MILLITECH CORP, S-1, 1999-09-27

MILLITECH CORP
S-1, 1999-09-27

Previous: BOEING CAPITAL CORP, 424B3, 1999-09-27

Next: CAMBRIDGE HOLDINGS LTD, NT 10-K, 1999-09-27

<PAGE>

As filed with the Securities and Exchange Commission on September 27, 1999.
File No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

-----------

MILLITECH CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 3679 04-2751645
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)

20 Industrial Drive East
South Deerfield, MA 01373-0109
(413) 665-8551
(Address, including ZIP code, and telephone number, including area code, of
registrant's principal executive offices)
John L. Youngblood
President and Chief Executive Officer
MILLITECH CORPORATION
20 Industrial Drive East
South Deerfield, MA 01373-0109
(413) 665-8551
(Name, address, including ZIP code, and telephone number, including area code,
of agent for service)
Copies to:
DAVID L. LOUGEE, ESQ. WILLIAM R. KOLB, ESQ.
JEFFREY L. DONALDSON, ESQ. JOHN D. HANCOCK, ESQ.
Mirick, O'Connell, DeMallie & Lougee, Foley, Hoag & Eliot llp
llp One Post Office Square
100 Front Street Boston, MA 02109
Worcester, Massachusetts 01608-1477 (617) 832-1000
(508) 791-8500
-----------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
-----------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
-----------
CALCULATION OF REGISTRATION FEE
<TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
Proposed
maximum
aggregate Amount of
Title of each class of offering registration
securities to be registered price(1) fee
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.01 par value.......................... $72,450,000 $20,141.10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(1) Estimated pursuant to Rule 457(o) solely for purposes of calculating the
registration fee.

-----------

The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

SUBJECT TO COMPLETION, DATED SEPTEMBER 27, 1999

[Logo of Telaxis Communications Corporation]

Common Stock

------------

Prior to this offering, there has been no public market for our common
stock. The initial public offering price of the common stock is expected to be
between $ and $ per share. We will apply to list our common stock on
The Nasdaq Stock Market's National Market under the symbol "TLXS."

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 6.

<TABLE>
<CAPTION>
Underwriting
Discounts and Proceeds to
Price to Public Commissions Telaxis
--------------- ------------- -----------
<S> <C> <C> <C>
Per share.................................. $ $ $
Total...................................... $ $ $
</TABLE>

Delivery of the shares of common stock will be made on or about ,
1999.

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

Banc of America Securities LLC

CIBC World Markets

The date of this prospectus is , 1999
<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.

------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................. 3
Risk Factors........................ 6
Special Note Regarding Forward-
Looking Statements................. 14
Use of Proceeds..................... 15
Dividend Policy..................... 15
Capitalization...................... 16
Dilution............................ 18
Selected Financial Data............. 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 20
Business............................ 29
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management....................... 40
Material Relationships and
Related-Party Transactions...... 47
Principal Stockholders........... 49
Description of Capital Stock..... 51
Shares Eligible for Future Sale.. 55
Underwriting..................... 57
Notice to Canadian Residents..... 58
Legal Matters.................... 59
Experts.......................... 59
Where You Can Find More
Information..................... 60
Index to Financial Statements.... F-1
</TABLE>

------------

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 , 1999 (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 unsold allotments or subscriptions.

------------

"Telaxis Communications," "Telaxis" and the Telaxis logo are our trademarks.
All other trademarks or service marks appearing in this prospectus are
trademarks or service marks of the respective companies that own them.

<PAGE>

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully.

Telaxis Communications Corporation

We develop and supply high-speed, or broadband, wireless access equipment
used by network service providers to deliver integrated voice, video and data
services to business and residential subscribers. Our products provide a high
performance alternative to other access technologies, such as traditional
copper wires, digital subscriber lines and cable modems, that connect the
network service provider and the subscriber. Our products enable high-speed
Internet access, electronic commerce, remote access, telecommuting and
extensions of corporate networks to branch offices. Using our products, network
service providers can enter markets quickly and economically, and then expand
their networks as the number of subscribers grows.

Our product line consists of wireless transmitter and receiver equipment
that is installed outdoors in a cell-based arrangement. Each cell consists of a
hub that transmits and receives network traffic to and from customer premises
equipment, or CPE units, installed at multiple subscriber locations. This cell-
based arrangement is commonly referred to as point-to-multipoint architecture.

We have developed two families of broadband point-to-multipoint wireless
access products. Our modular hubs and CPE units can be rapidly tailored for
competitive trials and initial commercial deployments. These modular products
address a network service provider's need for accelerated time-to-market. Our
planar hubs and CPE units, based on a printed circuit board design, can be
mass-produced using low-cost, highly automated manufacturing techniques. These
planar products address a network service provider's need for cost-effective
mass deployment.

We sell our products primarily to network system integrators, such as
Newbridge Networks and Motorola, which include our products in broadband
wireless systems sold to network service providers. Our products have been
successfully demonstrated in more than 40 customer trials worldwide over the
last four years. We believe this experience is unmatched by any other supplier
of broadband point-to-multipoint wireless access equipment. As a result of
these trials, our products have been selected, either directly or by network
system integrators, for commercial deployment by network service providers,
including:

. American Wireless . Korea Telecom

. BellSouth Movicom . Maxlink Communications

. Central Texas Communications . Nexsatel

. Convergence Communications . South Central Telecom

. Formus . Telenordia

. Gateway Telecom . Tri-Corners Telecom

. Home Telephone

Our objective is to be the leading developer and supplier of broadband
point-to-multipoint wireless access equipment for use by network service
providers worldwide. Our strategy to accomplish this objective is to:

. Penetrate the global market with our two product families

. Capitalize upon our early customer acceptance

. Expand strategic relationships with network system integrators

. Reduce product costs while increasing performance and adding
functionality

. Leverage technology partnerships

. Establish brand identity

3
<PAGE>

Our principal executive offices and manufacturing facilities are located at
20 Industrial Drive East, South Deerfield, Massachusetts 01373-0109. Our
telephone number is (413) 665-8551. Our Web site is located at
www.telaxiscomm.com. Information contained in our Web site is not incorporated
by reference into this prospectus, and you should not consider this information
as part of this prospectus. Our company was incorporated in Massachusetts in
1982.

The Offering

Common stock offered.............. shares

Common stock outstanding after shares
this offering....................

Use of proceeds................... For general corporate purposes, including
working capital, and for potential
acquisitions.

Proposed Nasdaq National Market TLXS
symbol...........................

The number of shares to be outstanding after the offering is based on the
number of shares of common stock outstanding as of June 30, 1999 and gives
effect to the conversion of all outstanding shares of our preferred stock into
20,976,881 shares of common stock upon the closing of this offering. This
number excludes:

. 2,850,651 shares issuable upon the exercise of options outstanding as of
June 30, 1999 at an exercise price of $.50 per share

. 5,786,383 shares available for issuance upon the exercise of options
which have been or may be granted after June 30, 1999 under our active
stock plans, including our 1999 stock plan adopted on September 13, 1999

. 2,237,445 shares issuable upon the exercise of warrants outstanding as
of June 30, 1999 at a weighted average exercise price of $.57 per share

4
<PAGE>

Summary Financial Data
(in thousands, except per share data)

The following tables summarize our financial data. The statement of
operations data reflect only our continuing operations. 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 reflect
our issuance of $1.0 million of subordinated promissory notes in July 1999, our
issuance of $14.9 million, net of estimated issuance costs, of redeemable
preferred stock on September 17, 1999 and our contemporaneous repayment of $2.0
million of subordinated promissory notes, and the conversion of our currently
outstanding redeemable 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>
Year Ended December 31, Six Months Ended June 30,
-------------------------- ----------------------------
1996 1997 1998 1998 1999
------- ------- -------- ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Sales................... $ 201 $ 1,733 $ 2,386 $ 1,037 $ 2,762
Gross margin (loss)..... 54 (595) (4,814) (751) (17)
Operating loss.......... (1,829) (6,726) (13,172) (5,331) (3,716)
Loss from continuing
operations............. $(2,239) $(6,712) $(11,253) $ (4,751) $ (3,845)
Basic and diluted loss
per share from
continuing operations.. $ (2.07) $ (7.08) $ (11.44) $ (4.83) $ (3.87)
Shares used in computing
basic and diluted
loss per share......... 1,080 948 984 983 993
Pro forma basic and
diluted loss per share
from
continuing
operations(1).......... $ (0.89) $ (0.25)
Shares used in computing
pro forma basic
and diluted loss per
share(1)............... 12,638 15,303
</TABLE>
- --------------------
(1) For an explanation of these computations, see Note 1 to our financial
statements.

<TABLE>
<CAPTION>
June 30, 1999
-----------------------------------
Pro Forma
Actual Pro Forma As Adjusted
----------- ----------- -----------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................. $ 405 $14,305 $
Working capital (deficit)................. (421) 15,479
Total assets.............................. 10,650 24,550
Long-term debt and capital lease
obligations.............................. 1,686 1,686
Redeemable preferred stock................ 32,793 --
Total stockholders' (deficit) equity...... (29,875) 17,818
</TABLE>

Except where we state otherwise, the information we present in this
prospectus:

. reflects the discontinuation of our millimeter-wave products business
segment

. reflects the amendment of our charter to, among other things, increase
the authorized number of shares of common stock to 100,000,000 shares
and change our name to "Telaxis Communications Corporation" from
"Millitech Corporation"

. assumes that the underwriters do not exercise their option to purchase
additional shares after the closing of this offering

5
<PAGE>

RISK FACTORS

You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. The risks and
uncertainties described below are not the only ones that we face. Additional
risks and uncertainties not presently known to us or that we currently believe
are immaterial also may impair our business operations. If any of the following
risks occurs, our business, operating results and financial condition could be
seriously harmed. In addition, the trading price of our common stock could
decline due to any of these risks, and you may lose all or part of your
investment.

Risks Related To Our Business

We have incurred substantial losses and may not be profitable in the future.

Our continuing operations have not achieved profitability. We cannot predict
whether we will become profitable. Our failure to achieve profitability within
the time frame that investors expect may adversely affect the market price of
our common stock. We had losses from continuing operations of $3.8 million in
the six months ended June 30, 1999, $11.3 million in 1998 and $6.7 million in
1997. As a result of losses from continuing and discontinued operations, at
June 30, 1999, we had an accumulated deficit of $30.6 million. We have
generated relatively small amounts of product sales. We do not believe that our
sales growth rates are sustainable because those rates are calculated from a
small revenue base. In addition, we intend to increase expenditures in all
areas, including manufacturing and engineering, research and development, and
sales and marketing, in order to execute our business strategy.

Disappointing quarterly results could cause our stock price to fall.

Our quarterly sales and operating results are difficult to predict and may
continue to fluctuate significantly from quarter to quarter. If our quarterly
sales or operating results fall below the expectations of investors, the price
of our common stock could fall substantially.

Our quarterly results may fluctuate for several reasons, including the
following:

. the timing and size of orders for our products

. the mix of our product sales, which we expect will shift over time
generally toward our less profitable CPE units

. the hiring and loss of personnel, particularly in manufacturing and
sales and marketing, including significant recruiting bonuses or other
hiring expenses

. our lengthy sales cycle, which typically ranges from six to 18 months,
making it difficult for us to predict our future business operations and
make plans for the future

. our manufacturing capacity constraints and our ability to fulfill orders

. the timing of our investments in additional manufacturing capacity

. unforeseen additional charges related to our discontinued operations

We expect to increase our research and development, sales and marketing, and
general and administrative expenses. As a result, we expect to continue to
incur significant quarterly losses for at least the next several quarters.
Moreover, many of our expenses, such as employee compensation and rent, are
relatively fixed. We budget some of these expenses largely according to the
sales we expect to generate, and if our sales fall below our expectations, we
could incur significantly greater quarterly losses. Other factors could also
cause variations in our quarterly sales and operating results. Many of these
factors are outside our control.

6
<PAGE>

Do not rely on our discontinued operations to predict our future operating
results.

Historically, our operations focused on a business segment that we
discontinued in August 1999. We classify the results of that segment as a
discontinued operation in our financial statements. We shipped our first
prototype broadband point-to-multipoint wireless access equipment for trial in
1995. However, the commercial market for these products did not emerge until
recently. We received the first volume order for our broadband point-to-
multipoint wireless access products in June 1999. Accordingly, you have limited
financial data that you can use to evaluate our future prospects in the
broadband point-to-multipoint wireless access market. You should evaluate our
prospects in light of the risks, expenses and challenges we will encounter
because of our recent focus on this market.

We depend upon a small number of network system integrators for substantially
all of our sales.

We depend on a small number of network system integrators to market, sell,
install, finance and support broadband point-to-multipoint wireless access
systems that include our products. Our network system integrators' failure to
accomplish these tasks successfully would adversely affect our sales and
operating results. One network system integrator accounted for 70% of our sales
in the six months ended June 30, 1999 and three network system integrators
accounted for 68% of our sales in 1998. These sales related primarily to
customer trials and initial commercial deployments. We have no long-term
purchase commitments or exclusive purchase agreements with these or any other
customers. Because there are a relatively small number of network system
integrators with the resources and technical expertise necessary to offer
broadband point-to-multipoint wireless access systems, and because these
network system integrators extensively test and evaluate products such as ours
before making a purchase decision, we may be unable to replace our network
system integrators quickly. Moreover, because we may be able to supply only a
few network system integrators, we may be unable to reduce our dependence on a
few customers. Our network system integrators could stop purchasing products
from us because our products do not meet their needs, because they cannot sell
broadband point-to-multipoint wireless access solutions profitably or for other
reasons, such as a corporate reorganization, acquisition or other transaction
that alters their strategic focus. We do not control our network system
integrators and have little, if any, influence over their strategic decisions.
Those decisions could limit our prospects in ways we cannot predict. If our
customers reduce orders for our products, we could lose sales and suffer damage
to our reputation in the industry.

The failure of our network system integrators to sell broadband point-to-
multipoint wireless access solutions that include our products would adversely
affect our sales and operating results.

Even if our products meet all of our network system integrators' needs,
other factors may impede the success of their broadband point-to-multipoint
wireless access solutions. For example, installation costs may be high and
difficult to reduce. In addition, our network system integrators may not have
or use the financial, marketing and other resources necessary to ensure that
their solutions will succeed in the marketplace. For example, network service
providers may insist that network system integrators provide extensive
financing for the deployment of large broadband point-to-multipoint wireless
access networks, and our network system integrators may be unwilling or unable
to provide the necessary financial resources. Without providing financing, our
network system integrators may be unable to sell systems containing our
products, which would adversely affect our sales and operating results.

We may not be able to manufacture our products as quickly as our customers
require, which could cause us to lose sales.

Currently, we are unable to manufacture products as quickly as our customers
require. This manufacturing constraint could cause us to lose sales, damage our
reputation, incur financial liabilities and jeopardize our long-term prospects.
If we receive any substantial order in the near future, we may be unable to
fulfill the order on a timely basis. We currently have a single line of
assembly, and equipment downtime at any stage of the assembly process would
halt production. We believe we will need to build additional manufacturing
capacity in the near future. Many factors may impair our ability to manufacture
our products in large quantities, including:

. our limited experience with volume manufacturing

7
<PAGE>

. the complexity of our products

. our ability to obtain numerous sole-source components

. our ability to hire sufficient technical and engineering talent

. our ability to manage our supply chain and inventory levels

. our ability to maintain quality in a high volume production environment

. our limited financial resources

Any third-party manufacturer we engage may not perform to our satisfaction,
which could adversely affect our business.

We believe we will need to engage third-party manufacturers to supplement
our manufacturing capacity. Few, if any, third-party manufacturers have the
technical capabilities to meet our quality standards and production goals.
Therefore, it may be difficult and time-consuming to identify and engage an
appropriate third-party manufacturer. Any third-party manufacturer we engage
may not perform to our expectations. We will have little, if any, control over
their performance. Their failure to meet our expectations in any respect could
cause us to lose sales, harm our reputation and otherwise adversely affect our
business. Moreover, we have limited experience dealing with third-party
manufacturers and may encounter unforeseen problems that are costly, time-
consuming and difficult to resolve. Any such problem could have a material
adverse effect on our business. If we are unable to engage a third-party
manufacturer, we will need to build additional manufacturing facilities of our
own.

Our products include single-source components, and our inability to obtain
these components would halt production and could have a material adverse effect
on our sales and operating results.

We currently purchase a number of important components, such as electronic
filters, semiconductor devices, circuit boards, frequency references and
housings, from single-source suppliers for which alternative sources are not
readily available. Any delay or interruption in the supply of these components
could impair our ability to deliver our products and could reduce our sales.
Any of our single-source suppliers could enter into exclusive agreements with
or be acquired by our competitors, increase their prices, refuse to sell their
products, discontinue products or go out of business. Even if alternative
suppliers are available to us, identifying them is difficult and time-
consuming, and they may not meet our quality standards. We may not be able to
obtain sufficient quantities of these components on the same or substantially
the same terms. Consolidations among our suppliers could result in other sole-
source supply situations. An increase in the cost of these components could
make our products less competitive, lower our margins and have a material
adverse effect on our business, financial condition and results of operations.

As our customers enter new markets, we sometimes have to adapt our products
rapidly to the frequency and regulatory requirements that exist in those
markets, and we may incur significant costs making the necessary modifications.

Each of our products is designed for a specific range of frequencies.
Because different governments license different portions of the frequency
spectrum for the broadband wireless access market, and because network service
providers license a multitude of specific frequencies, we sometimes have to
adapt our products rapidly to use different frequencies. This design process
can be difficult and time-consuming, and could therefore increase our costs and
cause delays in the delivery of products to our customers.

We may be unable to achieve the continuing cost reductions and technological
improvements required for our products to remain competitive.

We expect that market conditions, particularly falling prices for competing
broadband access solutions, will force us to reduce our prices over time. If we
do not continue to reduce our product costs, we will continue to incur
operating losses. In order to reduce product costs, we must use low-cost,
automated manufacturing

8
<PAGE>

techniques, increase manufacturing volume and improve yield. Low-cost automated
manufacturing of products such as ours has not been demonstrated to be feasible
in high volumes. We may not have and may not be able to acquire the experience,
technical know-how and other resources to achieve these goals.

Our products have been purchased primarily by network system integrators for
customer trials and for sales to network service providers for early
deployment. Before our network system integrators commit to future orders for
our products, they may establish additional product specifications,
manufacturing parameters or other conditions of sale that we cannot meet. Our
failure or unwillingness to meet those specifications, parameters or conditions
could have a material adverse effect on our sales and operating results.

We expect to expand our operations significantly, and our failure to manage our
expansion could harm our business and adversely affect our financial condition
and results of operations.

We are rapidly and significantly expanding our operations, including the
number of our employees, the geographic scope of our activities and our product
offerings. Our failure to manage growth effectively could harm our business and
adversely affect our financial condition and operating results. This expansion
has placed a significant strain on all of our resources. We are reassigning or
retraining approximately 20 employees from our discontinued operations to work
in our continuing operations and we are converting facilities from our
discontinued operations for use in our continuing operations. We expect that
this retraining and conversion process will be difficult and time-consuming. To
manage our growth, we must:

. hire, train and manage significant numbers of qualified employees,
particularly manufacturing, engineering, sales and marketing personnel

. improve our core technologies

. expand our manufacturing capabilities

. manage our relationships with customers, suppliers and other business
partners

. improve our existing and implement new operational, financial and
management information controls, reporting systems and procedures

We expect to continue to derive a substantial portion of our sales from
international sources, and difficulties associated with international
operations could harm our business.

We sell substantially all of our products to domestic and foreign network
system integrators, which offer systems including our products to network
service providers on a global basis. We believe our products are primarily used
by network service providers outside the United States. Sales outside the
United States frequently involve additional risks and difficulties, including:

. licenses, tariffs and other trade barriers imposed on products such as
ours

. political and economic instability

. compliance with a wide variety of complex laws and treaties relating to
telecommunications equipment

. delays or difficulties collecting accounts receivable

. the significant lack of legal protection for intellectual property

. fluctuations in currency exchange rates

If our network system integrators suffer losses as a result of any of these
factors in connection with foreign deployments, they could seek to renegotiate
terms or otherwise pass those losses on to us. Either outcome could have a
material adverse effect on our sales or operating results.

The loss of any of our executive officers or other key employees could
adversely affect our business.

Our executive officers and key employees are crucial to our future success,
and the loss of their services could seriously impair our ability to implement
our business plan successfully. If we lost the services of any of

9
<PAGE>

these individuals, we might lack needed leadership, experience, industry
expertise and technical expertise, and we would have to devote substantial
resources to finding a replacement. Until we found a suitable replacement, our
management team would be incomplete, which could have a material adverse effect
on our business. In addition, our highly technical business requires
significant numbers of qualified and experienced engineers, designers and other
technical employees, many of whom have attractive employment alternatives. The
strong demand for these employees raises our employee compensation expenses,
and our failure to retain these employees or hire qualified replacements for
reasonable compensation could have a material adverse effect on our business
and results of operations.

If we, our suppliers, network system integrators, or network service providers
fail to be year 2000 compliant, our business might be severely disrupted.

Software and hardware that inaccurately process dates after December 31,
1999 present several areas of risk for our business. In particular, we are
subject to:

. costs and lost sales that we may incur if any of our products fail to be
year 2000 compliant, including potential warranty or other claims from
our customers;

. business shutdowns or slowdowns as a result of a failure of the internal
systems we use to run our business, which could disrupt our business
operations;

. interruption of product or component supplies, or a reduction in product
quality, as a result of the failure of systems used by our suppliers,
including any third-party manufacturer we may engage; and

. reductions or deferrals in sales as a result of year 2000 compliance
issues of network system integrators or network service providers.

Our intellectual property rights may be inadequate to preserve or prevent
others from using our proprietary technology.

Our success depends to a significant degree upon the preservation and
protection of our product and manufacturing process designs and other
proprietary technology. Our intellectual property rights, and our ability to
enforce those rights, may be inadequate to prevent others from using our
technology or substantially similar technology they may independently develop.
The use of that technology by others could eliminate any competitive advantage
we have, cause us to lose sales and otherwise harm our business. To protect our
proprietary technology, we generally limit access to our technology, treat
portions of our technology as trade secrets and obtain confidentiality or non-
disclosure agreements from persons with access to our technology. We have also
obtained and applied for patents in the United States and other countries, and
we rely on protections available under copyright and trademark law. These steps
may be inadequate to provide the protection we need. A significant portion of
our proprietary technology is know-how, and employees with know-how may depart
before transferring their know-how to other employees. Moreover, the laws of
other countries where we market our products may afford even less protection
for our intellectual property. If we resort to legal proceedings to enforce our
intellectual property rights, the proceedings could be burdensome and costly,
even if we were to prevail.

