided, made available, or disclosed by or on behalf of Airspan to
Distributor, or used by Airspan or any of Airspan's other Distributors in
connection with their own sales activities.
10.2 Trade secrets are confidential information that includes ideas,
concepts, techniques, processes, inventions, knowledge, and know-how developed
by Airspan which: (1) derives independent economic value, actual or potential,
from not being generally known to, and not being readily ascertainable by proper
means by, other persons who can obtain economic value from its disclosure or
use; and (2) is subject to the efforts of Airspan that are reasonable under the
circumstances to maintain its secrecy. (This "trade secret" language comes from
the Uniform Trade Secrets Act.)
10.3 Distributor covenants and agrees that it will use the Confidential
Information solely for the performance of services under this Agreement, and
shall not disclose such Confidential Information to any other person (including
Airspan employees in any other division, group, or entity), firm, or
corporation.
10.4 Distributor shall use the same degree of care in safeguarding the
Confidential Information as it uses for its own confidential information of like
importance, but no less than reasonable care. Upon discovery of any disclosure
or misuse of Confidential Information, Distributor shall endeavor to prevent any
further disclosure or misuse.
10.5 All Confidential Information shall remain the property of Airspan,
and such Confidential Information and all copies thereof shall promptly be
returned to Airspan upon request or, at Airspan 's option, destroyed, in which
case Airspan shall be notified in writing when it has been destroyed.
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10.6 Nothing contained in this Agreement shall be construed as granting
to or conferring upon Distributor any rights, by license or otherwise, express
or implied, in Airspan's Confidential Information, other than the right to use
the Confidential Information for the purpose of this Agreement.
10.7 Any copies of the Confidential Information made by Distributor
shall reproduce proprietary marking and legends included therein, but the
provisions of this Agreement supersede any provisions of such legends
inconsistent herewith.
10.8 The terms and conditions of this Agreement shall not be disclosed
by Distributor to others, except with the prior, written consent of Airspan, or
as may be required by law or as necessary to establish its rights hereunder.
10.9 If, in connection with its performance, Distributor discloses to
Airspan any ideas, developments, or inventions conceived or actually reduced to
practice by Distributor prior to its performance hereunder, no relationship,
confidential or otherwise, express or implied, is established with Airspan by
the disclosure thereof. With respect to any such disclosure, no obligation of
any kind is assumed by nor may be implied against Airspan, its subsidiary, or
associated companies unless a formal, separate, written contract regarding the
subject of disclosure is consummated by the parties, and then the obligation
shall be only as expressed in the separate contract.
10.10 Distributor agrees that any breach of the provisions of this
Section by Distributor or Distributor's personnel, agents, or subcontractors, or
any third party providing products or services to Distributor will cause
immediate and irreparable injury to Airspan and that, in the event of such
breach, Airspan shall be entitled to injunctive relief and any and all other
remedies available at law or in equity.
10.11 After Distributor has received Airspan's Confidential Information
and know-how, it will be impossible to segregate Airspan's knowledge and know-
how from other knowledge acquired independently by Distributor. Accordingly,
during the performance of this Agreement and for three (3) months after
termination of services under this Agreement, Distributor will not offer
services to third parties which compete with the services provided by Airspan
under this Agreement, or otherwise use the knowledge acquired from Airspan in
order to compete with Airspan or its customers. Notwithstanding anything to the
contrary above, Distributor is not precluded from any activities which concern
product sectors or industries other than those that concern products or services
similar to those offered by Airspan in connection with this Agreement. Nothing
in this paragraph will be construed to prevent Distributor from providing
service to existing customers of Distributor which would result in their
interruption of service to the public.
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10.12 During the performance of this Agreement and for three (3)
months after termination of services under this Agreement, Airspan will not
offer products or services to third parties which compete with the products or
services provided by Distributor under this Agreement, or otherwise use the
knowledge acquired from Distributor in order to compete with Distributor its
customers
10.13 The obligations of this Section 10 shall survive the expiration or
termination of this Agreement.
11. SOFTWARE LICENSE.
11.1 Airspan grants Distributor, and Distributor hereby accepts, a
nonexclusive, non-transferable license to use, and to sublicense as set forth
below, Software provided by Airspan hereunder only on a single System or unit of
Equipment, as may be applicable. No license is granted to use the Software on
multiple Systems or in conjunction with Equipment furnished by a party other
than Airspan, unless specifically agreed to in writing by Airspan. Software
licensed under this Agreement is defined as: (a) any digital instruction
sequence or control data contained on any media, including but not limited to,
any magnetic-, electronic-, optical-, or organic device, and the term Software
shall include any enhancement, modification, extension, part, portion or
expansion thereof or implementation or downloading from network of any of the
foregoing, for use exclusively on a System or a unit of Equipment; and (b) all
associated documentation used to describe, maintain and use the Software.
11.2 Any Software provided to Distributor by Airspan will be treated as the
exclusive property of Airspan, and Distributor will: (a) treat such Software as
Confidential Information under Section 10 of this Agreement; (b) utilize such
Software or any portions or aspects thereof (including any methods or concepts
utilized therein) solely on Systems or Equipment provided by Airspan; (c)
forthwith return to Airspan all memory media, documentation and/or other
material that has been modified, updated or replaced; (d) except to the extent
permitted by applicable law not modify, disassemble or decompile such Software,
or reverse engineer any portion of the Software or functioning of Systems or
Equipment, or permit others to do so, without Airspan's prior written consent;
(e) except to the extent permitted by applicable law not reproduce or copy such
Software in whole or in part except for backup and archival purposes or as
otherwise permitted in writing by Airspan; (f) not perform or release benchmarks
or other comparisons of the Software; and (g) not remove any trademark,
tradename, copyright, notice or other proprietary notice from the Software and
Distributor shall be responsible for the conservation of the same on any back-up
copy of the Software.
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11.3 In the event of a breach of this license by Distributor, then Airspan
may, in its discretion, terminate the license with immediate effect, whereupon
Distributor shall return to Airspan all Software and copies thereof within ten
(10) days.
12 EXCUSABLE DELAY.
Airspan shall not suffer any liability for non-performance, defective
performance, or late performance under this Agreement due to causes beyond its
control and without its fault or negligence such as, but not limited to, acts of
God, war (including civil war), civil unrest, acts of government, fire, floods,
explosions, the elements, epidemics, quarantine, restrictions, strikes, lock-
outs, plant shutdown, material shortages, or delays in transportation or delays
of its suppliers or subcontractors for like cause.
In the event of excusable delay as defined in the preceding sentence, then
Airspan, upon giving prompt written notice to Distributor, shall be excused from
such performance on a day-to-day basis to the extent of such prevention,
restriction, or interference (and Distributor shall likewise be excused from
performance of its obligations on a day-to-day basis to the extent Distributor's
obligations relate to the performance so prevented, restricted, or interfered
with), provided that Airspan shall use its best endeavors to avoid or remove
such causes of non-performance and both parties shall proceed to perform with
dispatch whenever such causes are removed or cease to exist.
13. TERM AND TERMINATION.
13.1 This Agreement shall remain in effect for sixty (60) months from
the Effective Date (the "Initial Term"). After the Initial Term, the term of the
Agreement may be extended by a further period of five (5) years by mutual
written agreement by the parties in the form of an amendment to this Agreement.
If Distributor wishes to extend the term of the Agreement beyond the Initial
Term, it must notify Airspan in writing at least six (6) months prior to then
end of the Initial Term. However, nothing contained herein shall be interpreted
as requiring either party to renew or extend this Agreement. Notwithstanding
the provisions of this section or of any other provisions of this Agreement,
this Agreement may be terminated prior to the expiration of its stated term as
set forth below.
13.2 Either party may terminate this Agreement at any time during the term
of this Agreement if either party fails materially to comply with any covenant,
term, or provision of this Agreement, by written notice given to the other party
not less than thirty (30) days prior to the effective date of such termination.
Either party's right to terminate this Agreement under this Section 13.2 may not
be exercised unless said
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party shall have given the other party written notice of the failure, and the
other party has not cured the failure within the thirty (30) day period
following notice from said party.
13.3 This Agreement terminates automatically for just cause, with no
further act or action of either party if: (a) a receiver is appointed for
Distributor or its property; (b) Distributor makes an assignment for the benefit
of its creditors; (c) any proceedings are commenced by, for, or against
Distributor under any bankruptcy, insolvency, or debtor's relief law; or (d)
Distributor is liquidated, dissolved, or otherwise terminates its activities.
13.4 In the event of termination by either party for any reason,
Distributor shall provide Airspan with lists of existing customers as well as
other information necessary for an orderly changeover of representation in the
Territory.
13.5 Upon termination, Distributor shall immediately return to Airspan
all Confidential Information, and Distributor agrees that neither it nor any
company or organization controlled or directed by it shall divulge the contents
of such material to any person at any time, notwithstanding the termination of
this Agreement.
13.6 Airspan shall not be liable to Distributor for damages of any kind,
including incidental or consequential damages, on account of the termination of
this agreement in accordance with this section 13. Airspan shall not be liable
to Distributor on account of termination or expiration of this Agreement for
reimbursement or damages for loss of goodwill, prospective profits, or
anticipated orders, or on account of any expenditures, investments, leases, or
commitments made by either party, or for any other reason whatsoever based upon
or growing out of such termination or expiration. Airspan will recognize
payments due to Distributor for orders received up to ninety (90) days after the
termination or expiration of this Agreement.
13.7 Distributor acknowledges and agrees that: (a) Distributor has no
expectation and has received no assurances that its business relationship with
Airspan will continue beyond the states term of this agreement or its earlier
termination in accordance with this section, that any investment by Distributor
in the promotion of Airspan's Products will be recovered or recouped, or that
Distributor shall obtain any anticipated amount of profits by virtue of this
Agreement; and (b) Distributor shall not have or acquire by virtue of this
Agreement or otherwise any vested, proprietary, or other right in the promotion
of Airspan's Products or in any goodwill created by its efforts hereunder.
13.8 This Section 13.8, as well as the provisions of Sections 9, 10, 11,
16, 17 and 18, shall survive the termination of this Agreement.
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14. WARRANTY.
14.1 THE WARRANTIES SET FORTH IN SECTIONS 14 AND 15 OF THIS AGREEMENT ARE
IN LIEU OF, AND Airspan HEREBY DISCLAIMS, ALL OTHER WARRANTIES AND CONDITIONS,
WHETHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, THE IMPLIED TERMS AND
WARRANTIES OF SATISFACTORY QUALITY, MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
14.2 Subject to Sections 14.3 and 14.4, Airspan warrants that the Equipment
sold to Distributor under this Agreement shall, under normal use and service, be
free from defects in materials and faulty workmanship, and that the Software
licensed to Distributor under this Agreement shall conform in all material
respects to Airspan's published specifications therefor. The warranty period for
any item of Equipment and related Software shall be twelve (12) months from the
date of delivery of such Equipment and related Software to Distributor as set
forth in Paragraph 8.1 (hereinafter, this period of time shall be referred to as
the "Initial Warranty Period.")
14.3 Airspan's obligation and Distributor's sole remedy under this warranty
are limited to the replacement or repair, at Airspan's option, of the defective
Equipment or Software within the Initial Warranty Period. Airspan shall have no
obligation to remedy any such defect if it can be shown that: (a) the Equipment
or Software was altered, repaired, or reworked by any party other than Airspan
without Airspan's prior written consent; (b) such defects were the result of
Distributor's or a third party's improper storage, mishandling, abuse, or misuse
of the Equipment or Software; (c) such defects were the result of Distributor's
or a third party's use of the Equipment or Software in conjunction with
equipment electronically or mechanically incompatible or of an inferior quality;
or (d) the defect was the result of damage by fire, explosion, power failure, or
any act of nature.
14.4 In no event shall Airspan be obliged to provide on-site maintenance.
Subject to the provisions of this warranty clause, defective parts or components
must be returned by Distributor to Airspan's designated facility located within
the contiguous 48 states in the United States, freight prepaid, within the
Initial Warranty Period, and said defective parts will be repaired or replaced
by Airspan at no charge to Distributor. In connection with such return by
Distributor, Distributor shall comply with Airspan's Return Material
Authorization (RMA) procedures. Risk of loss or damage to Equipment or Software
returned to Airspan for repair or replacement shall be borne by Distributor
until delivery to Airspan. Upon delivery of such Equipment or Software, Airspan
shall assume the risk of loss or damage until that time that the Equipment or
Software being repaired or replaced is returned and delivered to Distributor.
Distributor will pay all transportation costs for Equipment or Software shipped
to Airspan for repair or replacement. Airspan shall pay all transportation
costs associated
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with returning repaired or replaced Equipment or Software to Distributor unless
there was no fault found (NFF), in which event, the Distributor shall pay such
transportation costs, along with Airspan's then prevailing standard NFF charge.
14.5 Airspan will charge Distributor for any maintenance carried out which
is not covered by the warranties contained in Section 14.2 or Section 15 at
Airspan's then prevailing standard rates for such services.
15. WARRANTY ON REPAIRED AND REPLACEMENT MATERIALS.
Airspan warrants that, following repair or replacement, the repaired or replaced
Equipment or Software by Airspan shall be free from defects in materials and
faulty workmanship and that the Software will conform in all material respects
to Airspan's published specifications therefor for ninety (90) days from date of
shipment from Airspan to Distributor or until the end of the Initial Warranty
Period, whichever is longer.
16. LIMITATION OF LIABILITY.
16.1 WITHOUT PREJUDICE TO SECTION 16.4, NEITHER Airspan, NOR ANY OF ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, REPRESENTATIVES, SHAREHOLDERS, OR
AFFILIATES (Airspan AND SUCH OTHER PERSONS, THE "Airspan PARTIES"), SHALL HAVE
ANY LIABILITY TO DISTRIBUTOR FOR LOSS OF PROFITS, INCOME, REVENUE OR DATA, OR
INCIDENTAL, CONSEQUENTIAL, INDIRECT OR PUNITIVE DAMAGES OR LOSSES, ARISING FROM
OR IN CONNECTION WITH THIS AGREEMENT, ANY PURCHASE ORDER PLACED PURSUANT TO THIS
AGREEMENT OR ANY OTHER COLLATERAL CONTRACT, OR FROM OR IN CONNECTION WITH THE
EQUIPMENT OR THE SOFTWARE OR THE USE THEREOF OR THE INABILITY TO USE THEM EITHER
SEPARATELY OR IN COMBINATION WITH OTHER EQUIPMENT OR SOFTWARE, OR FROM ANY OTHER
CAUSE, WHETHER CAUSED BY NEGLIGENCE, BREACH OF CONTRACT, STRICT LIABILITY,
BREACH OF WARRANTY, ON GROUNDS OF FAILURE OF ESSENTIAL PURPOSE OR OTHERWISE.
16.2 Without prejudice to Sections 16.3 and 16.4, the liability of the
Airspan Parties, taken as a whole, for each event or series of connected events
arising out of or in connection with this Agreement, any purchase order placed
pursuant to this Agreement, or any other collateral contract, or from or in
connection with the Equipment or Software or the use thereof, or the inability
to use them either separately or in combination with other equipment or
software, or from any other cause, whether caused by negligence, breach of
contract, strict liability, breach of warranty, on grounds of failure of
essential purpose, or otherwise, shall in no circumstance exceed the total
amount payable by Distributor to Airspan under this Agreement for the provision
of
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the Equipment or Software which gave rise to the loss or damage or in
connection with which the loss or damage was incurred.
16.3 Airspan Parties, taken as a whole, shall be liable for physical
damage to Distributor's property resulting from Airspan's negligence under or in
connection with this Agreement up to a maximum aggregate amount of one million
US Dollars (US$1,000,000). And Distributor, taken as a whole, shall be liable
for physical damage to Airspan's property resulting from Distributor's
negligence under or in connection with this Agreement up to a maximum aggregate
amount of one million US Dollars (US$1,000,000).
16.4 Nothing in this Agreement shall exclude or in any way limit Airspan
liability for death or personal injury caused by its negligence.
16.5 Save as provided for in Section 17 Distributor shall indemnify and
hold harmless and defend the Airspan Parties from and against all claims,
demands, actions, suits, proceedings, writs, judgments, orders and decrees
brought, made or rendered against them or any of them and all damages, losses
and expenses suffered or incurred by them or any of them howsoever arising out
of or related to the breach by Distributor of any of the terms of this
Agreement. Airspan shall notify Distributor forthwith of any claim, demand,
action, suit, proceeding, writ, judgment, order or decree falling within the
scope of this Section 16.5 and shall permit Distributor sole conduct of the same
and shall provide reasonable assistance in relation thereto, subject to
appropriate defense by Distributor and the payment by Distributor of Airspan's
reasonable costs and expenses.
16.6 Distributor shall include, in its agreements with its customers
pursuant to which Distributor supplies Equipment or Software, provisions
pursuant to which such customers agree that the Airspan Parties shall have no
liability for any of the types of damages referred to at Section 16.1 in
connection with or arising from the Equipment or Software or the use thereof, or
the inability to use them either separately or in combination with other
equipment or software, or from any other causes.
17. INTELLECTUAL PROPERTY RIGHTS INDEMNITY.
17.1 Airspan agrees to indemnify and hold Distributor harmless with respect
to any suit, claim, or proceeding brought against Distributor by a third party
alleging that Distributor's use of the Equipment or the Software, separately or
in combination, as a whole or in part, constitutes an infringement of any patent
or copyright or misuse of proprietary or trade secret information. Airspan
agrees to defend Distributor against any such claims and to pay all litigation
costs, reasonable attorney's fees, settlement payments, and any damages awarded
or resulting from any such claim.
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17.2 Distributor shall promptly advise Airspan of any such suit, claim, or
proceeding and shall co-operate with Airspan in the defense or settlement
thereof. Airspan shall have sole control of the defense of any action involving
such a claim and of all negotiations for its settlement or compromise.
17.3 In the event that an injunction is obtained against Distributor's use
of the Equipment and/or the Software, in whole or in part, as a result of any
such claim, Airspan shall use its best efforts to either: (a) procure for
Distributor the right to continue using the portions of the Equipment or the
Software enjoined from use; or (b) replace or modify the same with functionally
equivalent or better Equipment and/or Software so that Distributor's use is not
subject to any such injunction. In the event that Airspan cannot perform the
remedies set forth in Sections 17.3(a) or 17.3(b), then Distributor shall have
the right to return such Equipment and the Software to Airspan. In the event of
such return, Airspan shall refund the depreciated value of the Equipment and the
license to use the Software within thirty (30) days of the receipt by Airspan of
the Equipment and the Software.
17.4 This indemnity shall not apply to claims arising in respect to the use
of the Equipment or Software supplied by Airspan or manufactured by its
suppliers in accordance with any design or any special instruction furnished by
Distributor, or which is used by Distributor in a manner or for a purpose not
contemplated by this Agreement.
17.5 The provisions of this Section 17 set forth the entire obligation of
Airspan with respect to any claim of patent infringement, copyright
infringement, or misuse of proprietary or trade secret information.
18. EXPORT CONTROLS AND LEGAL COMPLIANCE.
18.1 If any approval with respect to this Agreement, or the registration
thereof, shall be required at any time during the term of this Agreement, with
respect to giving legal effect to this Agreement in the Territory, or with
respect to compliance with exchange regulations or other requirements so as to
assure the right of remittance abroad of United States dollars pursuant to
Section 6 hereof, Distributor shall immediately take whatever steps may be
necessary in this respect, and any charges incurred in connection therewith
shall be for the account of Distributor. Distributor shall keep Airspan
currently informed of its efforts in this connection. Airspan shall be under no
obligation to ship Airspan Products to Distributor hereunder until Distributor
has provided Airspan with satisfactory evidence that such approval or
registration is not required or that it has been obtained.
18.2 In the performance of its obligations under this Agreement,
Distributor shall at all times strictly comply with all export laws,
regulations, and orders of the
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<PAGE>
United Kingdom and the United States of America. Distributor specifically
acknowledges that Equipment, Software or technology supplied or licensed by
Airspan under this Agreement are subject to U.K. and U.S. trade sanctions and
export control laws and regulations including, but not limited to, the various
Foreign Assets Control Regulations, the Export Administration Regulations, and
the International Traffic in Arms Regulations. Distributor specifically
acknowledges that Equipment, Software, or technology obtained from Airspan
pursuant to this Agreement shall not be exported, re-exported, transshipped,
disclosed, diverted, or transferred, directly or indirectly, contrary to U.K.
and U.S. laws, orders or regulations. The provisions of this section shall
survive any termination of this Agreement.
19. TRAINING AND DOCUMENTATION.
19.1 Airspan shall provide a single technical course in the English
language for up to two (2) qualified technicians of Distributor during the first
year of this Agreement. The training course so developed by Airspan shall be
used to familiarize Distributor's technicians with the use and maintenance of
Airspan Products. Training will be conducted at Airspan's facilities in
Uxbridge, UK, unless otherwise agreed to by Airspan. The necessary instructors
and training facilities will be provided by Airspan at no charge to Distributor.
Distributor will pay all additional expenses of training including, but not
limited to, travel and room and board. Additional training courses may be
requested by Distributor at Airspan's then current rates for such courses.
19.2 Airspan agrees to provide Distributor at no additional charge with its
standard package of documentation related to the use, maintenance, and
installation of Airspan Products. In the event that such documentation is
modified during the term of this Agreement, Airspan agrees to provide to
Distributor at no additional charge all such modifications. In addition to the
documentation described above, Airspan agrees to provide at no additional charge
reasonable amounts of sales materials such as brochures, press releases, and
fact sheets. All documentation provided by Airspan to Distributor shall be in
the English language. All translation of such documentation provided by Airspan
will be at Distributor's sole expense. All such translations and advertising
material not supplied by Airspan relating to Airspan Products and services will
be submitted to Airspan for approval before publication or dissemination.
20. CONFLICT OF INTEREST.
Distributor confirms that it has revealed all information pertaining to possible
conflicts of interest created by the sale of competing products or services or
arising from other positions or contracts held by Distributor, and represents
that no conflict of interest exists. Any future circumstances which could
create possible conflicts of interest will be revealed to Airspan as soon as
they become known by informing Airspan of any business relationships,
circumstances, or situations which could prejudice in any way
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<PAGE>
the conduct of Airspan marketing activities according to the highest ethical and
business standards, or place Airspan or Distributor in any kind of embarrassing
situation.
21. MISCELLANEOUS.
21.1 Pursuant to the Foreign Corrupt Practices Act of the United States
of America, directors, officers, or employees of Distributor shall not offer or
pay any bribe to any individual or corporation in connection with the provision
or support of any Airspan Products obtained under this Agreement. When other
individuals or organizations are required to participate in the sales program
covered by this Agreement, they shall be compensated fairly based on the tasks
performed. In no circumstances are public servants or holders of public office
to be offered or paid any bribe or other benefit, direct or indirect. No
contribution in any way related to Airspan shall be made to candidates for
public office or to political parties or other political organizations,
regardless of whether such contributions are permitted by the laws of the
Territory. The parties agree that both parties will comply fully with all of
the terms, conditions, rules, regulations and statutes of the Foreign Corrupt
Practices Act. The parties further agree that if either party violates any of
the provisions of said Act, the party violating the Act will indemnify the other
party from any and all liability thereunder, including costs, expenses, fines or
legal fees.
21.2 In performing this Agreement, the parties shall comply with all
applicable laws, rules, and regulations, and shall indemnify, defend and save
each other harmless from said party's failure to do so. Furthermore, if this
Agreement, the relationship created hereby or the performance hereof is
determined by either party to be contrary either to (a) the laws, rules or
regulations applicable to the parties; or (b) the parties' representations as
set forth herein, this Agreement will be null and void from its inception. The
parties have entered into this Agreement in material reliance on the following
representations made by each party that:
a. Neither this Agreement, the relationship created hereby nor the
performance hereof is contrary to any applicable law, rule or regulation;
b. The parties have not refunded and will not refund either directly
or indirectly, any funds to any director, officer, employee or other
representative of either party (or of any subsidiary controlled by or
affiliated with either party) or to such party's family; and
c. The parties represent and covenant that they have not made and
will not commit themselves to make, nor will they directly or indirectly
make, any payments in connection with the business of the parties to any
director, officer, official, employee or shareholder of any governmental or
private
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<PAGE>
customer, or prospective customer, or of any political party, or to such
party's family, or that are otherwise illegal under applicable law.
Distributor understands and agrees that Airspan will comply with any legal
provision requiring disclosure of, or request from a government or governmental
or private customer to disclose, by affidavit or otherwise, the identity of
payments made or to be made to Distributor.
21.3 Neither party may assign this Agreement or subcontract its
obligations under this Agreement to another party without the other party's
prior, written consent executed by a duly authorized officer. The parties agree
that if said assignment is to a subsidiary or affiliate organization, said
consent to assignment will not be unreasonably withheld.
21.4 This Agreement shall be construed in accordance with and governed by
the laws of the State of South Dakota.
21.5 Any dispute, controversy or claim between the parties arising out
of, or in connection with, this Agreement, or the breach, termination or
validity thereof will be resolved by mutual agreement of the parties, provided
that this shall not limit the ability of the parties to seek temporary or
interim injunctive relief in the event of any breach or threatened or impending
breach of the confidentiality provisions of this Agreement. If any dispute,
controversy, or claim arising out of or relating to this Agreement, or the
breach, termination or validity thereof is unable to be resolved by mutual
agreement of the parties, each of the parties hereby (i) agrees that any action,
suit or proceeding with respect to this Agreement against it or its properties
or revenues must be brought exclusively in the federal and state courts siting
in Minneapolis, MN, and (ii) irrevocably submits to the exclusive jurisdiction
of any such court and any appellate court from any order or judgment thereof in
any such action, suit or proceeding. The parties hereby irrevocably agree that
all claims in respect of such action, suit or proceeding may be heard and
determined in such courts. The parties hereby irrevocably waive, to the fullest
extent they may effectively do so, the defense of an inconvenient forum to the
maintenance of such action, suit or proceeding. The parties agree that a final
judgment in any such action, suit, or proceeding will be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
21.6 The parties' failure to enforce at any time any of the provisions
of this Agreement or any right with respect thereto, or to exercise any option
herein provided shall in no way be construed to be a waiver of such provision,
rights, or options, or in any way to affect the validity of this Agreement. The
parties' exercise of any of their rights hereunder or of any options hereunder
under the terms or covenants herein shall not preclude or prejudice the parties
from thereafter exercising the same or any right
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<PAGE>
which they may have under this Agreement, irrespective of any previous action or
proceeding taken by either party hereunder.