Claims by others that we have violated their intellectual property rights could
prevent the sale of our products, cause us to pay damages and otherwise harm
our business.

If we were to discover that any of our products violated the intellectual
property rights of a third party, we might be unable to redesign our product to
avoid violating their rights, and we might be unable to obtain a license on
commercially reasonable terms to use their intellectual property. In such a
case, we may be unable to continue selling that product, which could have a
material adverse effect on our revenues. For instance, we have received a
letter claiming that we may owe patent license fees for wafers we purchased for
research and development purposes not involving our continuing operations. We
do not conduct comprehensive patent searches to determine whether the
technology used in our products infringes any patents, and any searching we do
conduct would not reveal technology covered by confidential patent
applications. Any claim that we infringe or otherwise violate the intellectual
property rights of others could cause us to incur substantial costs defending
against the claim, even if the claim

10
<PAGE>

is invalid, and could distract our management from our business. Furthermore, a
party making such a claim could obtain a judgment that requires us to pay
substantial damages. A judgment could also include an injunction or other court
order that could prevent us from selling our products. Any of these events
could have a material adverse effect on our business, operating results and
financial condition.

RISKS RELATED TO OUR INDUSTRY

The broadband point-to-multipoint wireless access industry is new and its
future is uncertain. If significant demand for this technology does not
develop, our business, financial condition and results of operations will be
adversely affected.

Broadband point-to-multipoint wireless access technology is new and unproven
in the marketplace. This technology may prove unsuitable for widespread
commercial deployment. Many factors will influence the success or failure of
broadband wireless access technology, including:

. its capacity to handle growing demands for faster transmission of
increasing amounts of video, voice and data

. its cost-effectiveness and performance compared to other forms of
broadband access, whose prices and performance continue to improve

. its reliability and security

. whether the products can be manufactured in sufficient volume

. its suitability for a sufficient number of geographic regions

. the availability of sufficient frequencies for network service providers
to deploy products at commercially reasonable rates

. the availability of sufficient site locations for network service
providers to install products at commercially reasonable rates

. safety and environmental concerns regarding broadband wireless
transmissions

Broadband point-to-multipoint wireless access solutions are also competing
with other high-speed solutions such as digital subscriber lines, cable, fiber,
other high-speed wire, satellite and point-to-point wireless technologies. Many
of these alternative technologies can take advantage of existing installed
infrastructure and have achieved significantly greater market acceptance and
penetration than broadband point-to-multipoint wireless access technologies.
Moreover, current broadband point-to-multipoint wireless access technology has
inherent technical limitations that may inhibit its widespread adoption in many
areas, including the need for line-of-sight installation and reduced
communication distance in bad weather. We expect broadband point-to-multipoint
access technologies to face increasing competitive pressures from both current
and future alternative technologies. In light of these factors, many network
service providers may be reluctant to invest heavily in broadband point-to-
multipoint wireless access solutions and, accordingly, the market for these
solutions may fail to develop or may develop more slowly than we expect. Either
outcome would have a material adverse effect on our business, financial
condition and results of operations.

The broadband point-to-multipoint wireless access industry is intensely
competitive, and our failure to compete effectively could adversely affect our
sales and operating results.

The market for broadband point-to-multipoint wireless access equipment is
rapidly evolving and highly competitive. A number of large telecommunications
equipment suppliers, such as Alcatel, Ericsson and Nortel Networks, as well as
a number of smaller companies, have developed or are developing products that
compete with ours. Many of our competitors are substantially larger than we are
and have significantly greater financial, sales, marketing, distribution,
technical, manufacturing and other resources. These competitors may make
strategic acquisitions or establish cooperative relationships among themselves
or with third parties to increase their ability to gain market share rapidly.
We expect to face increasing competitive pressures from both current and future
competitors in the markets we serve.

11
<PAGE>

Compliance with changing domestic and foreign laws, regulations and industry
standards may be difficult and may adversely affect our sales and results of
operations.

Participants in the broadband industry, including ourselves and other
suppliers of broadband point-to-multipoint wireless access equipment, suppliers
of competing communications technologies, network system integrators and
network service providers, must comply with a significant number of evolving
communications laws, regulations and standards in the United States and abroad.
Industry participants may face additional costs, difficulties and challenges if
new laws, regulations or standards are adopted, or if existing laws,
regulations or standards are re-interpreted, or if they undertake activities
that require them to comply with additional laws, regulations and standards.
These costs, difficulties and challenges could have a material adverse effect
on the market for our products, which could cause us to lose sales, or could
otherwise render our business unprofitable.

If our products do not comply with all of the legal and regulatory
requirements and standards that apply in a jurisdiction, we may face liability
for any violation and may be unable to offer our products in that jurisdiction.
These requirements and standards vary widely among jurisdictions, and we may be
unable to obtain necessary approvals for the marketing and sale of our
products. In the United States, the Telecommunications Act of 1996
significantly altered the regulatory environment for the communications
industry, and both the United States Congress and the Federal Communications
Commission continue to monitor and respond to the effects of that legislation.
For example, the FCC is considering changes to its regulations relating to
access to telephone lines, the ability of third parties to install equipment at
a network service provider's central location and the compatibility
requirements for equipment that runs on telephone lines. Large, well-financed
companies may successfully lobby for new laws or regulations that operate to
our disadvantage. In addition, a reversal of the general trend toward
deregulation in the telecommunications industry could materially and adversely
affect network service providers, and thereby materially and adversely affect
our business, financial condition and results of operations.

RISKS RELATED TO THIS OFFERING AND OWNERSHIP OF OUR COMMON STOCK

The market price of our common stock is likely to be volatile.

The market price of our common stock could fluctuate significantly for many
reasons, including the following:

. our financial performance or the performance of our competitors

. technological innovations or other trends in our industry

. successes or failures at significant product evaluations or field trials

. the introduction of new products by us or our competitors

. the arrival or departure of key personnel

. acquisitions, strategic alliances or joint ventures involving us or our
competitors

. changes in estimates of our performance or recommendations by securities
analysts

. decisions by major participants in the communications industry

. decisions by investors to de-emphasize investment categories, groups or
strategies that include our company or industry

. market conditions in the industry, the financial markets and the economy
as a whole

In addition, the stock market has recently experienced extreme price and
volume fluctuations. These fluctuations are often unrelated to the operating
performance of particular companies. These broad market

12
<PAGE>

fluctuations may adversely affect the market price of our common stock. When
the market price of a company's stock drops significantly, stockholders often
institute securities class action lawsuits against the company. A lawsuit
against us could cause us to incur substantial costs and could divert the time
and attention of our management and other resources. Any of these events could
have a material adverse effect on our business, financial condition and results
of operations.

Future sales of common stock by our existing stockholders could cause our stock
price to fall.

If our stockholders sell substantial amounts of common stock in the public
market, including shares issuable upon the exercise of outstanding options and
warrants, the market price of our common stock could fall. The perception among
investors that these sales will occur could produce the same effect. After this
offering, we will have shares of common stock outstanding. The shares we are
selling in this offering will be freely tradeable in the public market. Giving
effect to lock-up agreements executed by our existing stockholders, the
remaining shares of common stock outstanding after this offering will be
available for sale in the public market as follows:

<TABLE>
<CAPTION>
Percent of Total
Shares
Number of Shares Outstanding Date of Availability for Sale
---------------- ---------------- -----------------------------
<C> <C> <S>
% , 1999 (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 subject to Rule 144
, 2000 (180 days after the date of this
prospectus), in some cases
subject to Rule 144
At various times after , 2000
</TABLE>

Our underwriters could waive the selling restrictions imposed by the lock-up
agreements at any time, which could accelerate the resale of outstanding shares
of common stock. In addition, at , 1999, there were outstanding warrants
to purchase shares and options to purchase shares not subject to lock-up
agreements. The shares issuable upon exercise of the warrants will become
available for sale in the public market in accordance with Rule 144 and the
shares issuable upon exercise of the options will become available for sale in
the public market upon vesting and after we file a registration statement
covering those shares. We intend to file such a registration statement as
promptly as practicable after this offering. In addition, some of our
securityholders have rights to require us to register their shares for resale
in the public market. For a more detailed description, see "Description of
Capital Stock--Registration Rights," "Shares Eligible for Future Sale" and
"Underwriting."

Our securities have no prior public market, and our stock price may decline
after the offering.

Before this offering, there has been no public market for our common stock,
and an active public market for our common stock may not develop or be
sustained after this offering. If an active public market for our common stock
does not develop, the liquidity of your investment may be limited, and our
stock price may decline below our initial public offering price. The initial
public offering price will be determined by negotiations between us and the
representatives of the underwriters and may bear no relationship to the price
that will prevail in the public market.

We have anti-takeover defenses that could delay or prevent an acquisition of
our company.

Our articles of organization and by-laws and Massachusetts law contain
provisions that might enable our management to resist a takeover of our
company. These provisions could discourage, delay or prevent a change in
control of our company or an acquisition of our company at a price that many
stockholders may find attractive. These provisions may also discourage proxy
contests and make it more difficult for our stockholders to elect directors and
take other corporate actions. The existence of these provisions could limit the
price that

13
<PAGE>

investors might be willing to pay in the future for shares of our common stock.
For a description of these provisions, see "Description of Capital Stock--Anti-
takeover Provisions of Massachusetts Law and Our Articles of Organization and
By-Laws."

We will have broad discretion in how we use the proceeds of this offering, and
our use of those proceeds may not yield a favorable return.

We intend to use all of our proceeds from this offering for general
corporate purposes, including working capital, and for potential acquisitions.
Accordingly, we will have broad discretion in using our proceeds. You will not
have the opportunity to evaluate the economic, financial or other information
that we will use to determine how to use our proceeds.

If we cannot raise additional capital we may need on acceptable terms, we may
not achieve our business goals.

If we do not have sufficient capital to fund our operations, we may be
forced to discontinue product development, reduce our sales and marketing
efforts, forego attractive business opportunities and lose the ability to
respond to competitive pressures. Any of these outcomes could have a material
adverse effect on our business, financial condition and results of operations.
We expect that the net proceeds from this offering, cash on hand and borrowings
under our credit facility will be sufficient to meet our working capital and
capital expenditure needs for at least the next 12 months. After that, we may
need to raise additional funds, 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 issue additional equity securities to
raise funds, the ownership percentage of our existing stockholders would be
reduced. New investors may demand rights, preferences or privileges senior to
those of existing holders of our common stock.

You will suffer immediate and substantial dilution.

The initial public offering price will significantly exceed the net tangible
book value per share of our common stock. Accordingly, if you purchase common
stock in this offering, you will incur immediate and substantial dilution of
your investment. To the extent that outstanding options or warrants are
exercised, you will incur additional dilution.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the sections entitled "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and "Business," contains forward-looking statements.
These statements relate to future events or our future financial performance,
and involve known and unknown risks, uncertainties, and other factors that may
cause our 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 these forward-looking statements. These
risks and other factors include, among other things, those listed under "Risk
Factors" and elsewhere in this prospectus. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "intends," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," "continue," or the negative of these terms or other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially. In evaluating these statements, you should
specifically consider the risks outlined under "Risk Factors." These factors
may cause our actual results to differ materially from any forward-looking
statement.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. 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.

14
<PAGE>

USE OF PROCEEDS

We expect to receive net proceeds of approximately $ from the sale of
shares of common stock, or approximately $ from the sale of shares if the
underwriters exercise their over-allotment option in full, assuming an 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 general
corporate purposes, including working capital. We may also use a portion of the
net proceeds to acquire complementary 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 our use of these proceeds, we will invest the net
proceeds in short-term, interest-bearing, investment-grade securities. The
amounts that we actually expend for general corporate purposes will vary
significantly depending on a number of factors, including future sales growth
and the amount of cash we generate from operations, if any.

DIVIDEND POLICY

We have never declared or paid any cash dividends. We currently intend to
retain any future earnings to fund the development and growth of our business.
In addition, under our credit facilities, we cannot pay dividends without our
creditors' consent, with limited exceptions. Therefore, we currently do not
anticipate paying cash dividends in the foreseeable future.

15
<PAGE>

CAPITALIZATION

The following table sets forth:

. our actual capitalization as of June 30, 1999

. our pro forma capitalization as of June 30, 1999, after giving effect to:

(a) our issuance of $1.0 million of subordinated promissory notes in
July 1999

(b) our issuance of $14.9 million, net of estimated issuance costs, of
redeemable preferred stock on September 17, 1999 and our
contemporaneous repayment of $2.0 million in outstanding
subordinated promissory notes

(c) the conversion of our currently outstanding redeemable preferred
stock into 20,976,881 shares of common stock upon the closing of
this offering

(d) the amendments of our charter

. our pro forma as adjusted capitalization as of June 30, 1999, which gives
effect to our sale of shares of common stock at an assumed initial
public offering price of $ per share, after deducting estimated
underwriting discounts and commissions and estimated offering expenses
payable by us

You should read the following table in conjunction with our financial
statements and accompanying notes included elsewhere in this prospectus.

<TABLE>
<CAPTION>
As of June 30, 1999
-----------------------------------
Pro Forma
Actual Pro Forma As Adjusted
----------- ----------- -----------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Notes payable and current maturities of
long-term debt............................. $ 1,675 $ 675 $ 675
======== ======= =======
Current maturities of capital lease
obligations................................ $ 795 $ 795 $ 795
======== ======= =======
Long-term debt:
Long-term debt, net of current portion.... $ 1,246 $ 1,246 $ 1,246
Capital lease obligations, net of current
portion.................................. 440 440 440
-------- ------- -------
Total long-term debt, net of current
portion................................ 1,686 1,686 1,686
-------- ------- -------
Redeemable preferred stock, $.01 par value;
issued in classes A, B, D and E; 19,080,000
total shares authorized and 14,310,214
total shares issued and outstanding,
actual; no shares authorized, issued or
outstanding, pro forma and pro forma as
adjusted................................... 32,793 -- --
Stockholders' (deficit) equity:
Preferred stock, $.01 par value; 7,500,000
shares authorized and no shares issued or
outstanding, actual; 4,500,000 shares
authorized and no shares issued or
outstanding, pro forma and pro forma as
adjusted.................................. -- -- --
Common stock, $.01 par value; 36,000,000
shares authorized and 1,000,360 shares
issued and outstanding, actual;
100,000,000 authorized, pro forma and pro
forma as adjusted; 21,977,241 shares
issued and outstanding, pro forma;
shares issued and outstanding, pro forma
as adjusted............................... 10 219
Additional paid-in capital................. 763 48,247
Accumulated deficit........................ (30,648) (30,648) (30,648)
-------- ------- -------
Total stockholders' (deficit) equity...... (29,875) 17,818
-------- ------- -------
Total capitalization...................... $ 4,604 $19,504 $
======== ======= =======
</TABLE>

16
<PAGE>

The foregoing information excludes the following shares as of June 30, 1999:

. 2,850,651 shares issuable upon the exercise of options outstanding as of
June 30, 1999 at an exercise price of $.50 per share

. 2,237,445 shares issuable upon the exercise of warrants outstanding as of
June 30, 1999 at a weighted average exercise price of $.57 per share

17
<PAGE>

DILUTION

If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma as adjusted net tangible book value per share of
our common stock immediately after this offering. Our pro forma net tangible
book value at June 30, 1999 was approximately $17.8 million, or $0.81 per share
of common stock. Pro forma net tangible book value per share represents total
tangible assets less total liabilities, divided by the pro forma number of
shares of common stock outstanding at June 30, 1999, after giving effect to our
issuance of redeemable preferred stock on September 17, 1999 for $14.9 million,
net of estimated issuance costs, our issuance and repayment of subordinated
promissory notes, and the conversion of our currently outstanding shares of
redeemable preferred stock into 20,976,881 shares of common stock upon the
closing of this offering. After giving effect to our sale of shares of
common stock 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, our pro forma as adjusted net tangible book
value at June 30, 1999 would have been $ , or $ per share. This represents
an immediate increase in pro forma net tangible book value of $ per share to
existing stockholders and an immediate dilution of $ per share to new
investors, or approximately % of the assumed initial public offering price of
$ per share. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $
Pro forma net tangible book value per share at June 30, 1999..... $0.81
Increase per share attributable to new investors.................
-----
Pro forma as adjusted net tangible book value per share after the
offering..........................................................
----
Dilution per share to new investors................................ $
====
</TABLE>

The following table shows, on a pro forma as adjusted basis at June 30,
1999, the number of shares of common stock purchased from us, the total
consideration paid to us and the average price paid per share by existing
stockholders and by new investors purchasing common stock in this offering,
after giving effect to:

. our issuance of shares of redeemable preferred stock on September 17,
1999 for $14.9 million, net of estimated issuance costs

. the conversion of our currently outstanding shares of redeemable
preferred stock into common stock

. our sale of shares of common stock at an assumed initial public
offering price of $ per share, before deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by us

<TABLE>
<CAPTION>
Average
Shares Purchased Total Consideration Price
------------------ ------------------- Per
Number Percent Amount Percent Share
---------- ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ 21,977,241 % $48,466,000 % $2.21
New investors.................... % % $
---------- ----- ----------- -----
Total.......................... 100.0% $ 100.0%
========== ===== =========== =====
</TABLE>

This discussion assumes no exercise of any stock options or warrants
outstanding as of June 30, 1999. At that date, there were 2,850,651 shares
issuable upon the exercise of outstanding options at an exercise price of $.50
per share and 2,237,445 shares issuable upon the exercise of outstanding
warrants at a weighted average exercise price of $0.57. Additionally, there
were 5,786,383 shares available for issuance upon the exercise of options which
have been or may be granted under our active stock plans after June 30, 1999.
To the extent holders exercise these outstanding options or warrants, or any
options we have granted or may grant after June 30, 1999, there will be further
dilution to new investors.

18
<PAGE>

SELECTED FINANCIAL DATA

You should read the following selected financial data with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our financial statements and notes appearing elsewhere in this prospectus. The
following statement of operations data reflect only our continuing operations,
which had minimal operating activity during the years ended December 31, 1994
and 1995. The statement of operations data for the years ended December 31,
1996, 1997 and 1998 and the balance sheet data at December 31, 1997 and 1998
are derived from the financial statements and notes audited by
PricewaterhouseCoopers LLP appearing elsewhere in this prospectus. The
statement of operations data for the years ended December 31, 1994 and 1995 and
the balance sheet data as of December 31, 1994, 1995 and 1996 are derived from
financial statements not appearing in this prospectus. The statement of
operations data for the six months ended June 30, 1998 and June 30, 1999 and
balance sheet data as of June 30, 1999 are unaudited. In our opinion, all
necessary adjustments, which consist only of normal recurring adjustments, have
been included to present fairly the unaudited six-month results, which should
be read with our financial statements and notes appearing elsewhere in this
prospectus. Historical results are not necessarily indicative of results that
may be expected for any future period. We have never declared or paid any cash
dividends.

<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
-------------------------------------- -----------------------
1994 1995 1996 1997 1998 1998 1999
----- ----- ------- ------- -------- ----------- -----------
(unaudited) (unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Sales................... $ -- $ -- $ 201 $ 1,733 $ 2,386 $ 1,037 $ 2,762
Cost of sales........... -- -- 147 2,328 7,200 1,788 2,779
----- ----- ------- ------- -------- ------- -------
Gross margin (loss)..... -- -- 54 (595) (4,814) (751) (17)
Operating expenses
Research and
development, net..... -- -- 433 3,724 4,630 2,717 1,801
Selling and
marketing............ -- -- 353 667 1,006 470 482
General and
administrative....... -- -- 1,097 1,740 2,722 1,393 1,416
----- ----- ------- ------- -------- ------- -------
Total operating
expenses............ -- -- 1,883 6,131 8,358 4,580 3,699
----- ----- ------- ------- -------- ------- -------
Operating loss.......... -- -- (1,829) (6,726) (13,172) (5,331) (3,716)
Other income (expense).. -- -- (410) (626) 757 (75) (129)
----- ----- ------- ------- -------- ------- -------
Loss from continuing
operations before
income taxes........... -- -- (2,239) (7,352) (12,415) (5,406) (3,845)
Income tax benefit...... -- -- -- (640) (1,162) (655) --
----- ----- ------- ------- -------- ------- -------
Loss from continuing
operations............. -- -- $(2,239) $(6,712) $(11,253) $(4,751) $(3,845)
Basic and diluted loss
per share from
continuing operations.. -- -- $ (2.07) $ (7.08) $ (11.44) $ (4.83) $ (3.87)
Shares used in computing
basic and diluted
loss per share......... -- -- 1,080 948 984 983 993
Pro forma basic and
diluted loss per share
from continuing
operations(1).......... $ (0.89) $ (0.25)
Shares used in computing
pro forma basic
and diluted loss per
share(1)............... 12,638 15,303
</TABLE>
- ---------------------
(1) For an explanation of these computations, see Note 1 to our financial
statements.

<TABLE>
<CAPTION>
December 31,
--------------------------------------------- June 30,
1994 1995 1996 1997 1998 1999
------- ------- ------- -------- -------- -----------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $ 1,078 $ 1,071 $ 1,213 $ 10,294 $ 2,635 $ 405
Working capital
(deficit).............. 3,694 3,962 3,266 8,439 3,271 (421)
Total assets............ 11,597 12,016 10,728 20,059 14,955 10,650
Long-term debt and
capital lease
obligations,
net of current
portion................ 2,385 1,929 3,257 1,690 1,047 1,686
Redeemable preferred
stock.................. 12,467 12,467 12,465 25,425 32,793 32,793
Total stockholders'
deficit................ (7,258) (6,693) (9,560) (14,998) (24,591) (29,875)
</TABLE>

19
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with our financial
statements and the accompanying notes.

Overview

We develop and supply broadband point-to-multipoint wireless access
equipment used by network service providers to deliver integrated voice, video
and data services to business and residential subscribers. We sell our products
primarily to network system integrators, which include our products in
broadband wireless systems sold to network service providers. We have developed
two families of broadband point-to-multipoint wireless access products. Our
modular hubs and CPE units can be rapidly tailored for competitive trials and
initial commercial deployments. These modular products address a network
service provider's need for accelerated time-to-market. Our planar hubs and CPE
units, based on a printed circuit board design, can be mass-produced using low-
cost, highly automated manufacturing techniques. These planar products address
a network service provider's need for cost-effective mass deployment.