21.7 In the advertising and sale of Airspan products, Distributor will
utilize Airspan's regular trade names and trademarks only as permitted or
directed by Airspan, will not make or permit alteration or removal of any tags,
labels, or other identifying marks placed by Airspan on its products, and will
not use the name "Airspan Communications Corporation" or abbreviations thereof
in Distributor's corporate titles or in any other way which might result in
confusion as to Airspan and Distributor being separate and distinct entities.
Distributor will not register any Airspan trademark.
21.8 This Agreement shall be binding upon the parties, their heirs,
successors in interest and permitted assigns.
21.9 This Agreement and any attachment hereto shall be modified only by
an instrument in writing and signed by duly-authorized officers or agents of the
parties.
21.10 All notices, requests, consents, and other communications
hereunder must be in writing and will be deemed to have been properly given when
actually received by the party to whom sent, at the following addresses:
To: Airspan To: Distributor
Airspan Networks Inc. GLS LLC
777 108 Th. Avenue NE 501 Fourth Street
Suite 1895 PO Box 67
Bellevue, Washington Sergeant Bluff, IA
98004 51054
Attn: Peter Stanway Attn: Jon Winkel
Contracts Manager
Fax No. 919-319-0106
21.11 The provisions of this Agreement are severable, and if any
provision is held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability will affect only such
provision or part thereof in such
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<PAGE>
jurisdiction, and will not in any manner affect the provision in any other
jurisdiction, or any other provision in this Agreement in any other
jurisdiction.
21.12 Distributor agrees not to publish any press releases or otherwise
publicize the existence, or any of the terms, of this Agreement without the
prior written consent of Airspan, such consent not unreasonably to be withheld
or delayed.
22. This document constitutes the entire agreement between the parties with
respect to the subject matter hereof, and supersedes all previous
communications, representations, understandings, and agreements, either oral or
written, between the parties or any official or Distributor thereof with respect
to the subject matter hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the Effective Date, such parties acting by their officers,
being thereunto duly authorized.
Airspan Networks Inc. GLS LLC
By: _______________________________ By: ______________________________
Name: ______________________________ Name: _____________________________
Title: ______________________________ Title: ____________________________
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<PAGE>
EXHIBIT 10.6
SUPPLY AGREEMENT
----------------
This Supply Agreement (the "Agreement") is made effective as of the 31st day of
March, 2000 (the "Effective Date"), by and among Airspan Networks Inc.,
("Airspan") a company incorporated under the laws of the State of Washington,
with its principal place of business at 777 108th Avenue NE Suite 1895,
Bellevue, Washington 98004, and GLS LLC, ("Purchaser") a limited liability
company incorporated under the laws of the State of South Dakota, with its
principal office at 501 Fourth Street, Sergeant Bluff, IA 51054.
WITNESSETH:
WHEREAS, Airspan is engaged in the design and manufacture of various
telecommunications product lines including, among others, those Airspan products
more completely described in Exhibit A hereto (the Airspan products described in
Exhibit A of this Agreement, as from time to time amended in accordance with the
provisions of this Agreement, are hereinafter called the "Airspan Products");
and
WHEREAS, Purchaser is engaged in the operation of telecommunications systems;
and intends to build and operate an Airspan fixed wireless network; and
WHEREAS, during the Term (as defined below) of this Agreement, Airspan desires
to supply to Purchaser, and Purchaser wishes to acquire from Airspan, the
Airspan Products and services on the terms and conditions contained in this
Agreement.
NOW, THEREFORE, in consideration of the mutual promises herein contained, it is
hereby agreed as follows:
Scope Warranty Excusable delay
Ordering Repairs Indemnification
Price Limitation of liability Remedies
Payment Software license Responsibilities purchaser
Delivery Documentation Notices
Subcontracting Confidentiality Services
Miscellaneous
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<PAGE>
1. SCOPE.
-----
1.1 This Agreement shall remain in effect for a period of sixty (60)
months from the Effective Date (the "Term").
1.2 During the Term, in accordance with each Purchase Order issued by
Purchaser and accepted by Airspan, Airspan shall:
a. Engineer, sell and deliver that equipment and services so
specified in the order ("Equipment" being defined as the hardware component
of each product being offered under the terms and conditions of this
Agreement);
b. Grant to Purchaser a non-transferrable, non-exclusive, paid-up
licence to use the Software (as defined in Section 10.1) during the useful
life of the associated Equipment on the terms and conditions set forth in
the Software Licence, Section 10. The license to use the Software (as
defined in Section 10.1) may be transferred by written authorisation from
Airspan to Purchaser, provided that Airspan will not unreasonably withhold
said written authorization;
c. Test and install the Equipment and/or Software (the "Installation
Services") if Purchaser elects to purchase the Installation Services, and
Airspan accepts the obligation to perform such services, or if such
services are included in the price of the Equipment or Software.
2. ORDERING PROCEDURE.
------------------
2.1 The following procedures shall be followed with respect to each
purchase order issued by Purchaser:
a. During the Term, Purchaser will inform Airspan of its intent to
purchase Equipment and Installation Services (but only if Airspan expressly
agrees to perform such Installation Services), and license Software, by
sending to Airspan a written order. This written order (the "Purchase
Order") will state the type of Equipment, System, or Installation Services
that Purchaser wants to purchase and the Software Purchaser wants to
licence, the price of the ordered items (the "Contract Price") as set forth
in Exhibit B, "Price List" (which is hereby incorporated by reference) and
the proposed delivery and installation dates, if applicable.
b. Each Purchase Order shall specifically incorporate by reference the
terms and conditions of this Agreement, and no additional or different
terms and conditions stated in a Purchase Order, any letter, or otherwise
shall be binding unless expressly referred and agreed to by Airspan in
writing. In the event of a
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conflict between the terms and conditions of this Agreement and of any
Purchase Order issued hereunder, or if the Purchase Order does not
reference the terms and conditions of this Agreement, the terms and
conditions of this Agreement shall control.
2.2 If a Purchase Order is accepted by Airspan, Airspan will issue an
order acknowledgement to Purchaser within five (5) business days of
Airspan's receipt of the written Purchase Order from Purchaser.
3. CONTRACT PRICE.
--------------
3.1 The Contract Price for each item of Equipment, Installation Services,
or Software is as specified in Exhibit B and shall be paid to Airspan in US
Dollars free of any withholding tax and any currency controls or other
restrictions. The Contract Price includes:
a. The price of the Equipment;
b. The fee for the licensing of the Software;
c. If Installation Services are ordered and such order is accepted by
Airspan, the charges for installing and testing each unit of Equipment
or Software;
d. The charges for the warranty of the Equipment and Software in
accordance with Section 7; and
e. Costs in accordance with delivery obligations set forth in Sections
5.1 and 5.2.
3.2 The Contract Price is shown in Exhibit B and shall include applicable
duties, taxes or imposts, including all export or import duties. Sales
taxes and contractor's excise taxes shall be itemized on all purchase
orders. The parties agree that the Contract Price in Exhibit B shall be
firm for a minimum period of twenty-four (24) months from the Effective
Date. Thereafter, Exhibit B may be revised by Airspan giving thirty (30)
days written notice to Purchaser.
4. PAYMENT TERMS.
-------------
4.1 Airspan will issue an invoice (the "Invoice") to Purchaser in
accordance with the payment terms below. The Invoice specifically will
identify the Equipment, Software, or other items shipped, and the Contract
Price of such
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<PAGE>
items. Any Installation Services or other services provided by Airspan will
be invoiced separately following completion of such services. The Invoice
also shall state the total due to Airspan from Purchaser (the "Invoice
Total"), which shall include the Contract Price, and any applicable taxes,
duties, and other fees due pursuant to Section 3.2 of this Agreement.
Payment of the Invoice Total is due (without any right of set-off) Net
forty-five (45) days after the date of invoice.
4.2 If Purchaser disputes any invoice or part thereof, Purchaser must
notify Airspan in writing within twenty-five (25) days of the invoice date
giving details of the reason for such dispute. Purchaser and Airspan agree
to work together in good faith to resolve the dispute as quickly as
possible. Purchaser may withhold payment of such disputed amounts until
resolution of the dispute. Any parts of the invoice not under dispute shall
be paid net forty-five (45) days after the date of invoice. On resolution
of the dispute, Purchaser shall immediately pay any amounts due in full.
4.3 Purchaser will make payment by wire or telegraphic transfer to the
bank account set forth below or, on receipt of written notification from
Airspan, to another designated bank within the United States.
Bank: Seafirst Bank, 10555 N.E. 8th, Bellevue, WA98004, USA.
Account name: Airspan Networks Inc.
Account number: 68777507
Routing Number: 125 - 0000 - 24
Further instructions: "Reference (Purchaser's name), Purchase Order number,
Payment of Invoice number"
Payment will be deemed to have been made upon receipt of funds in Airspan's
bank.
4.4 If the cost to Airspan of performing this Agreement increases as a
result of any change to the law or increase in import duty or freight duty,
Airspan may add such increase to the Contract Price by notifying Purchaser
in writing of such increase.
5. DELIVERY, TITLE AND RISK OF LOSS.
--------------------------------
5.1 All Equipment and Software will be delivered by Airspan CIP (as
defined in Incoterms 2000) to an airport in South Dakota that completes
international customs clearances and shipped to a location within the city
limits of the above arrival airport, such airport and delivery location are
to be agreed upon in writing by the parties for each Purchase Order.
Airspan will be responsible for and pay all packing, shipping, freight, and
insurance charges to the agreed upon location within the city limits. If
requested by Purchaser,
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<PAGE>
Airspan may arrange for shipment to be made to Purchaser's identified
warehouse facilities or freight forwarder outside of the city limits,
subject to approval in writing by Airspan and agreement to any additional
charges in advance of shipment. Unless specified in the Purchase Order,
Airspan will select the mode of shipment and the carrier.
In this Agreement, "Incoterms" means the most recent international rules
for the interpretation of trade terms published by the International
Chamber of Commerce as in force on the Effective Date. Unless the context
otherwise requires, any term or expression which is defined in or given a
particular meaning by the provisions of the Incoterms shall have the same
meaning in this Agreement, but if there is any conflict between the
provisions of the Incoterms and this Agreement, the latter shall prevail.
5.2 All risk of loss or damage to the Equipment and Software will pass to
Purchaser on collection by the freight forwarder from Airspan. However,
Airspan will insure the Equipment against loss or damage in transit to the
agreed upon location within the city limits as set forth in Paragraph 5.1.
5.3 Title to the Equipment shall pass to Purchaser on collection by the
freight forwarder from Airspan.
5.4 If Purchaser has any Airspan owned Equipment in its possession:
a. Purchaser shall ensure that Equipment is clearly marked as the
property of Airspan, and if asked, shall inform any third parties that
the Equipment is the property of Airspan;
b. Purchaser shall not purport to create any security, mortgage,
lien or pledge over the Equipment, or otherwise deal with the
Equipment without Airspan's written consent;
c. In the event of any threatened seizure of the Equipment by any
third parties, and on termination or expiration of this Agreement, or
any Contract made pursuant to it, Airspan shall have the right,
without prejudice to any other remedy, to enter without prior notice
any premises and to repossess and take away or otherwise deal with the
Equipment.
5.5 The Software shall at all times remain the exclusive property of
Airspan, subject to the uses provided herein.
5.6 Unless Purchaser clearly advises Airspan to the contrary in writing,
Airspan may make partial deliveries on account of Purchase Orders. Delay in
delivery of any instalment shall not relieve Purchaser of its obligation to
accept
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<PAGE>
said installment, provided that said delay does not exceed sixty (60) days
from Airspan's scheduled ship date and unless Purchaser has clearly advised
Airspan to cancel the delayed installment in writing at least fifteen (15)
days prior to its revised planned shipment date or its actual shipment date
by Airspan.
5.7 Airspan will use reasonable efforts to meet Purchaser's requested
delivery schedules for Equipment and Software, but Airspan reserves the
right to refuse, or delay delivery to Purchaser when Purchaser's credit is
impaired, when Purchaser is delinquent in payments or fails to meet other
credit or financial requirements reasonably established by Airspan, or when
Purchaser has failed to perform its obligations under this Agreement.
5.8 Should orders for Equipment and Software exceed Airspan's available
inventory, Airspan will allocate its available inventory and make
deliveries on a basis that Airspan deems equitable, in its sole discretion,
and without liability to Purchaser on account of the method of allocation
chosen or its implementation. In any event, Airspan shall not be liable for
any direct, indirect, consequential, or special losses or damages
(including, but not limited to, loss of income or profit and loss of data)
that may be suffered by the Purchaser or by any other person for failure to
deliver or for any delay or error in delivery of Equipment or Software for
any reason whatsoever.
6. SUBCONTRACTING. Airspan reserves the right to subcontract such portions
--------------
of: (a) the Equipment manufacture and/or Software development and supply;
and/or (b) installation to subcontractors of Airspan's choice as Airspan deems
appropriate.
7. WARRANTY.
--------
7.1 THE WARRANTIES SET FORTH IN SECTIONS 7 AND 8 OF THIS AGREEMENT ARE IN
LIEU OF ALL OTHER WARRANTIES AND CONDITIONS, WHETHER EXPRESS OR IMPLIED,
INCLUDING THE IMPLIED TERMS OF SATISFACTORY QUALITY AND FITNESS FOR A PARTICULAR
PURPOSE.
7.2 Subject to Sections 7.3 and 7.4, Airspan warrants that the Equipment
sold to Purchaser under this Agreement shall, under normal use and service, be
free from defects in materials and faulty workmanship, and that the Software
licensed to Purchaser under this Agreement shall conform in all material
respects to Airspan's published specifications therefor. If Installation
Services are provided by Airspan, the warranty period shall be twelve (12)
months from the earlier of the following dates: completion of installation as
defined in 18.2; or thirty (30) days after delivery to Purchaser as set forth in
Paragraph 5.1. If Installation Services are not provided by Airspan, the
warranty period shall be twelve (12) months from completed delivery of all
equipment sold under the Purchase Order to Purchaser. (Hereinafter, these
periods of time shall be collectively referred to as the "Initial Warranty
Period.")
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<PAGE>
7.3 Airspan's obligation and Purchaser's sole remedy under this warranty
are limited to the replacement or repair, at Airspan's option, of the defective
Equipment or Software within the Initial Warranty Period. Airspan shall have no
obligation to remedy any such defect if it can be shown that: (a) the Equipment
or Software was altered, repaired, or reworked by any party other than Airspan
without Airspan's written consent; (b) such defects were the result of
Purchaser's improper storage, mishandling, abuse, or misuse of the Equipment or
Software; (c) such defects were the result of Purchaser's use of the Equipment
or Software in conjunction with equipment electronically or mechanically
incompatible or of an inferior quality; or (d) the defect was the result of
damage by fire, explosion, power failure, or any act of nature.
7.4 In no event shall Airspan be obliged to provide on-site maintenance.
Subject to the provisions of this warranty clause, defective parts or components
must be returned by Purchaser to Airspan's designated facility located within
the contiguous 48 states in the United States, freight prepaid, within the
Initial Warranty Period, and said defective parts will be repaired or replaced
by Airspan at no charge to Purchaser. Risk of loss or damage to Equipment or
Software returned to Airspan for repair or replacement shall be borne by
Purchaser until delivery to Airspan. Upon delivery of such Equipment or
Software, Airspan shall assume the risk of loss or damage until that time that
the Equipment or Software being repaired or replaced is returned and delivered
to Purchaser. Purchaser will pay all transportation costs for Equipment or
Software shipped to Airspan for repair or replacement. Airspan shall pay all
transportation costs associated with returning repaired or replaced Equipment or
Software to Purchaser.
7.5 Airspan will charge Purchaser for any maintenance carried out which is
not covered by the warranties contained in Section 7.2 or Section 8 at Airspan's
then prevailing standard rates for such services.
8. WARRANTY ON REPAIRED MATERIALS. Airspan warrants that, following repair,
------------------------------
the Equipment or Software returned to Airspan for repair shall be free from
defective materials and faulty workmanship and that the Software will conform in
all material respects to Airspan's published specifications therefor for ninety
(90) days from date of shipment from Airspan to Purchaser or until the end of
the Initial Warranty Period, whichever is longer.
9. LIMITATION OF LIABILITY.
-----------------------
9.1 WITHOUT PREJUDICE TO SECTION 9.4, IN NO EVENT SHALL AIRSPAN OR ANY OF
ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, REPRESENTATIVES, SHAREHOLDERS, OR
AFFILIATES (AIRSPAN AND SUCH OTHER PERSONS, THE "AIRSPAN PARTIES"), HAVE ANY
LIABILITY TO PURCHASER FOR LOSS OF PROFITS, INCOME OR DATA, INCIDENTAL,
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<PAGE>
CONSEQUENTIAL, OR INDIRECT DAMAGES OR LOSSES ARISING FROM THIS AGREEMENT OR ANY
COLLATERAL CONTRACT, WHETHER CAUSED BY NEGLIGENCE, BREACH OF CONTRACT OR
OTHERWISE, OR FOR LOSS, DAMAGE, OR EXPENSE INDIRECTLY ARISING FROM THE USE OF
THE EQUIPMENT OR THE SOFTWARE, OR THE INABILITY TO USE THEM EITHER SEPARATELY OR
IN COMBINATION WITH OTHER EQUIPMENT OR SOFTWARE, OR FROM ANY OTHER CAUSE.
9.2 Without prejudice to Sections 9.3 and 9.4, the liability of the
Airspan Parties, taken as a whole, for each event or series of connected events
arising out of or in connection with this Agreement, any purchase order placed
pursuant to this Agreement, or any other collateral contract, or from or in
connection with the Equipment or Software or the use thereof, or the inability
to use them either separately or in combination with other equipment or
software, or from any other cause, whether caused by negligence, breach of
contract, strict liability, breach of warranty, on grounds of failure of
essential purpose, or otherwise, shall in no circumstance exceed the total
amount payable by Distributor to Airspan under this Agreement for the provision
of the Equipment or Software which gave rise to the loss or damage or in
connection with which the loss or damage was incurred.
9.3 Airspan shall be liable for physical damage to Purchaser's property
resulting from its negligence up to a maximum of USD 1,000,000.
9.4 Nothing in this Agreement shall exclude or in any way limit Airspan
liability for death or personal injury caused by its negligence.
10. SOFTWARE LICENSE.
----------------
10.1 Airspan shall grant Purchaser a nonexclusive, license to use the
Software, only with the Equipment purchased under this Agreement. Software
licensed under this Agreement ("Software") is defined as computer programs
contained on a magnetic tape, disc, semiconductor device, or other memory,
including: (a) hardwired logic instructions which manipulate data in the
central processor and which control input-output operations, error diagnostics,
and recovery routine; and (b) instruction sequences in machine-readable code
which control call processing, peripheral equipment, and administration and
maintenance functions as well as associated documentation used to describe,
maintain, and use the programs.
10.2 Any Software provided to Purchaser by Airspan shall be treated as the
exclusive property of Airspan, and Purchaser shall: (1) treat such Software as
Confidential Information under Section 12 of this Agreement; (2) utilise such
Software or any portions or aspects thereof (including any methods or concepts
utilised therein) solely in conjunction with the Equipment; (3) return to
Airspan all memory media, documentation and/or other material that has been
modified, updated or replaced; (4)
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not modify, disassemble or decompile such Software, or reverse engineer any
portion of the Software or functioning of the Airspan Products, or permit others
to do so, without Airspan's prior written consent; and (5) not reproduce or copy
such Software in whole or in part except for backup and archival purposes or as
otherwise permitted in writing by Airspan. Information to achieve
interoperability of the Software with independently created programs, within the
meaning of Article 6 of the Directive on the Legal Protection of Computer
Programs, is available from Airspan on written request.
10.3 The obligations of Purchaser under this Section 10 shall survive the
termination of this Agreement for any reason and shall continue even if the
Software is no longer utilised with the Equipment.
11. DOCUMENTATION. Airspan shall furnish that documentation, if any, specified
-------------
in Exhibit B to Purchaser to be used for the operation and ongoing maintenance
of the Equipment and Software. All such documentation is to be treated in
accordance with the terms of Section 12. Updates to the documentation shall be
at no charge during the Initial Warranty Period.
12. CONFIDENTIAL INFORMATION.
------------------------
12.1 All technical information, documentation, Software and other
proprietary information ("Confidential Information") supplied by Airspan to
Purchaser under this Agreement, except for that which may be in the public
domain, shall, as between the parties hereto, be treated as the confidential and
proprietary information of Airspan. Purchaser, except as specifically
authorised in writing by Airspan, shall: (a) not disclose any Confidential
Information received from Airspan to any person, except to its employees on a
"need-to-know" basis; (b) not reproduce any Confidential Information received
from Airspan, in whole or in part; (c) use any Confidential Information received
from Airspan only for operation and maintenance of the Equipment; and (d)
indemnify Airspan for any loss or damages resulting from a breach of this
Section 12.
12.2 If this Agreement is terminated or cancelled, or if Purchaser is
found to have breached any of the provisions of Sections 10 or 12, Purchaser
agrees to immediately return all technical information, documentation, and
Software to Airspan, with the exception of the AS8100 (Sitespan) network
operating software. In any event, the obligations of Sections 10 and 12 will
survive termination or cancellation of this Agreement.
13. EXCUSABLE DELAY.
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13.1 Airspan shall not suffer any liability for non-performance, defective
performance, or late performance under this Agreement due to causes beyond its
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control and without its fault or negligence such as, but not limited to, acts of
God, war (including civil war), civil unrest, acts of government, fire, floods,
explosions, the elements, epidemics, quarantine, restrictions, strikes, lock-
outs, plant shutdown, material shortages, or delays in transportation or delays
of its suppliers or subcontractors for like cause.
In the event of excusable delay as defined in the preceding sentence, then
Airspan, upon giving prompt written notice to Purchaser, shall be excused from
such performance on a day-to-day basis to the extent of such prevention,
restriction, or interference (and Purchaser shall likewise be excused from
performance of its obligations on a day-to-day basis to the extent Purchaser's
obligations relate to the performance so prevented, restricted, or interfered
with), provided that Airspan shall use its best endeavours to avoid or remove
such causes of non-performance and both parties shall proceed to perform with
dispatch whenever such causes are removed or cease to exist.
13.2 The parties reserve the right to cancel or otherwise terminate this
Agreement if the parties' performance is delayed for a period of more than sixty
(60) days as a result of excusable delay as defined in Section 13.1.
14. GENERAL INDEMNITY.
-----------------
14.1 Airspan agrees to indemnify and hold Purchaser harmless against all
costs, expenses, liabilities, damages, losses, claims, or proceedings incurred
by Purchaser in an action by a third party alleging that Purchaser's use of the
Equipment or the Software, separately or in combination, as a whole or in part,
constitutes an infringement of their intellectual property rights wherever in
the world enforceable, including applications to register and rights to apply
for any such rights ("Intellectual Property Rights"). Airspan agrees to defend
Purchaser against any such claims and to pay all litigation costs, reasonable
lawyer's fees, settlement payments, and any damages awarded or resulting from
any such claim.
14.2 Purchaser shall promptly advise Airspan of any such suit, claim, or
proceeding and shall co-operate with Airspan in the defence or settlement
thereof. Airspan shall have sole control of the defence of any action involving
such a claim and of all negotiations for its settlement.
14.3 In the event that an injunction is obtained against Purchaser's use of
the Equipment and/or the Software, in whole or in part, as a result of any such
claim, Airspan shall use its best efforts to either: (a) procure for Purchaser
the right to continue using the portions of the Equipment or the Software
enjoined from use; or (b) replace or modify the same with functionally
equivalent or better Equipment and/or Software so that Purchaser's use is not
subject to any such injunction. In the event that Airspan cannot perform the
remedies set forth in Sections 14.3(a) or 14.3(b), then Purchaser shall
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have the right to return such Equipment and the Software to Airspan. In the
event of such return, Airspan shall refund the depreciated value of the
Equipment and the licence to use the Software within thirty (30) days of the
receipt by Airspan of the Equipment and the Software.
14.4 This indemnity shall not apply to claims arising in respect of the
use of the Equipment or Software supplied by Airspan or manufactured by its
suppliers in accordance with any design or any special instruction furnished by
Purchaser, or which is used by Purchaser in a manner or for a purpose not
contemplated by this Agreement.
14.5 The provisions of this Section 14 set forth the entire obligation of
Airspan with respect to any claim of infringement of Intellectual Property
Rights.
15. REMEDIES AND TERMINATION.
------------------------
15.1 Airspan shall have the right, prior to payment to Airspan of the
Invoice Total, to suspend its performance under this Agreement by written notice
to Purchaser and forthwith remove and take possession of any Equipment and
operating Software which has been delivered if Purchaser shall: (a) become
insolvent; (b) have a receiver or manager appointed over the whole or any part
of its assets or business; (c) make any composition or arrangement with its
creditors; (d) take or suffer any similar action in consequence of debt, or an
order or resolution is made for its dissolution or liquidation (other than for
the purpose of amalgamation or reconstruction); or (e) if Purchaser attempts to
resell the Equipment or Software without the consent of Airspan.
15.2 In the event of any material breach of this Agreement by either party
which shall continue for thirty (30) or more days after written notice of such
breach (including a reasonably detailed statement of the nature of such breach)
shall have been given to the breaching party by the aggrieved party, the
aggrieved party shall be entitled at its option: (a) if the aggrieved party is
Purchaser, to suspend its performance under Section 4 of the Agreement for as
long as the breach continues uncorrected; or (b) if the aggrieved party is
Airspan, to suspend performance of all of its obligations under the Agreement
for as long as the breach continues uncorrected; (c) to avail itself of any and
all remedies available at law or equity whether or not it elects to suspend its
performance under Section 15.2(a) or 15.2(b) as applicable; or (d) to terminate
this Agreement.
15.3 In the event (a) either party fails timely to discharge its
obligations under this Agreement and (b) the aggrieved party employs a lawyer in
order to collect any amount due and unpaid or to enforce any right or remedy
hereunder, then the defaulting party agrees that, in addition to all amounts due
hereunder, it shall pay all costs of collection or enforcement including court
costs and reasonable Lawyer's fees.
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16. PURCHASER'S RESPONSIBILITIES. To the extent that Purchaser requests
----------------------------
Installation Services, and Airspan accepts the Purchase Order for such
Installation Services, then:
a. Purchaser shall ensure that all Airspan-designated personnel have
access to Purchaser's premises and the Equipment during the times necessary to
install, maintain, and service the Equipment. Airspan's personnel shall comply
with site and security regulations as specified by Purchaser.
b. Purchaser shall provide reasonable working space and facilities
including heat, light, ventilation, electric current and outlets for use by
Airspan's designated personnel. Adequate storage space for equipment and
materials shall be made available by Purchaser as required. All such facilities
shall be provided at no charge to Airspan.
c. Any information which Airspan reasonably requests from Purchaser and
which is required for Airspan properly to install or maintain the Equipment
shall be provided by Purchaser in a timely fashion and form reasonably specified
by Airspan.
d. Purchaser shall not perform, or attempt to perform, or cause to be
performed any maintenance or repair to the Equipment during the term of this
Agreement, other than pursuant to this Agreement, without Airspan's prior,
written consent.