We commenced operations in 1982 and have derived the significant majority of
our sales from our millimeter-wave products business segment. In August 1999,
we adopted a plan to focus all of our resources on our broadband point-to-
multipoint wireless access business segment and to dispose of the millimeter-
wave products segment. As a result, we have presented the operations of the
millimeter-wave products segment as a discontinued operation in our financial
statements. The following management's discussion and analysis focuses on our
ongoing broadband point-to-multipoint wireless access business.

Our first prototype broadband point-to-multipoint wireless access equipment
was evaluated in a trial in 1995. Before receiving our first volume order for
equipment in June 1999, virtually all of our shipments of products were for
customer trials and initial commercial deployments. To date, we have assembled
all of our products in-house, and only in limited volume. In the future, we may
engage third-party manufacturers to supplement our manufacturing capacity.

A substantial portion of our sales are comprised of shipments to customers
located outside of the United States, and we expect this trend to continue. To
date, international sales have been denominated solely in U.S. dollars and,
accordingly, we have not been exposed to fluctuations in non-U.S. currency
exchange rates.

Results of Operations

The following table provides continuing operations data as a percentage of
sales for the periods presented. The percentages may not add due to rounding.

<TABLE>
<CAPTION>
Six Months
Year Ended Ended
December 31, June 30,
-------------------------- ---------------
1996 1997 1998 1998 1999
-------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Sales.......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.................. 73.1 134.3 301.8 172.4 100.6
-------- ------ ------ ------ ------
Gross margin (loss)............ 26.9 (34.3) (201.8) (72.4) (0.6)
Operating expenses
Research and development,
net......................... 215.4 214.9 194.0 262.0 65.2
Selling and marketing........ 175.6 38.5 42.2 45.3 17.5
General and administrative... 545.8 100.4 114.1 134.3 51.3
-------- ------ ------ ------ ------
Total operating expenses... 936.8 353.8 350.3 441.7 133.9
-------- ------ ------ ------ ------
Operating loss................. (910.0) (388.1) (552.1) (514.1) (134.5)
Other income (expense)......... (204.0) (36.1) 31.7 (7.2) (4.7)
-------- ------ ------ ------ ------
Loss from continuing operations
before income taxes........... (1,113.9) (424.2) (520.3) (521.3) (139.2)
Income tax benefit............. -- (36.9) (48.7) (63.2) --
-------- ------ ------ ------ ------
Loss from continuing
operations.................... (1,113.9)% (387.3)% (471.6)% (458.1)% (139.2)%
</TABLE>

20
<PAGE>

Six Months Ended June 30, 1998 and 1999

Sales

Sales increased 166% from $1.0 million for the six months ended June 30,
1998 to $2.8 million for the six months ended June 30, 1999. This increase
primarily reflects the increase in sales of our planar products.

Cost of Sales

Cost of sales consists of component and material costs, direct labor costs,
warranty costs, overhead related to manufacturing our products and customer
support costs. Cost of sales increased 55% from $1.8 million for the six months
ended June 30, 1998 to $2.8 million for the six months ended June 30, 1999.
This increase was attributable primarily to increased shipments of our planar
products. Gross margins were negative 72% for the six months ended June 30,
1998 and were negative 0.6% for the six months ended June 30, 1999. This
improvement was attributable primarily to increased shipments of our higher
margin planar products and a significant shipment of modular products at
favorable pricing terms.

Research and Development Expenses

Research and development expenses consist primarily of personnel and related
costs associated with our product development efforts. These include costs for
development of products and components, test equipment and related facilities.
Our gross research and development expenses decreased 22% from $2.7 million for
the six months ended June 30, 1998 to $2.1 million for the six months ended
June 30, 1999. This decrease reflects the reassignment of a group of engineers
to a customer support function and the elimination of a senior management
position. Some of our customers have provided funding to offset our development
costs for specific products. Net of these reimbursements, our research and
development expenses decreased 34% from $2.7 million for the six months ended
June 30, 1998 to $1.8 million for the six months ended June 30, 1999.

Selling and Marketing Expenses

Selling and marketing expenses consist of employee salaries and benefits,
consultant fees, and expenses for advertising, travel, technical assistance,
trade shows, and promotional and demonstration materials. Sales and marketing
expenses increased 3% from $470,000 for the six months ended June 30, 1998 to
$482,000 for the six months ended June 30, 1999. We added personnel to our
customer support group as noted above, and increased marketing efforts in
targeting key accounts. Partially offsetting the cost of these efforts was the
reduction of senior management and staff as we relocated our sales function
from Texas to Massachusetts.

General and Administrative Expenses

General and administrative expenses consist primarily of executive,
administrative, human resources, quality assurance, management information
systems and finance related costs. General and administrative expenses were
$1.4 million for both periods. In the six months ended June 30, 1999, we
incurred significant expenditures for recruiting and relocation, and we also
continued spending on our new management information system. However, these
costs were offset by the reassignment of personnel to selling and marketing.

Other Income (Expense)

Other income (expense) consists of interest earned on cash and cash
equivalents offset by interest expense and miscellaneous non-operating
expenses. Total other expense increased 72% from $75,000 for the six months
ended June 30, 1998 to $129,000 for the six months ended June 30, 1999.
Interest income decreased by $159,000 in 1999 as a result of lower invested
cash balances. This decrease in interest income was partially offset by a
decrease in interest expense of $105,000 due to repayment of the outstanding
balance under a bank line of credit.

21
<PAGE>

Income Tax Benefit

In the six months ended June 30, 1998, we have recorded an income tax
benefit in continuing operations to the extent that the loss from continuing
operations offsets income from discontinued operations. No tax benefit has been
recorded in the six months ended June 30, 1999 due to the uncertainty in
deducting current losses against future taxable income.

Years Ended December 31, 1996, 1997 and 1998

Sales

Sales increased $1.5 million from $201,000 in 1996 to $1.7 million in 1997.
Sales increased 38% from 1997 to $2.4 million in 1998. The increase in sales
from 1996 to 1997 was attributable to increased sales of modular products as
well as sales of individual modules. The increase in sales from 1997 to 1998
reflects increased sales of modular products as well as sales from our newly-
introduced planar products.

Cost of Sales

Cost of sales increased by $2.2 million from $147,000 in 1996 to $2.3
million in 1997. Cost of sales increased $4.9 million from 1997 to $7.2 million
in 1998. The increase in cost of sales from 1996 to 1997 was attributable to
increased shipments of modular products as well as shipments of individual
modules. The increase in cost of sales from 1997 to 1998 was attributable to
increased shipments of modular products as well as shipments of our newly-
introduced planar products. Gross margins were 27% in 1996, negative 34% in
1997, and negative 202% in 1998. These negative gross margins resulted from our
strategy of providing substantial discounts to encourage customer trials of our
products and demonstrate the viability of broadband point-to-multipoint
wireless technology. We also developed automated manufacturing processes and
added capacity and personnel in anticipation of future volume orders for our
products. In 1998, we incurred a charge of $1.1 million to write off obsolete
inventory.

Research and Development Expenses

Our gross research and development expenses increased $3.4 million from
$433,000 in 1996 to $3.8 million in 1997. Gross research and development
expenses increased 48% from 1997 to $5.6 million in 1998. The increase from
1996 to 1997 reflected significant investments to develop our modular products
and adapt them for different frequency ranges. The increase from 1997 to 1998
reflected significant investments to develop our planar products and adapt our
modular products for additional frequency ranges. These activities required us
to substantially increase the size of our research and development staff by
52%, from 29 personnel at the end of 1997 to 44 at the end of 1998. Net of
customer reimbursements, our research and development expenses increased $3.3
million from $433,000 in 1996 to $3.7 million in 1997. Net research and
development increased 24% from 1997 to $4.6 million in 1998.

Selling and Marketing Expenses

Selling and marketing expenses increased 89% from $353,000 in 1996 to
$667,000 in 1997. Selling and marketing expenses increased 51% from 1997 to
$1.0 million in 1998. The increase in selling and marketing expenses from 1996
to 1997 was attributable to our increased efforts to expand our presence in the
broadband wireless access marketplace and initiate contacts with various
network system integrators and network service providers. The increase in
selling and marketing expenses from 1997 to 1998 was attributable to our hiring
of additional key personnel to enhance our relationships with major customers
and prospects. From 1996 through 1998, we invested significantly in
installation and demonstration of our equipment at various locations worldwide.

22
<PAGE>

General and Administrative Expenses

General and administrative expenses increased 59% from $1.1 million in 1996
to $1.7 million in 1997. General and administrative expenses increased 56% from
1997 to $2.7 million in 1998. The increase from 1996 to 1997 resulted from our
intensified recruiting efforts. Also, travel costs increased, as our executives
worked to promote the company and increase our recognition in the
telecommunications industry. The increase in general and administrative
expenses from 1997 to 1998 was attributable to the reconfiguration of
facilities to expand our manufacturing and engineering operations. In addition,
we began to implement a new integrated financial and management information
system.

Other Income (Expense)

Total other expense increased 53% from $410,000 in 1996 to $626,000 in 1997.
Total other expense changed from $626,000 in expense in 1997 to $757,000 in
income in 1998. The increase in other expense from 1996 to 1997 was
attributable to additional interest incurred on $3 million of subordinated
notes and additional borrowings under our bank line of credit. The change in
other expense from 1997 to other income in 1998 was primarily due to the
recognition of $997,000 in income related to the termination of a development
contract with a customer. Interest expense in 1998 was $210,000 lower than in
1997 due to repayment of the subordinated notes and bank line of credit.
Interest income increased by $193,000 due to proceeds invested from a private
placement completed in October 1997.

Income Tax Benefit

We have recorded an income tax benefit in continuing operations to the
extent that the loss from continuing operations offsets income from
discontinued operations. For 1997, the income tax benefit from continuing
operations is net of additional tax expense of $264,000, due to an increase in
the valuation allowance recorded against deferred tax assets.

23
<PAGE>

Quarterly Results of Operations

The following table provides, for the periods presented, continuing
operations data derived from our statement of operations in dollars and as a
percentage of sales. The statement of operations data have been derived from
our unaudited financial statements. In management's opinion, these statements
have been prepared on substantially the same basis as the audited financial
statements and include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial information for
the periods presented. This information should be read with our financial
statements and notes appearing elsewhere in this prospectus. The operating
results in any quarter are not necessarily indicative of the results that may
be expected for any future period.

<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31, March 31, June 30,
1998 1998 1998 1998 1999 1999
--------- -------- --------- -------- --------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Sales .................. $ 414 $ 623 $ 410 $ 939 $ 1,177 $ 1,585
Cost of sales .......... 1,047 741 1,261 4,151 1,581 1,198
------- ------- ------- ------- ------- -------
Gross margin (loss) .... (633) (118) (851) (3,212) (404) 387
Operating expenses
Research and
development
expenditures ......... 1,332 1,385 1,443 1,456 917 1,198
Research and
development
reimbursement ........ -- -- (508) (478) (120) (194)
------- ------- ------- ------- ------- -------
Research and
development, net .... 1,332 1,385 935 978 797 1,004
Selling and marketing
...................... 182 288 149 387 318 164
General and
administrative ....... 685 708 666 663 578 838
------- ------- ------- ------- ------- -------
Total operating
expenses ............ 2,199 2,381 1,750 2,028 1,693 2,006
------- ------- ------- ------- ------- -------
Operating loss ......... (2,832) (2,499) (2,601) (5,240) (2,097) (1,619)
Other income (expense)
Interest expense ...... (127) (132) (112) (102) (68) (86)
Income from contract
cancellation.......... -- -- -- 997 -- --
Interest income ....... 118 66 16 33 17 8
------- ------- ------- ------- ------- -------
Total other income
(expense) ........... (9) (66) (96) 928 (51) (78)
------- ------- ------- ------- ------- -------
Loss from continuing
operations before
income taxes .......... (2,841) (2,565) (2,697) (4,312) (2,148) (1,697)
Income tax benefit ..... 191 464 372 135 -- --
------- ------- ------- ------- ------- -------
Loss from continuing
operations ............ $(2,650) $(2,101) $(2,325) $(4,177) $(2,148) $(1,697)
As a Percentage of
Sales(1):
Sales .................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales .......... 252.9 118.9 307.6 442.1 134.3 75.6
------- ------- ------- ------- ------- -------
Gross margin (loss) .... (152.9) (18.9) (207.6) (342.1) (34.3) 24.4
Operating expenses
Research and
development
expenditures ......... 321.7 222.3 352.0 155.1 77.9 75.6
Research and
development
reimbursement ........ -- -- (123.9) (50.9) (10.2) (12.2)
------- ------- ------- ------- ------- -------
Research and
development, net .... 321.7 222.3 228.0 104.2 67.7 63.3
Selling and marketing
...................... 44.0 46.2 36.3 41.2 27.0 10.3
General and
administrative ....... 165.5 113.6 162.4 70.6 49.1 52.9
------- ------- ------- ------- ------- -------
Total operating
expenses ............ 531.2 382.1 426.8 216.0 143.8 126.6
------- ------- ------- ------- ------- -------
Operating loss ......... (684.1) (401.1) (634.4) (558.0) (178.2) (102.1)
Other income (expense)
Interest expense ...... (30.7) (21.2) (27.3) (10.9) (5.8) (5.4)
Income from contract
cancellation ......... -- -- -- 106.2 -- --
Interest income ....... 28.5 10.6 3.9 3.5 1.4 0.5
------- ------- ------- ------- ------- -------
Total other income
(expense) ........... (2.2) (10.6) (23.4) 98.8 (4.3) (4.9)
------- ------- ------- ------- ------- -------
Loss from continuing
operations before
income taxes .......... (686.2) (411.7) (657.8) (459.2) (182.5) (107.1)
Income tax benefit ..... 46.1 74.5 90.7 14.4 -- --
------- ------- ------- ------- ------- -------
Loss from continuing
operations ............ (640.1)% (337.2)% (567.1)% (444.8)% (182.5)% (107.1)%
</TABLE>
- ---------------------
(1) Percentages may not add due to rounding.

24
<PAGE>

Our past sales and results of operations have fluctuated significantly from
quarter to quarter, and we expect these fluctuations to continue in the future.
The following discussion highlights significant events that have impacted our
sales and financial results for the six quarters in the period ended June 30,
1999.

Our sales have increased each quarter beginning in the quarter ended
September 30, 1998. This increase was attributable primarily to increased
shipments of our planar products. Cost of sales has generally increased
primarily as a result of the increase in units shipped. We also incurred a
charge of $1.1 million in the quarter ended December 31, 1998 to write off
obsolete inventory. Before the quarter ended June 30, 1999, we generally had
negative gross margins. These negative gross margins reflect substantial
discounts provided to encourage customer trials of our products and demonstrate
the viability of broadband point-to-multipoint wireless access technology. Our
gross margins improved significantly in each quarter beginning in the quarter
ended March 31, 1999. This improvement was attributable primarily to the
increased shipments of our higher-margin planar products. We had a positive
gross margin of 24% in the quarter ended June 30, 1999. Our total operating
expenses decreased as a percentage of sales in each quarter beginning in the
quarter ended December 31, 1998. This decrease reflects the reduction of senior
management positions as we reorganized our sales, research and development, and
administrative functions in the quarter ended December 31, 1998. In addition,
some of our customers have provided funding to offset our development costs for
specific products. Our operating loss decreased as a percentage of sales in
each quarter beginning in the quarter ended December 31, 1998. The change from
other expense to other income in the quarter ended December 31, 1998 was the
result of the recognition of $1.0 million of other income related to the
termination of a development contract with a customer.

Liquidity and Capital Resources

Since 1997, we have financed our operations primarily through the sale of
redeemable preferred stock and, to a much lesser extent, from cash generated by
our discontinued operations. We have also issued subordinated notes and used
equipment lease financing and bank lines of credit to provide cash. At June 30,
1999, we had $1.0 million of subordinated notes outstanding. We raised net
proceeds of $12.8 million in 1997 and $7.3 million in 1998 from the issuance of
redeemable preferred stock.

At June 30, 1999, we had cash and cash equivalents of $405,000. At June 30,
1999, we had no bank borrowings and did not have a line of credit facility.

Cash used in operating activities for the six months ended June 30, 1999 was
$3.3 million compared to $4.7 million for the six months ended June 30, 1998.
Cash used in operating activities was $8.5 million in 1998, $426,000 in 1997
and $1.8 million in 1996. Cash used in operating activities has primarily
represented funding of our net losses.

Cash used in investing activities for the six months ended June 30, 1999 was
$747,000 compared to $2.6 million for the six months ended June 30, 1998. Cash
used in investing activities was $3.7 million in 1998, and $817,000 in 1997. In
each period, these amounts related primarily to the purchase of equipment used
in our manufacturing and research and development activities. Cash provided by
investing activities was $28,000 in 1996 and resulted from the sale of certain
property and equipment, net of additional equipment purchases.

Cash provided by financing activities for the six months ended June 30, 1999
was $1.8 million compared to cash used by financing activities of $948,000 in
the six months ended June 30, 1998. The financing activities for the six months
ended June 30, 1999 consisted of the issuance of subordinated notes and term
notes collateralized by equipment. Cash provided by financing activities was
$4.5 million in 1998, and $10.3 million in 1997. In each of these years,
financing activities consisted primarily of the issuance of redeemable
preferred stock. Cash provided by financing activities was $1.9 million in 1996
and resulted from borrowings under a bank line of credit and proceeds from the
issuance of term notes.

Our future cash requirements will depend upon a number of factors, including
the timing and level of research and development activities and sales and
marketing campaigns, and our ability to significantly increase

25
<PAGE>

our manufacturing volumes. We believe that our cash and cash equivalent
balances and the proceeds from this offering will provide sufficient capital to
fund our operations for at least 12 months. Thereafter, we may require
additional capital to fund our operations. In addition, from time to time we
evaluate opportunities to acquire complementary technologies or companies.
Should we identify any such opportunities, we may need to raise additional
capital to fund the acquisitions and our operations. There can be no assurance
that financing will be available to us on favorable terms or at all.

Year 2000 Issues

Many currently installed computer systems, software products and other
devices do not properly recognize dates after December 31, 1999. This "year
2000" problem could result in product failures, system failures or
miscalculations causing disruptions of operations. If the computer systems,
software products and devices upon which we rely do not correctly process dates
after December 31, 1999, our business could be adversely affected.

State of Readiness--Products. We have reviewed all of our products and their
components to determine whether they are date-sensitive. Based on our review,
we do not believe there are any date-sensitive features in any of our products
or their components. Accordingly, we believe our products, as well as our
inventories of product components, are year 2000 compliant.

State of Readiness--Third Parties. Because we depend on third parties, such
as single source suppliers, network system integrators and contract
manufacturers, we are assessing their year 2000 compliance. We have circulated
written surveys to our material component suppliers regarding their internal
year 2000 compliance. We have received and reviewed completed surveys from a
majority of our component suppliers. We are pursuing the suppliers that have
not responded to our survey for more information regarding their year 2000
compliance. The suppliers who responded to our survey stated that they believe
they are year 2000 compliant or will be year 2000 compliant by December 31,
1999. We have also had discussions regarding year 2000 compliance with our
network system integrator customers and selected third-party manufacturers we
may engage, but have not received definite assurances that year 2000 problems
will not materially affect their ability to do business with us. We do not
believe we will know by December 31, 1999 the year 2000 readiness of all third
parties with which we do business.

State of Readiness--Internal Systems. We have completed our evaluation of
all of our internal systems for year 2000 compliance. These systems include our
information technology systems, such as our financial systems, enterprise
resource planning systems, network hardware, server and PC operating systems,
and core software applications, including our design software. These systems
also include our non-information technology systems, such as our telephone
switches, security systems, and office and facilities equipment. In most cases,
we obtained these systems from third parties, and our evaluation consisted of
inquiries made to vendors to determine whether their products were year 2000
compliant. As a result of our evaluation, we replaced desktop computers and
upgraded and tested our network software and several software applications. We
believe that our critical internal systems are now year 2000 compliant.

Costs of Remediation. We estimate that the total costs that we incurred in
order to comply with year 2000 requirements was approximately $30,000. This
amount represents only our costs of upgrading or replacing software and
hardware ahead of schedule in order to obtain year 2000 compliant versions. We
do not separately track the internal costs of our year 2000 remediation
efforts. These costs consist primarily of payroll expenses for our information
systems personnel and selected research and development personnel.

Risks and Contingency Plans--Products. Despite our review, our products may
contain year 2000 defects or use components with year 2000 defects. Our
contingency plan is to re-design our products to be year 2000 compliant or to
use year 2000 compliant components. This redesign process could be difficult
and time-consuming, and the associated costs may be material. If components are
not year 2000 compliant, we would have to replace our inventories of those
components, and compliant alternatives may not be readily available.

26
<PAGE>

Moreover, we have represented to our customers that our products are year 2000
compliant. If our products are not year 2000 compliant, we could be liable for
the damages caused by our erroneous representation, and we could also lose
sales. These liabilities or lost sales could be significant, which could have a
material adverse effect on our business.

Risks and Contingency Plans--Third Parties. We do not know the year 2000
readiness of our material suppliers that have not completed our survey.
Moreover, the suppliers who returned our surveys may have been mistaken or
untruthful in responding to the survey. If year 2000 problems disrupt the
operations of our suppliers, we may be unable to obtain necessary components
for our products. Because we lack alternative suppliers for many components, we
are unable to develop contingency plans. Similarly, year 2000 problems that
affect our network system integrators, or their network service provider
customers, could cause them to reduce or defer purchases or deployments of our
products. Because we depend on and have little or no control over our network
system integrators, we are unable to develop contingency plans. We cannot
predict the impact that year 2000 problems will have on our business
relationships with other third parties, and do not have specific contingency
plans with respect to those third parties. These problems could have a material
adverse effect on our business.

Risks and Contingency Plans--Internal Systems. Because we believe our
internal systems are year 2000 compliant, we have not developed and do not
intend to develop any specific contingency plans for year 2000 problems that
may arise with these systems. If we encounter a year 2000 problem with a
critical system, the problem could severely disrupt our operations, damage our
reputation, distract us from planned business activities and cause us to incur
significant expenses to remedy the problem. These or other consequences of any
year 2000 problem could have a material adverse effect on our business.