17. NOTICES. All notices, requests, consents and other communications
-------
hereunder must be in writing and will be deemed to have been properly given when
actually received by the party to whom sent, at the following addresses:
If to Airspan: If to PURCHASER:
Peter Stanway Bill Cook
Contracts Manager ------------------------------
Airspan Networks Inc. GLS LLC c/o Golden West
777 108th Avenue NE Suite 1895 ------------------------------
Bellevue, Washington 2727 N. Plaza Drive
98004 ------------------------------
U.S.A. Rapid City, SD 57709-9159
------------------------------
U.S.A.
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18. HARDWARE AND SOFTWARE VERIFICATION
----------------------------------
18.1 If Installation Services are ordered, Airspan shall, upon completion
of the installation, test the Equipment. Purchaser may witness the installation
and test performance.
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18.2 When the Equipment and Software have satisfactorily completed all of
Airspan's tests, Airspan shall provide Purchaser with a "Hardware and Software
Verification" certificate. Provision of the certificate to Purchaser will be
deemed, for purposes of this Agreement, as "Completion of Installation".
19. PUBLICITY. Purchaser agrees not to publish any press releases or otherwise
---------
publicise the existence, or any of the terms, of this Agreement without the
prior written consent of Airspan.
20. MISCELLANEOUS
-------------
20.1 This Agreement shall be construed in accordance with and governed by
the laws of the State of South Dakota.
20.2 Any dispute, controversy or claim between the parties arising out
of, or in connection with, this Agreement, or the breach, termination or
validity thereof will be resolved by mutual agreement of the parties, provided
that this shall not limit the ability of the parties to seek temporary or
interim injunctive relief in the event of any breach or threatened or impending
breach of the confidentiality provisions of this Agreement. If any dispute,
controversy, or claim arising out of or relating to this Agreement, or the
breach, termination or validity thereof is unable to be resolved by mutual
agreement of the parties, each of the parties here (i) agrees that any action,
suit or proceeding with respect to this Agreement against it or its properties
or revenues must be brought exclusively in the federal and state courts siting
in Chicago, and (ii) irrevocably submits to the exclusive jurisdiction of any
such court and any appellate court from any order or judgment thereof in any
such action, suit or proceeding. The parties hereby irrevocably agree that all
claims in respect of such action, suit or proceeding may be heard and determined
in such courts. The parties hereby irrevocably waive, to the fullest extent they
may effectively do so, the defence of an inconvenient forum to the maintenance
of such action, suit or proceeding. The parties agree that a final judgment in
any such action, suit, or proceeding will be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law.
20.3 Airspan's delay or failure to enforce at any time any of the
provisions of this Agreement or any right with respect thereto, or to exercise
any option herein provided shall in no way be construed to be a waiver of such
provision, rights, or options, or in any way to affect its right later to
enforce them. Airspan's exercise of any of its rights hereunder or of any
options hereunder under the terms or covenants herein shall not preclude or
prejudice Airspan from thereafter exercising the same or any right which it may
have under this Agreement, irrespective of any previous action or proceeding
taken by Airspan hereunder.
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<PAGE>
20.4 This Agreement shall be binding upon and inure to the benefit of the
successors and permitted assigns of Airspan and shall be binding upon and inure
to the benefit of Purchaser's heirs, legal representatives, successors and
permitted assigns.
20.5 This Agreement and any Exhibit hereto shall be modified only by an
instrument in writing that is signed by duly-authorized representatives of the
parties.
20.6 This Agreement is executed in English only, and Purchaser hereby
waives any right that it may have under the laws of any other jurisdiction to
have this Agreement executed in any other language.
20.7 The provisions of this Agreement are severable, and if any provision
is held invalid or unenforceable in whole or in part in any jurisdiction, then
such invalidity or unenforceability will affect only such provision or part
thereof in such jurisdiction, and will not in any manner affect the provision in
any other jurisdiction, or any other provision in this Agreement in any other
jurisdiction. To the extent legally permissible, an arrangement that reflects
the original intent of the parties will be substituted for such invalid or
unenforceable provision.
20.8 All obligations that by their nature survive the expiration,
cancellation or termination of this Agreement shall remain in effect after its
expiration, cancellation or termination.
20.9 Purchaser shall not be entitled to assign this Agreement or its rights
under it without the prior written consent of Airspan, which said consent shall
not be unreasonably withheld. Airspan may assign the Agreement or its rights
under it without recourse to Purchaser.
20.10 In the performance of its obligations under this Agreement,
Purchaser shall at all times strictly comply with all export laws, regulations,
and orders of the United Kingdom and the United States of America. Purchaser
specifically acknowledges that Equipment, Software or technology supplied or
licensed by Airspan under this Agreement are subject to U.K. and U.S. trade
sanctions and export control laws and regulations including, but not limited to,
the various Foreign Assets Control Regulations, the Export Administration
Regulations, and the International Traffic in Arms Regulations. Purchaser
specifically acknowledges that Equipment, Software, or technology obtained from
Airspan pursuant to this Agreement shall not be exported, reexported,
transhipped, disclosed, diverted, or transferred, directly or indirectly,
contrary to U.K. and U.S. laws, orders or regulations.
21. This document constitutes the entire agreement between the parties with
respect to the subject matter hereof, and supersedes all previous
communications, representations, understandings and agreements, either oral or
written, between the parties or any official or representative thereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the Effective Date, such parties acting by their officers,
being thereunto duly authorised.
Airspan Networks Inc. GLS LLC
By: ________________________________ By: _____________________________
Name: ____________________________ Name: ___________________________
Title :_____________________________ Title:___________________________
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<PAGE>
EXHIBIT 10.7
ORIGINAL EQUIPMENT MANUFACTURER (OEM) AGREEMENT
This Original Equipment Manufacturer Agreement ("Agreement") is established
between Motorola, Inc., a Delaware corporation, by and through its Network
Solutions Sector with offices at 1501 W. Shure Drive, Arlington Heights, IL
60004 (hereinafter "Motorola"), and Airspan Communications, Ltd., a company
incorporated under the laws of England and Wales, with offices at Cambridge
House, Oxford Rd, Uxbridge, UB8 1UN, United Kingdom (hereinafter "Company).
Motorola and Company may each be referred to individually as a "Party" or
collectively as "Parties" to this Agreement.
Recitals
WHEREAS, Motorola is in the business of designing, developing,
manufacturing, selling and licensing wireless communication system equipment and
software for the operation of cellular and wireless telecommunications systems
on a worldwide basis.
WHEREAS, Company is in the business of developing and licensing certain
hardware and software products for Wireless Local Loop applications and
providing technical support and maintenance services for such products.
WHEREAS, Motorola desires to purchase and license certain hardware
equipment, software and services for products that will be used in Wireless
Local Loop applications in the 3.5 GHz band and Company desires to provide
certain hardware, software and services to support Motorola's line of wireless
communication system products, in accordance with the terms and conditions set
forth in this Agreement.
Agreement
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby mutually acknowledged, the Parties agree as
follows:
1. Scope of Agreement.
1.1 This Agreement sets forth the terms and conditions governing the
purchase and license of the Products (as hereinafter defined) by
Motorola. Motorola shall have the right to purchase and license
Products: for Motorola's own internal use for the purpose of Customer
support; or for resale and sublicense to Customers for worldwide use
except for where a conflict may be created by existing agreements that
Company currently has in place as listed in Exhibit G, as those
agreements may be renewed, modified and assigned, provided that such
modifications do not further limit Motorola's ability to distribute as
set forth in Exhibit G . The Parties agree to follow the procedures for
Key Accounts as set forth in Exhibit L.
1.2 The Parties agree to work together in good faith to develop a
mutually acceptable process for Project Level Agreements that may
extend beyond the scope of this agreement, as set forth in Exhibit E.
1.3 The Parties anticipate that they will cooperate on one or more
opportunities which may include invitations to tender, requests for
proposal or quotation, requests for trial equipment and other
expressions of interest for the sale of Products to potential Customers
that require
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contemplation of terms that fall outside of this Agreement. In that
connection, the Parties may enter into specific Project Level
Agreements, as set forth in Exhibit E, which shall, among other
provisions, specify the terms and conditions of such arrangements
including the respective responsibilities of the Parties in providing
trial equipment to potential Customers. Furthermore, in the event that
system performance guarantees are required by Customers, the Parties
shall work together on a case by case basis to provide such system
performance guarantees.
2. Definitions.
(a) "Affiliate" means any corporation or other entity which
controls, is controlled by, or is under common control with a
Party. A corporation or other entity shall be deemed to
control another if it owns or controls more than fifty percent
(50%) of the voting stock or other ownership interest of the
corporation or entity. References herein to Motorola and
Company shall be deemed to include reference to their
Affiliates unless otherwise specified or the context otherwise
requires. For the avoidance of doubt, Motorola Affiliates
shall include all operating divisions of Motorola, Inc.
(b) "Confidential Information" means confidential or proprietary
data or information of either Party or any of its Affiliates
which is disclosed in oral, written, graphic, machine
recognizable, sample or any other form, by one Party to the
other Party and which is clearly designated or marked as
confidential or proprietary. In order for information
disclosed orally to be considered Confidential Information, it
must be identified as confidential at the time of disclosure
and shall be confirmed in writing by the disclosing Party
within forty-five (45) days after such disclosure.
Notwithstanding anything to the contrary herein, the receiving
Party shall have no obligation to preserve the confidentiality
of any information which was previously known to the receiving
Party free of any obligation to keep it confidential; is
distributed to third parties by the disclosing Party without
restriction; is or becomes publicly available, by other than
unauthorized disclosure by the receiving Party; is
independently developed by the receiving Party; is received
rightfully and without confidential limitation by the
receiving Party from a third party; or is disclosed to a
governmental authority lawfully demanding Confidential
Information provided that the disclosing Party provides prior
written notice to the other Party and assists the other Party
with information as they seek a protective or other such
order, provided confidentiality is otherwise maintained by the
Parties after such disclosure.
(c) "Customers" means, individually or collectively, as
applicable, all entities, their successors and assigns, in the
chain of distribution, sale and use of Products, including
without limitation, Motorola Affiliates (subsidiaries, joint
ventures, third party licensees), resellers, agents,
representatives, distributors, system operators and End Users.
(d) "Documentation" includes, but is not limited to, all product
technical, repair, marketing and user documentation and any
succeeding changes thereto, including, without limitation, all
specifications as set forth in Company's product manuals;
installation, maintenance, operating and Customer manuals,
instructions and diagnostics; system administrative materials;
configuration guides; marketing and sales brochures and
literature; and product guides as listed in Exhibit H.
Documentation shall include, if applicable, documentation
provided to Company by its suppliers or licensors to the
extent Company is authorized by them to provide such material
on the terms in this Agreement. "Documentation" does not
include Source Code.
(e) "End-User" means a customer or prospective customer of
Motorola to whom Motorola offers Products for use in the
regular course of such customer's business and not for resale.
(f) "Epidemic Failure" means a significant repetitive, verifiable
and measurable defect that occurs in any portion of the
Products which is attributable to a failure of the Products to
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operate in accordance with the respective Specifications and
which is of either of the following types: (i) Emergency - The
defect causes network failure or loss of important information
which is essential for the network operator to do business or
a defect that constitutes a safety risk; or (ii) High - The
defect seriously effects the way in which the network operator
conducts business but does not prevent business from
continuing, and there may be some impact on network
subscribers. There is no work-around solution available for an
Epidemic Failure.
(g) "Exhibits" means the documents attached to this Agreement and
incorporated by this reference, as may be amended from time to
time by agreement of the Parties. Exhibits include, without
limitation, the following:
Exhibit "A"--Products and Price List
Exhibit "B"-- Technical Specifications
Exhibit "C"--Acceptance Test Plan
Exhibit "D"--Technical Support and Maintenance
Exhibit"E"--Project Level Agreements Exhibit
Exhibit "F"--Motorola Trademarks
Exhibit "G"--Territories
Exhibit "H"--List of Documentation
Exhibit "I"--Warranty/Repair Procedures
Exhibit "J-1"--Motorola Supplier Assessment
Exhibit "J-2" -Action Plan
Exhibit "K"--Source Code Escrow Agreement
Exhibit "L"- Key Account Sales
(h) "Hardware" means the Company hardware equipment Products set
forth on Exhibit "A", including Spares, and all Documentation
related thereto generally supplied by the Company to its
customers. The Parties may mutually agree in writing to amend
Exhibit "A" to expand or reduce the Hardware covered under
this Agreement.
(i) "Modification" means a revision, new function or minor change
to the Software intended to correct errors or non-conformance
with Specifications and provided as a change in the then
current release of the Software. Modifications may be issued
as a "point release" of the Software (that is, the version
number of which release, in comparison to the previous
release, has not changed in the digits before the decimal
point but has changed in the first digit after the decimal
point).
(j) "Object Code" means computer programs assembled or compiled in
magnetic or electronic binary form on software media, which
are readable and usable by machines, but not generally
readable by humans without reverse-assembly, reverse-compiling
or reverse-engineering.
(k) "Order" means a written purchase order to be provided by
Motorola to Company for Products as provided herein.
(l) "Products" means, collectively, the Hardware and Software that
is listed in Exhibit "A" (which may be amended from time to
time to include new product offerings) and conforms to the
Statement of Work and Specifications.
(m) "Services" means those consulting, engineering, installation,
optimization, maintenance, repair, technical support,
training, and other services referred to herein as being
performed by Company. These Services and pricing for such
Services shall be set forth in Exhibit A. The Parties may
mutually agree in writing to amend Exhibit "A" to expand or
reduce the Services covered under this Agreement.
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(n) "Software" means the computer software (including firmware) of
any form, provided with the Products, which enables the
Products to perform their functions and procedures in
accordance with the Specifications, including all
Modifications and Upgrades, which are listed in Exhibit "A".
The Parties may mutually agree in writing to amend Exhibit "A"
to expand or reduce the Software covered under this Agreement.
Any reference to Software being "sold" or "purchased" is
understood in fact to be a reference to the Software being
licensed.
(o) "Source Code" means the original fully commented form on any
media of the Software in the language as used by Company, or
any translation or modification of such Software which
substantially preserves its original identity together with:
(i) all necessary proprietary information and technical
documentation which will enable a reasonably skilled software
engineer(s) to maintain or enhance the Software without the
aid of Company or any other person or reference to any other
materials; (ii) maintenance tools (test programs and program
specifications); (iii) proprietary or third party system
utilities (compiler and assembler descriptions); (iv) a
description of the Software's system/program generation; and
(v) descriptions and locations of hardware and software, if
any, not owned by Company but required for use and/or support
of the Software.
(p) "Spares" means field replaceable units (FRUs) such as
replacement parts, sub-assemblies, circuit cards, modules and
other electronic and mechanical assemblies necessary to
support routine operation and maintenance of the Products
which may be replaced at an End User site and which may be
purchased separately as set forth in Exhibit "A".
(q) "Specifications" means the technical performance and
functionality requirements for the Products as set forth in
Exhibit "B". From time to time, the Parties shall update
Exhibit B to include Specifications on the latest releases.
(r) "Trademarks" means trademarks, trade names, logos, service
marks, quality designations and any other proprietary words
and symbols that each party uses to identify its business
products and services.
(s) "Upgrades" means new modules, applications or modifications to
Software, or new releases, which provide substantial increase
in functionality, which are deemed to be commercially
marketable as a separate module or application and which
Company offers on a commercial basis to users of the Products
as an upgrade to those products. Upgrades may be included as
part of Maintenance. Upgrades may be made available to
Motorola and both existing and new End Users.
3. Product Requirements.
3.1 Specifications. The Products shall conform to the Specifications
and shall incorporate the features and be delivered within the
timeframes set forth in Exhibit "E".
3.2 Enhanced Features and Upgrades. Additional or enhanced Hardware
features and Upgrades that are developed by Company and offered on a
commercial basis by the Company to users of the Products shall be
incorporated into the Products and included as part of the Products.
Company shall also provide, subject to availability of personnel and
resources, Services as requested by Motorola to develop and support
additional or enhanced Hardware features and Upgrades specific to
Motorola, and the Parties agree to negotiate in good faith prices,
payment, timing and other terms and conditions for such Services.
4. Ordering Products.
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4.1 Rolling Forecasts. As of the Agreement Date, Motorola shall submit
to Company a quarterly rolling order forecast of Products expected to
be ordered during the next twelve (12) months. Every three (3) months
thereafter, Motorola shall submit to the Company a new quarterly
rolling order forecast of the number of central terminals and the
number of subscriber terminals, by type and frequency plan (i.e. upper
or lower band of 3.5 GHz), for Products expected to be ordered during
the next twelve (12) months. All forecasts are for planning purposes
only and are non-binding.
4.2 Orders. Except as provided herein, any requests for the sale and
delivery of Products shall be made by Motorola pursuant to an Order.
Each Order shall be deemed to incorporate the terms of this Agreement,
whether or not this Agreement is specifically mentioned, and shall
clearly state the date of the Order, Order number, quantity,
specification and configuration, method of shipping, preferred carrier,
destination, prices and requested delivery date. Orders shall only be
placed by a designated Motorola entity, to be agreed by the Parties.
This Agreement supersedes any terms or conditions contained on
preprinted forms submitted as, or with, purchase orders, sales
acknowledgments or invoices.
4.3 Acceptance of Orders. Company shall make all reasonable effort to
provide its acknowledgment and acceptance of Orders in writing to
Motorola within three (3) business days of Company's receipt by email
or fax. Company may request revision and resubmittal of Orders that do
not contain required information. If Company is unable to comply with
Motorola's required delivery schedule, Company shall make all
reasonable effort to inform Motorola within such three (3) business
days and the Parties shall agree to a mutually suitable alternative
delivery schedule. If Company fails to provide its acknowledgment and
acceptance of the Order, within such three (3) business days, Company
shall be deemed to have rejected the Order. Company shall make all
reasonable effort to provide its acknowledgment and acceptance of
Emergency Orders in writing to Motorola within twenty-four (24) hours
of Company's receipt by email or fax and Motorola shall confirm
Emergency Orders by a telephone call to Company. If Company fails to
provide its acknowledgment and acceptance of the Order, within such
twenty-four (24) hour period, Company shall be deemed to have rejected
the Order.
4.4 Product Availability.
(a) Standard Lead Time. The lead time for delivery of forecasted
Products shall not exceed six (6) weeks after Company's
acceptance of an Order, provided that Motorola's orders are
not materially different from the volumes of Products to be
supplied under Motorola's forecast submitted to Company under
subsection 4.1. The lead time for delivery of non-forecasted
Products shall not exceed ten (10) weeks after Company's
acceptance of an Order.
(b) Emergency Support Lead Time. Upon a verbal, promptly followed
by a written notification or fax from Motorola that a Customer
requires an emergency order, Company shall make all
commercially reasonable efforts to ensure appropriate Products
are shipped to such Customer or Motorola, as agreed by the
Parties, within twenty-four (24) hours of such request.
Motorola shall provide Company with an Order number as soon as
reasonably possible after such request. Company shall, as soon
as reasonable, provide Motorola (or Customer, if requested by
Motorola) with a waybill number and carrier information.
Invoices for any emergency Orders shall be sent immediately to
Motorola and shall be payable in accordance with the terms
herein.
4.5 Order Rescheduling. Motorola may, at no charge, request
rescheduling of the delivery of an Order by notifying Company not less
than fourteen (14) calendar days prior to the scheduled delivery date
and Motorola will use best efforts to ensure that rescheduling happens
no more than one time per order. In the event that Motorola requests an
Order reschedule less than fourteen (14) days prior to shipment that
reflects a delay of an order exceeding ninety (90) days, such Order
shall be subject to Company's actual costs, but in no event exceed ten
percent (10%) of
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the applicable order. Such rescheduling charges shall be invoiced to
Motorola upon shipment of the Product.
4.6
(a) Cancellation of Order. Motorola shall have the right to cancel
all or a portion of any Order placed with Company, at no
charge, if the Order is cancelled more than thirty (30) days
prior to the scheduled ship date. In the event of a
cancellation (except for Orders canceled in accordance with
Sections 7.2 Late Delivery, 7.3(c) Rejection, 22 Termination
or 29 Force Majeure), Company may invoice Motorola for a
cancellation charge as Company's sole and exclusive remedy for
cancellation of the Order.
If the order is cancelled thirty (30) days or less prior to
the scheduled ship date, the following cancellation charges
may be charged by the Company:
If the price for Products Then the cancellation charge
cancelled is in the following shall be in an amount equal to
amounts ... the actual charges incurred but
shall not exceed the following
percentage of the price of the
Products for the Order in
question:
Less than $1 million 5%
$1 million or more but less than 7%
$10 million
$10 million or more 10%
No Cancellation Charge shall be applied if the rescheduling of
the Order is attributable to any material non-performance of
Company in its obligations hereunder. In addition, in no event
shall Motorola be responsible for any charges related to any
manufacturing or ordering of services or materials by Company
done in advance of the factory lead time necessary to meet the
requested delivery date shown on such Order. Further, in the
event of a cancellation, Company shall take all reasonable
steps to reallocate Products to other Customers.
(b) Special Cancellation Charges. Notwithstanding the foregoing,
the following special cancellation charge schedule ("Special
Cancellation Charge Schedule") shall apply to Orders that
become subject to the Special Cancellation Charge Schedule
pursuant to the procedures set forth below:
If the price for Products Then the cancellation charge
cancelled is in the following shall be in an amount equal to
amounts ... the actual charges incurred but
shall not exceed the following
percentage of the price of the
Products for the Order in
question:
Less than $1 million 10%
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$1 million or more but less than 15%
$10 million
$10 million or more 20%
In order for an Order to become subject to the Special
Cancellation Charge Schedule, it must, if accepted by the
Company and fulfilled in accordance with its terms, result in
a 300% increase in the Company's production rates over the
quarterly run rates. The run rate shall be calculated as the
average number of: ____ # of Central Terminals, _____ # of
Access Concentrators and ____# of Subscriber Units produced in
the previous quarter. If an Order meets the foregoing
requirement, then the Company may, in connection with its
acceptance and acknowledgement of the Order, indicate in
writing to Motorola that such Order shall be treated as being
subject to the Special Cancellation Charge Schedule; if
Company fails to indicate in connection with its acceptance
and acknowledgement of the Order, the Order shall not be
subject to the Special Cancellation Schedule. If the Company
in its Order indicates that such Order shall be treated as
being subject to the Special Cancellation Charge Schedule,
Motorola shall have seven (7) business days to indicate to
Company its acceptance of such treatment; if Motorola fails to
indicate acceptance of such treatment within such time period,
the Order shall be deemed accepted and subject to the Special
Cancellation Charge Schedule. If Motorola indicates its
rejection of such treatment with seven business days, the
order shall be deemed to be cancelled and of no further force
and effect.
4.7 No Minimum Purchase. This Agreement shall not be construed as a
purchase order for any Products. Motorola is under no obligation to
place orders for any minimum quantity of products. Notwithstanding the
foregoing, Motorola will use reasonable commercial efforts to promote
Company products and in the spirit of this Agreement, Motorola has
purchased two (2) demo/lab systems.
4.8 Factory Acceptance Testing. Company is responsible for the
development of the factory acceptance test plan ("FATP") for the
Products. The FATP must be submitted to Motorola for review and
approval or comments four (4) weeks prior to the planned start of
acceptance testing for Products to be delivered to Motorola under this
Agreement. Motorola must provide its comments concerning the FATP, if
any, within two (2) weeks and the FATP must be approved by both
Parties, which approval shall not be unreasonably withheld, prior to
the start of Product factory acceptance testing. The FATP will be a
subset of Company's standard product verification testing. Factory
acceptance testing will take place at Company's facilities. All
Products shall be subjected to factory acceptance testing. Prior to
factory acceptance testing, Company shall provide Motorola with a set
of pre-FATP engineering release notes.
4.9 Acceptance Criteria. The criteria that must be met by the Products
in order for the Products to be deemed factory accepted shall be set
forth in the FATP. Results of factory acceptance testing shall be
recorded in a Manufacturing Test Report.
5. Packaging and Shipping.
5.1 Packing Lists. Company shall include a complete packing list for
each Order stating Order number, Motorola's part number, Company's part
codes, serial number(s) and/or applicable Software version, quantity
and date shipped, and Company's invoice number. A copy of the
Manufacturing Test Report, which shall be a subset of the FATP, shall
also be packed with each Product. Configured Hardware should be
identified by one unique part number. Preloaded Software must be
identified by a separate part number which also identifies the Software
version. A receiving checklist which includes a detailed diagram of the
assembled Hardware shall also be packed in the shipment. For
international shipments, two (2) packing lists shall be provided for
each Order.
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5.2 Markings. Company shall mark the outside of all packages with
necessary shipping information including Order number, part number,
quantity shipped, addresses of Company and Customer or Customer's
designee, and other requirements agreed upon between Motorola and
Company. Company shall follow Motorola's reasonable instructions
concerning the use of any Trademarks of Motorola, or any word or symbol
likely to be confused with any Motorola Trademark, either alone or in
any combination with another word or words. Further, when using the
trademarks of Motorola, Company may only use the Trademarks of Motorola
as directed by Motorola for labeling and shipping of the Product as set
forth in Exhibit F.
5.3 Packaging. All Products shall be packaged in such a manner to
prevent physical damage (including damage from electrostatic discharge)
to the Products during shipment and delivery assuming customary and
normal standards of handling. Freight and insurance associated with the
shipment of any replacement Products due to a failure of Company to
properly package the Products shall be the responsibility of Company.
Motorola and Company will agree to work together to determine the best
method of supplying Motorola's logo and labels to Company. Such
materials shall be supplied to the Company at no charge to the Company
and shall be supplied at times and in quantities sufficient for Company
to meet Motorola's Orders.
5.4 FCA, Risk of Loss, Title. The FCA (as defined in Incoterms, 1990
edition), point of shipment shall be at Company's origin in the UK.
Title to Product Hardware and risk of loss of the Products shall pass
to Motorola at origin/Company's plant upon Company's tender of delivery
by Company to Motorola's designated freight forwarder or carrier. Title
to the Software shall not pass to Motorola or its Customer at any time.
Motorola shall pay all freight and insurance costs from point of origin
on a pre-pay and add basis and all applicable customs duties and
similar charges.
5.5 Shipping. All items shall be shipped FCA, as specified above, in
the manner specified in the Orders. If Company ships Products by a
transportation method other than that specified on the Order, Company
shall be liable for the difference, if any, between the cost of freight
incurred and cost of freight which would have been incurred had Company
complied with the Order's shipping instructions. In the event any
shipment will not meet the delivery date (except as provided herein),
routing may be changed to premium transportation at Motorola's request.
In that event, Company shall bear the expense of any difference in
freight cost for the premium transportation unless the failure to meet
the delivery date is due to acts or omissions or delays of Motorola or
its customers or due to force majeure events. Company will, at
Motorola's request, drop ship product directly to Motorola's Customers
worldwide.
5.6 Motorola must inform Company of any loss in transit or damages(s)
to the Equipment and Software, and co-operate with Company in filing
any claims with the carrier for such loss in transit or damage(s).
5.7 In this Agreement, "Incoterms" means the most recent international
rules for the interpretation of trade terms published by the
International Chamber of Commerce as in force at the date when this
Agreement is made. Unless the context otherwise requires, any term or
expression which is defined in or given a particular meaning by the
provisions of Incoterms shall have the same meaning in this Agreement,
but if there is any conflict between the provisions of Incoterms and
this Agreement, the latter shall prevail.
6. Foreign Regulatory Approvals and Export Controls.
6.1 Regulatory Approvals. Motorola and Company will work jointly to
obtain foreign government regulatory approvals for the Products. In the
event that type approval or certification has not previously been
obtained by Company, and is required (as reasonably agreed upon by the
parties), Company and Motorola will work together to secure type
approval and certification as required. In such circumstances, Company
and Motorola shall equally split 50/50 all costs and charges associated
with such approvals. However, each Party is responsible for their own
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internal costs associated with such type approvals or certification.
Company shall be free to use such approvals in its other business
activities.
6.2 Export Controls. Motorola shall obtain all export licenses and
other government authorizations necessary for the shipment of any
Products with such assistance from Company as Motorola may reasonably
request.
7. Delivery.
7.1 Delivery Date. The delivery date shall be the date that is set
forth in the Order. Delivery of Services shall be in accordance with
agreed to milestones stated in the applicable Order.
7.2 Late Delivery.
(a) As soon as Company becomes aware that any delivery is likely
to be late, Company will promptly notify Motorola and keep
Motorola informed about the circumstances causing the delay.
In the event Company fails to make delivery on time, Motorola
may give Company notice of such delinquency, allowing Company
a reasonable time to cure. In no event shall such cure period
exceed fifteen (15) days from the originally scheduled
delivery date, unless otherwise agreed upon by the parties. In
the event Company fails to deliver any portion of the ordered
Products during such period, Motorola, at its option, may
cancel the undelivered portion of such Order at no charge.
(b) Liquidated Damages. In the event Motorola incurs late fees
from its Customers attributable entirely to the fault of
Company, Motorola, at its discretion, may invoice Company for
such liquidated damages. Company shall have no liability for
late fees, liquidated damages, or the like if the delay is
attributable to a Force Majeure Event or any default by
Motorola. Company shall incur no late fees, liquidated damages
or the like unless such fees or damages are imposed on
Motorola by its customer. Under no circumstances, even if
orders submitted by Motorola and accepted by Company provide
for late fees or liquidated damages that are higher, shall the
aggregate amount of late fees or liquidated damages for an
order exceed a maximum of fifteen (15%) of the value of the
delayed items under the applicable Order. The schedule for
payment of late fees or liquidated damages shall not exceed
the following: 0.5% per day of the value of the delayed items
under the applicable Order for each day of delayed delivery
after the date falling fifteen (15) days after the scheduled
delivery date, to the extent such delay is not attributable to
a Force Majeure Event or default by Motorola. In the event
that the system may be put into commercial service without the
delayed items, then the liquidated damages will be limited to
a cap of 15 % of the value of the delayed items. However, if
the delayed items prevent the system to be put into commercial
service due to the delay, then the 15% cap applies to the
value of the total system. Payment of late fees, liquidated
damages or the like shall be the sole exclusive remedy against
Company in respect to late delivery.
7.3 Acceptance and Rejection.
(a) Delivery and Testing. When Company delivers Products to
Motorola or its Customers, Company shall provide a written
statement listing the items delivered and stating that they
are ready for Motorola's Acceptance Testing. Such statement of
readiness will be in Company's standard format and may be
accomplished via electronic transmission if stated in the
Order. Motorola and Company shall develop a joint Acceptance
Test Procedure ("ATP") and acceptance criteria, which shall be
based on the FATP, and incorporate such ATP herein as Exhibit
"C". Such Exhibit "C" shall be jointly approved by Motorola
and Company, which approval shall not be unreasonably
withheld, including how it will be applied to each such
Product delivery. At their sole option, Motorola, with the
assistance of Company for a maximum of three (3) Orders placed
by Motorola under
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this Agreement, may examine, install and test the Products in
accordance with the ATP prior to shipment to Motorola's
Customers to determine whether the Products conform to the
applicable Product Order and Exhibit "B" Specifications.
Company shall assist Motorola in developing additional test
plans as may be required for new customers.
(b) Acceptance. After installation of a Product(s), Motorola's
deployment team may perform acceptance testing upon the
Product(s) to ensure that the Product(s) is properly installed
and substantially performing in accordance with the Product
Specifications. Acceptance testing shall include a detailed
demonstration of the Products by Motorola to the relevant
Customer. This demonstration will include an interactive
operation of the Products with the various components supplied
to the Customer, and will be deemed complete upon confirmation
by Motorola's deployment team that the Products are in proper
working order per the Product Specifications. Upon receipt of
such confirmation, Company shall, for a maximum of (3) Orders
placed by Motorola under this Agreement, assist Motorola
and/or the Customer in conducting acceptance tests using
simulated and/or actual data, at Motorola's discretion, for a
period not to exceed ten (10) days from the conclusion of the
Motorola Testing Period (the "Customer's Testing Period").
Within five (5) days after completion of Customer's Testing
Period, Motorola and Customer shall complete and execute a
Hardware Acceptance Checklist and a Software Acceptance
Checklist in the forms attached as Exhibit C (each a
"Checklist"), which shall state with specificity any aspects
of the Product(s)'s performance which do not substantially
conform to the Product Specifications. If the checklists
demonstrate that the Product(s) substantially conforms to the
Product Specifications, then such Product(s) shall be
considered accepted by Motorola and the Customer.
(c) Rejection. Motorola reserves the right to refuse delivery of
any Products which are not in material compliance with the
provisions of any Order or the material provisions of this
Agreement. Motorola, at its option may return, freight
collect, all Product received, which is not in material
compliance with the order or this Agreement, in its original
condition, to Company at Company's location in the UK or may,
at its option, retain such Product and make an appropriate
adjustment to the Purchase Order agreed upon by Company.
Incorrect or Dead on Arrival (DOA) Delivery. Company will use
all commercially reasonable efforts to deliver Product
replacement to Motorola or its designated freight forwarder,
or Customers ( as designated by Motorola) for materially
incorrect shipments or DOA (i.e. Products that materially fail
to perform "out-of-box" ) shipments within twenty-four (24)
hours of notice Motorola. If Company is unable to meet these
requirements, Company shall contact Motorola and the Parties
will mutually agree upon an alternative delivery schedule.
If Motorola properly rejects the installation of a Product(s)
pursuant to Section 7.3(b), then Company will work promptly,
diligently and continuously to correct the deficiencies such
that the Product(s) is performing substantially in accordance
with the Product Specifications as soon as reasonably
practicable thereafter. If the Product(s) is not so performing
within thirty (30) days following the rejection, Motorola may,
as its sole and exclusive remedy, cancel the Order, return at
Company's cost all of the Product, in its original condition,
( except for ordinary wear and tear and necessary adjustments
for installation and de-installation) to Company at Company's
location in the UK, and receive a full refund of all fees paid
to Company for the Product(s) and associated services.
(d) The provisions of this Section 7 shall also apply to
installations of Hardware or Software on a Product(s) after
the initial installation of such Product(s), except that: (i)
for a maximum of three (3) Orders placed by Motorola under
this Agreement, Company and Motorola and/or its relevant
Customer shall first test the newly-installed Hardware or
Software and subsequently test the Product(s) after
integration of the newly-installed items; (ii) Motorola may
reject such newly-installed Hardware in the manner described
in
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Subsection (b); (iii) Company shall have sixty (60) days to
correct the deficiencies with such Hardware or Software; and
(iv) if Company fails to do so, Motorola may terminate its
obligations with respect to such additional Hardware or
Software within thirty (30) days following expiration of such
60-day period, in which case Company shall refund to Motorola
all fees paid for such newly installed Product following
return by Motorola of the Products to the Company, in their
original condition, ( except for ordinary wear and tear and
necessary adjustments for installation and de-installation) at
the Company's location in the U.K..
7.4 No Waiver. Neither Motorola's acceptance of partial shipments nor
provision for delivery of Products in installments shall relieve
Company of its obligations under this Agreement.
8. Prices and Payment.
8.1 Prices. The prices payable for the Products are as set out in
Exhibit "A". Prices stated shall be firm fixed for orders placed during
the initial term of this Agreement, and thereafter, for periods after
the initial two year term, may be adjusted annually by the Company by
notice given by Company to Motorola at least ninety (90) days prior to
the then applicable contract expiration date. After the initial term of
this Agreement, price changes shall not be made more often than once a
year, effective on the anniversary of the Agreement Date unless agreed
otherwise in writing by both Parties. Company shall provide Motorola
ninety (90) days prior written notice of any intent to change its
prices for Products from those set forth on Exhibit A. Nothing herein
shall prevent the Company from adding new products and prices
associated with those products to the price list and either during or
after the initial term of this Agreement, setting prices for Upgrades
and Products incorporating Upgrades.
8.2 Payment Terms. All payments for the Products shall be made in U.S.
dollars at the applicable prices detailed in Exhibit "A", and are due
net forty-five (45) days after the date on which Motorola receives a
correct invoice therefor. Company's invoices shall contain (i)
Motorola's "Invoice to" and "Ship to" addresses as specified by the
Order, (ii) Order number, (iii) applicable price(s) and discount, and
(iv) reference to this Agreement. Payment of invoices shall not
constitute acceptance of the Products and shall be subject to
adjustments for shipment shortages and other failures of Company to
meet the requirements of this Agreement.
8.3 Late Payment Fee. Payments not made when due shall thereafter bear,
at the option of the receiving party, interest at a rate equal to the
lower of (x) 12% per annum, or (v) highest rate permitted by applicable
law.
8.4 Taxes. The prices set forth in Exhibit "A" for the Products do not
include applicable sales, use, excise or similar taxes. To the extent
Company is required by law to collect such taxes, they shall be a
separate line item on invoices and paid in full by Motorola, unless
Motorola is exempt from such taxes and furnishes Company with an
appropriate certificate of exemption.
8.5 Most Favored Customer. Notwithstanding any other provision of this
Agreement, the prices, services and warranties granted by Company to
Motorola pursuant to this Agreement taken as a whole are hereby
warranted by Company to be comparable to or more favorable to Motorola
than the comparable prices, services and warranties offered by Company
to any of its other customers, purchasing the same Products in the same
or substantially the same quantities, under substantially similar
terms, during the term of this Agreement, including any renewal
thereof. Upon discovery that Company is or has provided more favored
prices, services and warranties, taken as a whole, to any other
customer in violation of the foregoing, Company shall immediately
provide notice to Motorola of such fact and this Agreement shall be
deemed to be automatically amended to include such more favored prices,
services and warranties, taken as a whole.
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8.6 If Company breaches the warranty in 8.5 above, Motorola's sole and
exclusive remedy shall be for Company to provide the more favored price
or warranties to Motorola, effective immediately, from the date
Motorola or Company discovers the breach.
9. Product Changes.
9.1 Company shall provide Motorola ninety (90) days prior written
notice of any intent to change: (a) any material changes in quality
control for manufacturing processes for the Products; (b) any material
functionality or physical characteristics of the Products; or (c) part
number(s) before substituting Products with new numbers for Products
ordered under old numbers. This does not include Modifications that are
provided as part of normal maintenance Services.
9.2 No Discontinuance. Company may not discontinue the production or
availability of any Products at any time during the term of the
Agreement without giving Motorola seven (7) months prior written notice
(with details as to replacement products) or receiving the prior
written approval of Motorola, which will not be unreasonably withheld.
During such seven (7) month notice period, Motorola may purchase or
license additional quantities of the Products being discontinued. In
the event of a Products discontinuance under this Agreement, Company
shall provide substitute Products which under normal and proper use:
(i) shall not materially or adversely affect physical or functional
interchangeability or performance (except where there is written
agreement between the Parties that specific characteristics will be so
affected), (ii) shall not detract from the safety of the Products, and
(iii) shall be type-accepted by the appropriate authority, if required.
Company will use all commercially reasonable efforts, subject to
technology and vendor availability, to provide support for ten (10)
years after notice of product discontinuance.
9.3 Compatibility. Company shall use its commercially reasonable
efforts to ensure that all Products, including any future releases
thereof, shall be backwards compatible with, at a minimum, all
current/inservice Products, both software and hardware, and any
releases made available during the two (2) years prior to the date any
new release is first made available to Motorola; and upwardly
compatible with any future release of any Products which Motorola
purchases or licenses under this Agreement.
9.4 Change Order Process. Notwithstanding Section 9.3, any changes to
Products after acceptance thereof which affect the technical
functionality of the Products in any material respect must be submitted
in writing (in the form of a "Change Order Request") to Motorola
preferably within six (6) months but in no event less than four (4)
months prior to the intent to implement the change. Motorola will
review proposed changes within six (6) weeks of receipt of the Change
Order Request. Motorola will respond in writing with an approval or
alternative recommendation for the change. Proposed changes to Products
Specifications (Exhibit "B") as well as the introduction of future
Upgrades shall be subject to this change process. Such notice period
shall not apply in the event that the change is implemented to
introduce a bug-fix, repair or other modification to restore
functionality to that of the product specification described in Exhibit
B.
10. Product Documentation.
10.1 Documentation Deliverables. Upon execution of this agreement,
Company shall provide Motorola with two (2) complete master sets of
Documentation, of the type it generally provides to Customers of the
Products, at no additional charge. Documentation shall also be provided
to Motorola in a mutually agreed to electronic format. Company shall
notify Motorola of Company's Product release notices so that Motorola
may integrate such notices into the Documentation. Company shall
further provide any content/page updates or revisions, and series
numbers, if affected, on the date of their release for incorporation
into the master set. Prior to the first commercial installation of the
Products, Company and Motorola shall jointly develop a process for
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the delivery and revision of future documentation releases. Once
integrated, Motorola shall provide Product Documentation to Company via
electronic format and Company shall ship such integrated Documentation
to Customers when drop shipping Products.
10.2 Rights to Documentation. Company grants to Motorola a
non-exclusive, worldwide, perpetual, royalty-free license to edit,
reproduce and merge into other Product materials and Documentation or
other written materials, including any revisions thereof, Documentation
provided under this Agreement. Motorola shall be responsible for the
final style edit and formatting, to ensure consistency with the overall
Motorola documentation style, graphics and format. Motorola may use any
Documentation internally, as well as sell or otherwise make available
such Documentation to Customers. Company grants Motorola the right to
remove any trademark, copyright or other notices which may appear in
the body of any such Documentation and to place Motorola's own
trademark, copyright and other notices on such Documentation. Company
grants to Motorola all licenses under any copyrights or trademarks or
other rights which may be necessary in order to provide the foregoing
rights. Company is granted no rights in any Product Documentation or
materials that contain edited, reproduced or merged Documentation.
Motorola shall use the Documentation so licensed to Motorola only for
purposes of providing sales , marketing, maintenance and support of
Products sold by Company hereunder and for purposes of providing such
Documentation to Motorola's Customers only for use in their maintenance
and support of Products sold by Company hereunder.
10.3 Language. Motorola and Company acknowledge and agree that the
Documentation shall be in the English language. Motorola has the option
to contract with Company to have the Documentation translated into one
or more foreign languages at reasonable rates and terms. If Motorola
translates the Documentation into a foreign language, Motorola shall
provide a copy of the translation to Company and Company shall be free
to use such translations, after removing Motorola trademarks and
tradenames, in its other business activities.
11. Training.
11.1 Training Courses. Company shall provide an initial training
courses up to a maximum of three (3) courses for Motorola's personnel
to integrate, install, operate and maintain the Products and utilize
any necessary test equipment for a maximum of twenty (20) employees or
contractors of Motorola. Such courses shall be for a total of forty
(40) hours ( 5 business days) per employee. One of these courses may
include a "Train the Trainer" course. All slides and scripts developed
by Company shall be made available in electronic format for use by
Motorola at no charge, provided that Motorola shall use the same only
for maintenance and training with respect to Products sold by Company
under this Agreement. Motorola personnel sent to such courses shall
have an appropriate technical background. Concurrent with the execution
of this Agreement, Company and Motorola shall mutually agree on the
date on which the initial training course shall commence. In any event,
the initial training course shall commence within thirty (30) days of
Motorola's reasonable request. Such course shall be made available at a
location defined by Company and at no cost to Motorola. Company shall
also provide training for three (3) new Motorola employees per year at
a location defined by Company and at no cost to Motorola. For the
avoidance of doubt, Motorola shall be responsible for all travel, per
diem and accommodation costs incurred by their personnel.
11.2 On-Site and Additional Training Courses. Company shall, at
Motorola's reasonable request, and at a mutually agreeable time,
conduct on-site training courses for Motorola's Customers, or other
additional training courses, at any reasonable location designated by
Motorola on a subcontract basis at the Company's prevailing rates in
effect at the time of scheduling. Current pricing for Company's
training classes are set forth in Exhibit A; such prices shall be firm
for the initial two year term of this Agreement. Motorola shall also
pay all actually incurred, reasonable and customary travel and per diem
expenses for conduct of such courses, provided Motorola has previously
approved of such expenses in writing.
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11.3 Training Material. Company shall supply each trainee a complete
set of appropriate reproducible training aids, lesson plans, handouts
and associated materials pertaining to the Products for use by
Motorola's personnel. Company shall provide Motorola, upon Motorola's
reasonable request and at no charge, additional training material
handouts for use in any Motorola Customer training program. Company
grants to Motorola the right and license to reproduce all or any part
of the documents described in this Subsection and revisions thereof
solely for use in such training programs in connection with the
Products provided that the rights of Company in copyrighted material
that is Confidential Information are safeguarded by Motorola as set
forth in this Agreement (including those of Section 10.2).
12. Warranties.
12.1 Hardware.
(a) Hardware is warranted to be free from defects in material and
workmanship and to conform in all materials respects to the
Product Specifications for twenty-one (21) months from the
date of delivery of the applicable Hardware Products.
This Warranty applies to both domestically as well as
internationally deployed Product(s)s. Replacement or repaired
parts and depot labor at Company's facility (for repair of
parts) will be provided free of charge for the full warranty
period. Replacement or repaired parts may be drop shipped
directly to Motorola's customers or may be dropped shipped to
a Motorola's specified depot.. Motorola (or its Customer)
shall pay for costs of deinstalling defective parts and
installing replacement or repaired parts. Motorola shall
reimburse Company for costs incurred by Company in the event
of NFF (No Fault Found) in accordance with Company's prices as
set forth in Exhibit I Motorola shall prepay for shipping the
Product to Company and Company shall be responsible for the
costs of shipping the Product back to Motorola as specified by
Motorola . Motorola returns shall comply with Company's
standard MRR and other warranty procedures as set forth in
Exhibit I. Twelve month extended warranties for Hardware may
be purchased beyond the initial warranty period. Extended
warranty pricing shall be as set forth in Exhibit "A".
(b) In the event of a breach of Company's warranty in respect of
Hardware, Company shall repair or replace the part according
to the following procedures and those set forth in Exhibit I.
All costs incurred by Company during this process of repair,
repurchase or replacement of Company products, including but
not limited to, costs of repurchase or replacement shall be
borne by Company. In addition, during the warranty period,
Company will perform the following : (i) replace any defective
board with a Spare FRU within five (5) business days, for
emergencies, and ten (10) business days, for non-emergencies,
of receipt of the defective board or repair any defective
board within twenty five (25) working days of receipt.
Hardware not manufactured by Company will be repaired or
replaced within twenty-five (25) working days of receipt or
more promptly as arrangements with the manufacturers or
vendors thereof permit; (ii) provide Motorola with a list of
the Spare FRU model numbers from which the replacement of a
defective board shall be made; modifications to this list may
be made at any time with or without notice to Motorola or its
Customer; (iii) issue a Material Return and Replacement (MRR)
number to Motorola prior to Motorola's Customer's return of
the defective board; (iv) provide Motorola's Customers with
repair tags, return goods shipper forms, and shipping labels,
as reasonably required; (v) pay all transportation charges for
return of the board to Motorola's Customer; (vi) if Motorola
has provided Company with a blanket (call-off) purchase order,
provide emergency service by sending Spare FRUs within one (1)
business day after notification by Motorola to Company of such
emergency; (vii) upon Motorola's request, provide Motorola
with a copy of Company's then-current Policies and Procedures
for repair and replacement of defective equipment; (viii)
on-site repair within the USA can be performed at an
additional charge; such charge shall be quoted to Motorola's
Customer and approved before dispatch of personnel; and (ix)
Company may
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elect to either repair or replace third party equipment with
the assistance of third party service providers. Motorola End
Users shall approve the quote for field support.
12.2 Spares.
(a) Company shall provide spares for all Hardware under contract
according to the following procedures and those set forth in
Exhibit I. All orders for Spare parts then in stock will be
shipped within five (5) business days of receipt of the order,
although Company will use its reasonable efforts to ship
emergency related Spare parts orders within one (1) business
day. If ordered spare item is not in stock at such time, the
order will be shipped when spare item is available. Company
warrants that upon delivery of the Spares to Motorola and for
a period of twenty-one (21) months thereafter, all Spares
purchased hereunder will be free from defects in material,
workmanship and design and will perform in all material
aspects in accordance with the Product Specifications for such
parts. Company further warrants that each Spare will be a fit,
form and function replacement of the part it is designed to
replace and that Spares for Products having a prescribed mean
time between failures ("MTBF") will meet or exceed such MTBF
specifications.
(b) In the event spares delivered hereunder do not meet the
requirements of Section 12.2(a), Motorola may have the same
remedies as set forth with respect to Hardware (Section
12.1(b)).
12.3 Software.
(a) Company further warrants that for a period of twenty-one (21)
months from the date of delivery, the Software licensed under
this Agreement will be free from defects that result in
malfunctions and will perform in all material respects the
functions described in the Specifications in Exhibit "B". If
Motorola finds a defect in the Software's performance during
this period, Company will, replace or modify the Software in
accordance with the terms of Section 12.3(b) and those
procedures set forth in Exhibit I. so that it performs in all
material respects in accordance with the Specifications in
Exhibit "B", all in accordance with the further provisions of
Section 12.3(b).
(b) Correction of Defects. At Company's sole cost and expense,
Company agrees to respond to and make all commercially
reasonable efforts to complete correction of any breach in
warranty, during the applicable warranty period, in the
Software in accordance with Exhibit "D" and the following
definitions and priority classification:
Severity 1 Causes data corruption
or Product(s) crash or
Motorola cannot make
effective use of the
Software
Severity 2 Feature does not work
as documented, no
reasonable work-around
exists and Motorola
has a critical need of
the feature
Severity 3 Feature does not work
as documented but a
reasonable work-around
exists or Motorola can
wait for the next
release for a fix
Severity 4 Enhancement request.
Company shall correct: (i) any Severity 1 problem within
forty-eight (48) hours from verification of such defect; (ii)
any Severity 2 problem within ten (10) business days from
verification of such defect; (iii) any Severity 3 problem
within forty-five (45) days from verification of such defect;
and (iv) any Severity 4 problem on a case-by-case basis.
(c) Updates. Software Modifications shall be provided at no
additional cost to Motorola during the term of this Agreement
and any extension thereof and shall be warranted to the same
extent as the original Software for a period of twenty-one
(21) months from the date of delivery. Software Upgrades shall
be supplied under the terms of this warranty
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for the Software Warranty Period, including any extension
thereof, and during any period in which Motorola has paid or
has deemed to have paid Maintenance fees.
(d) Year 2000 Warranty. Supplier represents and warrants, in
addition to all other representations and warranties, that
until July 31, 2001, the Products supplied will be: (i) free
from any error(s) or defect(s) relating to date data
(including leap year calculations); (ii) will not generate any
invalid and/or incorrect date-related results; and (iii) such
date data will not impair the performance, output or accuracy
of Motorola's systems or products. In the event of a breach of
the foregoing warranty, Company shall repair or replace the
Software that does not comply with such warranty.
12.4 Epidemic Failures
(a) Under Warranty. In the event an Epidemic Failure occurs during
the applicable Warranty period, Company shall immediately take
remedial action at its sole expense, which may include
in-field inspection and onsite Services for replacement of all
Products and/or Software with a reasonable probability for
such a failure.
(b) Out of Warranty. If an Epidemic Failure occurs in any Products
and/or Software that has not continuously been under the
warranty as set forth herein, then within five (5) days of
notification from Motorola, Company shall prepare and propose
a corrective action plan for remedying such Epidemic Failures.
Upon approval of the corrective action plan by Motorola,
Company shall promptly implement the corrective action plan at
an agreed upon fee.
12.5 Services. All Services performed by Company under this
Agreement shall be performed in a good and workmanlike manner
in accordance with the applicable Telecommunications Industry
Standards. All Services and Maintenance obligations, as listed
in Exhibit "D", are warranted for twenty-one (21) months from
date of delivery.
12.6 Extent of Warranties.
(a) The warranties of Company, together with any applicable
service guarantees, shall run to Motorola. However, Company
agrees that Motorola can direct Customers who experience
warranty problems with Products to ship the relevant item, on
behalf of Motorola, directly to the Company and on direction
of Motorola, the Company shall drop ship to the location of
the relevant Customer items that have been repaired or
replaced pursuant to the Company warranty. Any NFF charges in
connection with any such direct shipments shall remain, as
between the Company and Motorola, the responsibility of
Motorola, however, Company shall be responsible for costs of
shipping NFF Products back to Motorola or its Customers.
(b) THE WARRANTIES IN THIS AGREEMENT ARE GIVEN IN LIEU OF ALL
OTHER WARRANTIES, EXPRESS OR IMPLIED, WHICH ARE SPECIFICALLY
EXCLUDED AS TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT
LIMITATION, IMPLIED WARRANTIES OF MERCHANTIBILITY OR FITNESS
FOR A PARTICULAR PURPOSE.
12.7 General
The remedies set forth in this Section for breaches of
Company's warranties are Motorola's sole and exclusive remedy
for breach of such warranties. Company shall have no liability
for any breach of warranty to the extent attributable to the
failure of Motorola or its customer to handle, install, or
maintain the Products in accordance with the Documentation and
good industry practice or to install promptly the latest
Modification supplied by Company.