Recent Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ("SFAS No. 131"), which establishes
standards for reporting information about operating segments in interim and
annual financial reporting. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
SFAS No. 131 is effective for fiscal years beginning after December 15, 1997.
SFAS No. 131 did not have a material effect on our financial statements.

In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, Accounting for the Cost of Computer Software
Developed or Obtained for Internal Use (SOP 98-1). SOP 98-1 is effective for
fiscal years beginning after December 15, 1998 and provides guidance over
accounting for computer software developed or obtained for internal use
including the requirement to capitalize specified costs and amortization of
such costs. We have adopted the provisions of SOP 98-1 for our six month period
ended June 30, 1999.

In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities (SFAS No.
133), which establishes accounting and reporting standards for derivative
instruments and hedging activities. The statement requires recognition of all
derivatives at fair value in the financial statements. FASB Statement No. 137,
Accounting for Derivative Instruments and Hedging Activities Deferral of the
Effective Date of FASB Statement No. 133, an amendment of FASB Statement No.
133, defers implementation of SFAS No. 133 until fiscal years beginning after
June 15, 2000. We have reviewed SFAS No. 133 and believe that, upon
implementation, the standard will not have a significant effect on our
financial statements.

27
<PAGE>

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 subject to risks and
uncertainties. Actual results could vary materially as a result of a number of
factors, including those set forth in "Risk Factors."

As of June 30, 1999, we had cash and cash equivalents of $405,000.
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 subject 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 June 30, 1999 rates would cause the fair
value of these short-term investments to decline 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.

We do not own any material equity investments. Therefore, we do not
currently have any direct equity price risk.

Currently, all sales to international customers are denominated in United
States dollars and, accordingly, we are not currently exposed to foreign
currency exchange rate risks.

28
<PAGE>

BUSINESS

Overview

We develop and supply broadband wireless access equipment used by network
service providers to deliver integrated voice, video and data services to
business and residential customers. Our products provide a high performance
alternative to other technologies, such as traditional copper wires, digital
subscriber lines and cable modems, that connect the network service provider
and the subscriber. Our products enable high-speed Internet access, electronic
commerce, remote access, telecommuting and extensions of corporate networks to
branch offices. Using our products, network service providers can enter markets
quickly and economically, and then expand their networks as the number of
subscribers grows.

Our product line consists of wireless transmitter and receiver equipment
that is installed outdoors in a cell-based arrangement. Each cell consists of a
hub that transmits and receives network traffic to and from CPE units installed
at multiple subscriber locations. This cell-based arrangement is commonly
referred to as point-to-multipoint architecture.

<TABLE>
<S> <C>
. American Wireless . Korea Telecom

. BellSouth Movicom . Maxlink Communications

. Central Texas Communications . Nexsatel

. Convergence Communications . South Central Telecom

. Formus . Telenordia

. Gateway Telecom . Tri-Corners Telecom

. Home Telephone
</TABLE>

Industry Background

The Growing Demand for Broadband Communications

The amount of data being transmitted over the Internet and private
communications networks is increasing rapidly due to the growing number of
users accessing these networks and the increasing range of data-intensive
activities for which they use these networks. Businesses increasingly use the
Internet to enhance their reach to customers and suppliers with applications
such as electronic commerce, supply chain management, Web hosting, global
marketing and customer support. Businesses are also using the Internet to
create data networks among corporate sites, remote offices and telecommuters in
order to facilitate employee communications, e-mail, file sharing, and research
and analysis. Consumers use the Internet to communicate, collect and publish
information, conduct retail purchases and access online entertainment. These
network-based business and consumer activities require the transmission of
increasingly large amounts of data quickly and reliably. As a result, broadband
access is becoming increasingly important.

Deregulation and Competition are Driving Deployment of Broadband Access
Technologies

Global telecommunications deregulation is creating significant competition
among providers of advanced communications services, thereby accelerating the
deployment of broadband access technologies. In the United States, incumbent
telephone companies such as Ameritech, Bell Atlantic, BellSouth, GTE, Pacific
Bell, SBC

29
<PAGE>

Communications and US West were, until recently, the exclusive providers of the
copper wire connections between their network backbones and subscribers,
commonly known as the "last mile." The federal Telecommunications Act of 1996
intensified the competitive environment in the United States by requiring
telephone companies to lease portions of their networks, including the last
mile, to competing carriers. Additionally, telephone companies and cable
operators are seeking to expand their service offerings by entering each
others' markets. Similar deregulation and competition are occurring in many
regions of the world. To compete in this environment, many network service
providers seek to differentiate themselves and maximize revenue per subscriber
by offering integrated voice, video and data services, which require broadband
access.

Developing Nations are Installing Communications Infrastructure

In many parts of the world, communication services are either inadequate or
non-existent due to the lack of existing infrastructure. A number of developing
nations have privatized their state-owned telecommunications monopolies and
opened their markets to new network service providers. In constructing new
networks, many network service providers deploy broadband access technologies
to expand the services they offer and maximize revenue.

Traditional Network Access Solutions Have Limitations

To meet the growing demand for high-speed data transmission, many network
service providers have installed high-speed fiber optic transmission equipment,
switches and routers in the Internet backbone and in interoffice networks.
While the network backbone is capable of delivering data at very high speeds, a
bottleneck exists in the last mile, which was originally built to provide
traditional analog telephone service. Along the fiber optic network backbone,
data moves at speeds up to 10 billion bits per second, or 10 Gbps. Subscribers
have traditionally connected to the backbone using dial-up analog modems, which
transmit data at rates up to 56.6 thousand bits per second, or 56.6 Kbps, or
using integrated service digital network, or ISDN, modems, which transmit data
at rates up to 128 Kbps. At these modem speeds, several minutes are often
required to access a media-rich Web site, and several hours may be required to
transfer or download large files. This bottleneck frustrates subscribers and
limits the capability of network service providers to satisfy the demand for
high-speed Internet access, multimedia entertainment, real-time telecommuting
and branch office inter-networking. Additionally, the continued growth in both
the number of analog modem users and their time spent connected to the Internet
compounds the congestion experienced on many networks.

Where subscribers require higher-speed connections, network service
providers have traditionally deployed copper-based T1 services in the United
States and E1 services internationally. A T1 line is a high-capacity, dedicated
telecommunications line which can support data transmission rates of up to 1.5
million bits per second, or 1.5 Mbps, which is 26.5 times the speed of analog
modems. An E1 line can support data transmission rates of up to 2.0 Mbps, or 35
times the speed of analog modems. Although T1 and E1 services have met the
broadband access needs of many large businesses, these services are either
unavailable to or prohibitively expensive for many small businesses, remote
offices, telecommuters and consumers.

Alternative Access Solutions are Emerging

Because analog and ISDN modem technologies do not satisfy the high-speed
access needs of many subscribers, and T1 or E1 access is often unavailable or
prohibitively expensive, alternative access solutions have been developed such
as:

DSL. Digital subscriber line, or DSL, technology improves the data
transmission rate of a telephone company's existing copper wire network.
However, most deployments offer either high-speed asymmetrical services or
slower symmetrical services. Asymmetrical data rates provide higher
transmission speeds from the network to the subscriber and lower speeds from
the subcriber to the network. Symmetrical data rates provide equal transmission
speeds to and from the subscriber. DSL transmission rates are limited by the
length and quality of available copper wires.

30
<PAGE>

Cable. Two-way cable modems enable asymmetrical data services to be
delivered over a network originally designed to provide television service to
residential subscribers. Cable networks connect to the home using coaxial
cable, which has greater transmission capacity than the copper wires used by
telephone companies. However, these networks often are costly to upgrade for
two-way data services.

Fiber. Fiber offers the highest data transmission rate of any access
solution, but is the most costly to deploy. Corporations and institutions use
fiber connections where critical operations require such data rates.

Satellite. Broadband satellite solutions enable asymmetrical, 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.

Point-to-Point Wireless. Point-to-point wireless technology enables
symmetrical data services using a dedicated link between a subscriber and a
network. However, the network service provider must install dedicated equipment
at each end of a link for each new subscriber. Therefore, economies of scale
are limited.

Broadband Point-to-Multipoint Wireless. Broadband point-to-multipoint
wireless technology provides higher-speed symmetrical access than all other
alternative broadband solutions except high-cost dedicated links using fiber or
point-to-point wireless. Broadband point-to-multipoint wireless access
technology also offers the following advantages:

. Rapid Deployment. Network service providers can initiate service quickly
because they are not required to install copper wire, cable or fiber.

. Low-cost Market Entry. Network service providers can initiate service
economically with one hub and a small number of CPE units.

. Economies of Scale. Network service providers can add subscribers
rapidly and cost-effectively, as each installed hub can support many CPE
units.

[CHART SHOWING BROADBAND ACCESS DATA RATES]

Mass Deployment of Broadband Point-to-Multipoint Solutions Presents Challenges

Broadband point-to-multipoint wireless access equipment typically must be
tailored for frequency requirements that vary from country to country and
within each country. A further complication by the lack of

31
<PAGE>

universal standards for equipment specifications and protocols. As a result,
suppliers of broadband point-to-multipoint wireless access equipment face
challenges in achieving economies of scale and developing cost-effective
products suitable for mass deployment.

Conventional industry practice is to build broadband point-to-multipoint
wireless access equipment using multiple modules connected by small metal pipes
and wires. This approach requires considerable hand assembly and tuning and is
not suited to automated manufacturing. Therefore, assembly is often outsourced
to low-cost labor environments, which greatly reduces the ability to deliver
tailored products in a timely fashion.

An opportunity exists to substantially reduce the cost of broadband point-
to-multipoint wireless access equipment by integrating the functionality of
multiple conventional modules onto printed circuit boards, thereby enabling the
use of low-cost manufacturing processes. However, major technical difficulties
have plagued the development and production of printed circuit boards that
operate at high frequencies and at high data rates because they typically
generate distorted or unwanted signals.

The Telaxis Solution

Our solution consists of two product families that enable both the adoption
and growth of broadband wireless access for a diverse range of markets and
applications worldwide. Our modular products address a network service
provider's need for rapid time-to-market. Our planar products address a network
service provider's need for cost-effective mass deployment.

Modular products for rapid time-to-market

Our modular products feature a flexible architecture that enables us to
deliver a tailored solution in as little as four to six weeks for network
service provider trials and initial stages of deployment. This allows network
service providers using our modular products to be among the first to offer
broadband wireless services in new markets. We are able to achieve rapid
turnaround for the following reasons:

. Extensive Design Expertise and Database. Our 17 years of experience in
millimeter-wave design and manufacturing provides us with an extensive
database of circuit designs that we can readily simulate and modify.

. Flexible Platform. We have developed a flexible multiple module
architecture that enables us to modify our products rapidly to address
different frequencies, customer interfaces and performance requirements.

. Proven Modules. Through successful demonstrations in more than 40
customer trials over the past four years, we have developed a large
number of transmitters, receivers and other modules that we can quickly
reproduce in our automated manufacturing facility.

. Integrated Facilities. Our integrated design and manufacturing
facilities allow us to produce a custom circuit from concept to
completion in a matter of days.

Planar products for cost-effective mass deployment

Large-scale commercial buildouts by network service providers require cost-
effective products. Our planar products integrate the functionality of multiple
conventional modules onto printed circuit boards, thereby enabling the use of
low-cost automated manufacturing processes. We believe we are the only provider
of broadband point-to-multipoint wireless access equipment that has
successfully implemented these manufacturing techniques. As a result, we are
able to offer products suitable for mass deployment with the following
benefits:

. Lower cost

. Higher performance

. Greater reliability

. Smaller size

32
<PAGE>

Strategy

Our objective is to be the leading worldwide provider of broadband point-to-
multipoint wireless access equipment. Our strategy to accomplish this objective
is to:

Penetrate the global market with our two product families. Our strategy is
to secure new customer relationships by delivering tailored products to network
system integrators and network service providers more rapidly than our
competitors. Once network service providers and network system integrators use
our modular products in successful trials and initial deployments, we are
strategically positioned to sell them our cost-effective planar products for
mass deployment.

Capitalize upon our early customer acceptance. We shipped our first
broadband point-to-multipoint access prototype in 1995. Our equipment has been
successfully demonstrated in more than 40 customer trials worldwide. We believe
this experience is unmatched by any other supplier. As a result of these
trials, our products have been selected, either directly or by network system
integrators, for initial commercial deployment by many network service
providers. We intend to build upon this acceptance of our products to become
the primary provider of broadband point-to-multipoint wireless access equipment
to these and other network service providers as they deploy commercial
buildouts.

Expand strategic relationships with network system integrators. We believe
successful deployment of broadband wireless access equipment requires close
working relationships with network system integrators. We have established
relationships with Newbridge Networks, Motorola and Hughes Network Systems
Europe, that include joint marketing, sales development and supply agreements.
Our relationships with key industry leaders offer us insight into market
requirements and deployment trends, which shapes development of our long-term
product strategy. We intend to build upon our existing relationships and
establish new relationships with network system integrators to increase
distribution of our products and build brand awareness.

Reduce product costs while increasing performance and adding
functionality. We continue to reduce the cost and improve the reliability of
our planar products by integrating various components directly into the circuit
board design. We are also developing a CPE unit with an antenna integrated into
its die-cast housing, which will significantly reduce product cost and size. In
order to reduce our customers' installation costs, we are developing products
with simple cabling and mounting hardware.

Leverage technology partnerships. We have established a relationship with
the University of Massachusetts to design proprietary millimeter-wave
integrated circuits to achieve higher levels of integration and reduce costs.
We have a joint design and manufacturing relationship with California Amplifier
to combine our complementary expertise in designing and manufacturing low-cost
wireless products. We intend to continue to partner with other technology
developers to maintain and enhance our technology leadership position.

Establish brand identity. We intend to establish brand awareness with
network service providers and to build upon our position in the broadband
point-to-multipoint wireless access equipment market. Historically, our
products have been sold primarily under private label by prominent network
system integrators. In the future, we will increasingly brand or co-brand our
products to build name recognition. In addition, we plan to invest in a broad
range of marketing programs, including participation in trade shows,
advertising in print publications, direct marketing to major customers and Web-
based marketing.

Products

We have two product families, consisting of modular products which can be
rapidly tailored for new markets and planar products for cost-effective mass
deployment. Our modular and planar product families consist of hub and CPE
equipment that is installed outdoors in a cell-based arrangement. Our products
provide capacity for data rates several times the rates supported by today's
modem technology. We believe that the highest symmetrical data rate available
with today's point-to-multipoint modem technology is 35 Mbps. Our products
operate at various frequencies ranging from 24 gigahertz, or GHz, to 44 GHz,
and are available with a range of interfaces, including hybrid fiber coax, or
HFC, and digital audio visual counsel, or DAVIC.

33
<PAGE>

CPE Products.

We have concentrated our development efforts on the CPE unit. Because
multiple CPE units are supported by each hub, cost reduction of the CPE unit
has the most significant impact on the ability of a network service provider to
deploy broadband access services to its customers on a cost-effective basis.
Our modular CPE units address our customers' need for rapid time-to-market, and
our planar CPE units address their need for cost-effective mass deployment.

Modular CPE. Our modular CPE unit can be quickly adapted to meet the
individual frequency, performance and interface requirements of a network
service provider. This product is currently available with DAVIC or HFC
interfaces. [Photograph of our modular CPE]

Planar CPE. Our planar CPE unit is a highly integrated unit using single-
board, planar architecture that enables highly automated, cost-effective
manufacturing. These units enable network service providers to lower their
costs of deployment in commercial service buildouts. This product is currently
available with a DAVIC interface and we are developing an HFC interface.
[Photograph of our planar CPE]

We are also developing a planar CPE unit that incorporates a proprietary
antenna and is designed to achieve significant size and cost reductions. This
CPE unit is designed to address the low-cost, high volume consumer market
segment to the extent it emerges.

Hub Products

Each hub provides two-way connectivity to multiple CPE units out to a range
of approximately two to three miles.

Modular hub. Our modular hub can be quickly adapted to meet the performance
and interface requirements of a network service provider. This hub has the
flexibility to accommodate various combinations of transmitter or receiver
modules within a single housing. Antennas can be included within the housing or
attached externally. This hub is available with DAVIC or HFC interfaces.
[Photograph of our modular hub]

Planar hub. Our planar hub consists of separate transmitter and receiver
units that are deployed together to provide two-way connectivity. The receiver
unit works in conjunction with one or more transmitter units to form a hub. The
planar hub unit enables network service providers to lower their costs of
deployment in commercial service buildouts. The planar hub is available with
DAVIC or HFC interfaces. [Photograph of our planar hub]

Technology

Our 17 years of experience in millimeter-wave technology is the foundation
for our capability in the broadband point-to-multipoint wireless market. Our
products transmit and receive signals at various frequencies ranging from 24
GHz to 44 GHz and interface with modems that operate at frequencies below 2
GHz. A key element of our competitive advantage stems from our ability to
integrate millimeter-wave and microwave semiconductor devices and other
electronic components onto a single printed circuit board inside a die-cast
housing which is a functioning element of the overall product. The result is an
integrated outdoor unit using planar architecture that enables highly
automated, cost-effective manufacturing.

Millimeter-wave technology uses frequencies that are ten times higher than
microwave technology, resulting in electronic components that are ten times
smaller. The higher frequency causes greater signal interference between
components, depending on their location and spacing on the circuit board. The
small size of the components and the need to place them precisely on the
circuit board present challenges for the design, development and manufacturing
of millimeter-wave products.

Historically, hand tuning of each unit was required to prevent the products
from transmitting excessively distorted or unwanted signals that could
interfere with other radios or electronic equipment, which is prohibited

34
<PAGE>

by governmental agencies worldwide. Our years of experience in developing
products that operate at high frequencies enable us to minimize excessively
distorted or unwanted signals and eliminate the need for hand tuning during
the manufacturing process. Furthermore, our automated processes are highly
repeatable, thereby minimizing mechanical misalignments in the placement of
components onto printed circuit boards. These misalignments contribute
directly to the creation of distorted and unwanted signals.

In order to integrate millimeter-wave and microwave technologies into an
outdoor unit using planar architecture, we have developed additional expertise
in several areas, including:

. Micro-controller adaptation. We design interface circuits and software
to incorporate micro-controllers into our products. These micro-
controllers provide our products a high degree of functionality,
including automatic adaptation to changing operating environments.

. Antennas. We design antennas and other sophisticated waveguide-based
components to reduce the size, cost and complexity of the packaging of
our products, while improving performance.

. Reference oscillators. We design and integrate reference oscillators
onto our printed circuit boards to minimize signal distortion and to
reduce cost.

. Microwave translation circuits. We design and integrate microwave
translation circuits enabling our products to interface with various
modems.

. Power supplies. We have a development program underway to integrate
power supplies onto our printed circuit boards to reduce cost and
increase reliability.

. Material selection and mechanical assemblies. We select materials and
design mechanical assemblies using the die-cast housing as a functional
part of the product. This has enabled us to minimize unwanted signal
interference while protecting our electronic components from damage.

The accompanying photograph contrasts the physical architecture of our
planar and modular CPE units.

[Photograph contrasting our planar and modular CPE units]

Customers

We sell our products primarily to network system integrators, including
Newbridge and Motorola Networks. The network system integrators in turn
develop complete broadband network solutions for their customers, the network
service providers. Occasionally, we sell our products directly to network
service providers. Our equipment has been successfully demonstrated in more
than 40 customer trials worldwide over the last four years. We believe this
experience is unmatched by any other supplier of broadband point-to-multipoint
wireless access equipment. As a result of these trials, we have been selected,
either directly or by network system integrators, to supply equipment for
commercial deployment by network service providers, including:

<TABLE>
<S> <C>
. American Wireless . Korea Telecom

. BellSouth Movicom . Maxlink Communications

. Central Texas Communications . Nexsatel

. Convergence Communications . South Central Telecom

. Formus . Telenordia

. Gateway Telecom . Tri-Corners Telecom

. Home Telephone
</TABLE>

For the six months ended June 30, 1999, sales to Newbridge Networks
represented 70% of sales and sales to Convergence Communications represented
22% of sales. For the year ended December 31, 1998, sales to Newbridge
Networks represented 30% of sales, sales to Convergence Communications
represented 26% of sales, and sales to Nexsatel, an affiliate of Formus,
represented 12% of sales.

35
<PAGE>

Network System Integrator Relationships

We have established relationships with three network system integrators to
facilitate the deployment of our products and to meet the requirements of
network service providers. In June 1999, all three of these network system
integrators introduced solutions that include our products at the Supercomm
trade show in Atlanta.

. Newbridge Networks. We have entered into product development and
reseller agreements with Newbridge Networks. Through this relationship,
our equipment has been evaluated in trials in North America, South
America, Asia and Europe. As a result of these trials, Newbridge
Networks has selected our equipment for commercial deployment in Canada,
Argentina and the United States.

. Motorola. Motorola has deployed our equipment in trials in North America
and Asia. We are currently developing equipment for commercial
deployment in the United States.

. Hughes Network Systems (HNS) Europe. We have entered into a joint
marketing and sales agreement with HNS Europe. Through this
relationship, our equipment has undergone trials in North America and
Europe.

Manufacturing

Conventional industry practice is to build point-to-multipoint wireless
access equipment using multiple modules connected by small metal pipes and
wires. This approach has evolved from the more mature microwave industry, where
hand assembly and hand tuning is common due to low volume production. We have
developed extensive expertise in automated assembly and testing of printed
circuit board, planar products that operate at frequencies many times higher
than those used in the microwave industry. We have focused this experience on
the development of manufacturing strategies for high-volume production of cost-
effective broadband wireless access products for mass deployment.

Concurrent process development. We develop our automated manufacturing
processes concurrently with the design and development of our millimeter-wave
products. These concurrent activities facilitate the design of products that
can be manufactured with very high tolerances, thereby minimizing unwanted and
distorted signals and eliminating the need for hand tuning.

Automated component assembly. Our automated manufacturing technology enables
the repeated, high-precision placement and attachment of small chips, and the
bonding of wires between the chips and the printed circuit board. In the
production of millimeter-wave devices, this high precision is the critical
requirement to minimize distorted and unwanted signals and to achieve
acceptable performance.

Final assembly and test. Our final assembly and automated test facility is
designed for pilot production runs ranging from several hundred to a few
thousand units. We use these pilot production runs to validate our
manufacturing processes in a carefully controlled environment at our
facilities. For high-volume production, we plan to supplement our manufacturing
capacity by establishing a relationship with a development and manufacturing
partner.