12.8 Warranty for Repaired Items
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Any repair or replacement of an item of Hardware or Software
provided by Company as a result of its warranty obligation
hereunder shall be warranted to the same extent as the
original item supplied by the Company (and subject to the same
exclusions and other provisions of this Section 12) for a
period equal to the longer of the original warranty period for
the original item subject to repair or replacement or nine (9)
months from the date of delivery of the repaired or
replacement item.
13. Technical Support.
13.1 Technical Assistance. Company shall provide Technical Support and
assistance in accordance with Exhibit "D", including telephone support.
Support shall be 7 x 24. The support provided in this Section shall
extend to both new and old versions of Products for three (3) years
from acceptance of the Products by Motorola. A complete description of
the technical support to be provided by Company is set forth in such
Exhibit "D".
13.2 Problem Reports. Company shall track, summarize and maintain
up-to-date status on all problem reports related to the Products
regardless of whether they are generated by Motorola or Motorola's
Customers (so long as Motorola forwards such Customer data to the
Company). Company shall provide Motorola with reports on demand of
Motorola, but no more than quarterly. Motorola shall have access to the
aforementioned information at no charge. Company shall assign a
specific individual to interface with Motorola's personnel.
14. Quality.
Airspan would have to review all referenced and associated
documentation before agreeing to clause 14 and subclauses.
14.1 Quality System. Company shall maintain a quality system for the
purpose of achieving major quality improvements in the Products and
Services supplied to Motorola. As part of Company's quality system,
Company agrees to qualify with the criteria set forth in the Motorola
Supplier Assessment, as set forth at Exhibit J-1 including Company's
participation in bi-annual or annual Supplier Assessments. Company
agrees to be subject to Supplier Assessment reviews and or audits and
to work with Motorola to endeavor to improve Company's quality systems
based on the outcome of the supplier assessments. For the purpose of
example and not limitation, Services may include training,
documentation, response center, etc.
14.2 Audit. Company shall grant Motorola the right, upon reasonable
notice and at reasonable time, to audit Company's facilities and
documents that pertain to the Products only, for purposes of verifying
compliance with the quality terms set forth in this Agreement. Audits
shall be done no more than once per year.
14.3 Quality Data. Company shall provide Motorola access to quality
data for the purpose of measuring and evaluating Company's continuous
process improvement. Company shall also participate in periodic quality
reviews to discuss product roadmaps and to conduct operation reviews.
14.4 Improvement Action Planning. Company shall create a quality
improvement action plan, coordinated with Motorola (attached hereto as
Exhibit J) and meet with Motorola on a periodic basis to review
progress of action items and their quality impact. Company agrees to
use commercially reasonable efforts to comply with the agreed upon
milestones in the improvement action plan as set forth in Exhibit J-2.
In the event that Company fails to comply with the foregoing, Motorola
may treat such action as a material breach subject to the terms and
cure periods set forth in Section 22.1(a).
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<PAGE>
14.5 Participation. Company shall grant Motorola the right to
participate in reviews of milestones and implementation of revisions to
Products under this Agreement, all as reasonably agreed to. Motorola
agrees to promptly provide comments, as applicable.
14.6 Hardware Development. Company shall maintain a documented and
repeatable process for Hardware development and manufacturing for any
Hardware which Company develops and manufactures for Motorola.
14.7 Software Development. Company shall maintain a documented and
repeatable process for Software development for any Software which
Company develops for Motorola.
15. Company's Commitment to Customer Satisfaction.
15.1 Company acknowledges that commitment to total customer
satisfaction is essential to Motorola's continuing success in wireless
radio markets. A malfunction in the Products or Services may create
real or perceived customer satisfaction problems and a loss of goodwill
with customers. It is agreed that such problems may be outside the
scope of Company's warranty obligations set forth in this Agreement.
Company represents that it is committed to Motorola's stated
fundamental objective of Total Customer Satisfaction and will assist
Motorola in endeavoring to solve problems attributable to the Products,
when reasonably requested by Motorola. Under no circumstances however
is this Section, or Section 15.2, intended to give Motorola additional
remedies for breach of Company's warranty or to expand Company's
obligations with respect to Products out of warranty.
15.2 By way of example, and not limitation, at Motorola's reasonable
request, Company may be requested to periodically attend Customer
meetings and/or symposiums for the purpose of promoting and responding
to questions and concerns of Customers utilizing such Products, taking
action items at such meetings and working with Motorola to endeavor to
resolve customer satisfaction problems; be requested to attend on-site
meetings with individual customers who may be experiencing unique
difficulties with Products; etc. The parties shall mutually agree on
the allocation of any expenses to achieve the foregoing.
16. Intellectual Property Rights.
16.1 IPR of Company. All patents, trademarks, copyrights, mask works,
circuit layout rights, design rights, trade secrets and other
intellectual property rights in the Products and Company's Confidential
Information are and shall remain the exclusive property of Company or
its licensor.
16.2 IPR of Motorola. All patents, trademarks, copyrights, design
rights, trade secrets and other intellectual property rights in
Motorola's Confidential Information are and shall remain the exclusive
property of Motorola or its licensors.
16.3 Integration. Company shall not integrate or merge any Motorola
Confidential Information into any of the Products, unless otherwise
specifically directed by Motorola in writing.
16.4 Motorola shall not undertake any modifications to the Software
unless necessary to provide support to Customers in the event that
Motorola is provided Source Code pursuant to the escrow arrangement.
Motorola acknowledges that, except pursuant to the escrow arrangement
contemplated hereby, all Software provided hereunder will be provided
in Object Code only. Motorola shall not decompile, disassemble or
reverse such Software. .
17. Trademarks, Tradenames and Service Marks.
17.1 Right to Use Trademarks. In conjunction with the distribution and
sale of Products, Company grants Motorola the right to use all
trademarks, trade names, logos, service marks, quality designations and
any other proprietary words and symbols ("Trademarks") of Company
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associated with the Products in proposal and promotional activities.
Motorola shall comply with all reasonable rules and regulations
furnished to Motorola by Company with respect to the use of each such
Trademark.
17.2 No Use of Motorola Marks. Company shall not use any Trademarks of
Motorola, or any word or symbol likely to be confused with any Motorola
Trademark, either alone or in any combination with another word or
words, except as authorized by Motorola under section 5.2 and Exhibit F
of this agreement.
18. License Grants.
18.1 Right to Use. Company grants Motorola a perpetual, worldwide,
except as set forth in Exhibit G, non-exclusive, non-transferable,
non-assignable royalty-free right to use the Software solely for
Motorola's internal use in conjunction with sales, maintenance and
customer support in conjunction with Products supplied by Company
hereunder and for the uses contemplated by Sections 18.2, 18.3 and
18.4. The license fee is included in the price of the Products.
18.2 Right to Sublicense. Company grants Motorola a perpetual,
worldwide, except as set forth in Exhibit G, non-exclusive,
non-transferable, non-assignable right to use, reproduce, market and
distribute, and to grant Customers perpetual, worldwide, except as set
forth in Exhibit G, non-exclusive, nontransferable, non-assignable
sublicenses to use, , and copy for backup and archival purposes, the
Object Code form of the Software, in all such cases solely for use in
the Products supplied by the Company hereunder, provided that such
sublicensees agree to be bound by terms and conditions which grant no
more rights concerning the Software than those contained herein, which
includes prohibitions against further sublicensing, disclosing,
disassembling or reverse engineering the Software.
18.3 Right to Copy. Upon execution of this Agreement, Company agrees to
promptly provide Motorola two (2) copies of the Object Code form of the
Software. In lieu of ordering Software from the Company, Company agrees
that Motorola may copy the Software, in object code form, solely for
the purpose of sublicensing the Software to Customers for use in
Products supplied by the Company hereunder. Motorola agrees to provide
Company, on a quarterly basis, a certificate verifying the number of
copies made and sublicensed.
18.4 Right to Use Source Code. Company grants Motorola a perpetual,
non-exclusive, non-transferable, non-assignable, royalty-free license
to use the Source Code of the Software, but solely in the circumstances
and in accordance with the terms of Section 19 herein.
19. Source Code Escrow.
19.1 Source Code Obligation. Motorola may, at its option, enter into a
Software Source Code escrow agreement with Company. Such escrow
agreement shall state that Company shall deposit, concurrently with the
execution of this Agreement and on each anniversary of the date of this
Agreement, with a third party reasonably acceptable to the Company
("Escrow Agent"), the most recent Source Code of the Software. Under
that agreement, in the event Company enters into any voluntary or
involuntary receivership arrangement or other insolvency procedures
(with appropriate cure periods for involuntary procedures, to be set
forth in the Escrow Agreement, attached hereto as Exhibit K), or ceases
to provide, in all material respects, substantially all of the support
services required by this Agreement in respect of Products sold by the
Company hereunder, such cessation continues after appropriate notices
and cure periods as set out in the Escrow Agreement, and there is no
successor to the Company undertaking such support, Motorola may direct
the Escrow Agent to deliver to Motorola the deposited Source Code
unless Motorola is then in material default under this Agreement
according to section 22.1(a) (for these purposes, this Agreement and
Orders placed thereunder shall be taken as a whole). It is understood
that ownership of the Source Code at all times remains with Company and
that any release to Motorola of such Source Code is made as an
accommodation to Motorola and shall
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not vest any ownership or ownership rights in Motorola. In the event
that receivership or insolvency proceedings are dismissed and Company
continues as the primary obligor under this Agreement, Motorola, within
twenty (20) working days of receiving notice thereof, shall return the
Source Code and all copies to the Escrow Agent. During any period of
time in which the Source Code is in the possession of Motorola, it is
agreed that the Source Code shall be used only by Motorola and agents,
such as subcontractors, and may be used and modified solely for the
purposes of providing continuing support for Products sold by the
Company under this Agreement; for avoidance of doubt, the Source Code
shall not be used for development purposes nor duplicated, sold or
licensed to others or marketed in any manner. Motorola agrees to pay
all costs of entering into the Software Escrow Agreement and all annual
renewal costs. Except as specified in this Section, Motorola shall have
no access to the Source Code.
19.2 Specific Performance. Company expressly agrees to promptly comply
with the foregoing obligations and agrees that if Motorola, at its
option, enters into such a Software Escrow Agreement, then Motorola
shall be entitled to an order for specific performance of such
obligation in the event Company's representative, including any trustee
in bankruptcy, refuses to comply with the foregoing obligations. In the
event of bankruptcy, the Parties acknowledge that Motorola shall be
entitled to the full protection provided to licensees of intellectual
property rights specified in 11 U.S.C. ss. 365.
20. Confidentiality.
20.1 Exchange of Confidential Information. From time to time during the
performance of this Agreement, the Parties may deem it necessary to
provide each other with Confidential Information. The Parties agree:
(a) To maintain the confidentiality of such Confidential
Information and not disclose same to any third party, except
as authorized by the original disclosing Party in writing.
(b) To restrict disclosure of Confidential Information to
employees, contractors, and agents who have a "need to know".
Such Confidential Information shall be handled with the same
degree of care which the receiving Party applies to its own
confidential information but in no event less than reasonable
care.
(c) To take precautions necessary and appropriate to guard the
confidentiality of Confidential Information, including
informing its employees, contractors and agents who handle
such Confidential Information that it is confidential and not
to be disclosed to others.
(d) That Confidential Information is and shall at all times remain
the property of the disclosing Party. No use of any
Confidential Information is permitted except as otherwise
expressly provided herein and no grant under any proprietary
rights is hereby given or intended, including any license
implied or otherwise.
20.2 Responsibilities as to Employees. The receiving Party acknowledges
that Confidential Information may contain information that is
proprietary and valuable to the disclosing Party and that unauthorized
dissemination or use of the Confidential Information may cause
irreparable harm to the disclosing Party. Therefore, the receiving
Party shall take appropriate action, by instruction, agreement or
otherwise, with any employee or contractor permitted access to the
Confidential Information so as to enable it to hold the Confidential
Information in confidence or otherwise satisfy its obligations under
this Agreement.
20.3 Survival. Each Party's obligations under this Agreement to keep
confidential and restrict use of the other Party's Confidential
Information shall survive the expiration or termination of this
Agreement for a period of five (5) years.
20.4 Disclosure. Except as may be required by applicable law, neither
Party shall disclose to any third party the contents of this Agreement
or any amendments hereto without the prior written
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consent of the other Party. The foregoing shall not prevent disclosure
to a Party's accountants and lawyers.
20.5 Independent Development. Company acknowledges that Motorola and/or
third parties are, or may be developing, Products similar in
functionality to those developed hereunder by Company. Company agrees
that the receipt of Confidential Information by Motorola from Company
shall in no way prohibit Motorola and/or third parties from developing
such applications, provided that the provisions of this Section 20
regarding the ownership, protection and security of Company's
Confidential Information have not been breached.
21. Limitation of Liability and Indemnification.
21.1 Limitation of Liability. UNLESS SPECIFICALLY SET FORTH HEREIN,
AND EXCEPT FOR UNCURED MATERIAL BREACHES OF CONFIDENTIALITY
OBLIGATIONS IN THIS AGREEMENT, in no event shall either
Motorola or Company (AND THEIR EMPLOYEES, DIRECTORS, AGENTS,
OFFICERS , whether as a result of breach of contract OR
WARRANTY, tort (including WITHOUT LIMITATION negligence),
FAILURE OF ESSENTIAL PURPOSE, or otherwise, have any liability
to each other for any indirect, special, incidental or
consequential damages, LOSS OF PROFITS, LOSS OF REVENUES OR
LOSS OF SALES IN CONNECTION WITH OR RELATED TO THIS AGREEMENT.
THE TERM CONSEQUENTIAL DAMAGES AS USED HEREIN SHALL NOT BE
CONSTRUED TO INCLUDE DAMAGES AS DEFINED IN THE UNITED STATES
CODE 35 U.S.C. 284. THE PARTIES UNDERSTAND AND AGREE THAT
DAMAGES UNDER 35 U.S.C. 284 ARE A FORM OF DIRECT DAMAGES.
21.2 General Indemnity. Subject to the limitations of Section 21.1
(unless otherwise required by applicable law), Motorola and Company
agree to indemnify and save each other harmless from any and all
claims, damages, expenses, suits, loss or liability for any death,
personal injury, or physical damage to tangible property to the extent
caused by, or arising from or connected with the performance of this
Agreement due to or occasioned by the other Party, its officers,
employees, agents or representatives.
21.3 Intellectual Property Indemnification.
(a) Company agrees, subject to the provisions of Section 21.1 (the
foregoing is not a limitation on Company's obligation to
indemnify Motorola for claims of the type covered by Section
21.1 which a third party seeks to recover from Motorola as a
result of actual or claimed infringement but are intended to
limit Motorola's recovery by indemnity for damages of the type
covered by Section 21.1 which are suffered by Motorola) to
indemnify and save harmless Motorola, its successors, assigns
and Customers from any and all expenses, liabilities, damages
or other losses, including court costs and attorney's fees,
arising from or by reason of any actual or claimed
infringement of any patents, trademarks (other than trademarks
of Motorola), copyrights, maskworks, trade secrets or other
intellectual property rights by the Products and/or
Documentation or any part thereof; and to defend at its
expense any action based thereon with respect to the use,
license or sale of the Products and /or Documentation by
Motorola or the Customers. Company shall be given prompt
notice of any claim which is the subject of this Section and
shall be given the right to control the defense of the claim.
(b) If the use of any portion of the Products developed under this
Agreement is enjoined as a result of such suit, then Company,
at no expense to Motorola and the Customers, shall either
procure the right for Motorola and Customers to continue using
the Products or replace or modify same so that they becomes
non-infringing and are of equivalent or superior
functionality. If neither of the foregoing alternatives are
available on terms which are acceptable to Motorola, Motorola
may return all or any part of the Products at
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Motorola's sole option, for no less than a full refund of the
purchase price or license fees paid under this Agreement.
21.4 Cap on Liability.
Except for breach of the Confidentiality obligations,
restrictions in this Agreement on use of intellectual
property, obligations under Section 21.3, and as otherwise
prohibited by law, each party's total aggregate liability
arising from or related to this Agreement shall not exceed the
higher of (x) $8,000,000 (or (y) the amount invoiced by
Company to Motorola for Products and Services sold to Motorola
pursuant to this Agreement, regardless of whether such damages
are based on breach of contract or warranty, tort (including
without limitation negligence) failure of essential purpose or
otherwise.
21.5 Customer Agreement to Limitations.
Motorola shall use reasonable efforts to attempt to secure
from its Customers an agreement to a limitation on indirect,
special, incidental, and consequential damages of the type
contemplated by Section 21.1.
22. Termination.
22.1 Right to Terminate. Either Party may terminate this Agreement upon
notice to the other if:
(a) Material Breach. The other Party breaches a material
obligation under this Agreement and such breach continues
without cure for a period of thirty (30) days after notice or,
if the breach is not one which is capable of being cured
within thirty (30) days and the breaching Party has commenced
to cure the breach within such time and continues to do so
diligently and in good faith, then the breaching Party shall
be granted an extension for a reasonable period of time at the
discretion of the non-breaching Party.
(b) Change of Control. An entity that does not currently control
Company or Motorola, as the case may be, acquires either
direct or indirect control of the other Party (Company or
Motorola, as the case may be) and such Change of Control
materially and adversely affects the rights of the terminating
party. For these purposes, Change of Control shall mean the
possession of the power, directly or indirectly, to direct or
cause the direction of management or policies of the Party,
whether through the ownership of more than fifty percent (50%)
of the then outstanding shares or other equity rights of the
Party or by contract or agency or such similar arrangement. In
such event, if a Party terminates because of a Change in
Control of the other Party, the Parties shall cooperate to
conduct an orderly termination of the Agreement. Motorola
acknowledges that Company is expecting to conduct an initial
public offering in the near future. Motorola agrees that this
event alone will not give rise to a Change of Control event
that will permit Motorola to terminate this Agreement under
this Section 22(b)
(c) Insolvency or Cessation of Business. The other Party ceases to
conduct business in the normal course in a manner that
materially adversely affects the ability of the Party to meet
its obligations under this Agreement, becomes insolvent,
enters into a general suspension of payments, moratorium,
reorganization or bankruptcy, makes a general assignment for
the benefit of creditors, admits in writing its inability to
pay debts as they mature, suffers or permits the appointment
of a receiver for substantially all of its business or assets,
or avails itself of or becomes subject to any other judicial
or administrative proceeding that relates to insolvency or
protection of creditors' rights.
22.2 Rights and Obligations at Termination. Upon expiration or
termination of this Agreement for any reason:
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(a) Cease and Destroy. Each Party will promptly cease using and
destroy and certify such destruction, or return to the other
Party, all items that contain any Confidential Information (as
defined herein) of the other Party, except Motorola may retain
one copy of Confidential Information for the sole and express
purpose of supporting then-existing Customers in connection
with their use of products supplied by Company hereunder.
(b) Sale of Inventory. Motorola may sell any of its then existing
inventory of Products originally purchased from Company.
However, Company shall have no warranty and support
obligations for such product under Sections 22.2(d) and (g) if
this Agreement is terminated because of Motorola's material
default pursuant to Section 22.1(a).
(c) Right to Use. Unless otherwise provided for herein, Motorola
and Customers shall continue to have the right to use Software
in Object Code form associated with the Products sold under
this Agreement, but subject to the limitations of this
Agreement.
(d) Spares. Upon termination of the initial term or any renewal of
this Agreement, or upon termination for any reason other than
Company's total cessation of business, Company agrees to use
all commercially-reasonable efforts, subject to vendor
availability, to offer for sale to Motorola, in accordance
with the provisions set forth herein, functionally equivalent
Spares for a period no less than ten (10) years after the
expiration or termination of this Agreement. In the event
Company is unable to supply such Spares or is unable, after
notice and a reasonable period of time, to obtain another
source of supply for Motorola, then Company shall provide
Motorola and its designated third party manufacturers of such
Spares with a royalty-free, non-exclusive license to use
intellectual property so that Motorola and such manufacturers
will have sufficient information and right to manufacture or
to obtain functionally equivalent Spares from other sources,
but solely for purposes of supplying Spares for Products sold
by Company under this Agreement. Company shall be obligated to
provide support services for Hardware, as set forth in Exhibit
D, attached hereto, for a period of ten (10) years after the
date of termination, and to provide support services for
Software, as set forth in Exhibit D, attached hereto, for a
period of two (2) years after the date of termination, unless
such termination is due to a material breach by Motorola,
pursuant to Section 22.1(a). In the event of a Company
bankruptcy, for purposes of this Agreement, the Parties
acknowledge that Motorola shall be entitled to the full
protection provided to licensees of intellectual property
rights specified in 11 U.S.C. 365.
(e) Outstanding Sums. Company shall invoice Motorola for any
outstanding sums which may be owing from any Order as detailed
in Exhibit "A. In the event that Motorola terminates for
material breach as set forth herein, Motorola reserves the
right to offset any damages it incurs against any sums that
Motorola owes to Company.
(f) Source Code. In the event of a termination due to the
conditions set forth in Subsection 22.1(c) above, Company
shall provide to Motorola Source Code in accordance with the
terms of any escrow agreement entered into pursuant to Section
19.
(g) Continuation of Services. Upon termination at the end of the
initial term or any renewal thereof, unless termination is due
to a material breach by Motorola, pursuant to Section 22.1(a)
Company will provide warranty remedy, support services, of the
type required hereby, until the end of the last applicable
warranty period or term of support or maintenance agreement.
23. Term and Renewal.
This Agreement shall commence as of the Agreement Date and shall be for
an initial term of two (2) years, and may be renewed by the Parties for
successive terms of one-year each, provided that each Party executes a
written consent as to each one year renewal period sixty (60) days in
advance of the expiration date of the previous term.
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<PAGE>
24. Product Liability and Compliance with Laws.
24.1 Product Liability. Company represents and warrants that the
Products shall be produced and delivered in accordance in all material
respects with all applicable laws, rules and regulations governing
product safety of those jurisdictions from which Company or Motorola
(with the active cooperation of Company) has obtained or is in the
process of actively obtaining type certification for the Products.
24.2 Defense of Claim. Company agrees, upon receipt of notification, to
promptly assume full responsibility subject to the limitations of
Section 21.1, for the defense of any suit or proceeding which may be
brought against Motorola, its directors, officers, agents or Customers
for personal injury, death, or physical damage to tangible property
based upon a claim that the Products, or any aspect of the Products,
breached the representation of Section 24.1, have caused death or
personal injury, are defective in any way, or were negligently designed
or manufactured or fail to comply with any product safety laws. Company
further, subject to the limitations of Section 21.1, agrees to
indemnify and hold harmless Motorola, its directors, officers, agents
and Customers against any and all expenses, losses and damages,
including court costs and attorney's fees, resulting from any such suit
or proceeding, including any settlement. Motorola may be represented by
and actively participate through its own counsel in any such suit or
proceeding if it so desires, and the cost of such representation shall
be paid by Motorola.
25. Security.
Each Party agrees that, when employees or agents of the visiting Party
are on the premises of the host Party, they will at all times comply
with all security regulations in effect and of which the Party has been
apprised. The visiting Party further agrees to abide at all times with
off premises security regulation when the visiting Party has
Confidential Information of the host Party. Motorola and Company
specifically agree not to disclose to any third party any information,
systems, equipment, ideas, processes or methods of operation observed
at either Party's facilities, all of which shall be deemed Confidential
Information as defined herein.
26. Insurance.
While performing this Agreement, Company shall maintain insurance in
such amounts and in such forms and with such insurers as Motorola may
reasonably request.
27. Notices.
27.1 Form of Notices. All notices and other communications required or
contemplated under this Agreement shall be in writing and shall be
transmitted to the address shown below either by (i) personal delivery,
(ii) expedited messenger service, (iii) airmail postage prepaid return
receipt requested certified mail, or (iv) electronic telefacsimile with
confirmed answerback.
<TABLE>
<S> <C>
Motorola shall send notices as follows: Airspan Communications Ltd.
Cambridge House
Oxford Rd
UXBRIDGE, UB8 1UN, UK
Attention: Director of Marketing
Telefax: +44 1895 467152
Company shall send notices as follows: Motorola, Inc.
Network Solutions Sector
1441 West Shure Drive
Arlington Heights, Illinois 60004
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Attention:
John Thode, Wireless Access Systems Division
General Manager
Cc: Laura Jensen, Wireless Access Systems Division
Senior Marketing Manager
Telefax: 847-632-2168
Motorola
Network Solutions Sector
Global Alliance Development Department
1441 W. Shure Drive
Arlington Heights, Illinois 60004
Attn: Legal
Facsimile: 847-632-2300
</TABLE>
27.2 When Effective. Notices shall be effective upon the date of
receipt of delivery or at such time as delivery is refused by addressee
upon presentation.
28. Force Majeure.
28.1 Definition. Neither Party shall be liable for delays in delivery
or performance when caused by any of the following which include but
are not limited to, acts or events which are beyond the actual control
of the delayed Party, including but not limited to the following: (i)
acts of God, (ii) acts of the public enemy, (iii) acts or failure to
act by the other Party, (iv) acts of civil or military authority, (v)
governmental priorities, strikes or other labor disturbances, (vi)
hurricanes, (vii) earthquakes, (viii) fires, (ix) floods, (x)
epidemics, (xi) embargoes, (xii) war, (xiii) riots, and (xv) failures
of common carriers.
28.2 Extension. In the event of any such delay the date of delivery or
of performance shall be extended for a period equal to the effect of
time lost by reason of the delay.
28.3 Right to Terminate. Notwithstanding the foregoing, in the event
that such Force Majeure causes Company to be delayed in its delivery or
performance for more than seventy-five (75) days, Motorola shall have
the right to terminate this Agreement with no liability whatsoever.
28.4 Notice. A party claiming delay in delivery or performance, due to
an act of force majeure as set forth herein, shall send written notice
thereof and a statement of particulars to the other party, prior to or
at the time performance would have been required by the non-performing
party.
29. Governing Law and Dispute Resolution.
29.1 Governing Law. The validity, performance, and all matters relating
to the effect of this Agreement and any amendment hereto shall be
governed by the laws of the State of Illinois, U.S.A., which shall be
applied without regard to the U.N. Convention on International
Contracts for the Sale of Goods.