Marketing, Sales and Customer Service

Marketing

The global communications equipment industry is dominated by a limited
number of network system integrators. As a result, we focus our marketing
efforts on network system integrators and their customers, the network service
providers. Our marketing activities target technical experts and product
managers who heavily influence purchase decisions. Additionally, we coordinate
with our network system integrator partners to support their marketing
programs. We regularly provide them with design information, technical data and
promotional material to enable their sales forces to promote our products.

36
<PAGE>

We build brand awareness through several promotional programs, including the
following:

. Participation in trade shows

. Speaking at industry forums

. Web-based communication and promotion

. Publication of press releases

Sales

Our sales approach is to start by building a technical relationship with the
network system integrator. Typically, a senior executive from our technical
organization initiates discussions regarding a potential partnership. We then
assign an account manager to coordinate our efforts and focus our resources on
developing the relationship. This account manager aligns our engineering teams
and managers with their counterparts in the network system integrator's
organization to provide highly responsive technical and operational support
during trials of our equipment. After successful demonstration of our products,
we often adapt them for incorporation into the network system integrator's
broadband point-to-multipoint wireless systems. We support the network system
integrator in trials with network service providers. The objective of these
trials is the adoption of our equipment for mass deployment.

Customer Service

A key element of our sales approach is to be highly responsive to customers'
needs. We provide customer service in the following areas:

. System engineering. We provide engineering support for system trials,
site surveys, specification development, integration of third-party
equipment, installation and follow-on test support.

. Problem resolution. We provide prompt responses to customer problem
reports, including telephone support, field service, and repair or
replacement of equipment.

. Field support. Our customer service personnel are on call to provide
global field support. We provide field support primarily for trials and
initial deployments.

. Repairs. We maintain a repair center staffed with technicians who work
directly with our quality assurance team to analyze failures and repair
equipment.

Currently, we conduct all customer support activities from our South
Deerfield, Massachusetts headquarters. As network buildouts progress, we intend
to establish support centers closer to our major customer deployments.

Research and Development

The goal of our development activities is to reduce the cost and increase
the functionality of our products, while adapting them to the frequency and
interface specifications required for new markets. Our experience in
millimeter-wave and microwave technologies enables us to develop cost-effective
broadband point-to-multipoint wireless access products. We continue to advance
our core competencies and to extend these core competencies to meet rapidly
changing market needs. We are pursuing several development projects, including:

. Adapting our products to additional frequencies

. Developing additional modem interfaces

. Integrating microwave components into planar architectures

. Improving our products to reduce deployment costs

. Integrating the antenna into the die-cast housing

. Developing proprietary semiconductor devices

37
<PAGE>

Our multidisciplinary research and development team consists of engineers
and scientists whose specialities include microwave engineering, millimeter-
wave engineering, electrical engineering, mechanical engineering, chemistry,
physics, computer science and materials science. We also maintain close working
relationships with the University of Massachusetts and various technical
organizations.

Competition

The rapid technological developments within the network equipment industry
result in frequent changes to our group of competitors. The principal
competitive factors in our market include:

. Product availability

. Relationships with network system integrators and network service
providers

. Product performance, features and inter-operability

. Product development speed

. Price

. Ability to manufacture and distribute products

. Technical support and customer service

. Brand recognition

Intellectual Property

Our success depends to a significant degree upon the preservation and
protection of our product and manufacturing process designs and other
proprietary technology. Although we employ a variety of intellectual property
in the development and manufacturing of our products, we believe that none of
our intellectual property is individually critical to our current operations.
However, taken as a whole, we believe our intellectual property rights are
significant. To protect our proprietary technology, we generally limit access
to our technology, treat portions of our technology as trade secrets and obtain
confidentiality or non-disclosure agreements from persons with access to our
technology. To date, we have been granted two United States patents, one of
which has been issued. In addition, we have two United States patent
applications pending. We have counterpart patents pending in three
international jurisdictions. We also rely on protections available under
copyright and trademark law.

Our intellectual property rights, and our ability to enforce those rights,
may be inadequate to prevent others from using our technology or substantially
similar technology they may independently develop. The use of that technology
by others could eliminate any competitive advantage we have, cause us to lose
sales and otherwise harm our business. A significant portion of our proprietary
technology is know-how, and employees

38
<PAGE>

with know-how may depart before transferring their know-how to other employees.
Moreover, the laws of other countries where we market our products may afford
even less protection for our intellectual property. If we resort to legal
proceedings to enforce our intellectual property rights, the proceedings could
be burdensome and costly, even if we were to prevail.

Facilities

We lease approximately 78,000 square feet of facilities comprised of three
buildings in South Deerfield, Massachusetts. The term of the lease for our
primary facility expires in September 2000. We also lease approximately 4,200
square feet in Richardson, Texas. We believe that our existing facilities are
adequate to meet our current requirements and that suitable space will be
available as needed.

Employees

On June 30, 1999, we had 130 employees in our continuing operations,
including approximately 56 in manufacturing, 42 in engineering, 9 in quality
assurance, 7 in sales, marketing and customer service and 16 in finance and
administration. We are not a party to any collective bargaining agreement. We
believe that relations with our employees are good.

Legal Proceedings

We are not currently a party to any material legal proceedings.

39
<PAGE>

MANAGEMENT

Directors and Executive Officers

Our directors, executive officers and key employees as of September 27, 1999
are as follows:

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Albert E. Paladino, 67 Chairman of the Board of Directors
Sc.D.(1)...............
John L. Youngblood, 58 President, Chief Executive Officer and Director
Ph.D.(1)...............
Mervyn N. FitzGerald.... 54 Senior Vice President, Operations
Ransom D. Reynolds...... 56 Senior Vice President, Business Development
Dennis C. Stempel....... 36 Vice President, Chief Financial Officer and Treasurer
Kenneth R. Wood(2)...... 45 Vice President, Engineering
Robert F. Browning(2)... 42 Vice President, Manufacturing
Allan M. Doyle, 69 Director
Jr.(1)(3)..............
Robert C. Fleming(1).... 43 Director
James W. Fordyce(3)..... 56 Director
David A. Norbury........ 48 Director
Matthew S. Robison...... 38 Director
</TABLE>
- ---------------------
(1) Member of the compensation committee
(2) Key employee
(3) Member of the audit committee

Dr. Albert E. Paladino has been our Chairman of the Board since January 1992
and a director since March 1984. Since December 1998, he has been a private
investor. He was a General Partner of Advanced Technology Ventures, a venture
capital firm, from 1981 through 1998. He is also a member of the board of
directors of TranSwitch Corporation, a publicly-traded developer of
semiconductor solutions for the communications markets, RF Micro Devices, a
publicly-traded manufacturer of radio frequency integrated circuit components,
and Helioss Corporation, a developer of high-capacity millimeter-wave
communications equipment. Dr. Paladino holds a B.S. and an M.S. in engineering
from Alfred University and an Sc.D. in materials science from the Massachusetts
Institute of Technology.

Dr. John L. Youngblood has been our Chief Executive Officer and a director
since June 1992, and our President since March 1993. From August 1991 to June
1992, he was a management consultant. From May 1991 to August 1991, Dr.
Youngblood served as Executive Vice President of IMO Industries, a manufacturer
of analytical and optical instruments, electronic and mechanical controls, and
power transmission products. From January 1985 to May 1991, he held various
positions, including Chairman, Chief Executive Officer and President, at
Kollmorgen Corporation, a publicly-traded manufacturer of high-performance
electronic motion control products. He holds a B.S. in electrical engineering
from the University of Texas at Arlington, and both an M.S. and a Ph.D. in
electrical engineering from Oklahoma State University.

Mervyn N. FitzGerald has been our Senior Vice President, Operations since
September 1999. From September 1996 to September 1999, Mr. FitzGerald served as
Vice President, Operations and Customer Service for the broadband wireless
access division of Nortel Networks, a provider of communications products and
services. From February 1995 to September 1996, he served as General Manager of
AlliedSignal Canada, a Canadian subsidiary of Allied Signal Inc., a diversified
aerospace manufacturer. From February 1992 to February 1995, he served as Vice
President, Operations for C-MAC Industries, a contract manufacturing company.
Mr. FitzGerald holds a B.S. in applied nuclear and solid state physics from
Polytechnic of the South Bank in London, England.

Ransom D. Reynolds has been our Senior Vice President, Business Development
since February 1993. From May 1987 to February 1993, Mr. Reynolds served as
Director of the electro-optical division of Kollmorgen Corporation. He holds a
B.S. in physics from Southwest Texas State University and an M.B.A. from the
University of Houston.

40
<PAGE>

Dennis C. Stempel has been our Vice President, Chief Financial Officer and
Treasurer since April 1999. From November 1998 to April 1999, Mr. Stempel
served as our Director of Finance. From April 1996 to November 1998, he served
as a controller at Pratt & Whitney, a division of United Technologies
Corporation and a manufacturer of aircraft engines and space propulsion
systems. From March 1993 to April 1996, he served as the Director of Finance
for Anocoil Corporation, a manufacturer of lithographic printing plates. He
worked for Coopers & Lybrand from 1989 to 1993, including serving as a
certified public accountant from 1992 to 1993. Mr. Stempel holds a B.S. in
accounting from the University of Massachusetts.

Kenneth R. Wood has been our Vice President, Engineering since December
1997. From April 1990 to December 1997, he was our Senior Microwave Engineer
and Program Manager. Mr. Wood holds a B.S. in electrical engineering from the
University of Pretoria and an M.S. in microwaves from the University of London.

Robert F. Browning has been our Vice President, Manufacturing since July
1996. From December 1992 to July 1996, he served first as our manager and then
as our Director of Manufacturing. Mr. Browning holds a B.S. in electrical
engineering from Western New England College.

Allan M. Doyle, Jr. has been a director since March 1984. From 1964 to May
1996, Mr. Doyle served as a member of the board of directors of Kollmorgen
Corporation. Before his retirement in 1990, he served as Vice Chairman of the
board of directors of Kollmorgen, and before that he served as Chief Financial
Officer. From 1990 to 1993, Mr. Doyle was an Associate Professor of Management
at Union College. Mr. Doyle holds a B.A. in industrial administration from
Union College and an M.B.A. from the Columbia University School of Business.

Robert C. Fleming has been a director since November 1997. Since November
1995, he has been a General Partner of Prism Venture Partners, a venture
capital firm. From July 1993 to November 1995, he was a General Partner of
Norwest Venture Capital, also a venture capital firm. Mr. Fleming holds an A.B.
in engineering from Dartmouth College and an M.B.A. from the Wharton School.

James W. Fordyce has been a director since June 1987. He has served as a
General Partner of Prince Ventures, a venture capital firm, since 1981. Mr.
Fordyce holds a B.A. in English literature from the University of Pennsylvania,
a Master's degree in philosophy, politics and economics from the University of
Oxford, and an M.B.A. from the Harvard Business School.

David A. Norbury has been a director since September 1999. He has been
President, Chief Executive Officer and a director of RF Micro Devices since
September 1992. Mr. Norbury holds a B.S. in electrical engineering from the
University of Michigan, an M.S. in electrical engineering from Stanford
University and an M.B.A. from Santa Clara University.

Matthew S. Robison has been a director since November 1997. Mr. Robison has
served as Vice President and Senior Technology Analyst for Ferris, Baker Watts,
an investment banking firm, since January 1999. From January 1997 to January
1999, Mr. Robison was a General Partner at Botti Brown Asset Management, an
asset management firm. From October 1994 to January 1997, Mr. Robison served as
Vice President and Research Analyst for Montgomery Securities. Mr. Robison
currently serves as a director of Anaren Microwave, a publicly-traded
manufacturer of wireless, satellite and electronics products. Mr. Robison holds
a B.S. from the University of Denver.

Our board of directors is divided into three classes, with one class of
directors elected each year at the annual meeting of stockholders for a three-
year term of office. Messrs. Fleming and Doyle will serve in the class whose
terms expire in 2000. Messrs. Robison and Fordyce will serve in the class whose
terms expire in 2001. Drs. Youngblood and Paladino and Mr. Norbury will serve
in the class whose terms expire in 2002. Our executive officers are elected
annually by the directors and serve at the discretion of the directors. There
are no family relationships among our directors and executive officers.

41
<PAGE>

Committees of the Board of Directors

We have a compensation committee, consisting of Drs. Youngblood and
Paladino, and Messrs. Doyle and Fleming. The compensation committee:

. reviews the compensation and benefits of our executive officers and
recommends stock option grants under our stock option plans

. makes recommendations to the board of directors regarding compensation
matters

We have an audit committee, consisting of Messrs. Doyle and Fordyce. The
audit committee:

. reviews and evaluates our audit and control functions

. reviews the results and scope of the audit and other services provided
by our independent auditors

. makes recommendations to the board of directors regarding the selection
of independent auditors

We have a finance and executive committee consisting of Drs. Paladino and
Youngblood and Mr. Fleming. The finance and executive committee:

. maintains continuity between the board of directors and our executive
officers

. acts on behalf of the board of directors between meetings but refers any
major decisions to the full board of directors.

Director Compensation

After this offering, we will pay all non-employee directors:

. a $10,000 annual retainer for serving on the board

. a $2,000 annual retainer for serving as chairman of a standing committee
of the board

. $1,000 for each board meeting attended in person

. $500 for each committee meeting attended in person

We will also reimburse our non-employee directors for reasonable expenses
incurred in attending meetings of the board of directors and its committees.

In addition to cash compensation, we intend to grant:

. a non-qualified stock option to purchase 12,000 shares of our common
stock that vests in three equal annual installments beginning on the
date of grant to each new non-employee director elected or appointed to
the board

. a fully vested, non-qualified stock option to purchase 9,000 shares of
our common stock to each incumbent non-employee director immediately
following each annual meeting of stockholders, as long as the director
has served at least one year before the date of the annual meeting

In January 1998, we granted (a) an option to purchase 9,000 shares of common
stock at $.50 per share to Dr. Paladino, Messrs. Doyle and Fordyce and a former
director, our four non-employee directors who had served for at least one year
before our 1997 annual stockholders meeting, (b) an option to purchase 12,000
shares of our common stock at $.50 per share to Messrs. Robison and Fleming,
the two newly appointed non-employee directors, and (c) an option to purchase
53,550 shares of our common stock at $.50 per share to Dr. Paladino in
recognition of his active role in the management and financing activities of
our company. The option granted to Mr. Fleming was issued to Prism Venture
Partners, the venture capital firm of which Mr. Fleming is a general partner.

In May 1998, we granted an additional option to purchase 9,000 shares of our
common stock at $.50 per share to Dr. Paladino, Messrs. Doyle and Fordyce and a
former director, our four non-employee directors who had served for at least
one year before our 1998 annual stockholders meeting.

42
<PAGE>

In 1998, we paid Dr. Paladino $60,000 for his services as Chairman of the
Board. During 1998, we did not pay our directors any other cash compensation
for their services as directors except for reimbursement of the reasonable
expenses they incurred in attending meetings of the board of directors and its
committees.

In May 1999, we granted an option to purchase 9,000 shares of our common
stock at $.50 per share to Dr. Paladino, Messrs. Doyle, Fordyce and Robison,
Prism Venture Partners and a former director. In August 1999, we granted Dr.
Paladino an option to purchase 80,000 shares of our common stock at $1.25 per
share and an additional option to purchase 20,198 shares of our common stock at
$2.25 per share, both in recognition of his active role in the management and
financing activities of our company. In September 1999, we granted an option to
purchase 12,000 shares of our common stock at $2.25 per share to Mr. Norbury as
a newly appointed director.

Compensation Committee Interlocks and Insider Participation

The board of directors has a compensation committee consisting of four of
our directors. Dr. Youngblood, our President and Chief Executive Officer,
served as a member of our compensation committee during 1998. Dr. Youngblood
participated in discussions regarding the compensation of our executive
officers. None of our executive officers or members of our board of directors
serves as a member of the board of directors or compensation committee of any
other entity that has an executive officer serving as a member of our board of
directors or compensation committee, except that Dr. Paladino serves as a
member of the board of directors and of the compensation committee of RF Micro
Devices, of which Mr. Norbury, one of our directors, is President and Chief
Executive Officer.

Executive Compensation

Summary Compensation. The following table summarizes the compensation earned
for services rendered to us in all capacities during 1998 by our Chief
Executive Officer and our only other executive officer who earned more than
$100,000 in salary and bonus during 1998. We refer to these executives as our
"named executive officers" elsewhere in this prospectus. The compensation
summarized in this table does not include medical, group life insurance, or
other plan benefits that are available generally to all of our salaried
employees or perquisites or other personal benefits that do not in the
aggregate exceed the lesser of $50,000 or 10% of the officer's salary and
bonus.

Summary Compensation Table
For 1998

<TABLE>
<CAPTION>
Long-Term
Compensation
---------------------
Annual Compensation Awards
------------------- ---------------------
Securities Underlying
Name and Principal Position Salary ($) Options (#)
- --------------------------- ------------------- ---------------------
<S> <C> <C>
John L. Youngblood................... $216,825 200,000
President and Chief Executive
Officer
Ransom D. Reynolds................... 142,543 140,000
Senior Vice President, Business
Development
</TABLE>

Option Grants in 1998. The following table provides information regarding
all options granted to our named executive officers in 1998. Amounts reported
in the last two columns of the table represent hypothetical values that the
holder could realize by exercising the options immediately before their
expiration, assuming the value of our common stock appreciates at the specified
compounded annual rates over the terms of the options. These numbers are
calculated based on the SEC's rules and do not represent our estimate of future
stock price growth. Actual gains, if any, on stock option exercises and common
stock holdings will depend on the timing of exercise and the future performance
of our common stock. We may not achieve the rates of appreciation

43
<PAGE>

assumed in this table, and the named executive officers may not receive the
calculated amounts. This table does not take into account any appreciation in
the price of our common stock from the date of grant to the current date. The
values shown are net of the option exercise price, but do not include
deductions for taxes or other expenses associated with the exercise.

Option Grants in 1998

Potential Realizable
Individual Grants Value at Assumed
------------------------------------------------ Annual Rates of
Number of Percent of Stock Price
Securities Total Options Appreciation for
Underlying Granted to Exercise Option Term
Options Employees in Price Expiration --------------------
Name Granted (#) Fiscal Year (%) ($/Share) Date 5% ($) 10% ($)
- ---- ----------- --------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
John L. Youngblood...... 150,000 10.1% $0.50 01/05/08 $ 47,167 $ 119,530
50,000 3.4 0.50 02/25/08 15,722 39,843
Ransom D. Reynolds...... 140,000 9.4 0.50 01/05/08 44,022 111,561
</TABLE>

All options were granted at fair market value on the date of grant as
determined by our board of directors. The board of directors determined the
fair market value of our common stock based on various factors, including the
illiquid nature of an investment in our common stock, recent sales of
redeemable preferred stock, our limited operating history and our future
prospects.

Each of these options vests over a four-year period, vesting as to 20% of
the shares subject to the option on the date of grant and as to an additional
20% on each anniversary of the date of grant until the option has fully vested.
These options become fully vested upon (a) a merger or consolidation of our
company with any other company, (b) the sale of substantially all of our assets
or (c) the sale of more than 50% of our outstanding stock to an unrelated
person or group.

All options granted to the named executive officers in 1998 terminate on the
earliest of (a) three months after the date of termination of the executive's
employment if he ceases to be employed by us except as a result of his death or
disability, (b) one year after his death or disability, or (c) 10 years from
the date of grant.

In August 1999, we granted an additional option to Dr. Youngblood to
purchase 180,000 shares at $1.25 per share and an additional option to Mr.
Reynolds to purchase 80,000 shares at $1.25 per share. These options otherwise
have the same terms as the options granted to these individuals in 1998.

Fiscal Year-End Option Values. The following table provides information
regarding the value of all unexercised options held by the named executive
officers at the end of 1998. The value of unexercised in-the-money options
represents the difference between the fair market value of our common stock on
December 31, 1998 and the option exercise price, multiplied by the number of
shares underlying the option. There was no public trading market for our common
stock on December 31, 1998. Accordingly, solely for the purposes of this table,
we have assumed that the fair market value of our common stock on December 31,
1998 was $ , the assumed initial public offering price. Neither named
executive officer exercised any options in 1998.

1998 Fiscal Year-End Option Values

<TABLE>
<CAPTION>
Number of Shares
of Common Stock Value of Unexercised
Underlying Unexercised In-the-Money
Options at Fiscal Options at
Year-End (#) Fiscal Year-End ($)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John L. Youngblood.......... 415,000 210,000
Ransom D. Reynolds.......... 96,000 134,000
</TABLE>

44
<PAGE>

Employment Agreement and Change-of-Control Provisions

In January 1994, we entered into an employment agreement with Dr.
Youngblood. Dr. Youngblood's employment agreement had an original term of 24
months and now renews automatically on a quarterly basis, provided that Dr.
Youngblood's employment has not terminated before the renewal date. Dr.
Youngblood's annual compensation was initially set at an annual base salary of
$190,000, and has since been increased to his current annual base salary of
$220,000. We currently furnish Dr. Youngblood with a company automobile at our
expense. Dr. Youngblood is entitled to receive severance payments for a minimum
of six months and a maximum of 24 months after termination of his employment
depending on the circumstances under which his employment terminates. The
maximum 24-month severance period will only apply if we terminate
Dr. Youngblood's employment without cause after we undergo a "change of
control" that was not approved by a majority of our board of directors. A
"change of control" is defined in Dr. Youngblood's agreement to include any
transaction that results in (a) a person or group holding 50% or more of the
combined voting power of our outstanding securities or (b) changes to our board
of directors such that the persons who were either directors on the date of Dr.
Youngblood's employment agreement or their nominated successors no longer
comprise a majority of the board. If we terminate Dr. Youngblood's employment
for cause, he will not be entitled to severance payments.

Upon (a) our merger or consolidation with another company, (b) the sale of
substantially all of our assets to another company, or (c) the sale of more
than 50% of our outstanding capital stock to an unrelated person or group,
substantially all unvested options held by Dr. Youngblood and Mr. Reynolds will
vest and become immediately exercisable.

Stock Plans

We currently maintain the three stock plans described below. We refer to
these stock plans as the "active stock plans" elsewhere in this prospectus.

<TABLE>
<CAPTION>
Shares or Options
Outstanding Shares Available for
Shares or Options Issued Issuance Under
Adoption Expiration Reserved Under Plan as of Plan as of
Plan Name Date Date Under Plan September 17, 1999 September 17, 1999
--------- -------- ---------- ---------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
1996 Stock
Plan..... 01/26/96 01/26/06 600,000 279,000 321,000
1997 Stock
Plan..... 06/11/97 06/11/07 3,700,000 2,878,975 821,025
1999 Stock
Plan..... 09/13/99 09/13/09 3,500,000 -- 3,500,000
</TABLE>

In addition to the active stock plans, there are a total of approximately
537,900 shares subject to options issued under our 1986 Stock Option Plan, 1987
Stock Plan and 1988 Stock Plan. Although those three plans have expired and no
new options, stock or other stock rights may be issued under those plans, the
outstanding options under those plans will remain outstanding until their
expiration or exercise.

The 1986 Plan provided for the grant of incentive stock options to
employees, including officers and directors who are employees. The other stock
plans provide for the grant of incentive stock options to employees and non-
qualified stock options and stock awards to employees, directors and
consultants. Additionally, the 1996, 1997 and 1999 Stock Plans provide for the
grant of stock appreciation rights to employees, directors and consultants.

The compensation committee of the board of directors administers the stock
plans and recommends to the board of directors the terms of stock rights
granted, including (if applicable) the exercise price, the number of shares
subject to individual option awards and the vesting period of options. The
exercise price of incentive stock options cannot be lower than 100% of the fair
market value of the common stock on the date of grant and, in the case of
incentive stock options granted to holders of more than 10% of our voting
power, not less than 110% of the fair market value. The term of an incentive
stock option cannot exceed ten years, and the term of an incentive stock option
granted to a holder of more than 10% of our voting power cannot exceed five

45
<PAGE>

years. Stock purchase rights may be issued either alone, in addition to, or in
tandem with other awards granted under the stock plans and/or cash awards made
outside of the stock plans. Incentive stock options granted under our stock
plans generally become exercisable over a four-year period, with 20% of the
shares subject to the option vesting on the date of grant and 20% vesting on
each anniversary of the date of grant until fully vested.

The board of directors may amend, modify or terminate the stock plans at any
time as long as the amendment, modification or termination does not impair the
rights of plan participants with respect to outstanding options or other stock
rights.

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 the stock plans described above. 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, subject, in the case of certain holders, to the
Rule 144 limitations applicable to affiliates and the lock-up agreements.

Our 401(k) Plan

In 1990, we adopted a 401(k) plan for our employees. The plan is subject to
the Employee Retirement Income Security Act of 1974. All of our employees who
are at least 18 years old may make salary reduction contributions under the
plan. Employees must have six months of qualified service to qualify for all
other contributions under the plan. In general, a participant may contribute up
to 15% of his or her annual compensation. We may elect to make both matching
contributions and discretionary contributions under the plan. In recent years,
we have made matching contributions equal to 50% of the participant's
contributions, subject to limits. Any discretionary profit-sharing
contributions we may make in a year would be allocated to plan participants
based on the proportion that the participant's compensation for the year bears
to the compensation of all participants for the year. We did not make any
discretionary contributions in 1998. Total employee and employer contributions
under the plan for any participant may not exceed the lesser of 25% of
compensation or $30,000. Participants are immediately vested in their voluntary
contributions under the plan and vest in all other contributions under the plan
based on their years of service. Participants are fully vested after four years
of qualified service. We may modify, amend or terminate the plan, subject to
the provisions of the Employee Retirement Income Security Act of 1974. If we
terminate the plan, participants will become fully vested in their account
balances under the plan.

Our Incentive Compensation Plan

Each year, we adopt an incentive compensation plan for our employees. In
general, our full-time employees who have been employees for at least six
months are entitled to participate in the plan. The plan establishes an
incentive bonus pool, calculated according to a formula based on our
achievement of specified key operating objectives. We allocate approximately
75% of the pool for distribution to all eligible employees and 25% of the pool
for distribution to individuals who have made special contributions to our
company. We did not make any payments under our 1998 incentive compensation
plan.

46
<PAGE>

MATERIAL RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

The following is a description of transactions since January 1, 1996 to
which we have been a party and in which the amount involved exceeded $60,000
and any director, executive officer or holder of more than five percent of our
capital stock had or will have a direct or indirect material interest.

Since January 1, 1996, we have issued preferred stock, promissory notes,
and warrants as follows:

. On September 25, 1996 and July 31, 1997, we issued an aggregate of
$3,000,000 in principal amount of 10% subordinated convertible notes due
September 1998 and July 1999, respectively. As part of this transaction,
we issued warrants to the participating investors to purchase an
aggregate of 1,800,000 shares of our common stock at an exercise price
of $.50 per share.

. On November 21, 1997 and December 18, 1997, we issued an aggregate of
7,200,000 shares of our Class D redeemable preferred stock at a purchase
price of $1.80 per share.

. On October 27, 1998, November 13, 1998, December 29, 1998, and September
17, 1999, we issued an aggregate of 9,941,508 shares of our Class E
redeemable preferred stock at a purchase price of $2.25 per share.

. On April 15, 1999 and July 16, 1999, we issued an aggregate of
$2,000,000 in principal amount of 9.75% subordinated promissory notes
due on the earlier of December 31, 1999 or the date we sell equity
securities for at least $5,000,000. As part of this transaction, we
issued warrants to the participating investors to purchase an aggregate
of 400,000 shares of our common stock at an exercise price of $.50 per
share.

Our executive officers, directors and 5% stockholders participated in the
foregoing transactions as follows:

<TABLE>
<CAPTION>
10% Note 9.75% Note
Financing Financing
------------------ ------------------
Number Number of Number of Number
Principal of Class D Class E Principal of
Purchaser Amount Warrants Shares Shares Amount Warrants
--------- --------- -------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Directors and executive
officers:
Albert E. Paladino...... $ 25,000 15,000 14,088 39,692 $ 8,250 1,650
John L. Youngblood...... 30,000 18,000 16,906 13,949 4,000 800
Ransom D. Reynolds...... 30,000 18,000 16,906 8,889 -- --
Allan M. Doyle, Jr. .... 25,000 15,000 14,088 6,595 -- --
James W. Fordyce........ 102,485 61,491 57,755 25,154 3,000 600

Five percent
stockholders:
SVE Star Ventures
Group.................. -- -- 1,497,689 3,744,015 400,000 80,000
Prism Venture Partners
I, L.P. ............... -- -- 1,666,667 711,111 600,000 120,000
Alliance Technology
Ventures Group......... -- -- -- 2,248,889 306,000 61,200
Techgains Group......... -- -- 555,556 1,006,754 210,000 42,000
Axiom Venture Partners
II, L.P. .............. -- -- 1,111,112 412,916 240,000 48,000
Spring Point Group...... -- -- 555,556 655,614 -- --
Prince Venture Partners
II Limited
Partnership............ 375,000 225,000 211,333 409,594 200,000 40,000
United of Omaha Life
Insurance Company...... 1,000,000 600,000 563,555 -- -- --
</TABLE>

Mr. Fleming, a member of our board of directors, is affiliated with Prism
Venture Partners I, L.P. Mr. Fordyce, a member of our board of directors, is
affiliated with Prince Venture Partners II Limited Partnership.

The SVE Star Ventures Group is comprised of five affiliated entities --
Star Growth Enterprise, SVE Star Ventures Enterprises No. V, SVM Star Ventures
Management GmbH No. 3, SVE Star Ventures Managementgesellschaft mbH Nr. 3 &
Co. Betelligungs KG Nr. 2, and SVE Star Ventures Enterprises No. VII.
Collectively, these entities beneficially own 5% or more of our capital stock.

47
<PAGE>

The Alliance Technology Venture Group is comprised of two affiliated
entities -- Alliance Technology Ventures II, L.P. and ATV II Affiliates Fund,
L.P. Collectively, these entities beneficially own 5% or more of our capital
stock.

The Techgains Group is comprised of three affiliated entities - Technology
Associates Management Co., Ltd., Techgains International Corp., and Techgains
Corp. Collectively, these entities beneficially own 5% or more of our capital
stock.

The Spring Point Group is comprised of two affiliated entities - Spring
Point Partners L.P. and Spring Point Offshore Fund. Collectively, these
entities beneficially own 5% or more of our capital stock.

In September 1999, we agreed to issue 225,000 shares of common stock to
Mervyn N. FitzGerald, our Senior Vice President, Operations, for a purchase
price of $1.25 per share. In connection with this issuance of shares, we will
loan Mr. FitzGerald the $281,250 purchase price. The interest rate on the loan
will be the applicable federal rate, and the loan must be repaid upon Mr.
FitzGerald's sale of the shares. These shares will vest 20% on the date of
issuance and as to an additional 20% on the next four anniversaries of the date
of issuance. The unvested amount of these shares will be subject to repurchase
at a price of $1.25 per share upon Mr. FitzGerald's termination of employment.
Upon (a) our merger or consolidation with another company, (b) the sale of
substantially all of our assets to another company, or (c) the sale of more
than 50% of our outstanding capital stock to an unrelated person or group, all
unvested shares will immediately vest.

Sale of Contraband Detection System Business. In June 1996, we sold the
assets, contracts and documentation relating to our contraband detection
systems business to Millimetrix LLC, a company controlled by Dr. G. Richard
Huguenin. At the time of the sale, Dr. Huguenin was one of our directors and
executive officers. We received the following as consideration for this
business:

. $606,873 in cash

. a $250,000 promissory note, payable over time

. 19.9% of the ownership of Millimetrix

. the right to receive royalty payments

As part of the transaction, we granted Millimetrix a license to use
intellectual property related to the business and the right to acquire the
licensed intellectual property if agreed conditions were met. Millimetrix also
assumed operating leases related to the business, agreed to lease space from
us, and hired some of our employees.

In connection with the sale, Dr. Huguenin resigned as one of our directors
and executive officers and surrendered all of his outstanding stock options. At
the same time, we repurchased 206,666 shares of our common stock from Dr.
Huguenin for $103,333 and granted him a non-qualified stock option to purchase
270,000 shares of common stock at an exercise price of $.50 per share.

Millimetrix failed to perform its obligations in connection with this
transaction, and we have obtained a judgment against it.

Our Policy on Interested Transactions

We have implemented a policy whereby contracts and business arrangements
with our officers, directors or stockholders, entities they own in whole or in
part, or entities for whom they serve as officers, directors, trustees or
members must be on an arm's-length basis and approved by the board of
directors. Our articles of organization and by-laws require approval of the
contract or transaction by a majority of the independent directors who have no
interest in the contract or transaction.

48
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table provides information regarding the beneficial ownership
of our outstanding common stock as of September 17, 1999, and as adjusted to
reflect our sale of common stock in this offering, by:

. each person or group that we know owns more than 5% of the common stock,

. each of our directors,

. each of our executive officers, and

. all of our directors and executive officers as a group.

Beneficial ownership is determined in accordance with rules of the SEC and
includes shares over which the indicated beneficial owner exercises voting
and/or investment power. Shares of common stock subject to options or warrants
currently exercisable or exercisable within 60 days of September 17, 1999 are
deemed outstanding for computing the percentage ownership of the person holding
the options or warrants but are not deemed outstanding for computing the
percentage ownership of any other person. Except as we otherwise indicate, we
believe the beneficial owners of the common stock listed below, based on
information furnished by them, have sole voting and investment power with
respect to the number of shares listed opposite their names. Unless we
otherwise indicate, the address for each stockholder below is c/o Millitech
Corporation, 20 Industrial Drive East, South Deerfield, Massachusetts 01373-
0109.

<TABLE>
<CAPTION>
Percentage of Shares Outstanding
Number of Shares ---------------------------------------
Name of Beneficial Owner Beneficially Owned Before Offering After Offering
- ------------------------ ------------------ ---------------- ---------------
<S> <C> <C> <C>
SVE Star Ventures 5,668,434 25.2%
Group(1)...............
Possart Strasse No. 9
81679 Munich, Germany
Prism Venture Partners 2,513,378 11.1
I, L.P(2)..............
c/o Prism Venture
Management, Inc.
100 Lowder Brook Drive,
Suite 2500
Westwood, MA 02090
Robert C. Fleming(3).... 2,513,378 11.1
Alliance Technology 2,310,089 10.3
Ventures Group(4)......
8995 Westside Parkway,
Suite 200
Alpharetta, GA 30004
Techgains Group(5)...... 1,604,310 7.1
2378 West 239th Street
Torrance, CA 90501
Axiom Venture Partners 1,572,028 7.0
II, L.P(6).............
City Place II--17th
Floor
185 Asylum Street
Hartford, CT 06103
James W. Fordyce(7)..... 1,346,023 6.0
Spring Point Group(8)... 1,211,170 5.4
1 Montgomery Street,
Suite 3300
San Francisco, CA 94104
Prince Venture Partners 1,171,023 5.2
II Limited
Partnership(9).........
25 Ford Road
Westport, CT 06880
United of Omaha Life 1,163,555 5.0
Insurance Company(10)..
c/o Mutual of Omaha
Insurance Company
Mutual of Omaha Plaza
Omaha, NE 68175
John L. Youngblood(11).. 565,655 2.5
Albert E. Paladino(12).. 260,301 1.2
Mervyn N.
FitzGerald(13)......... 225,000 1.0
Ransom D. Reynolds(14).. 195,795 *
</TABLE>

49
<PAGE>

<TABLE>
<CAPTION>
Percentage of Shares Outstanding
Number of Shares --------------------------------------
Name of Beneficial Owner Beneficially Owned Before Offering After Offering
- ------------------------ ------------------ ---------------- ---------------
<S> <C> <C> <C>
Allan M. Doyle, 65,683 *
Jr.(15)................
Dennis C. Stempel(16)... 30,222 *
David A. Norbury(17).... 25,222 *
Matthew S. Robison(18).. 22,111 *
All executive officers
and directors as a
group (10 persons)..... 5,249,390 22.3
</TABLE>
- ---------------------
* Less than 1%.
(1) Represents (a) 2,222,222 shares held by Star Growth Enterprise, (b)
1,035,984 shares held by SVE Star Ventures Enterprises No. V, (c) 978,853
shares held by SVM Star Ventures Management GmbH Nr. 3, (d) 183,927
shares held by SVE Star Ventures Management GmbH Nr. 3 & Co. Betelligungs
KG Nr. 2, (e) 1,167,448 shares held by SVE Star Ventures Enterprises No.
VII and (f) warrants held by SVE Star Ventures Enterprises No. VII to
purchase 80,000 shares of common stock.
(2) Includes 4,600 shares issuable upon the exercise of stock options within
60 days of September 17, 1999 and warrants to purchase 120,000 shares of
common stock.
(3) Mr. Fleming is a general partner and co-manager of Prism Venture Partners
I, L.P. The shares listed represent the 2,513,378 shares beneficially
held by Prism Venture Partners I, L.P. Mr. Fleming disclaims beneficial
ownership of the shares beneficially held by Prism Venture Partners I,
L.P., except to the extent of his pecuniary interest in those shares. Mr.
Fleming's address is the same as the address of Prism Venture
Partners I, L.P.
(4) Represents (a) 2,204,444 shares held by Alliance Technology Ventures II,
L.P., (b) warrants held by Alliance Technology Ventures II, L.P. to
purchase 60,000 shares of common stock, (c) 44,445 shares held by ATV II
Affiliates Fund, L.P. and (d) a warrant held by ATV II Affiliates Fund,
L.P. to purchase 1,200 shares of common stock.
(5) Represents (a) 56,754 shares held by Technology Associates Management
Co., Ltd., (b) a warrant to purchase 2,000 shares held by Technology
Associates Management Co., Ltd., (c) 600,000 shares held by Techgains
International Corp., (d) a warrant held by Techgains International Corp.
to purchase 20,000 shares of common stock, (e) 905,556 shares held by
Techgains Corp. and (f) a warrant held by Techgains Corp. to purchase
20,000 shares of common stock.
(6) Includes warrants to purchase 48,000 shares of common stock.
(7) Mr. Fordyce is a general partner of Prince Venture Partners II Limited
Partnership. The shares listed represent (a) 1,171,023 shares
beneficially held by Prince Venture Partners II Limited Partnership,
(b) 109,909 shares held by Mr. Fordyce, (c) 3,000 shares issuable upon
exercise of stock options held by Mr. Fordyce within 60 days of September
17, 1999 and (d) warrants held by Mr. Fordyce to purchase 62,091 shares
of common stock. Mr. Fordyce disclaims beneficial ownership of the shares
beneficially held by Prince Venture Partners II Limited Partnership,
except to the extent of his pecuniary interest in those shares.
(8) Represents 815,614 shares held by Spring Point Partners L.P. and 395,556
shares held by Spring Point Offshore Fund.
(9) Includes warrants to purchase 265,000 shares of common stock.
(10) Includes warrants to purchase 600,000 shares of common stock.
(11) Includes 516,000 shares issuable upon exercise of stock options within 60
days of September 17, 1999 and warrants to purchase 18,800 shares of
common stock.
(12) Includes 100,198 shares issuable upon exercise of stock options within 60
days of September 17,1999.
(13) Of the shares held by Mr. FitzGerald, 180,000 are subject to repurchase
by us. See "Material Relationships and Related-Party Transactions."
(14) Includes 152,000 shares issuable upon exercise of stock options within 60
days of September 17, 1999 and a warrant to purchase 18,000 shares of
common stock.
(15) Includes 9,000 shares issuable upon the exercise of stock options within
60 days of September 17, 1999 and a warrant to purchase 15,000 shares of
common stock.
(16) Includes 28,000 shares issuable upon exercise of stock options within 60
days of September 17, 1999.
(17) Includes 3,000 shares issuable upon exercise of stock options within 60
days of September 17, 1999.
(18) Includes 11,000 shares issuable upon exercise of stock options within 60
days of September 17, 1999.

50
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Upon the closing of this offering, we will be authorized to issue up to
100,000,000 shares of common stock, $.01 par value, and 4,500,000 shares of
undesignated preferred stock, $.01 par value. As of September 17, 1999, there
were 1,476,860 shares of common stock outstanding held of record by 118
stockholders and 20,976,881 shares of redeemable preferred stock held by 85
stockholders. Upon the closing of this offering, these shares of redeemable
preferred stock will automatically convert into 20,976,881 shares of common
stock. Following this offering, there will be shares of common stock
outstanding, or shares if the underwriters exercise their over-allotment
option in full, assuming no exercise of outstanding options or warrants.

Common Stock

The holders of common stock are entitled to one vote per share on all
matters to be voted on by stockholders. When a quorum is present at a meeting,
the holders of a majority of the common stock present or represented and voting
on a matter will decide any matter to be voted on by the stockholders except
where a class vote is required by law or the articles of organization or where
a larger vote is required by law or the articles of organization. Elections are
determined by a plurality of the votes cast by stockholders entitled to vote at
the election. Subject to preferences of any outstanding shares of preferred
stock, the holders of common stock are entitled to receive ratably any
dividends the board of directors declares out of funds legally available for
the payment of dividends. Dividends are non-cumulative. If we are liquidated,
dissolved or wound up, the holders of common stock will be entitled to share
pro rata all assets remaining after payment of liabilities and liquidation
preferences of any outstanding shares of preferred stock. Holders of common
stock have no preemptive rights or rights to convert their common stock into
any other securities. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are
fully paid and non-assessable, and the shares of common stock to be issued in
this offering will be fully paid and non-assessable. The rights, preferences
and privileges of holders of common stock are subject to, and may be adversely
affected by, the rights of holders of preferred stock that the board of
directors may designate and issue in the future. As of September 17, 1999,
there were 8,380,674 shares of common stock reserved for issuance upon the
exercise of options and warrants. On that date, there were outstanding stock
options to purchase an aggregate of 3,518,509 shares of common stock and
warrants to purchase an aggregate of 2,481,890 shares of common stock.

Preferred Stock

Upon the closing of this offering, our articles of organization will
authorize our board of directors, without any action by our stockholders, to
issue up to 4,500,000 shares of undesignated, or "blank check," preferred stock
in one or more classes or series. The board also has the authority to fix the
designations, powers, preferences, privileges and relative, participating,
optional or special rights and the qualifications, limitations or restrictions
of any preferred stock, including dividend rights, conversion rights, voting
rights, terms of redemption and liquidation preferences, any or all of which
may be greater than the rights of the common stock. The board of directors,
without stockholder approval, can issue preferred stock with voting, conversion
or other rights that could adversely affect the voting power and other rights
of the holders of common stock. Our board could quickly issue preferred stock
with terms that could delay or prevent a change in control of our company or
make removal of our management more difficult. Additionally, the issuance of
preferred stock may decrease the market price of the common stock. We have no
plans to issue any preferred stock.

Warrants

As of September 17, 1999, there were warrants outstanding to purchase a
total of 2,481,890 shares at a weighted average exercise price of $1.68 per
share. These warrants expire on various dates from December 21, 2000 to July
30, 2007.

51
<PAGE>

Registration Rights

After this offering, the holders of shares of common stock and warrants
to purchase shares of common stock, or their permitted transferees, will be
entitled to certain rights with respect to the registration of those shares
under the Securities Act. These registration rights are contained in four
agreements, one with certain of our stockholders (currently covering
shares and warrants to purchase shares) and three separate agreements with
three of our lenders (in the aggregate covering shares and warrants to
purchase shares). As described below, the agreement with our stockholders
provides for both demand registration rights and piggyback registration rights
while the agreements with our lenders only provide for piggyback registration
rights.

Demand Registration Rights. At any time after six months following the
closing of this offering, the holders of at least 40% of the registrable
securities under the agreement with our stockholders may require, on two
occasions, that we use our diligent best efforts to register some or all of
those registrable securities under the Securities Act at our expense. In
addition, the holders of at least 20% of the registrable securities under the
agreement with our stockholders may require that we use our diligent best
efforts to register some or all of those registrable securities under the
Securities Act on Form S-2 or S-3 or similar short-form registration, as long
as we are eligible to use a short-form registration and the value of the
securities to be registered is reasonably anticipated to exceed $1,000,000.
Only the first two short-form registrations will be at our expense. Inclusion
of any holders' registrable securities in any registration is subject to
limitations and conditions.

Piggyback Registration Rights. If we propose to register any of our
securities under the Securities Act for our own account or for the account of
any of our stockholders, holders of registrable securities under each of the
four agreements granting registration rights are entitled, subject to
limitations and conditions, to receive notice of that registration and to
include registrable securities in that registration at our expense. One of the
limitations is the ability of any underwriter of any of those offerings to
reduce the number of shares proposed to be registered in view of market
conditions.