29.2 Escalation. Motorola and Company agree to attempt to settle any
claim or controversy arising out of this Agreement through consultation
and negotiation in good faith and spirit of mutual cooperation. Any
dispute between the Parties relating to this Agreement will first be
submitted in writing to a panel of two senior executives of Company and
Motorola, who will promptly meet and confer in an effort to resolve
such dispute. Each Party's executive will be identified by notice to
the other Party, and may be changed at any time thereafter by notice to
the other. Any agreed decisions of the executives will be final and
binding on the Parties. In the event the executives are unable to
resolve any dispute within thirty days after submission to
-25-
<PAGE>
them, either Party may then refer such dispute to mediation in
accordance with Subsection 29.3. Notwithstanding the foregoing, any
disputes with respect to intellectual property rights shall be
submitted to the courts and not be subject to the provisions of this
Section 29.2 or Subsection 29.3.
29.3 Alternate Dispute Resolution ("ADR"). If those attempts fail, then
the dispute will be mediated by a mutually acceptable mediator to be
chosen by Motorola and Company within forty-five (45) days after
written notice by either Party demanding mediation. Such mediation
shall be conducted in a location to be agreed upon by the parties.
Neither Party may unreasonably withhold consent to the selection of a
mediator or location, and Motorola and Company will share the costs of
the mediator equally. Each Party shall pay its own attorneys' fees. By
mutual agreement, however, Motorola and Company may postpone mediation
until each has completed some specified but limited discovery regarding
the dispute. The Parties may also agree to replace mediation with some
other form of alternate dispute resolution, such as neutral
fact-finding or a mini-trial.
29.4 Submittal to Courts. Any dispute which cannot be resolved between
the Parties through negotiation, mediation or other form of ADR within
four (4) months of the date of the initial demand for ADR by one of the
Parties shall then be submitted to a court of competent jurisdiction.
The use of any ADR procedures will not be construed under the doctrines
of laches, waiver or estoppel to affect adversely the rights of either
Party. Nothing in this Section will prevent either Party from resorting
to judicial proceedings if (a) good faith efforts to resolve the
dispute under these procedures have been unsuccessful, or (b) interim
relief from a court is necessary to prevent serious and irreparable
injury to that Party or to others.
30. Subcontracting.
Company shall not, without the prior written consent of Motorola,
subcontract any portion of the work covered by this Agreement except
for the purchase of standard commercial supplies or raw materials
incidental to the work to be performed.
31. Assignment.
Neither this Agreement nor any right under this Agreement may be
transferred, assigned or delegated by either Party without the prior
written consent of the other Party. Any attempted assignment,
delegation or transfer shall be void.
32. Independent Contractors.
Company shall perform activities under this Agreement only as an
independent contractor and nothing contained herein shall be construed
to be inconsistent with this relationship or status. Under no
circumstances shall any personnel of Company be considered to be an
employee or agent of Motorola. Nothing in this Agreement shall be
interpreted as granting either Party the right or authority to make
commitments of any kind for the other, implied or otherwise, without
prior review and written agreement. This Agreement shall not
constitute, create, or in any way be interpreted as a joint venture,
partnership or formal business organization of any kind.
33. Authority.
Each Party hereto represents and warrants that (i) it has obtained all
necessary approvals, consents and authorizations of third parties and
governmental authorities, if applicable, to enter into this Agreement
and to perform and carry out its obligations under this Agreement, (ii)
the persons executing this Agreement on its behalf have express
authority to do so, and, in so doing, to bind the Party thereto; (iii)
the execution, delivery, and performance of this Agreement does not
violate any provision of any bylaw, charter, regulation, or any other
governing authority of the Party; and (iv) the execution, delivery and
performance of this Agreement has been duly
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<PAGE>
authorized by all necessary partnership or corporate action and this
Agreement is a valid and binding obligation of such Party, enforceable
in accordance with its terms.
34. No Right to Audit.
Nothing contained herein shall be deemed to grant Company or any third
party, by implication, estoppel or otherwise, any right to inspect or
examine any of Motorola's data, documents, instruments, records,
software, systems, premises or plants related to or in any way
connected with the Products. Motorola shall have no duty to disclose
any financial statements, balance sheets, or any other business records
to Company, Company's representatives or any third party which may
request same. By way of example, and not limitation, Motorola has no
duty to disclose the existence or location of any Customer who has
purchased Products.
35. Cumulative Remedies.
Except as otherwise provided herein, if Company breaches this
Agreement, Motorola shall have the right to assert all legal and
equitable remedies available.
36. Severability and Survivability.
In the event any one or more of the provisions of this Agreement is
held to be unenforceable under applicable law, (i) such
unenforceability shall not affect any other provision of this
Agreement; (ii) this Agreement shall be construed as if said
unenforceable provision had not been contained herein; and (iii) the
Parties shall negotiate in good faith to replace the unenforceable
provision by such as has the effect nearest to that of the provision
being replaced.
The Parties agree that where the context of any provision indicates an
intent that it shall survive the term of this Agreement then it shall
survive. For the avoidance of doubt, the following sections shall
survive: 12 - Warranty; 19 - Source Code Escrow; 20 - Confidential
Information; 21- Limitation of Liability and Indemnification; 22.2
Rights and Obligations at Termination; 29- Governing Law and Dispute
Resolution.
37. Publicity.
Neither party shall issue a press release or make any similar public
announcement regarding the transactions contemplated by this Agreement
without the other party's prior written consent to the specific
language and intended distribution of such press release or
announcement.
38. Entire Agreement.
This Agreement and Exhibits hereto constitute the entire understanding
between the Parties concerning the subject matter hereof and supersede
all prior discussions, agreements and representations, whether oral or
written and whether or not executed by Motorola and Company. In case of
inconsistencies between the terms of this Agreement and the Exhibits,
this Agreement shall govern and supercede the Exhibits. Orders issued
pursuant to this Agreement shall be deemed to be governed by the terms
of this Agreement, and in case of inconsistencies between the terms of
this Agreement and such Orders, this Agreement shall supercede, whether
or not this Agreement is specifically incorporated by reference into
such Orders. For the avoidance of doubt, this Agreement supersedes the
Non-Disclosure Agreement dated April 23rd, 1999 entered into between
the parties hereto. This Agreement or any part or provision hereof
shall not be deemed waived, amended, or modified by either Party unless
such waiver, amendment or modification is in writing and executed by
authorized representatives of both Parties.
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<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of
<__________________>, 2000 ("Agreement Date").
<TABLE>
<CAPTION>
Motorola Inc. AIRSPAN COMMUNICATIONS LTD.
NETWORK SOLUTIONS SECTOR
<S> <C>
By: By:
--------------------------------------------- ------------------------------------------
(Signature) (Signature)
Name: Name:
--------------------------------------------- ------------------------------------------
(Print - Block Letters) (Print - Block Letters)
Title: Title:
-------------------------------------------- -----------------------------------------
(Print - Block Letters) (Print - Block Letters)
</TABLE>
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<PAGE>
Exhibit 10.8
DATED 1998
- --------------------------------------------------------------------------------
GRAND METROPOLITAN ESTATES LIMITED
- and -
GRAND METROPOLITAN INFORMATION SERVICES LIMITED
-and -
AIRSPAN COMMUNICATIONS LIMITED
AGREEMENT FOR UNDERLEASE
-of-
Oxford and Cambridge Houses, Uxbridge
TAYLOR JOYNSON GARRETT
Carmelite
50 Victoria Embankment
Blackfriars
London EC4Y 0DX
Tel No: 0171-353 1234.
Fax No: 0171-936 2666
DX: 41 LONDON
<PAGE>
THIS AGREEMENT FOR UNDERLEASE is made on 1998
BETWEEN
(1) GRAND METROPOLITAN ESTATES LIMITED (Company Number: 367551) whose
registered office is situate at 8 Henrietta Place, London W1M 9AG ("GME");
(2) GRAND METROPOLITAN INFORMATION SERVICES LIMITED (Company Number: 1064476)
whose registered office is at 8 Henrietta Place, London W1M 9AG ("GMI");
and
(3) AIRSPAN COMMUNICATIONS LIMITED (Company Number: 03501881)whose registered
office is at 5 New Square, Feltham, Middlesex TWl4 8HA (the "Tenant").
AGREED TERMS
1. Interpretation
1.1 In this Agreement the following words and expressions shall where the
context admits have the following meanings:
"Building Contract" means the building contract to be entered into between
the Tenant and the Project Managers pursuant to .clause 2 in respect of the
Works together with any further contract or contracts from time to time
entered into by the Tenant and the Project Managers supplemental thereto;
<PAGE>
"Cambridge House Bank Guarantee" means the deed of guarantee to be issued
by Lloyds Bank plc in the form annexed in schedule 1;
"Cambridge House Deed of Indemnity" means a deed of indemnity to be made
between GMI (1) and the Tenant (2) in the form annexed in schedule 2;
"Cambridge House Premises" means all those premises as are more
particularly defined in the Cambridge House Underlease;
"Cambridge House Underlease" means an underlease of the Cambridge House
Premises to be made between GMI (1) and the `Tenant (2) in the form annexed
in schedule 3;
"Certificate of Practical Completion" means the certificate of practical
completion to be issued by the Project Managers pursuant to the Building
Contract certifying practical completion of the Works in accordance with
the terms of this Agreement and the expression "Practical Completion" shall
be construed accordingly;
"Completion Date" means ten Working Days after the latest of:
(a) the issue of the Certificate of Practical Completion;
(b) completion of the Works in accordance with the terms of this Agreement;
and
(c) the issue of the Qualified Notice of Satisfaction;
"Contribution" means a payment or payments to be made by GME on behalf of
GME and GMI to the Tenant as its contribution to the cost of the
Dilapidation Works in an aggregate sum of THREE HUNDRED AND FIFTY THOUSAND
POUNDS ((Pounds)350,000.00) exclusive of Value Added Tax;
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<PAGE>
"Defects Liability Period" means the period of 12 :months commencing upon
the issue of the Certificate of Practical Completion;
"Dilapidation Works" means the works more particularly described in a fax
dated 6 November 1998 from Catherine Corcoran of Diageo plc a copy of which
is annexed in schedule 4;
"Force Majeure" means:
(a) fire storm tempest and other extreme adverse weather conditions war
hostilities rebellion revolution insurrection military or usurped
power civil war labour lock-outs strike and other industrial disputes
riot commotion disorder decree of government non-availability of
material or equipment or utilities (save if and to the extent that
non-availability could have been avoided by the exercise of
reasonable foresight); or
(b) any other cause or circumstance provided that each and every such
cause or circumstance:
(i) adversely affects the performance ,of the terms and provisions of
this Agreement; and/or
(ii) cannot reasonably be avoided or provided against; and/or
(iii) is not due to the willful or deliberate act default or negligent act
or omission of the Tenant or the Project Managers,
-3-
<PAGE>
PROVIDED ALWAYS that only a cause or circumstance which may entitle the
Project Managers to an extension of time under the Building Contract shall
be a circumstance of force majeure;
"GM's Representative" means Bob Bird of William Martin & Partners,
Greencoat House, Francis Street, Victoria, London SW1P 1DH or such other
firm of surveyors as may be appointed by GME and/or GMI from time; to time
to monitor the carrying out of the Works;
"GM's Solicitors" means the firm of solicitors acting for both GME and GMI
which firm shall be Taylor Joynson Garrett of Carmelite 50 Victoria
Embankment Blackfriars London EC4Y 0DX (Ref: JDW) or such other firm of
solicitors from time to time appointed by GME and/or GMI and of whose
appointment the Tenant shall be notified in writing by GME and/or GMI;
"Insolvency Event" means in relation to the Tenant if any one or more of
the following events has occurred:
(a) a voluntary arrangement is made under Part I of the Insolvency Act
1986 (hereinafter referred to as the "Act"); or
(b) a petition is presented for an Administration Order or an
Administration Order is made under Part II of the Act; or
(c) a receiver or manager is appointed whether under Part III of the Act
(including an administrative receiver) or otherwise; or
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<PAGE>
(d) a petition is presented or an order is made for its winding up or it
goes into liquidation as defined in Section 247(2) of the Act (other
than a voluntary winding up solely for the purpose of amalgamation or
reconstruction while solvent); or
(e) a provisional liquidator is appointed under Section 135 of the Act;
"Interim Valuation Statement" means a monthly' statement prepared by the
Project Managers setting out in respect of the period to which the
statement relates:
(a) the value of all interim certificates issued under the Building
Contract less retentions held;
(b) the value of all properly submitted fee invoices received from the
Project Managers;
(c) the value of any retentions released under the Building Contract or
fee invoices;
"Landlord" means Louisville Investments (Uxbridge) Limited whose registered
office is situate at Nations House, 103 Wigmore Street, London W1H 9AB and
includes its successors in title and assigns;
"Leases" means together the Oxford House Underlease and the Cambridge House
Underlease;
"Licenses for Alterations" means together the licenses for alterations
pursuant to the Cambridge House Underlease and the Oxford House Underlease
to be made between the Landlord (1) GME or GMI (as appropriate) (2) and the
Tenant (3) in the form of licenses annexed in schedule 5;
-5-
<PAGE>
"National Conditions" means the National Conditions of Sale (Twentieth
Edition);
"Necessary Consents" means all planning consents and all other permissions
licenses and approvals under the Town and Country Planning Acts the Public
Health Acts and all other statutes and regulations building regulation
consents bye law approvals and all other authorization certificates
consents approval.,; and licenses of whatsoever nature from whomsoever the
same may be required which may be applicable to or requisite for the
carrying out and completion of the Works and which expression shall include
all amendments and variations made thereto from time to time;
"Notice of Completion of Making Good Defects" the notice issued by GM s
Representative at the expiry of the Defects Liability Period pursuant to
the provisions of this Agreement;
"Oxford House Bank Guarantee" means the deed of guarantee to be issued by
Lloyds Bank plc in the form annexed in schedule 6;
"Oxford House Premises" means all those premises as are more particularly
defined in the Oxford House Underlease;
"Oxford House Underlease" means an underlease of the Oxford House Premises
to be made between GME (1) and the Tenant (2) in the form annexed in
schedule 7;
"Parking Spaces" means the parking spaces edged blue on the plan annexed in
schedule 8;
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<PAGE>
"Plans" the plans sections elevations specifications and descriptions of
the works to be carried out annexed in schedule 9 and shall include any
plans elevations specifications or descriptions of the works to be carried
out which are approved prior to clause 2.9;
"Planning Permission" means the planning permission to be granted pursuant
to an application to be made by the Tenant on the basis of plan number Aair
10/00/DT 08/B -27.09.98 which is annexed in schedule 9;
"Premises" means together the Cambridge House Premises and the Oxford House
Premises;
"Prescribed Rate" means 4% above the base rate from time to time of
National Westminster Bank Plc;
"Project Managers" means Morgan Lovell of Ascot House, Finchampstead Road,
Wokingham, Berks;
"Qualified Notice of Satisfaction" a notice to be issued by GM's
Representative confirming that the Works have been completed in accordance
with this Agreement subject to the matters mentioned in such notice;
"Rent Commencement Date" means ____________________ 1998;
"Retention" means the sum of SEVENTEEN THOUSAND FIVE HUNDRED POUNDS
((Pounds)17,500) together with value added tax :thereon;
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<PAGE>
"Site" means all that piece or parcel of land (and buildings and
constructions thereon) known as Oxford and Cambridge Houses Oxford Road
Uxbridge as the same is for the purpose of identification only shown edged
red on the plans annexed to the Cambridge House Underlease and the Oxford
House Underlease and the Parking Spaces;
"Target Date" means a date which is six months after the date of this
Agreement;
"Tenant's Solicitors" means Hudson Freeman & Berg of 94 Gloucester Place,
London W1H HEE (Ref: Simon Freeman) or such other firm of solicitors-from
time to time appointed by the Tenant and of whose appointment GM's
Solicitors shall be notified in writing by the Tenant;
"Title Documents" means the title deeds and documents supplied by GM's
Solicitors to the Tenant's Solicitors;
"Working Day" means any day except Saturday Sunday and bank or other,
public holidays in England; and
"Works" means the works set out in the Plans which for the avoidance of
doubt includes the Dilapidation Works.
2. Works
2.1 The Tenant will not enter into the Building Contract without:
(a) the prior written consent of GME and GMI (such consent not to be
unreasonably withheld or delayed); and
-8-
<PAGE>
(b) first producing evidence to GME and GMI that the Project Managers has
in force insurance at a level acceptable to GME and GMI in respect of
death of or injury or illness or disease to third parties and/or loss
of or damage to third party property obstruction loss of amenities
trespass nuisance or any like cause.
2.2 The Tenant will supply to GME and GMI a certified copy of the
completed Building Contract within 7 Working Days of completion of
such Building Contract.
2.3 To the extent that the Building Contract has not been completed prior
to the date of this Agreement the Tenant undertakes to enter into the
Building Contract as soon as practicable and in any event before the
Completion Date and to supply the original or a certified copy (as
appropriate) of the Building Contract to GME and GMI within 7 Working
Days of completion of the same.
2.4 The Tenant shall indemnify and keep indemnified GME and GMI against
any breach non-observance or non-performance by the Tenant and/or
the Project Managers of all obligations on the part of the Tenant and
the Project: Managers contained in the Building Contract.
2.5 The Tenant shall not appoint new Project Managers in connection with
the Works unless such new appointment has first been approved in
writing by GME and GMI; and
2.6 The Tenant shall within one month of the issue of the Qualified Notice
of Satisfaction supply to GME and GMI two complete sets of maintenance
manuals and plans and specifications relating to the Works as
constructed by the Tenant.
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<PAGE>
2.7 GME GMI and the Tenant hereby acknowledge that the Landlord has not
yet given its consent to the Plans.
2.8 Notwithstanding clause 2.7 GME and GMI will allow the Tenant into
occupation pursuant to clause 7.1 but subject always to the terms of
this Agreement.
2.9 GME and GMI shall continue to use reasonable endeavours to obtain the
consent of the Landlord to the Plans but if the Landlord shall
properly refuse consent to any matter contained or referred to in the
Plans the Plans shall be amended and resubmitted to GME and GMI in
duplicate for approval in writing by GME GMI and the Landlord and this
process shall be repeated as often as may be necessary until such
Plans are so approved in writing.
2.10 To the extent that any part or parts of the Works have been carried
out pursuant to the Plans to which the Landlord has properly refused
consent such part or parts of the Works shall be reinstated by the
Tenant to the satisfaction of the Landlord GME and GMI and carried out
by the Tenant in accordance with the amended Plans approved by GME GMI
and the Landlord prior to clause 2.9.
2.11 The Tenant shall indemnify GME GMI and the Landlord from and against
all damages losses expenses liability and costs in respect of actions
suits claims and demands whatsoever by reason of or arising in any way
directly or indirectly out of the execution of any part or parts of
the Works to which the Landlord shall properly refuse consent, any
failure of the Tenant to reinstate and to carry out the Works pursuant
to clause 2.10 in accordance with the amended Plans approved by
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<PAGE>
GME GMI and the Landlord pursuant to clause 2.9 or any other breach of
the terms of this Agreement.
3. Building Obligations and Necessary Consents
The Tenant hereby further AGREES AND UNDERTAKES with GME and GMI as
follows:
(a) to design or to procure that the designs contained in the Plans are
prepared with all reasonable skill and care in accordance with the
standards of appropriately qualified professional designers;
(b) following commencement of the Works to carry out or to procure that
the Project Managers carry out the Works with all due diligence and
expedition in a good and workmanlike manner with good quality
materials of the several kinds specified in the Plans and in
accordance with the terms of the Building Contract and the Tenant
further warrants to GME, and GMI that it will exercise all reasonable
Skill and care in the performance of its obligations under this
Agreement;
(c) to commence the Works as soon as reasonably practicable following the
date of this Agreement and to carry out and complete the same so that
the Target Date is achieved in accordance with and pursuant to the
terms of this Agreement and in accordance with the Plans the Planning
Permission and all conditions attaching thereto all Necessary Consents
and all statutes and any enforceable codes of practice of the local
authority which may affect the execution and completion of the Works;
(d) from and after the date of this Agreement until the earliest of:
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<PAGE>
(i) the Completion Date; or
(ii) the date upon which GME or GMI terminates this Agreement, to pay
all rates taxes and outgoings duties charges and other
impositions whether Parliamentary or otherwise lawfully assessed
charged or payable in respect of the Site or the Works or part
thereof respectively or on or by the owner or occupier thereof;
(e) to obtain at its own cost and expense and comply with all Necessary
Consents necessary to comply with the obligations of `the Tenant
hereunder (including but without prejudice to the generality of the
foregoing consents under the building regulations) and to give all
necessary and usual notices under all relevant statutes regulations or
bye-laws including where necessary in the Tenant's reasonable
discretion or whenever GME or GMI reasonably so requires appealing
against the decision of any authority and pursuing such applications
or appeals and the Tenant shall send copies of' all Necessary Consents
to GME and GMI within five Working Days of receipt of the same;
(f) from the date of this Agreement up to and including the Completion
Date at all times to comply and to require the occupants of the Site
to comply with all Acts of Parliament statutory instruments
regulations bye-laws directions orders and notices and to comply with
the lawful requirements of all authorities affecting the Site or the
Works (including without: prejudice to the generality of the foregoing
all requirements in order to enable fire certificates to be granted)
or otherwise relating to the carrying out by the Tenant of its
obligations under this Agreement and to indemnify GME and GMI fully in
respect of any breach of this provision;
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(g) to use all reasonable endeavours to procure that all Necessary
Consents are preserved for the benefit of the Site and to procure that
so far as applicable such consents remain in full force and effect
during the course of the Works;
(h) prior to the commencement of any Works on the Site by the Tenant and
during the currency of such Works where reasonably necessary or where
reasonably required by GME and GMI to erect hoardings and canopies the
details of which shall be first approved by GME and GMI (such approval
not to be unreasonably withheld or delayed) and at all times to
maintain such hoardings and canopies in adequate condition to the
reasonable satisfaction of GME and GMI and/or any statutory
undertaking and generally to keep the Site adequately secure at all
times;
(i) to use all reasonable endeavours to procure that all works on the Site
are carried out in accordance with all requirements of the local
authority or any other statutory authority or body and in such a
manner as to cause no nuisance to any owners or occupiers of any
adjoining or neighbouring premises and to indemnify and keep
indemnified GME and GMI against any losses to GME and GMI occasioned
by any claims or proceedings brought by any party against GME and/or
GMI caused directly or indirectly by the Works;
(j) to indemnify GME and GMI in respect of any claim against GME and/or
GMI arising as a result of any obstruction to the use of any adjoining
roads or pavements caused during the course of the Works;
(k) as soon as practicable to rectify any defect in the Works notified to
it in writing by GME and/or GMI during the Defects Liability Period;
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(l) not to deposit or make up manufacture or permit to be deposited made
up or manufactured upon the Site any materials except such as shall be
required for the Works and regularly to remove all superfluous
materials rubbish and debris and to do all cleansing of adjoining
highways or roads resulting from the Works and as may be required by
GME and GMI and on the Completion Date (or earlier if GME and/or GMI
shall terminate, this Agreement for any reason) to remove from the
Site all unused materials and rubbish whatsoever;
(m) as from the date of this Agreement the Tenant shall indemnify GME and
GMI from and against all damages losses expenses liability and costs
in respect of actions suits claims and demands whatsoever by reason of
or arising in any way directly or indirectly out of the execution of
the Works;
(n) from and after the date of this Agreement to effect or cause to be
effected adequate third party and public liability insurance in
respect of the Works with an insurance fund or with underwriters of
repute approved by GME and GMI in a sum of not less than on any one
claim five million pounds ((Pounds)5,000,000) and shall produce a copy
of such policy to GME and GMI on demand together with evidence of
payment of the current premiums in respect thereof;
(o) not to do or suffer or knowingly suffer to be done anything which may
render the policy or policies of insurance effected by GME and GMI in
respect of the Works or the Site void or voidable or without GME and
GMI's prior written approval cause the premium for such policy or
policies to be increased;
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<PAGE>
(p) if any delay in Commencing or completing any part of the Works shall
arise from Force Majeure to give written notice to GME and GMI of the
cause of the delay as soon as possible and then the Target Date shall
be revised by agreement between GME GMI and the Tenant and failing
agreement the revised Target Date shall be determined by the
Independent Person (as hereinafter defined) pursuant to clause 15 who
shall have regard to such extension of time for the completion of the
Works as shall be fair and reasonable having regard to the
circumstances;
(q) If the Works are construction work covered by the Construction (Design
and Management) Regulations (the "CDM Regulations") the Tenant shall:
(i) comply with its duties under the CDM Regulations;
(ii) ensure that any person owing duties under the CDM Regulations
complies with the same;
(iii) prior to commencement of the Works make a declaration to the
Health and Safety Executive in accordance with Regulation 4 of
the CDM Regulations stating that it shall be the only client in
respect of such work;
(iv) at any time make the health and safety file available for
inspection and forthwith upon receipt of a request from GME
and/or GMI produce a copy of the same; and
(v) produce to GME and/or GMI on demand such information as GME
and/or GMI shall reasonably require to:
(A) demonstrate compliance wilt the CDM Regulations; and
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(B) enable GME and/or GMI to update the health and safety file
relating to the Oxford House Premises and/or the Cambridge
House Premises;
(r) to carry out the Works in accordance with all requirements of the
Landlord;
(s) not to carry out any part of the Works requiring Planning Permission
until the Planning Permission has been obtained and a copy has been
delivered to GME GMI and GM's Representative.
4. Insurance of the Site and the Works
GME GMI and the Tenant hereby respectively agree as follows:
(a) from commencement of the execution of the Works until the earliest of:
(i) the date of issue of the Certificate of Practical Completion; or
(ii) the date upon which GME and GMI shall terminate this Agreement,
the Tenant shall insure or procure that the Works are insured and kept
insured with an insurance fund or with underwriters of repute approved
by GME and GMI with the interest of GME and GMI noted on the policy in
a sum which in the opinion of GME and GMI is sufficient to cover the
cost of completely reinstating the Works in the event of total
destruction together with all fees and other expenses incidental
thereto against loss or damage by fire storm flood tempest (including
lightning) impact from vehicles explosion aircraft in peacetime and
articles dropped therefrom riot malicious damage war hostilities
rebellion revolution civil commotion and earthquake (fire and shock)
terrorism (so long as terrorism cover is available) and such other
risks as GME and GMI shall
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reasonably require and the Tenant shall pay or cause to be paid all
premiums and other money necessary for that purpose and to procure the
production to GME and GMI on request of a copy of the policy or
policies for such insurance or the appropriate extracts therefrom and
evidence of payment of the current premiums;
(b) from the date of this Agreement GME and GMI (as appropriate) shall
comply with their respective obligations as landlord in clauses 7 of
the Leases;
(c) in the event of damage or destruction of the Works arising out of the
occurrence of any insured risk mentioned in clause 4(a) above'
(i) the amount owed by GME and GMI to the Tenant in respect of the
Contribution as at the date of such destruction or damage shall
be deemed to have been reduced by an amount equivalent to the
value of that element of the Works which has been destroyed or
damaged as certified by all Interim Valuation Certificates issued
prior to the date of such destruction or damage and as approved
by GM's Representative pursuant to clause 17; and
(ii) the Tenant shall forthwith (subject to receipt of all Necessary
Consents) lay out all insurance monies received in respect of
such destruction or damage in reinstatement of the Works (making
up any shortfall out of its own pocket).