We intend to file, promptly 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, subject, in some cases, to the Rule 144 limitations
applicable to our affiliates and the lock-up agreements. For more information,
see "Shares Eligible for Future Sale."

Anti-takeover Provisions of Massachusetts Law and Our Articles or Organization
and By-Laws

Provisions of Massachusetts law and our articles or organization and by-laws
may discourage takeover attempts not previously approved by our board of
directors, including takeovers that some stockholders may deem to be in their
best interest. These provisions may inhibit temporary fluctuations in the
market price of our common stock that might otherwise result from actual or
rumored takeover attempts. These provisions could also delay or frustrate the
removal of incumbent directors or the assumption of control by stockholders,
even if it would be beneficial to our stockholders. These provisions could also
discourage or make more difficult a merger, tender offer or proxy contest, even
if it would be beneficial to stockholders, and could depress the market price
of our common stock. Our board of directors believes that these provisions are
appropriate to protect the interests of our stockholders. Our board of
directors has no present plans to adopt any other measures or devices which may
have an anti-takeover effect.

Classified Board of Directors. Our articles of organization provide for a
board of directors that is divided into three classes. The first class of
directors will hold office until the first annual meeting of stockholders
following this offering, the second class of directors will hold office until
the second annual meeting of stockholders following this offering, and the
third class of directors will hold office until the third annual meeting of
stockholders following this offering. After each annual meeting, the directors
elected at that meeting will serve a three-year term. Stockholders may remove
our directors only for cause.

52
<PAGE>

Meetings of Stockholders. Our by-laws provide that annual meetings of
stockholders will be held at the date, time and place, either within or outside
the Commonwealth of Massachusetts, as the board of directors may determine. A
special meeting of the stockholders may be called only by our President, our
board of directors, or the holders of at least 30% of our outstanding voting
stock. The provision permitting only stockholders holding at least 30% of the
outstanding voting stock to call a special meeting may be amended only by
stockholders holding 75% of the outstanding voting stock.

Amendment of By-Laws. Our articles of organization and by-laws provide that
the by-laws may be amended or repealed by the board of directors or by the
stockholders. An amendment by stockholders requires the affirmative vote of the
holders of at least 75% of the outstanding capital stock entitled to vote
generally at an election of directors.

This system of electing directors, the ability of stockholders to remove
directors only for cause and the inability of stockholders holding less than
30% of the outstanding voting stock to call a special meeting may discourage
someone from making a tender offer or otherwise attempting to obtain control of
our company and may maintain the incumbency of the board of directors.

Massachusetts Statutory Business Combination Provision. We will be subject
to the provisions of Chapter 110F of the Massachusetts General Laws, an anti-
takeover law, after this offering has been completed. In general, this statute
prohibits a Massachusetts corporation with more than 200 stockholders of record
from engaging in a "business combination" with an "interested stockholder" for
a period of three years after the date of the transaction in which the person
becomes an interested stockholder, unless:

. before that date, the board of directors approved either the business
combination or the transaction that resulted in the stockholder's
becoming an interested stockholder,

. the interested stockholder acquires 90% of the outstanding voting stock
of the corporation (excluding shares held by affiliates of the
corporation) at the time the stockholder becomes an interested
stockholder, or

. the business combination is approved by both the board of directors and
holders of two-thirds of the outstanding voting stock of the corporation
(excluding shares held by the interested stockholder).

A "business combination" includes a merger, consolidation, stock or asset
sales, and other specified transactions involving the corporation or any direct
or indirect majority-owned subsidiary of the corporation resulting in a
financial benefit to the interested stockholder. Generally, an "interested
stockholder" is:

. a person who, alone or together with affiliates and associates, owns
five percent or more of the corporation's voting stock, or 15% or more
in the case of persons eligible to file a Schedule 13G under the
Securities Exchange Act,

. an affiliate or associate of the corporation who at any time within the
three-year period preceding the date of the transaction owned five
percent or more of the corporation's voting stock, or 15% or more in the
case of persons eligible to file a Schedule 13G under the Securities
Exchange Act, or

. the affiliates and associates of any such affiliate or associate of the
corporation.

A person is not an "interested stockholder" if its ownership of shares in
excess of the five percent or fifteen percent limitation is the result of
action taken solely by us, but the person will become an "interested
stockholder" if the person thereafter acquires additional shares of voting
stock, except as a result of further corporate action not caused, directly or
indirectly, by the person. We may at any time elect not to be governed by
Chapter 110F by amending our articles of organization or by-laws by a vote of a
majority of the stockholders entitled to vote. Such an amendment would not be
effective for 12 months and would not apply to a business combination with any
person who became an interested stockholder before the adoption of the
amendment.

In addition, Massachusetts General Laws Chapter 110D, entitled "Regulation
of Control Share Acquisitions," provides, in general, that any stockholder of a
Massachusetts corporation with more than 200 stockholders of record who
acquires voting stock of the corporation in a "control share acquisition" may
not vote the shares so acquired (or shares acquired within 90 days before or
after the "control share acquisition") unless a majority of the other
stockholders of the corporation entitled to vote so authorize. In general, a

53
<PAGE>

"control share acquisition" includes the acquisition by any person of
beneficial ownership of shares which, when added to all other shares
beneficially owned by the person, would entitle the person to vote:

. between 20% and 33 1/3%,

. between 33 1/3% and 50%, or

. more than 50% of the outstanding voting stock of the corporation.

A "control share acquisition" generally does not include, among other
transactions, the acquisition of shares directly from the issuing corporation.
In addition, Chapter 110D permits a corporation to provide in its articles of
organization or by-laws that the corporation may redeem, for fair value, all of
the shares acquired in a control share acquisition if the interested
stockholder does not deliver a control share acquisition statement or if the
interested stockholder delivers a control share acquisition statement but the
stockholders of the corporation do not authorize voting rights for those
shares.

Massachusetts General Laws Chapter 156B, Section 50A, requires that
publicly-held Massachusetts corporations that have not "opted out" of Section
50A have a classified board of directors consisting of three classes as nearly
equal in size as possible. Section 50A also provides that directors who are
classified may be removed by the stockholders only for cause. Our articles of
organization reflect the requirements of Section 50A.

Limitations on Liability and Indemnification

Our articles of organization limit the liability of our directors to the
extent permitted by Massachusetts law. No director will be personally liable to
us or our stockholders for monetary damages resulting from his or her conduct
as a director except liability for:

. breach of the director's duty of loyalty

. acts or omissions not in good faith or which involved intentional
misconduct or knowing violations of law

. unlawful distributions and loans to insiders

. transactions from which the director personally received a benefit in
money, property or services to which the director was not legally
entitled

Our by-laws provide that we will indemnify any person made a party to a
proceeding because he or she was or is a director, officer, employee or other
agent of ours and that we may advance or reimburse reasonable expenses incurred
by him or her before the final disposition of the proceeding if he or she
undertakes to repay those expenses if he or she is adjudicated to be not
entitled to indemnification. In addition, we have the right, before a final
adjudication, to compromise and settle a proceeding and pay expenses, if a
compromise and settlement of a proceeding is in our best interests. To the
extent our by-laws provide for indemnification of directors for liabilities
arising under the Securities Act, those provisions are, in the opinion of the
SEC, against public policy as expressed in the Securities Act and are therefore
unenforceable.

We maintain a liability insurance policy, which may insure our directors and
officers against liability they may incur for serving in their capacities as
directors and officers.

We believe that the limitation of liability provisions in our articles or
organization, the indemnification provisions in our by-laws and our liability
insurance policy will facilitate our ability to continue to attract and retain
qualified individuals to serve as directors and officers.

Transfer Agent and Registrar

The transfer agent and registrar for the common stock is Registrar and
Transfer Company.

The Nasdaq Stock Market's National Market Listing

We will apply for inclusion of our common stock on The Nasdaq Stock Market's
National Market under the symbol "TLXS."

54
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Before this offering, there has been no public market for our common stock.
The market price of our common stock could drop if our existing stockholders
sell large numbers of shares of our common stock in the public market or if
investors perceive that such sales could occur. These factors could also make
it more difficult to raise funds through future offerings of common stock.

After this offering, there will be outstanding shares of common stock,
or shares if the underwriters exercise their over-allotment option in full,
assuming no exercise of outstanding options or warrants. Of these shares, the
shares sold in this offering, or shares if the underwriters exercise
their over-allotment option in full, 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
22,453,741 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 pursuant to an exemption from registration, such as
the exemption provided by Rule 144.

Our executive officers, directors and certain 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 such offer,
sale, contract, pledge or disposal, without the prior written consent of Credit
Suisse First Boston Corporation. In addition, we have agreed in the
underwriting agreement that, for a period of 180 days after the date of this
prospectus and with limited exceptions, 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 such 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.

Subject to 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 Total
of Shares
Shares Outstanding Date of Availability for Sale
------ ----------- ----------------------------------------------------------
<C> <C> <S>
, 1999 (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 subject to Rule 144
, 2000 (180 days after the date of this prospectus),
in some cases subject to Rule 144
At various times after , 2000
</TABLE>

In addition, as of June 30, 1999, there were outstanding options to purchase
2,850,651 shares of common stock and warrants to purchase 2,237,445 shares of
common stock. Of these options and warrants, will be subject to lock-up
agreements. After the expiration of the lock-up agreements, of these
options and warrants will be vested and exercisable, assuming no prior
exercise, cancellation or expiration.

55
<PAGE>

Rule 144. In general, under Rule 144 as currently in effect, beginning 90
days after the date of this prospectus, any person (or persons whose shares are
aggregated) who has beneficially owned shares for at least one year is entitled
to sell, within any three-month period, a number of shares that does not exceed
the greater of:

. 1% of the then-outstanding shares of common stock, which will equal
approximately shares immediately after this offering

. the average weekly trading volume in the common stock during the four
calendar weeks immediately preceding the date on which the seller files
a notice of the sale on Form 144 with the SEC

Sales under Rule 144 are also subject to requirements relating to notice,
manner of sale and the availability of current public information about us.

Rule 144(k). A person (or persons whose shares are aggregated) who has not
been our affiliate at any time during the three months immediately preceding a
sale, and who has beneficially owned the shares for at least two years, would
be entitled to sell the shares under Rule 144(k) without regard to the volume
limitations, notice requirements and other conditions of Rule 144.

Rule 701. In general, under Rule 701 as currently in effect, each of our
directors, officers, employees, consultants or advisors who purchased shares
from us before the date of this prospectus in connection with a compensatory
stock plan or other written compensatory agreement will be eligible to sell
those shares in the public market 90 days after the date of this prospectus in
reliance on Rule 144, but without complying with all of the restrictions of
Rule 144, such as the holding period. In addition, Rule 701 will apply to
shares of common stock we issue upon exercise of the options we granted before
the effective date of this offering.

As soon as practicable after this offering, we intend to file a registration
statement under the Securities Act to register approximately shares of
common stock available for issuance pursuant to our stock plans. The
registration statement will become effective upon filing. Shares issued
pursuant to our stock plans after the effective date of the registration
statement will be available for sale in the open market subject in some cases
to the lock-up agreements and, for affiliates, subject to the conditions and
restrictions of Rule 144.

For a description of the registration rights of our securityholders, see
"Description of Capital Stock--Registration Rights."

56
<PAGE>

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated , 1999, we have agreed to sell to the underwriters named
below, for whom Credit Suisse First Boston Corporation, Banc of America
Securities LLC and CIBC World Markets Corp. 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.............................
Banc of America Securities LLC.....................................
CIBC World Markets Corp............................................
---
Total............................................................
===
</TABLE>

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.

We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares at the initial public offering price
less the underwriting discounts and commissions. The option may be exercised
only to cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share on
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-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting Discounts
and Commissions
paid by us............. $ $ $ $
Expenses payable by us.. $ $ $ $
</TABLE>

The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.

Certain employees of CIBC World Markets Corp., including the research
analyst that will cover us, own redeemable preferred stock that will convert
into shares of common stock upon completion of this offering.

We and our executive officers, directors and certain other securityholders
have agreed not to offer, sell, contract 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 relating
to, any shares of common stock or securities convertible into or exchangeable
or exercisable for any common stock, or publicly disclose the intention to make
any such offer, sale, contract, pledge, disposition or filing, without the
prior written consent of Credit Suisse First Boston Corporation for a period of
180 days after the date of this prospectus, with exceptions for outstanding
stock options and warrants.

The underwriters have reserved for sale, at the initial public offering
price, up to shares of common stock for business partners, employees,
directors and other persons associated with us who have expressed an interest
in purchasing common stock in this offering. The number of shares available for
sale to

57
<PAGE>

the general public in this offering will be reduced to the extent these persons
purchase the reserved shares. Any reserved shares not so purchased will be
offered by the underwriters to the general public on the same terms as the
other shares.

We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be
required to make in that respect.

We will apply to list our common stock on The Nasdaq Stock Market's National
Market under the symbol "TLXS."

Before this offering, there has been no public market for our common stock.
The initial public offering price was determined by negotiation between us and
the representatives. The principal factors considered in determining the public
offering price included:

. the information in this prospectus and otherwise available to the
representatives

. the history of 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 Exchange Act.

. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.

. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.

. Syndicate covering transactions involve purchases of 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 the
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

Resale Restrictions

The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the common stock.

58
<PAGE>

Representations of Purchasers

Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (1) the purchaser is entitled under
applicable provincial securities laws to purchase the common stock without the
benefit of a prospectus qualified under these securities laws, (2) where
required by law, that the purchaser is purchasing as principal and not as
agent, and (3) 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
herein may be located outside Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or these persons. All or a substantial portion of the assets of the
issuer and 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 pursuant to 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 in respect of common stock acquired on the same date and under the
same prospectus exemption.

Taxation and Eligibility for Investment

Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.

LEGAL MATTERS

Certain legal matters will be passed upon for us by Mirick, O'Connell,
DeMallie & Lougee, LLP, Worcester, Massachusetts. Partners and associates in
the firm own an aggregate of 38,500 shares of common stock and have options to
purchase an additional 27,250 shares of common stock. Certain legal matters
will be passed upon for the underwriters by Foley, Hoag & Eliot LLP, Boston,
Massachusetts.

EXPERTS

PricewaterhouseCoopers LLP, independent accountants, have audited the
financial statements of Millitech Corporation as of December 31, 1997 and 1998,
and for each of the three years in the period ended December 31, 1998 which are
included in this prospectus and registration statement. Our financial
statements are included in this prospectus in reliance on the report of
PricewaterhouseCoopers LLP, given on their authority as experts in auditing and
accounting.

59
<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 set forth in the registration statement and its
exhibits. 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 review a copy of the registration statement, including
exhibits and schedules filed with it, at the SEC's public reference facilities
in Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the SEC located at 7 World Trade Center, Suite
1300, New York, New York 10048, and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. You may also obtain copies of the
materials from the Public Reference Section of the SEC, Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
SEC maintains a Web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants, such as our
company, that file electronically with the SEC.

We intend to furnish our stockholders with annual reports containing
financial statements audited by independent certified public accountants and
will make available quarterly reports containing unaudited summary financial
information for each of the first three quarters of each fiscal year.

60
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants.......................................... F-2
Balance Sheets............................................................. F-3
Statements of Operations and Comprehensive Loss............................ F-4
Statements of Changes in Stockholders' Deficit............................. F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
Millitech Corporation

In our opinion, the accompanying balance sheets and the related statements
of operations and comprehensive loss, of changes in stockholders' deficit and
of cash flows present fairly, in all material respects, the financial position
of Millitech Corporation (the "Company") at December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
Millitech Corporation's management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

Springfield, Massachusetts
March 5, 1999, except for Note 2
as to which the date is August 24, 1999

F-2
<PAGE>

MILLITECH CORPORATION
BALANCE SHEETS
(in thousands, except share data)

<TABLE>
<CAPTION>
December 31, Pro Forma
------------------ June 30, June 30,
1997 1998 1999 1999
-------- -------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents........ $ 10,294 $ 2,635 $ 405 $ 405
Accounts receivable, less
allowance for doubtful accounts
($210 in 1997 and $368 in
1998)........................... 2,744 3,013 955 955
Contracts in process............. 85 139 -- --
Inventories...................... 3,162 3,093 2,613 2,613
Net assets to be disposed of..... -- -- 1,399 1,399
Other current assets............. 96 97 253 253
-------- -------- -------- --------
Total current assets........... 16,381 8,977 5,625 5,625
Property, plant and equipment,
net............................. 3,430 5,922 4,933 4,933
Patents and intangible assets,
net of accumulated
amortization.................... 121 -- -- --
Other assets..................... 127 56 92 92
-------- -------- -------- --------
Total assets................... $ 20,059 $ 14,955 $ 10,650 $ 10,650
======== ======== ======== ========
Liabilities, Redeemable Preferred
Stock and Stockholders' (Deficit)
Equity
Current liabilities
Notes payable.................... $ 1,500 $ -- $ 1,000 $ 1,000
Accounts payable................. 2,268 2,209 1,572 1,572
Customer prepayments............. 1,028 204 186 186
Accrued expenses................. 1,968 2,060 1,768 1,768
Income taxes payable............. 53 41 50 50
Current maturities of long-term
debt............................ 508 379 675 675
Current maturities of capital
lease obligations............... 617 813 795 795
-------- -------- -------- --------
Total current liabilities...... 7,942 5,706 6,046 6,046
Long-term debt..................... 729 350 1,246 1,246
Capital lease obligations.......... 961 697 440 440
-------- -------- -------- --------
Total liabilities.............. 9,632 6,753 7,732 7,732
-------- -------- -------- --------
Commitments and contingencies
Redeemable Preferred Stock
Redeemable preferred stock, Class
A, $.01 par value; $3.25
redemption value; authorized
3,090,323 shares (3,270,000 in
1997); issued and outstanding
3,045,696 shares................ 9,899 9,899 9,899 --
Redeemable preferred stock, Class
B, $.01 par value; $3.25
redemption value; authorized
789,677 shares (1,250,000 in
1997); issued and outstanding
789,677 shares.................. 2,566 2,566 2,566 --
Redeemable preferred stock, Class
C, $.01 par value; authorized 0
shares (400,000 in 1997); none
issued ......................... -- -- -- --
Redeemable preferred stock, Class
D, $.01 par value; $1.80
redemption value; authorized
7,200,000 shares; issued and
outstanding 7,200,000 shares.... 12,960 12,960 12,960 --
Redeemable preferred stock, Class
E, $.01 par value; $2.25
redemption value; authorized
8,000,000 shares in 1999 and
4,000,000 shares in 1998; issued
and outstanding 3,274,841
shares.......................... -- 7,368 7,368 --
-------- -------- -------- --------
25,425 32,793 32,793 --
Stockholders' (Deficit) Equity
Preferred stock, $.01 par value;
7,500,000 shares authorized in
1999; none issued............... -- -- -- --
Common stock, $.01 par value;
authorized 36,000,000 shares in
1999, 25,000,000 shares in 1998
and 20,000,000 shares in 1997;
issued and outstanding 1,000,360
shares in 1999, 987,920 shares
in 1998 and 983,394 shares in
1997............................ 10 10 10 153
Additional paid-in capital....... 733 669 763 33,413
Accumulated deficit.............. (15,741) (25,270) (30,648) (30,648)
-------- -------- -------- --------
Total stockholders' (deficit)
equity........................ (14,998) (24,591) (29,875) 2,918
-------- -------- -------- --------
Total liabilities, redeemable
preferred stock and
stockholders' (deficit)
equity........................ $ 20,059 $ 14,955 $ 10,650 $ 10,650
======== ======== ======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE>

MILLITECH CORPORATION
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share data)

<TABLE>
<CAPTION>
Six months ended June
Year ended December 31, 30,
-------------------------- -----------------------
1996 1997 1998 1998 1999
------- ------- -------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Sales..................... $ 201 $ 1,733 $ 2,386 $ 1,037 $ 2,762
Cost of sales............. 147 2,328 7,200 1,788 2,779
------- ------- -------- ------- -------
Gross margin (loss)....... 54 (595) (4,814) (751) (17)
Operating expenses
Research and development,
net..................... 433 3,724 4,630 2,717 1,801
Selling and marketing.... 353 667 1,006 470 482
General and
administrative.......... 1,097 1,740 2,722 1,393 1,416
------- ------- -------- ------- -------
Total operating
expenses................ 1,883 6,131 8,358 4,580 3,699
------- ------- -------- ------- -------
Operating loss............ (1,829) (6,726) (13,172) (5,331) (3,716)
------- ------- -------- ------- -------
Other income (expense)
Interest expense......... (423) (683) (473) (259) (154)
Income from contract
cancellation............ -- -- 997 -- --
Interest income.......... 13 40 233 184 25
Other.................... -- 17 -- -- --
------- ------- -------- ------- -------
Total other income
(expense)............... (410) (626) 757 (75) (129)
------- ------- -------- ------- -------
Loss from continuing
operations before income
taxes.................... (2,239) (7,352) (12,415) (5,406) (3,845)
Income tax benefit........ -- (640) (1,162) (655) --
------- ------- -------- ------- -------
Loss from continuing
operations............... (2,239) (6,712) (11,253) (4,751) (3,845)
------- ------- -------- ------- -------
Discontinued operations:
Income (loss) from
operations of MMWP
segment, net of taxes of
$328, $904, $1,162, $655
(unaudited) and $0
(unaudited) for the
years ended December 31,
1996, 1997, and 1998 and
for the six months ended
June 30, 1998 and 1999,
respectively............ (530) 1,342 1,724 971 367
Loss on disposition of
MMWP segment, including
provision of $300
(unaudited) for
operating losses during
the phase-out period,
net of $0 (unaudited)
for taxes............... -- -- -- -- (1,900)
------- ------- -------- ------- -------
Income (loss) from
discontinued operations.. (530) 1,342 1,724 971 (1,533)
------- ------- -------- ------- -------
Net loss and comprehensive
loss..................... $(2,769) $(5,370) $ (9,529) $(3,780) $(5,378)
======= ======= ======== ======= =======
Basic and diluted earnings
(loss) per share from:
Continuing operations.... $ (2.07) $ (7.08) $ (11.44) $ (4.83) $ (3.87)
======= ======= ======== ======= =======
Discontinued operations.. $ (0.49) $ 1.42 $ 1.75 $ .99 $ (1.54)
======= ======= ======== ======= =======
Net loss................. $ (2.56) $ (5.66) $ (9.68) $ (3.85) $ (5.42)
======= ======= ======== ======= =======
Shares used in computing
basic and diluted
earnings (loss) per
share.................... 1,080 948 984 983 993
======= ======= ======== ======= =======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE>