5. Works Progress Reports and Interim Valuation Statements
The Tenant hereby further AGREES with GME and GMI as follows:
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(a) to provide to GM's Representative such evidence as it shall reasonably
require concerning the progress of the Works and to supply GM's
Representative with copies of the following documents if and when the
same shall be issued:
(i) monthly progress reports;
(ii) minutes of meetings between the Project Managers and the
Tenant;
(iii) at least 5 Working Days notification of all site meetings
relating to the Works and the facility to attend if desired;
(iv) copies of all instructions and notices issued by the Project
Managers;
(b) the Tenant shall submit to GM's Representative on the last day of
every month after the date of this Agreement the Interim Valuation
Statement together with evidence to the reasonable satisfaction of
GM's Representative that the sums set out therein have been paid by
the Tenant together with relevant dates of payment to the Project
Managers.
6. Deleterious Materials
6.1 The Tenant hereby warrants and represents to GME and GMI that the
Project Managers have not specified and will not specify to be used
will not use and have not used in the Works:
(a) materials or substances or any combination thereof generally
known in the United Kingdom at the time of specification to be
deleterious to the safety performance or durability of the Works
or the health and safety of any
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person or damaging to the environment including any material or
substance or any combination thereof used otherwise than in
accordance with British Standards and Codes of Practice or the
recommendations of' the Building Research Establishment; and
(b) any deleterious materials referred to or specified in the
Building Contract.
6.2 The Tenant further warrants that it has exercised and will exercise
all reasonable skill and care to see that no such materials or
substances have been specified for use or used in the Works by others.
7. License
7.1 From the date of this Agreement until completion of the. Leases or
termination of this Agreement (whichever is the earlier) GME and GMI
confirm that the Tenant has license to enter onto the Site for the
purpose of carrying out the Works on the terms and conditions herein
mentioned but so that the Tenant shall have no other or additional
interest in the Site pursuant to this Agreement (save such as will
arise upon the grant of the Leases).
7.2 A license fee will be payable by the Tenant to GME and GMI
respectively under this Agreement until the completion of the Leases
or termination of this Agreement (whichever is the earlier) in an
amount equivalent to the Basic Rent (as such expression is defined in
the Cambridge House Underlease) and the rent firstly reserved under
the Oxford House Underlease payable pursuant to the Cambridge House
Underlease and the Oxford House Underlease respectively but subject at
all times to the provisions of the Cambridge House Deed of Indemnity
such license fee to be payable quarterly in advance on the usual
quarter days the
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first payment being a proportionate sum in respect of the period from
the Rent Commencement Date `to the next following quarter day to be
made on the Rent Commencement Date.
7.3 A license fee will be payable by the Tenant to GME and GMI
respectively under this Agreement until the completion of the Leases
or termination of this Agreement (whichever is the earlier) in an
amount equivalent to the Insurance Rent (as such expression is defined
in each of the Leases) and the additional rent (determined in
accordance with clause 4 in each of the Leases) payable pursuant to
each of the Leases upon the days and in the manner stated in the
Leases as if the Leases had been completed.
8. Inspection
8.1 At all times during the execution of the Works GME GMI and GM's
Representative shall have the right:
(a) to enter upon the Site at all reasonable tiptoes on giving (save
in the case of emergency) not less than 48 hours prior notice to
view the state of the Works in progress to ascertain generally
that the covenants agreements conditions and stipulations in this
Agreement and in the Building Contract have been and are being
duly observed and performed;
(b) to make representations to the Tenant regarding the Works;
(c) to require the Tenant to have any materials and workmanship
provided in relation to the Works tested; and
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(d) to require the Tenant to procure the remedy forthwith of any non-
observance or non-performance of any such covenants agreements and
stipulations found upon such inspection and upon default by the Tenant
in remedying or procuring the remedy of any such defect in the Works
GME and GMI may enter upon the Site or any part thereof and any
buildings thereon for the purpose of protecting repairing and
maintaining the Site or the Works or removing any work or item which
contravenes the terms of this Agreement and all expenses of so doing
shall be paid by the Tenant to GME and GMI on demand as a liquidated
debt together with interest at the Prescribed Rate from the date of
expenditure to the date of payment.
8.2 Notwithstanding any rights of inspection or testing herein contained
or the exercise of such rights by GME and/or GMI neither GME nor GMI
nor anyone acting on their respective behalves shall be liable to the
Tenant hereunder and the Tenant shall not be relieved or excused of
any liability or responsibility hereunder.
9. Qualified Notice of Satisfaction and Defects Liability Period
GME and GMI and the Tenant agree with each other as follows:
(a) the Tenant shall procure that GM's Representative be given at least
ten Working Days notice of the intention of the Project Managers to
inspect the Works with a view to the issue of the Certificate of
Practical Completion under the Building Contract and GM's
Representative shall be entitled to accompany the Project Managers
upon their tour of inspection for that purpose to the intent that GM's
Representative may have an opportunity of making its views known to
the Project
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<PAGE>
Managers verbally on the occasion of such inspection and in writing to
the Tenant within ten Working Days of such inspection;
(b) following the occasion of an inspection taking place with the
intention of issuing the Certificate of Practical Completion under the
Building Contract GM's Representative shall issue to the Tenant within
ten Working Days of such inspection (if GM's Representative is
satisfied that the works under the Building Contract have been
completed in accordance with the terms of the Building Contract and
this Agreement) the Qualified Notice of Satisfaction and GME and GMI
shall release 50% of the Retention within 10 Working Days of the date
of issue of such Qualified Notice of Satisfaction subject to the
matters contained in such notice;
(c) if the Qualified Notice of Satisfaction is not issued GM's
Representative shall give a written statement of reasons within ten
Working Days of such inspection to the Tenant stating why the same
should not be issued;
(d) in the event that GM's Representative refuses to issue the Qualified
Notice of Satisfaction the Tenant shall within a reasonable time carry
out any further works as may be necessary to allow GM's Representative
to issue the same and the procedure set out in clauses 9(a) to 9(c)
(inclusive) hereof shall be repeated as many times as may be necessary
to enable GM's Representative to issue the same;
(e) following the issue by GM's Representative of the Qualified Notice of
Satisfaction the Tenant shall at its own cost and expense procure the
remedy of all matters contained in the Qualified Notice of
Satisfaction to the satisfaction of
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<PAGE>
GM's Representative within one month of the date of issue of the
Qualified Notice of Satisfaction;
(f) if the Tenant shall fail to carry out any remedial works identified in
the Qualified Notice of Satisfaction within a reasonable time after
issue of the Qualified Notice of Satisfaction then GME and/or GMI
shall be entitled to enter and carry out such works and the cost of
such works shall be payable by the Tenant to GME and GMI on demand as
a debt together with interest at the Prescribed Rate from the date of
expenditure to the date of payment;
9.2 At least fifteen Working Days prior to the expiry of any Defects
Liability Period GM's Representative shall inspect the Works with a
view to issuing the relevant Notice of Completion of Making Good
Defects.
9.3 (a) When GM's Representative is satisfied that any defects in the
Works which have arisen during any Defects Liability Period have
been remedied or otherwise dealt with as specified in clause 3(k)
to his satisfaction he shall issue a Notice of Completion of.
Making Good Defects and GME and GMI shall release the balance of
the Retention within 10 Working Days of the issue of the Notice
of Completion of Making Good Defects;
(b) If GM's Representative is not so satisfied he shall give a
written statement of reasons why a Notice of Completion of Making
Good Defects cannot be issued and the Tenant shall procure that
such defects be remedied or otherwise dealt with pursuant to
clause 3(k) such that the relevant Notice of Completion of Making
Good Defects may be issued and the procedure set out in this
clause shall be repeated as many times as may be necessary
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<PAGE>
to enable GM's Representative to issue the relevant Notice of
Completion of Making Good Defects.
9.4 If the Tenant shall fail to procure the remedy of or otherwise deal
with the defects as aforesaid under this clause within a reasonable
time GME and/or GMI shall be entitled:
(a) to enter and carry out such works as may be reasonably necessary
in respect thereof and the cost of such works shall be payable by
the Tenant to GME and GMI on demand as a debt together with
interest at the Prescribed Rate from the date of expenditure to
the date of payment; and
(b) to retain the balance of Retention and shall not be obliged to
pay the same to the Tenant.
10. Terms of the Lease
10.1 The term of each of the Leases shall commence; on the quarter day
immediately preceding the grant of the Leases.
10.2 Payment of the Basic Rent (as such expression is defined in the
Cambridge Lease) and the rent firstly reserved under the Oxford Lease
payable under the Cambridge Lease and the Oxford Lease respectively
but subject at all times to the provisions of the Cambridge House
Deed of Indemnity shall commence on the Rent Commencement Date.
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<PAGE>
10.3 Payment of the Insurance Rent (as such expression is defined in each
of the Leases) and the additional rent (determined in accordance with
clause 4 in each of the Leases) payable under each of the Leases
shall commence on the date of this Agreement.
10.4 Nothing in this clause 10 shall prejudice the provisions of clause 7.
11. Completion
11.1 GM's Solicitors shall prepare the engrossed Leases and shall deliver
the same to the Tenant's Solicitors `with five Working Days of [he
issue of the Qualified Notice of Satisfaction.
11.2 (a) GME and GMI shall on or before the Completion Date duly execute
the original Oxford House Underlease and Cambridge House
Underlease.
(b) The Tenant shall on or before the Completion Date duly execute
the counterpart Oxford House Underlease and Cambridge House
Underlease.
11.3 Upon the Completion Date each of the parties to this Agreement agrees
with the other that the following shall occur:
(a) GME shall grant and the Tenant shall accept the Oxford House
Underlease and simultaneously GMI shall grant and the Tenant
shall accept the Cambridge House Underlease;
(b) GM's Solicitors shall deliver the original Oxford House
Underlease and Cambridge House Underlease to the Tenant's
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<PAGE>
Solicitors and the Tenant's Solicitors shall deliver the
counterpart Oxford House Underlease and Cambridge House
Underlease to GM's Solicitors; and
(c) the Tenant shall deliver the counterpart Licenses for Alterations
to GM Solicitors duly executed and shall release the Licenses for
Alterations to GM Solicitors for completion at will.
12. Title
The Tenant's Solicitors having been supplied with copies of the Title
Documents the Tenant shall accept the grant of the Leases with full
knowledge of all matters contained in such documents and shall make no
requisition or objection in respect of them or in any way relating to them.
13. National Conditions
The National Conditions of Sale Twentieth Edition shall apply to this
Agreement in so far as they are not inconsistent with the terms of this
Agreement.
14. Forfeiture
Notwithstanding and without prejudice to any other remedies and powers
herein contained or otherwise available to GME and GMI:
(a) if the Tenant shall fail to perform and observe any covenants
agreements stipulations or conditions on its part in this
Agreement; or
(b) if in relation to the Tenant an Insolvency Event occurs; or
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(c) if the Target Date occurs prior to the issue of the Qualified
Notice of Satisfaction; or
(d) if the Tenant shall suspend the execution of the Works for a
period in excess of two months other than for a reason which
constitutes Force Majeure,
THEN and in any such case GME and GMI shall have full right
liberty and power at any time thereafter:
(i) to determine this Agreement by service of written notice on
the Tenant to that effect and this Agreement shall thereupon
immediately determine but without prejudice to any right of
action or other remedy by any party against another party;
(ii) to enter the Site and complete tire Works and five Working
Days following completion of the Works by GME and GMI the
Completion Date shall occur and the parties shall complete
the documentation provided for in clause 11 of this
Agreement;
(e) if the Landlord shall enter the Site and complete the Works
pursuant to the terms of this clause the cost of so doing
shall at the option of GME and GMI either:
(i) be paid by the Tenant to GME and GMI as a debt payable
on demand together with interest at the Prescribed Rate
from the date of expenditure to the date of payment; or
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(ii) be deducted from the amount of the Contribution owed by
GME and GMI to the Tenant pursuant to the Interim
Valuation Statements issued prior to the date of such
entry by GME and/or GMI.
15. Disputes
15.1 If any dispute or difference shall arise between GME GMI and the
Tenant as to their respective rights duties and obligations hereunder
or as to any matter arising out of or in connection with the subject
matter of this Agreement (other than any dispute or difference with
regard to the meaning or construction of this Agreement) then (unless
this Agreement otherwise expressly provides) any party at any time by
giving written notice to the other ("Determination Notice") may :refer
the dispute or difference for determination to an independent person
("Independent Person") who shall have been qualified in respect of the
general subject matter of the dispute or difference for not less than
ten years and who shall be a specialist in relation to such subject
matter.
15.2 The Independent Person shall be appointed by agreement between GME GMI
and the Tenant or if within three Working Days after service of the
Determination Notice they are unable to agree then on the application
of any party to such one of the following persons as shall be agreed
to be appropriate having regard to the nature of the dispute or
difference in question:
(a) the Chairman for the time being of the Bar Council;
(b) the President for the time being of the Royal Institute of British
Architects;
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(c) the President for the time being of the Royal Institution of
Chartered Surveyors;
(d) the President for the time being of the Institute of Chartered
Accountants;
(e) the President for the time being of the Institution of Civil
Engineers or (in each such case) the duly appointed deputy of
such President or any other person authorized by him to make
appointments on his behalf.
15.3 Any dispute or difference arising between GME GMI and the Tenant as
to:
(a) the meaning or construction of this Agreement; and
(b) whether a particular dispute or difference should be dealt with
under clause 15.1 and which classification applies under clause
15.2,
shall be referred to an independent solicitor or barrister of not less than
ten years' admission or call agreed between GME GMI and the Tenant or
failing such agreement within three Working Days of such dispute or
difference arising nominated at the request of either party by the
President for the time being of the Law Society or his duly appointed
deputy or any other person authorized by him to make appointments on his
behalf.
15.4 The Independent Person shall act as an expert and the following
provisions shall have effect:
(a) his decision shall be final and binding upon the parties hereto;
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(b) the Independent Person shall consider (inter alia) any written
representations and cross representations and supporting evidence
made on behalf of GME and GMI or the Tenant (if made reasonably
promptly) but shall not be bound thereby;
(c) GME GMI and the Tenant shall use all reasonable endeavours to
procure that the Independent Person shall give his decision as
speedily as possible and such decision shall be in writing
accompanied by reasons;
(d) the costs of appointing the Independent Person and his costs and
disbursements in connection with his duties under this Agreement
shall be shared between the parties in such proportions as the
Independent Person shall determine or in the absence of such
determination equally between the parties.
15.5 Where the Independent Person dies refuses to act or is unable to act
or fails to proceed with reasonable speed to discharge his duties the
procedure contained in this clause 15 for the appointment of the
Independent Person may be repeated as often as necessary until a
decision is obtained.
16. Notices
Any notices requiring to be served by any party hereunder shall be deemed
to be validly served if sent by prepaid recorded delivery post:
(a) in respect of the Tenant addressed to Tenant at its registered office
for the time being;
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(b) in respect of GME and GMI if sent to Jill Skidmore of GME at 106
Oxford Road, Uxbridge, Middlesex UB8 1NA; and
(c) in respect of GM's Representative if sent to Bob Bird at William
Martin & Partners of Greencoat House, Francis Street, Victoria, London
SW1P 1DH.
17. Payment of Landlord's Contribution to the Works
17.1 The Tenant shall not more frequently than monthly deliver the Interim
Valuation Statement to GME and GMI with a copy to GM's Representative
within 5 Working Days of receipt of the same from the Project
Managers.
17.2 GM's Representative shall approve or disapprove in writing the Interim
Valuation Statement within five Working Days of receipt of the same
from the Tenant.
17.3 If GM's Representative shall disapprove the Interim Valuation
Statement he shall give written notice to the Tenant specifying the
reasons for such disapproval and the Tenant shall return to GM's
Representative appropriate corrections or amendments to the Interim
Valuation Statement within five Working Days after the date of receipt
of such notice.
17.4 If GM's Representative shall still decline to approve the Interim
Valuation Statement as corrected or amended GM's Representative shall
within 5 Working Days after the date of the receipt of such
corrections or amendments, give written notice to the Tenant
specifying the reasons for such disapproval in which event any party
may at any time thereafter refer the matter or matters in dispute to
the
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Independent Person for determination in accordance with the
provisions of clause 15.
17.5 GME shall (subject to receiving a valid VAT invoice from the Tenant
addressed to GME) on behalf of itself and GMI pay the amount sated in
the Interim Valuation Statement or the amount determined by the
Independent Person pursuant to clause 17.4 (whichever is applicable)
within 5 Working Days of the earliest of:
(a) approval in writing of the Interim Valuation Statement by GM's
Representative; and
(b) determination by the Independent Person in accordance with clause
17.4.
17.6 The aggregate of the payments made under clause 17.5 shall not exceed
the Contribution less the Retention.
18. Bank Guarantee
On the date of this Agreement the Tenant will deliver the completed Oxford
House Bank Guarantee to GME and the completed Cambridge House Bank
Guarantee to GMI.
19. Value Added Tax
Any sums mentioned in this Agreement shall be deemed to be exclusive of
Value Added Tax and each party shall be entitled to charge any Value Added
Tax properly payable on any supply made by that party in connection with
this Agreement and Value Added Tax shall be payable in addition at the
appropriate rate by the party receiving the supply upon production of a
valid Value Added Tax invoice.
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20. General Provisions
20.1 Notwithstanding the occurrence of the Completion Date or completion of
the Leases pursuant to clause 26 this Agreement shall remain in full
force and effect in respect of any matter which remains to be carried
out observed or completed by any party and the terms and conditions of
this Agreement shall continue to apply thereto.
20.2 The Tenant agrees with GME and GMI that it will not assign charge or
part with interest under this Agreement or any part thereof or
undertake so to do.
20.3 It is acknowledged by the Tenant that in relation to this Agreement
the Tenant has not acted or relied on any representations made by or
on behalf of GME and/or GMI except those made in writing by GM's
Solicitors in response to written enquiries submitted by the Tenant's
Solicitors.
20.4 This Agreement constitutes the entire contract between the parties.
21. Paragraph Headings
The headings to the clauses and the schedules hereto shall be of no force
or effect and shall not affect the construction hereof.
22. Jurisdiction
The parties hereto agree that this Agreement shall be subject to the
jurisdiction and laws of England.
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23. Schedules
This Agreement incorporates the schedules bound separately and signed by
the parties as being referred to herein.
24. Perpetuity
For the avoidance of doubt the Perpetuity Period for the purposes of this
Deed is 21 years.
25. Dilapidations
25.1 The parties acknowledge that the Premises are not currently in the
state of repair required under the terms of the superior lease of the
Cambridge House Premises and the superior lease of the Oxford House
Premises and the parties further acknowledge that such superior leases
impose a full repairing obligation on GMI and GME respectively.
25.2 The parties have agreed that the Tenant will carry out the
Dilapidation Works on behalf of GME and GMI and GME and GMI have
agreed[ to reimburse the Tenant in respect of such Dilapidation Works
by payment of the Contribution.
26. Early Completion
26.1 Notwithstanding clause 11 of this Agreement, GME and GMI shall be
entitled to serve written notice on the Tenant requiring it to
complete the Leases prior to the Completion Date.
26.2 Five working days following the date of issue of the written notice
referred to in clause 26.1 GME shall grant and the Tenant shall accept
the Oxford House
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Underlease and simultaneously GMI shall grant and the Tenant shall
accept the Cambridge House Underlease.
27. Rent Deposit
27.1 In the event that a demand is made by GMI under the Cambridge House
Bank Guarantee and/or by GME under the Oxford House Bank Guarantee GMI
and/or GME shall pay the amount equal to the product of the total
liability under the relevant bank guarantee less the amount demanded
under the relevant bank guarantee into the relevant Account (as such
expression is defined in the rent deposit deeds dated today's date in
respect of Oxford House and Cambridge House respectively.
27.2 In the event that GME and/or GMI serve written notice on the Tenant
determining this Agreement GME and/or GMI shall send a copy of such
written notice to Lloyds Bank Plc at the address for service stated in
the relevant bank guarantee.
28. Confidentiality
28.1 The parties agree that except where such disclosure is required in
order to comply with the requirements of this agreement or of any
statutory or other competent authority none of them shall disclose to
any third party details of this agreement but this clause shall not
prevent the GME GMI or the Tenant from disclosing the contents of this
Agreement-to their respective professional advisers or bankers or any
associated company.
28.2 Where such disclosure is required for the reasons specified in clause
28.1 the person or body to whom details are disclosed shall be made
aware of the confidential nature of this agreement and shall be put
under an obligation to keep
-35-
<PAGE>
such information confidential and not to disclose details to any other
person or body.
28.3 No announcement of the conclusion of this agreement shall be made
unless it has been mutually agreed by the parties.
AS WITNESS whereof the parties hereto have executed this Agreement as a deed the
day and year first before written.
THE COMMON SEAL of GRAND )
METROPOLITAN ESTATES LIMITED )
was affixed in the presence of: )
Director
Director/Secretary
THE COMMON SEAL of GRAND )
METROPOLITAN INFORMATION )
SERVICES LIMITED was affixed in the )
presence of: )
Director
Director/Secretary
THE COMMON SEAL of AIRSPAN )
COMMUNICATIONS LIMITED was )
affixed in the presence of: )
Director
Director/Secretary
-36-
<PAGE>
Exhibit 10.9
DATED 1998
- --------------------------------------------------------------------------------
BLOCKBUSTER ENTERTAINMENT LIMITED
- and -
AIRSPAN COMMUNICATIONS LIMITED
AGREEMENT FOR UNDERLEASE
------------------------
relating to
Unit 1 The Island
Hilton Industrial Estate
Riverside Way Uxbridge
Brook Street Des Roches
1 Des Roches Square
Witney Oxon OX8 6BE
(Ref: RC.EH.BB. Uxbridge Agree Lse.doc 30/10/98)
<PAGE>
THIS AGREEMENT is made the _____ day of ___________ 1998
BETWEEN:
(1) "The Landlord" BLOCKBUSTER ENTERTAINMENT LIMITED whose registered office
is at 45 Riverside Way Uxbridge Middlesex UB8 2YF
(2) "The Tenant" AIRSPAN COMMUNICATIONS LIMITED of [ ]
NOW IT IS AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 "the Premises" means all those premises situate at and known as
Unit 1 The Island Hilton Industrial Estate
Riverside Way Uxbridge more particularly described
in the Lease hereinafter mentioned
1.2 "the Landlord" includes the successors in title of the Landlord
to the Premises and any other person who is at any
time entitled to the reversion immediately
expectant on the term agreed to be granted by this
Agreement
1.3 "the Tenant" does not include the personal representatives or
any other successors in title of the Tenant
-2-
<PAGE>
1.4 "the Completion Date" means the 15 day of February 1999 or if later
the working day following the Conditional
Date
1.5 "the Lease" means an underlease of the Premises for a
term of years expiring on the 22 day of June
2006 at an initial rent of (Pounds)157,500.00
(one hundred and fifty seven thousand five
hundred pounds) per annum such underlease to
be in the form of the draft annexed to this
Agreement and initialled by or on behalf of
the parties hereto
1.6 "Rent Commencement Date" means a date which is six months from
1.6.1 (if the Lease is completed on the Completion
Date) the Completion Date
1.6.2 (if the Lease is not completed until after
the Completion Date solely because of any
failure by the Landlord for any reason to
comply with his obligations under this
Agreement) the date on which the Lease is;
completed
1.6.3 (if the Lease is not completed until after
the Completion Date solely because of any
failure by the Tenant for any reason to
comply with his obligations under this
Agreement) the Completion Date
-3-
<PAGE>
1.6.4 (in any other case) the date on which the
Lease is completed
1.7 "Bank Guarantee" means a guarantee equivalent to the initial
annual rent and term as referred to in clause
1.5 above and provided by Lloyds Bank in a
form of the draft annexed hereto
1.8 "Conditional Date" means the date on which the License is if
later the date on which the Bank Guarantee is
granted in respect of which no notification
is given pursuant to Clause 3.4
1.9 "the Superior Landlord" means Sun Group Alliance Properties or its
successors in title or assigns
1.10 "License" means the consent in writing of the Superior
Landlord to the grant of the Lease to the
Tenant
1.11 "Head Lease" means the Lease dated 29 day of September
1981 and made between Sun Alliance and London
Assurance Company Limited (1) Kabivitrum (2)
1.12 words importing one gender shall be construed as importing the other
gender
-4-
<PAGE>
1.13 words importing the singular shall be construed as importing the
plural and vice versa
1.14 where any party comprises more than one person the obligations and
liabilities of that party under this Agreement shall be joint and
several obligations and liabilities of those persons
1.15 the clause headings herein do not form part of this Agreement and
shall not be taken into account in its construction or interpretation
2. BANK GUARANTEE
2.1 The Tenant shall immediately make diligently pursue an application to
Lloyds Bank requesting the Bank Guarantee
2.2 If for any reason within the period of 3 months immediately following
the date of this Agreement the Bank Guarantee has not been made the
Landlord may at the end of such period or at any time subsequently
before the Bank Guarantee has been made serve on the other a Notice
invoking the provisions of Clause 4.1 3.
3. SUPERIOR LANDLORD'S CONSENT
3.1 The Tenant shall:
3.1.1 comply with all requirements which the Superior Landlord is
entitled by the terms of the Head Lease to impose on a
prospective undertenant of the Premises as a condition of the
Superior Landlord granting the License;
-5-
<PAGE>
3.1.2 if so required by the Superior Landlord as a condition of
granting the license to covenant directly with the Superior
Landlord to observe and perform the covenants and conditions to
be contained in the Lease; and
3.1.4 comply with all reasonable requirements of the Landlord and the
Superior Landlord in relation to the obtaining of the License
3.2 Subject to compliance by the Tenant with its obligations under
Clause 3.1 the Landlord shall:
3.2.1 promptly and at its own expense apply to the Superior Landlord
for the License and diligently pursue such application; and
3.2.2 use all reasonable endeavors to procure the grant of the
License
3.2.3 promptly supply to the Tenant a certified copy of the License
when it has been granted
3.3 If the Superior Landlord does not grant the License or proffers or
grants the License on conditions which arc unacceptable to the
Landlord he shall not be obliged by the terms of this clause to
institute proceedings for a declaration that the Superior Landlord's
consent has been unreasonably withheld
3.4 Any condition subject to which the License is granted or proffered
shall be unacceptable if either the Landlord or the Tenant is
unwilling on reasonable grounds to comply with the same and so
notifies the other in writing within fourteen days after the date on
which his solicitors first receive the original or a
-6-
<PAGE>
copy of the License or written notification that the Superior Landlord
is seeking to impose such a condition (time being of the essence) but
otherwise any such condition shall be deemed to be acceptable
3.5 If for any reason within 3 months from the date hereof the License has
not been granted or has been granted subject to unacceptable
conditions to the Landlord then either the Landlord or the Tenant may
after the expiry of the said period or at any later date (and
notwithstanding any license that may have been proffered or granted
after the expiry of such period) sere on the other a Notice invoking
the provisions of Clause 4 hereof
4. TERMINATION
4.1 Upon service of Notice pursuant to either Clause 2.2 or Clause 3.5
(and notwithstanding anything to the contrary contained or implied
elsewhere in this Agreement) this Agreement shall (save for Clause 4.2
and without prejudice to any pre-existing fight of action of' any
party in respect of any breach by the other party of its obligations
under tiffs Agreement) immediately determine and cease to have effect
and the party shall be released from any further liability hereunder
4.2 If this Agreement determines in accordance with Clause 2.2 or Clause
3.5 the Tenant shall immediately procure the cancellation of any Land
Charge registered at H M Land Charges Registry or (as the case may be)
any notice or other entry registered against the Landlord's title at
H M Land Registry in respect of this Agreement
-7-
<PAGE>
5. GRANT AND COMPLETION
5.1 Subject to Clause 4 the Landlord shall grant the Lease and the Tenant
shall accept the Lease and execute the counterpart of it
5.2 The Lease and the counterpart shall be prepared by the Landlord's
solicitors and an engrossment of the counterpart shall be delivered to
the offices of the Tenant's solicitors at least five days before the
Completion Date
5.3 The Lease shall be completed on the Completion Date at the offices of
the Landlord's solicitors or at such other place as the Landlord's
solicitors shall reasonably require
5.4 At any time on or after the Completion Date either the Landlord or the
Tenant being ready and willing to complete the Lease and perform its
other obligations under this Agreement may (but without prejudice to
any other available fight or remedy) by notice to the other invoke the
provisions of Clause 5.5
5.5 Within fourteen days after service of such notice (excluding the day
of service) the Lease shall be completed and the parties shall perform
their other obligations under this Agreement and time shall be of the
essence in this provision
6. VACANT POSSESSION AND RENT
6.1 Vacant possession of the Premises shall be given to the Tenant on the
following dates:
-8-
<PAGE>
6.1.1 as to that part of the Premises comprising the warehouse
building January 1999
6.1.2 as to that part of the Premises comprising the first floor of
the office building January 1999
6.1.3 as to the remainder of the Premises March 1999
Provided that (and without prejudice to any other remedy available to
the Tenant) if the Landlord shall fail to give possession of the whole
or any parts of those parts of the Premises specified in this
subclause on the dates provided the rent-free period of six months
from the Completion Date shall be extended pro rata for each day that
vacant possession shall not have been given.
6.2 If the Lease is completed rent shall be payable in accordance with the
terms of the Lease from the Rent Commencement Date and on completion
of the Lease the Tenet shall pay to the Landlord rent (apportioned if
necessary as provided in Clause 6.3) in respect of the period
commencing on the Rent Commencement Date and ending on the day before
the usual quarter day immediately following the date on which the
Lease is completed
6.3 Rent shall be apportioned for the purposes of Clause 6.2 on the
assumption that it accrues on a day-to-day basis and in accordance to
the number of days in the relevant period relevant to the number of
days in the full year
-9-
<PAGE>
7. LICENSE TO OCCUPY
7.1 If the Tenant is authorized by the Landlord to go into occupation of
the whole or any part of the premises before completion then as from
the date of such authorization the Tenant shall:
7.1.1 not occupy the Premises otherwise than as the licensee of
the Landlord
7.1.2 pay to the Landlord a license fee at the same annual rate
and on the same dates as the rents referred to in the Leases
PROVIDED THAT (where the Tenant is authorized to occupy part
only of the Premises) such License fee and rents shall be
apportioned as follows:
Ground Floor less than or equal to 26,596.00 (twenty-six
thousand
five
hundred and
ninety-six
pounds)
First Floor less than or equal to 26,596.00 (twenty-six
thousand
five
hundred and
ninety-six
pounds)
Second Floor less than or equal to 26,596.00 (twenty-six
thousand
five
hundred and
ninety-six
pounds)
Warehouse less than or equal to 77,758.00 (seventy-
seven
thousand
seven
hundred and
fifty-eight
pounds)
7.1.3 perform and observe the covenants and conditions contained
in the Lease as if a lease in the form of the Lease had been
granted so far as the same may be applicable to the license
created by this Agreement, and
-10-
<PAGE>
7.1.4 not carry out any work to the Premises without having
_________ obtained all necessary consents including that of
the Superior Landlord
7.2 If before completion the Tenant fails to pay such license fee or to
perform and observe such covenants and conditions or any event happens
which would entitle the Landlord to re-enter upon the Premises if the
Lease had actually been granted (whether or not after notice) and such
failure or event has not been remedied within five working days from
the receipt by the Tenant of notice specifying such failure or event
and requiting the same to be remedied then the Landlord may terminate
this Agreement without prejudice to accrued rights of action
7.3 The Tenant's license to occupy the Premises shall expire on the
earliest of:
7.3.1 the Completion Date
7.3.2 the date this Agreement is rescinded, or
7.3.3 the date this Agreement is terminated
7.4 Upon the expiry of the Tenant's license to occupy the Tenant shall
forthwith vacate the Premises and at the request of the Landlord
restore it to the same state of repair and condition as at the date of
this Agreement If the Tenant fails to comply with such request the
Landlord may carry out the necessary works and the costs of the works
shall be paid by the Tenant to the Landlord on demand
7.5 If the Tenant remains in occupation of' the Premises after its license
to occupy expires. such occupation shall be upon the same conditions
as in this Agreement but without prejudice to the Landlord's fight of
action
-11-
<PAGE>
7.6 Any property remaining in or upon the Premises after the Tenant has
vacated and which the Tenant has failed to remove by the fifth working
day after being requested by the Landlord so to do may in so far as it
is annexed to the Premises be treated as having reverted to the
Landlord or otherwise be removed, stored and sold by the Landlord as
the agent of the Tenant The Landlord shall hold the proceeds of sale
after deducting the costs and expenses of removal storage and sale
incurred by it to the order of the Tenant In either case the Tenant
shall indemnify the Landlord against liability incurred by it to any
third party whose property is dealt with by the Landlord in the bona
fide mistaken belief (which shall be presumed unless the contrary is
proved) that such property belonged to the Tenant and was liable to be
dealt with as such pursuant to this sub-clause
7.7 Any works carried out to the Premises by the Tenant or at its request
pending completion shall be at the sole risk and expense of the Tenant
the Tenant shall not be entitled to claim any compensation or other
sum from the Landlord in respect of such matters if the proposed lease
is not completed
7.8 The Tenant will keep the Landlord fully and effectively indemnified
from and against all actions proceedings claims damage costs claims
loss expenses or injury arising directly or indirectly out of the
license to occupy created by this Agreement
8. DAMAGE TO THE PREMISES
No damage or destruction of the building of which the Premises form part or
any part of them occurring after the date of this Agreement howsoever
occasioned shall in any way affect the obligations of the parties under the
Agreement
-12-
<PAGE>
9. TITLE AND CONDITION
9.1 The Tenant shall assume the right of the Landlord to grant the Lease
and shall not require any evidence of or raise any objection
requisition or enquiry in respect of the Landlord's title to the
Premises
9.2 The Premises shall be deemed to be subject to the matters set out or
referred to in the Lease and the Tenant or the Tenant's solicitors
having been supplied with such information as the Landlord has
concerning such matters the Tenant has entered into this Agreement
with notice of them and shall raise no objection requisition or
enquiry in respect of them
9.3 The Tenant has entered into this Agreement with notice of the actual
state and condition of the Premises and shall take the Premises as
they are
10. RESTRICTIONS
10.1 In this Clause "Restrictions" means all matters affecting the Premises
or their use registered or capable of being registered as local land
charges and all notices charges orders resolutions demands proposals
requirements restrictions agreements directions or other matters
affecting the Premises or their use served or made by any local or
other competent authority or otherwise arising under any statute
10.2 The Premises shall be demised subject to all (if any) Restrictions
(whether in existence at the date of this Agreement or arising at any
later date)
-13-
<PAGE>
10.3 No representation is made or warranty given by the Landlord as to
whether or not any Restrictions exist or as 'to the permitted use of
the Premises for planning purposes or as to whether in other respects
the Premises comply with any Restrictions
10.4 The Tenant acknowledges that its obligations under this Agreement and
the Lease shall not be affected or lessened in any way by the fact
that there may now or subsequently exist any Restrictions or any non-
compliance with any Restrictions and (to the extent that compliance
with the same would be the Tenant's responsibility under the Lease)
the Tenant shall indemnify the Landlord in respect of any liability
under any requirement of any local or other competent authority in
relation to the Premises (whether made before or after the date of
this Agreement)
11. MISREPRESENTATIONS, ETC.
11.1 Save as hereinafter provided no agent adviser or other person acting
for the Landlord has at any time been authorized by the Landlord to
make to the Tenant or to any agent adviser or other person acting for
the Tenant any representation whatever (whether written oral or
implied) in relation to the Premises or to any matter contained or
referred to in this Agreement
11.2 Any statement made in writing by the Landlord's solicitors to the
Tenant's solicitors prior to the making of this Agreement in reply to
an enquiry made in writing by the Tenant's solicitors was made with
the authority of the Landlord
11.3 No immaterial error omission or misstatement in this Agreement or in
any plan referred to in this Agreement or in any statement made by any
person prior to the
-14-
<PAGE>
making of this Agreement shall in any way affect the obligations of
the parties under this Agreement or entitle any party to damages or
compensation
12. NO ASSIGNMENT, ETC.
The Tenant shall not assign underlet charge or otherwise deal with the
benefit of this Agreement in whole or part and the Landlord shall not be
obliged to grant, the Lease to any person other than the Tenant
13. NO POSSESSION
13.1 This Agreement is an executory Agreement only and shall not operate as
a demise of the Premises
13.2 [Subject to the provisions of Clause 7 hereof] the Tenant shall not be
entitled to occupation or possession of the Premises until the Lease
is completed
14. NOTICES
14.1 Any notice or other communication given or made in accordance with
this Agreement shall be in writing and may (in addition to any other
effective mode of service) be sent by registered and recorded delivery
post to the relevant party either at the address of that party shown
on the first page of this Agreement or at such other address as may
from time to time have been notified to the sender as being the
address for service of the relevant party of the purposes of this
Agreement
-15-
<PAGE>
14.2 Any notice or other communication given by or to any party in
accordance with this Agreement may be given by or to that party's
solicitors;
15. NO MERGER
To the extent that they remain to be observed and performed all the
provisions of this Agreement shall continue in full force and effect
notwithstanding completion of the Lease
IN WITNESS WHEREOF, the hands of the Tenant the Surety and of an authorized
officer of the Landlord have hereunto been set the day and year first
before written
THE COMMON SEAL of )
BLOCKBUSTER ENTERTAINMENT )
LIMITED was hereunto )
affixed in the presence of: )
Director
Secretary
THE COMMON SEAL of )
AIRSPAN COMMUNICATIONS )
LIMITED was hereunto )
affixed in the presence of: )
Director
Secretary
-16-
<PAGE>
DATED 1998
- --------------------------------------------------------------------------------
BLOCKBUSTER ENTERTAINMENT LIMITED
- and -
AIRSPAN COMMUNICATIONS LIMITED
UNDERLEASE
----------
- of -
premises situate at
Unit 1 The Island
Hilton Industrial Estate
Riverside Way
Uxbridge
Brook Street Des Roches
1 Des Roches Square
Witney Oxon OX8 6BE
(Ref: RC.EH.BB. Uxbridge Agree Lse.doc 14/10/98)
-17-
<PAGE>
THIS UNDERLEASE is made the _____ day of One Thousand Nine Hundred and Ninety
Eight
BETWEEN:
(1) BLOCKBUSTER ENTERTAINMENT LIMITED whose registered office is at 45
Riverside Way Uxbridge Middlesex UB8 2YF (hereinafter called "the Landlord"
which expression include the reversioner for the time being immediately
expectant upon the term hereby created)
(2) AIRSPAN COMMUNICATIONS LIMITED of [ ]
(hereinafter called "the Tenant" which expression includes his successors
in title and assigns)
WITNESSETH as follows:
1. DEFINITION
IN this Underlease the following expressions shall have the meanings
hereinafter, respectively, assigned to them:
1.1 "the Head Lease" the Lease dated 29 day of September 1981 and
made between Sun Alliance and London
Assurance Company Limited (1) Kabivitrumm (2)
1.2 "the Demised Premises" the premises described in the First Schedule
hereto
1.3 "the Interest Rate" one per cent (1%) above the interest rate
specified in the Head Lease from time to time
1.4 "the Term" a term of years from the date hereof until
the 22 day of June 2006 (unless determined as
provided hereunder)
-18-
<PAGE>
1.5 "the Rent" a rent of One, Hundred and Fifty Seven
Thousand Five Hundred Pounds
((Pounds)157500.00) per annum subject to
review in accordance with the provisions
of Clause 5 hereof
1.6 "the Rent Commencement Date" the [ ] day of [ ] 19[ ]
1.7 "the Permitted User" Please insert specific use excluding the
users prohibited by the Head Lease and
clause [ ] of this Underlease
1.8 "the Head Rent" the rent first reserved by the Head
Lease
1.9 "the Excepted Clauses" Clauses 2(1)(3)(30)(31) of the Head
Lease
1.10 "the Insurance Rent" the sums payable by the Landlord under
Clause 1 (a) of the Head Lease
1.11 "the Superior Landlord" the immediate Superior Landlord and
where the context so admits every
Landlord having an interest in the
Demised Premises in reversion to the
Underlease
2. DEMISE
IN CONSIDERATION of the rents hereinafter reserved and of the Tenant's covenants
hereinafter contained the Landlord HEREBY DEMISES unto the Tenant ALL THOSE the
Demised Premises TOGETHER with the fights set out in the Second Schedule hereto
but EXCEPTING and reserving to the Landlord and all others so entitled as
mentioned in the Third Schedule hereto and SUBJECT to the rights quasi easements
privileges covenants restrictions and stipulations of whatever nature affecting
the Demised Premises TO HOLD the same unto the Tenant for the Term YIELDING ,AND
PAYING therefor to the Landlord:-
-19-
<PAGE>
2.1 the Rent to be paid clear of all deductions and set-off whatsoever by equal
quarterly payments in advance on the usual quarter days and by bankers
standing order if required by the Landlord the first of such payments being
a proportionate sum from the Rent Commencement Date to the next quarter day
being payable on the Rent Commencement Date
2.2 by way of fresher and additional rent:
2.2.1 any interest payable under the provisions of clause 3.2 hereof
2.2.2 the Insurance Rent as payable under provisions of clause 3.4 hereof
2.2.3 any other sum payable by the Tenant to the Landlord hereunder
3. THE TENANT HE.BY COVENANTS
With the Landlord in manner following that is to say:-
3.1 To pay Coy standing order to the Landlord's Bank as notified to the Tenant
from time to time) the Rent and the further and additional rent hereby
reserved on the days and in the manner aforesaid without any deduction or
set-off
3.2 To pay interest at the Interest Rate on all Rent or other sums due
hereunder from the Tenant to the Landlord from the due date therefor to the
date of payment (whether before or after judgement) .
3.3 To pay and discharge all rates taxes duties charges assessments impositions
and outgoings whatsoever whether parliamentary parochial local or of any
other description which are now or may at any time hereafter be assessed
charged imposed upon or payable in respect of the Demised Premises or any
part thereof or by the owner or occupiers thereof and to pay for all
supplies of gas water electricity or power consumed upon the Demised
Premises including all meter rent and standing charges
3.4 To pay to the Landlord on demand without any deduction or set-off by way of
further and additional rent and in advance if required by the Landlord the
Insurance Rent
-20-
<PAGE>
3.5 To pay to the Landlord on demand without deduction or set-off by way of
further and additional rent the reasonable costs of management of the
Demised Premises whether by the Landlord or otherwise
3.6 To pay all Value Added Tax (which expression includes in this Underlease
any tax or duty from time to time replacing or supplementing the same) at
the rate for the time being in force as shall be legally payable in respect
of all monies covenanted to be paid by the Tenant under the terms of this
Underlease or as the case may be to repay to the Landlord any Value Added
Tax borne by the Landlord (except to the extent in the latter case to which
the Landlord can recover the same in its accounting with the appropriate
revenue authority) and in every case where in this Underlease the Tenant
covenants to pay an amount of money such amount shall be regarded as being
exclusive of all Value Added Tax (or such other tax or duty) which may from
time to time be legally payable thereon and to provide the Landlord with
such information regarding the Value Added Tax stares of the Tenant as the
Landlord may from time to time require and to notify the Landlord forthwith
on the occurrence of a change in such stares
3.7 Not to use or occupy or permit to be used or occupied the Demised Premises
for exempt purposes (as defined in the Value Added Tax Act 1994) without
paying to the Landlord on demand the full amount of all Value Added Tax (if
any) which the Landlord is or would be required to repay to or would be
unable to recover from HM Customs & Excise as a result of such use for
exempt purposes
3.8 Not to use the Demised Premises for any purpose ,except the Permitted User
3.9 Not to assign the whole (as opposed to any part or parts) of the Demised
Premises without the previous written consent of the Landlord not to be
unreasonably withheld or delayed and in the event of the Landlord
consenting to an assignment of the whole of the Demised Premises to procure
that the assignee enters into covenants with the Landlord free of cost to
the Landlord and in such form as the Landlord shall reasonably require to
-21-
<PAGE>
pay the rents hereby reserved and perform and observe the covenants on the
part of the Tenant herein contained during the residue of the term hereby
granted
3.10 Not to accept any premium or other capital payment in consideration of the
surrender of any Underlease by any Undertenant without the previous written
approval of the Landlord (not to be unreasonably withheld)
3.11 Not to accept or agree to accept the surrender of any Underlease without
the previous written approval of the Landlord (such approval not to
unreasonably withheld)
3.12 Not to permit the assignment of any Underlease save by way of an Assignment
to a respectable and responsible Tenant having the previous written
approval of the Landlord not to be unreasonably withheld or delayed
3.13 Not (except by way of an Assignment) to underlet or part with possession of
the Demised Premises hereby demised or any part thereof
3.14 PROVIDED ALWAYS that in the case of an assignment of the whole of the
Demised Premises the Landlord shall be entitled:
3.14.1 to withhold its consent in any of the circumstances set out in
clause 3.16
3.14.2 to impose all or any of the matters set out in clause 3.17 as a
condition of its consent
3.15 The provisos to clause 3.14 are specified for the purposes of Section 19
(1A) of the Landlord and Tenant Act 1927 and shall operate without
prejudice to the fight of the Landlord to withhold such consent on any
other ground or grounds where such withholding of consent is reasonable or
to impose any further condition or conditions upon the grant of consent
where the imposition of such condition or conditions is reasonable
3.16 The circumstances referred to in clause 314.1 are as follows:
3.16.1 where in the reasonable opinion of the Landlord it has not been
satisfactorily demonstrated that the proposed assignee is able
and likely to perform and observe and will be able and likely to
perform and observe the tenant's covenants and obligations
-22-
<PAGE>
under this Underlease and any deed which has then been entered into
supplemental or pursuant to this Underlease
3.16.2 where the proposed assignee enjoys diplomatic or state immunity
3.16.3 where the assets of the proposed assignee upon which any reasonable
assessment of financial strength is based are not in the United Kingdom
or some other jurisdiction with which there is subsisting with the
United Kingdom a system of reciprocal enforcement of judgements
3.17 The conditions referred to in clause 3.14.2 are as follows:
3.17.1 the execution and delivery to the Landlord prior to or
contemporaneously with the assignment in question of a deed of
guarantee in the form set out in the Fourth Schedule hereof
(being an authorized guarantee agreement within Section 16 of
the Landlord and Tenant (Covenants) Act 1995)
3.17.2 the payment to the Landlord of all rents and other sums which
have fallen or which fall due under this Underlease prior to the
date of the assignment
3.17.3 the obtaining and compliance with any conditions of any
requisite consent of any Superior Landlord or mortgagee
3.18 To observe and perform the covenants on the part of the Lessee contained
or referred to in the Head Lease (save for the Excepted Clauses) as if
the same were set out herein in extenso (as if reference to the landlord
under the Head Lease were reference to the Landlord and as if reference
to the tenant under 'the Head Lease were reference to the Tenant and
reference to the term granted by the Head Lease were reference to the
Term) but excluding the payment of the Head Rent and to keep the
Landlord fully and effectively indemnified against all claims for breach
non-observance or non-performance thereof in respect of the Demised
Premises
3.19 To permit the Landlord upon reasonable prior notice (save in case of
emergency) to enter upon the Demised Premises for any purpose that in
the opinion of the Landlord is necessary to enable it to comply with the
covenants on its part contained in the Head
-23-
<PAGE>
Lease notwithstanding that the obligation to comply with such covenants
may be imposed on the Tenant by this Underlease
3.20 Not to use or permit the Demised Premises to be used for the retail sale
and hire of videos
4. THE LANDLORD HEREBY COVENANTS with the Tenant:
4.1 That the Tenant paying the rents and other charges reserved and made
payable at the times and manner aforesaid and performing and observing
the covenants agreements conditions and stipulations on the part of the
Tenant hereinbefore contained shall and may peaceably and quietly hold
and enjoy the Demised Premises for the Term without any interruption
from or by the Landlord or any person lawfully claiming through under or
in trust for it
4.2 To pay the Head Rent during the term of the Head Lease
4.3 Subject to the Tenant paying the rents and other charges reserved and
made payable hereunder to use its reasonable endeavours at the cost of
the Tenant to procure that the Superior Landlord complies with its
obligations in the Head Lease provided that the Landlord shall be under
no liability personally to comply with such obligations
5. RENT REVIEW
5.1 The rent payable hereunder shall be reviewed with effect from the 24 day
of June 2001
5.2 The rent review provisions of the Head Lease shall apply hereto mutatis
mutandis
6. PROVISIONS AND DEFINITIONS
IN this Underlease where the context so admits:
6.1 Reference to the Landlord shall (where appropriate) include reference to
the Superior Landlord
6.2 For the avoidance of any doubt the Landlord's consent shall not be
deemed to be unreasonably withheld should it arise from the refusal by
the Superior Landlord to give consent
-24-
<PAGE>
6.3 Reference to the Landlord the Superior Landlord and the Tenant shall
include the person for the time being entitled to the reversion
immediately expectant on the determination of the Term and the Tenant's
successors in title respectively
6.4 Reference to "the Term" includes any period of holding-over or extension
or continuation of the contractual term whether by statute or common law
6.5 Nothing herein contained shall confer on the Tenant any liberty
privilege easement fight or advantage whatsoever mentioned or referred
to in Section 62 of the Law of' Property Act 1925 save those expressly
set out herein
7. INCORPORATION OF HEAD LEASE TERMS
Except as varied hereby this demise is made subject to the same terms and
conditions (mutatis mutandis) as the Head Lease the terms whereof (save as
varied hereby and otherwise as appropriate) shall be deemed to be incorporated
as if set out herein in extenso including without prejudice to the foregoing
the right of re-entry contained in Clause 6 of the Head Lease
8. NO AGREEMENT FOR LEASE
The parties hereto certify that there is no Agreement for Lease to which this
Lease gives effect IN WITNESS whereof the parties hereto have executed this
----------
Deed the day and year first before written
THE FIRST SCHEDULE
------------------
(The Demised Premises)
ALL THOSE premises known as Unit 1 The Island Hilton Industrial Estate
---------
Riverside Way Uxbridge more particularly described in the Head Lease
THE SECOND SCHEDULE
-------------------
(The Rights)
The fights and easements equivalent to those mentioned in. the Head Lease to
the extent relevant to the Demised Premises
THE THIRD SCHEDULE
------------------
The Exceptions and Reservations
-25-
<PAGE>
The Rights and Exceptions equivalent to those mentioned in the Head Lease to the
extent relevant to the Demised Premises
THE FOURTH SCHEDULE
-------------------
AUTHORISED GUARANTEE AGREEMENT ON ASSIGNMENT OF LEASE
-----------------------------------------------------
AGREEMENT dated _______________________, 199__
BETWEEN (1)________________________ of/whose registered office is at
("Landlord") and (2) _________________________________ of/whose registered
office is at ("Assignor")
1. The Assignor has agreed to assign the Lease dated ______________, 199___
and
made between ______________________________________________________ (1)
_________________________________ (the "Lease")
___________________________________ (2) ___________________ ("the Lease")
to ______________________________________________________________________
of ______________________________________________________________________
("the Assignee") and this Agreement takes effect when the Lease is assigned
to the Assignee
2. The Assignor agrees to indemnify the Landlord against all losses incurred
as a result of any failure by the Assignee to comply with any of the terms
of the Lease
3. The Assignor is liable to the Landlord under this Agreement as principal
debtor and his/its obligation remains fully effective even if the Landlord
gives the Assignee extra time to comply with any obligation in the Lease or
does not insist on its strict terms
4. The Assignor agrees the event that the Lease is disclaimed and on being so
required by the Landlord, to accept from the Landlord the grant of a new
tenancy and to execute and deliver a counterpart of it to the Landlord the
new tenancy is to be on the same terms and conditions as the Lease at the
date of the disclaimer and to be for a term expiring on the term date of
the Lease
-26-
<PAGE>
5. This Agreement ceases to have effect when the Assignee is released from the
tenant covenants of the Lease by virtue of Section 5 of the Landlord and
Tenant (Covenants) Act 1995 or with the consent of the Landlord
IN WITNESS of which this Deed has been executed on the date first written above
THE COMMON SEAL of )
BLOCKBUSTER ENTERTAINMENT )
LIMITED was hereunto )
affixed in the presence of:- )
Director
Secretary
THE COMMON SEAL of )
AIRSPAN COMMUNICATIONS )
LIMITED was hereunto )
affixed in the presence of:- )
Director
Secretary
-27-
<PAGE>
Exhibit 21.1
Subsidiary of the Registrant
Airspan Communications Limited
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated February 9, 2000 and April 11, 2000, in the
Registration Statement (Form S-1) and related Prospectus of Airspan Networks
Inc for the registration of shares of its common stock.
/s/ Ernst & Young
Ernst & Young
London, England
April 11, 2000
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<PAGE>
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