MILLITECH CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
(in thousands, except share data)

<TABLE>
<CAPTION>
Common Stock Additional
----------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
--------- ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Balances, December 31,
1995...................... 1,092,860 $ 11 $ 898 $ (7,602) $ (6,693)
Exercise of common stock
options................... 11,500 -- 5 5
Treasury stock acquired and
retired................... (206,666) (2) (101) (103)
Net loss................... (2,769) (2,769)
--------- ---- ----- -------- --------
Balances, December 31,
1996...................... 897,694 9 802 (10,371) (9,560)
Exercise of common stock
options................... 85,700 1 42 43
Other...................... (111) (111)
Net loss................... (5,370) (5,370)
--------- ---- ----- -------- --------
Balances, December 31,
1997...................... 983,394 10 733 (15,741) (14,998)
Exercise of common stock
options................... 4,526 -- 2 2
Other...................... (66) (66)
Net loss................... (9,529) (9,529)
--------- ---- ----- -------- --------
Balances, December 31,
1998...................... 987,920 10 669 (25,270) (24,591)
Exercise of common stock
options................... 12,440 -- 6 6
Other...................... 88 88
Net loss................... (5,378) (5,378)
--------- ---- ----- -------- --------
Balances, June 30, 1999
(unaudited)............... 1,000,360 $ 10 $ 763 $(30,648) $(29,875)
========= ==== ===== ======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE>

MILLITECH CORPORATION
STATEMENTS OF CASH FLOWS
(in thousands)

<TABLE>
<CAPTION>
Six months ended June
Year ended December 31, 30,
------------------------- -----------------------
1996 1997 1998 1998 1999
------- ------- ------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities
Net loss................... $(2,769) $(5,370) $(9,529) $(3,780) $(5,378)
Adjustments to reconcile
net loss to net cash
utilized by operating
activities:
Depreciation and
amortization.............. 1,176 1,563 2,076 888 1,162
Loss on disposition of MMWP
segment................... -- -- -- -- 1,900
Non-cash compensation
expense................... -- -- -- -- 88
Gain on sale of property
and equipment............. (241) -- -- -- --
Deferred income taxes...... 322 277 -- -- --
Changes in assets and
liabilities
Accounts receivable....... 1,240 (161) (269) 93 625
Contracts in process...... (68) 449 (54) (159) (11)
Inventories............... (866) 220 69 (1,922) (1,273)
Other current assets...... 41 31 (1) (214) (156)
Accounts payable and
accrued expenses......... (927) 1,911 32 333 (264)
Customer prepayments...... 427 601 (824) 57 17
Income taxes payable...... (134) 53 (13) (3) 9
------- ------- ------- ------- -------
Net cash utilized by
operating activities..... (1,799) (426) (8,513) (4,707) (3,281)
------- ------- ------- ------- -------
Cash flows from investing
activities
Additions to property and
equipment................. (556) (778) (3,706) (2,574) (708)
Proceeds from sale of
property and equipment.... 642 -- -- -- --
Reduction (addition) to
other assets.............. (58) (39) 20 3 (39)
------- ------- ------- ------- -------
Net cash provided
(utilized) by investing
activities............... 28 (817) (3,686) (2,571) (747)
------- ------- ------- ------- -------
Cash flows from financing
activities
Proceeds from note
payable................... 2,000 1,000 -- -- 1,000
Net (repayment) borrowing
under line of credit...... 1,500 500 (1,500) (300) --
Proceeds from long-term
debt...................... -- -- -- -- 1,416
Repayments of long-term
debt and capital lease
obligations............... (1,415) (994) (1,264) (648) (624)
Issuance of common stock
upon exercise of options.. 6 43 2 -- 6
Issuance of redeemable
preferred stock........... -- 9,917 7,368 -- --
Stock issuance costs....... -- (111) (66) -- --
Redemption of preferred
stock..................... (3) -- -- -- --
Treasury stock acquired and
retired................... (103) -- -- -- --
Addition to other assets... (72) (31) -- -- --
------- ------- ------- ------- -------
Net cash provided
(utilized) by financing
activities............... 1,913 10,324 4,540 (948) 1,798
------- ------- ------- ------- -------
Net increase (decrease) in
cash and cash equivalents.. 142 9,081 (7,659) (8,226) (2,230)
Cash and cash equivalents at
beginning of period........ 1,071 1,213 10,294 10,294 2,635
------- ------- ------- ------- -------
Cash and cash equivalents at
end of period.............. $ 1,213 $10,294 $ 2,635 $ 2,068 $ 405
======= ======= ======= ======= =======
Supplemental disclosure of
cash flow information
Cash paid (received) during
the period for
Income taxes paid (net of
cash refunds received).... $ 167 $ (62) $ -- $ -- $ --
Interest paid.............. 423 615 240 121 149
Non-cash investing and
financing activities:
Equipment acquired under
capital lease agreements.. 130 1,781 689 689 125
Conversion of notes and
accrued interest to
preferred stock........... -- 3,043 -- -- --
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-6
<PAGE>

MILLITECH CORPORATION

NOTES TO FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

The following is a summary of significant accounting policies:

Unaudited Interim Financial Data

The financial information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited. In the opinion of management, such interim
financial information includes all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the results for such interim
periods. The results of operations for the six months ended June 30, 1999 are
not necessarily indicative of the results to be expected for any future period.

Unaudited Pro Forma Balance Sheet

The outstanding shares of the Company's preferred stock Series A, B, D and E
automatically convert to common stock upon a public offering resulting in gross
proceeds of at least $15,000,000 and with an offering price of $9.75, $9.75,
$9.75, and $4.50 per share, respectively. These conversions have been reflected
in the unaudited pro forma balance sheet as of June 30, 1999. The pro forma
balance sheet excludes the 6,666,667 shares of Series E stock issued in
September 1999 (see Note 19).

Cash and Cash Equivalents

The Company considers highly liquid investments with a maturity of three
months or less at the time of purchase to be cash equivalents.

Revenue Recognition

Sales under short-term contracts and for stock items are recognized when
deliveries are made. Sales under cost-reimbursement contracts are recorded as
costs are incurred and include estimated earned fees in the proportion that
costs incurred to date bear to total estimated costs.

Sales under certain fixed-price and fixed-price incentive contracts are
recorded utilizing the percentage of completion method, wherein costs and
estimated gross margin are recorded as the work is performed. Income is accrued
based upon the percentage that costs incurred to date bear to estimated total
costs after giving effect to the most recent estimates of costs and funding at
completion.

Fees under certain contracts may be increased or decreased in accordance
with cost or performance incentive provisions which measure actual performance
against established targets or specific criteria. Incentive fee awards or
penalties are included in sales or cost of sales at the time the amounts can be
reasonably determined.

F-7
<PAGE>

MILLITECH CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

As some contracts extend over one or more years, revisions in cost and
profit estimates during the course of the work are reflected in the accounting
period in which the facts which require the revision become known. At the time
a loss on a contract becomes known, the entire amount of the estimated ultimate
loss on such contract is accrued.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash, cash equivalents and trade accounts
receivable. The Company places its cash investments with high-quality financial
institutions. The Company extends credit to its customers based on an
evaluation of the customer's financial condition and history and generally does
not require collateral. The Company has historically incurred minimal credit
losses. Approximately 24% and 27% of accounts receivable at December 31, 1997
and 1998 are due from customers who each comprise more than 10% of the total
outstanding accounts receivable. At June 30, 1999, all accounts receivable were
due from four customers, each comprising more than 10% of the total outstanding
accounts receivable relating to the Company's continuing operations.

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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Comprehensive Income

Effective January 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 130, Reporting Comprehensive Income. For
the years ended December 31, 1996, 1997 and 1998 and for the six months ended
June 30, 1998 and 1999, comprehensive loss equaled net loss.

Research and Development

The Company incurs research and development costs in the exploration of
commercially viable applications of its millimeter-wave and microwave
technology.

The Company also incurs research and development costs under customer-funded
contracts. Costs of approximately $1,640,000 and $1,727,000 are recorded net of
the associated customer funding of $67,000 and $986,000 in the years ended
December 31, 1997 and 1998, respectively. Costs of approximately $277,000
(unaudited) are shown net of the associated customer funding of $314,000
(unaudited) for the six months ended June 30, 1999. There were no such
contracts in the year ended December 31, 1996 or the six months ended June 30,
1998. Significant terms of customer-funded research and development
arrangements include granting the customer a non-exclusive, royalty-free right
and license to use and distribute the product and its related sales and
technical literature that is developed by the Company under the agreement.

Inventories

Inventories are stated at the lower of cost (average cost method) or market.
During 1998, the Company recorded a related reserve of approximately $1,068,000
to adjust such inventory to its net realizable value.

F-8
<PAGE>

MILLITECH CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is computed
using the straight-line method based upon the estimated useful lives of the
assets as follows:

<TABLE>
<CAPTION>
Asset Life
----- -------------
<S> <C>
Machinery and equipment........................................ 5 to 7 years
Furniture and fixtures......................................... 7 to 10 years
Leasehold improvements......................................... 5 to 10 years
Equipment under capital leases................................. 5 to 7 years
</TABLE>

Leasehold improvements and equipment under capital leases are amortized over
the lesser of the life of the lease or the useful lives of the improvements or
equipment.

When assets are sold or retired, the related cost and accumulated
depreciation are removed from their respective accounts and any resulting gain
or loss is included in income.

Patents and Intangible Assets

Patents and intangible assets are recorded at cost and are amortized using
the straight-line method over 10 years.

In accordance with FASB Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, the Company
reviews long-lived assets and certain identifiable intangibles for impairment
at each reporting date, and whenever changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company recorded
charges of $125,000 and $76,664 for the years ended December 31, 1997 and 1998,
respectively, as a result of its decision to reduce the carrying value of
certain patents held by the Company. This charge is included as a component of
general and administrative expenses.

Income Taxes

Deferred tax assets and liabilities are computed annually for differences
between the financial statement and tax bases of assets and liabilities that
will result in taxable or deductible amounts in the future based on enacted tax
laws and rates applicable to periods in which the differences are expected to
affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized.

Income tax expense (benefit) is the tax payable or refundable for the period
plus or minus the change during the period in deferred tax assets and
liabilities. An income tax benefit is recorded in the Company's continuing
operations to the extent that the loss from continuing operations offsets
income from discontinued operations.

F-9
<PAGE>

MILLITECH CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

Earnings Per Share

Earnings per share has been computed by dividing the loss from continuing
operations, income (loss) from discontinued operations and net loss by the
weighted average common shares outstanding. No effect has been given to the
exercise of common stock options, stock warrants, convertible notes, and
redeemable preferred stock, since such effect would be antidilutive on
continuing operations for all reporting periods. Pro forma basic and diluted
loss per share have been computed assuming the conversion of all outstanding
shares of redeemable preferred stock into common shares, as if the shares had
converted immediately upon their issuance. The following table presents the
calculation of historical and pro forma per share amounts (in thousands, except
per share data):

<TABLE>
<CAPTION>
Six months ended
Year ended December 31, June 30,
-------------------------- -----------------------
1996 1997 1998 1998 1999
------- ------- -------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Historical:
Loss from continuing
operations.............. $(2,239) $(6,712) $(11,253) $(4,751) $(3,845)
======= ======= ======== ======= =======
Weighted average shares
of common stock
outstanding............. 1,080 948 984 983 993
======= ======= ======== ======= =======
Basic and diluted loss
per share from
continuing operations... $ (2.07) $ (7.08) $ (11.44) $ (4.83) $ (3.87)
======= ======= ======== ======= =======
Income (loss) from
discontinued
operations.............. $ (530) $ 1,342 $ 1,724 $ 971 $(1,533)
======= ======= ======== ======= =======
Weighted average shares
of common stock
outstanding............. 1,080 948 984 983 993
======= ======= ======== ======= =======
Basic and diluted income
(loss) per share from
discontinued
operations.............. $ (0.49) $ 1.42 $ 1.75 $ .99 $ (1.54)
======= ======= ======== ======= =======
Net loss................. $(2,769) $(5,370) $ (9,529) $(3,780) $(5,378)
======= ======= ======== ======= =======
Weighted average shares
of common stock
outstanding............. 1,080 948 984 983 993
======= ======= ======== ======= =======
Basic and diluted net
loss per share.......... $ (2.56) $ (5.66) $ (9.68) $ (3.85) $ (5.42)
======= ======= ======== ======= =======
Pro Forma (Unaudited):
Weighted average shares
of common stock
outstanding............. 984 993
Pro forma adjustment to
reflect weighted average
effect of assumed
conversion of
outstanding redeemable
preferred stock into
common stock............ 11,654 14,310
-------- -------
Weighted average shares
used to compute pro
forma basic and diluted
loss per share.......... 12,638 15,303
======== =======
Pro forma basic and
diluted loss per share
from: Continuing
operations.............. $ (0.89) $ (0.25)
======== =======
Discontinued
operations............. $ 0.14 $ (0.10)
======== =======
Net loss................ $ (0.75) $ (0.35)
======== =======
</TABLE>
Derivative Instruments

In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities, which establishes accounting and reporting standards for derivative
instruments and hedging activities. The statement requires recognition of all
derivatives at fair value

F-10
<PAGE>

MILLITECH CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

in the financial statements. FASB Statement No. 137, Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133, an amendment of FASB Statement No. 133, defers
implementation of Statement No. 133 until fiscal years beginning after June 15,
2000. The Company has reviewed Statement No. 133 and believes that, upon
implementation, the standard will not have a significant effect on its
financial statements.

Reclassification

Certain 1996 and 1997 amounts have been reclassified to conform to the
current year's presentation.

2. Discontinued Operations

In August 1999, the Board of Directors voted and authorized management to
dispose of the Company's millimeter-wave products (MMWP) business segment. This
segment consists of the development and manufacture of millimeter-wave
components and assemblies, including antennas and quasi-optical products,
multiplexer products, and passive waveguide products.

Accordingly, the Company has restated its historical financial statements to
present the MMWP segment's operating results as a discontinued operation. The
results of the MMWP operations, including provisions for termination costs,
employee benefits, losses during the phase-out period of $300,000 and an
estimated loss on disposal of $1,600,000 resulting from the write-down of
inventory and equipment, have been segregated from continuing operations and
reported as a separate line item in the statement of operations and
comprehensive loss.

The assets and liabilities of the MMWP segment at June 30, 1999, consisting
primarily of accounts receivable, inventories, equipment, accounts payable and
accrued expenses, have been segregated as net assets to be disposed of in the
amount of $1,399,000 (unaudited) in the accompanying balance sheet.

Sales for the MMWP segment were $13,467,000, $14,686,000, $12,211,000,
$6,357,000 (unaudited) and $4,689,000 (unaudited) for the years ended December
31, 1996, 1997 and 1998 and for the six months ended June 30, 1998 and 1999,
respectively.

3. Contracts in Process

Contracts in process consist of the following (in thousands):

<TABLE>
<CAPTION>
December 31,
------------------ June 30,
1997 1998 1999
-------- -------- -----------
(unaudited)
<S> <C> <C> <C>
Costs and estimated profit or loss on
uncompleted contracts.................... $ 10,618 $ 13,488 $--
Less billings to date..................... (10,533) (13,349) --
-------- -------- ----
$ 85 $ 139 $--
======== ======== ====
</TABLE>

Unbilled amounts are recorded on a percentage of completion method and are
recoverable upon shipment of the product, presentation of billings, or
completion of the contract.

F-11
<PAGE>

MILLITECH CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

4. Inventories

Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
December 31,
------------- June 30,
1997 1998 1999
------ ------ -----------
(unaudited)
<S> <C> <C> <C>
Work in process.................................... $ 997 $ 918 $1,311
Parts and subassemblies............................ 2,165 2,175 1,302
------ ------ ------
$3,162 $3,093 $2,613
====== ====== ======
</TABLE>

5. Property, Plant and Equipment

Property, plant and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
December 31,
----------------- June 30,
1997 1998 1999
------- -------- -----------
(unaudited)
<S> <C> <C> <C>
Machinery and equipment..................... $ 7,841 $ 10,962 $ 8,430
Furniture and fixtures...................... 622 740 675
Leasehold improvements...................... 1,508 1,980 1,711
Equipment under capital leases.............. 2,785 3,469 2,748
------- -------- -------
12,756 17,151 13,564
Less accumulated depreciation and
amortization............................... (9,326) (11,229) (8,631)
------- -------- -------
$ 3,430 $ 5,922 $ 4,933
======= ======== =======
</TABLE>

The net book value of all equipment under capital leases was approximately
$1,581, $1,487 and $1,134 (unaudited) at December 31, 1997 and 1998, and June
30, 1999, respectively.

Depreciation expense for the years ended December 31, 1996, 1997 and 1998
was $1,101, $1,393 and $1,903, respectively. Depreciation expense for the six
months ended June 30, 1998 and 1999 was $838 (unaudited) and $1,159
(unaudited), respectively.

6. Accrued Expenses

Accrued expenses consist of the following (in thousands):

<TABLE>
<CAPTION>
December 31,
------------- June 30,
1997 1998 1999
------ ------ -----------
(unaudited)
<S> <C> <C> <C>
Accrued payroll, commissions and related
expenses....................................... $ 909 $1,002 $ 583
Accrued warranty expense........................ 342 492 555
Accrued contract costs.......................... 647 334 210
Other accrued expenses.......................... 70 232 120
Accrued loss on disposition of MMWP segment..... -- -- 300
------ ------ ------
$1,968 $2,060 $1,768
====== ====== ======
</TABLE>

F-12
<PAGE>

MILLITECH CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

7. Notes Payable

Notes payable consisted of a collateralized line of credit of $1,500,000 at
December 31, 1997.

Collateral for the line of credit consisted of all assets of the Company.
The maximum amount that could be borrowed under this agreement was limited to
80% of bank-approved domestic accounts receivable plus 75% of bank-approved
international accounts receivable. Interest accrued at the rate of prime plus
1%. (Prime was 8.5% at December 31, 1997.) The line of credit expired on
October 31, 1998 and was not renewed by the Company.

In April 1999, the Company received $1,000,000 (unaudited) in proceeds from
subordinated promissory notes as bridge financing. The notes bear interest at 9
3/4% and are payable at the earlier of December 31, 1999 or the sale of equity
securities of the Company of at least $5,000,000. The note holders received
warrants for the purchase of 200,000 shares (unaudited) of the Company's common
stock at an exercise price of $.50 per share.

8. Long-Term Debt

Long-term debt consists of the following (in thousands):

<TABLE>
<CAPTION>
December
31,
------------ June 30,
1997 1998 1999
------ ---- -----------
(unaudited)
<S> <C> <C> <C>
Uncollateralized subordinated note, due December
2000, quarterly principal payments of $87,500
with interest at 10% (see Note 13)............... $1,138 $700 $ 525
Uncollateralized subordinated note, due June 2003,
monthly principal payments of $8,333 with
interest at 10% (see Note 13).................... 99 29 400
Collateralized equipment notes, due April 2003,
monthly principal and interest payments of
$24,695, with interest at 7.8%................... -- -- 996
------ ---- ------
1,237 729 1,921
Less current portion.............................. (508) (379) (675)
------ ---- ------
$ 729 $350 $1,246
====== ==== ======
</TABLE>

The maturities of long-term debt outstanding are as follows (in thousands):

<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
------------ -----------
(unaudited)
<S> <C> <C>
1999................................................ $379 $ 675
2000................................................ 350 520
2001................................................ -- 365
2002................................................ -- 361
---- ------
$729 $1,921
==== ======
</TABLE>

During 1997, the Company issued subordinated convertible notes totaling
$1,000,000. In conjunction with these notes, the Company issued a total of
600,000 common stock warrants. In 1997, the $1,000,000 subordinated convertible
notes and $2,000,000 subordinated convertible notes issued previously, together
with accrued interest of $43,000, were converted into 1,690,656 shares of Class
D redeemable preferred stock (see Notes 12 and 13).

The subordinated note due June 2003 and the line of credit (Note 7) contain
debt covenant requirements related to financial ratios, including a quick
ratio, debt-to-equity ratio and debt service coverage. The Company

F-13
<PAGE>

MILLITECH CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

was in default of certain of these covenants as of and for the years ended
December 31, 1997 and 1998. The lenders of the line of credit have waived such
defaults as of and for the year ended December 31, 1997. The line of credit
expired and was not renewed in 1998. The lenders of the subordinated note have
waived such default as of and for the year ended December 31, 1998 and through
the year ending December 31, 1999.

In May 1999, the Company entered into a senior loan and security agreement
which provides for the issuance of up to $2,000,000 in promissory notes. As of
June 30, 1999, $996,000 (unaudited) in notes were outstanding against this
agreement. The notes are collateralized by machinery, equipment, intangible and
other assets of the Company. The notes require an additional interest
compensation payment at the end of the term of the notes. The payment, at the
option of the Company, is either 12.5% of the original principal of the note,
or six months of payments in the amount of 2.43% of the original principal of
the note. In conjunction with these notes, the Company issued 44,445
(unaudited) Class E preferred stock warrants which expire in May 2006 (see Note
13).

In June 1999, the Company paid the balance of its uncollateralized
subordinated note due June 1999 and issued a new uncollateralized subordinated
note due June 2003 to the same lender totaling $400,000 (unaudited). The
previous note due June 1999 required monthly payments of $5,833 with interest
at 10%. In conjunction with the new note due June 2003, the Company issued
40,000 (unaudited) common stock warrants that expire July 2007 (see Note 13).
The Company also extended the duration of the lender's outstanding Class A
preferred stock warrants to June 2003.

9. Leases

The Company leases its operating facility and certain equipment under
operating and capital leases which extend through 2003. Certain leases include
renewal options.

Future minimum annual lease payments under these lease agreements at
December 31, 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
Operating Capital
Year ending Leases Leases
----------- --------- -------
<S> <C> <C>
1999...................................................... $ 659 $ 864
2000...................................................... 242 585
2001...................................................... 149 340
2002...................................................... 91 123
2003...................................................... 60 --
------ ------
Future minimum lease payments............................. $1,201 1,912
======
Less amount representing interest......................... (402)
------
Present value of net minimum lease payments............... 1,510
Less current portion...................................... (813)
------
Long-term portion......................................... $ 697
======
</TABLE>

The Company has a ten-year operating lease for its primary operating
facility. The building lease requires the Company to pay utilities, insurance,
maintenance costs and real estate taxes. The building is leased from a
preferred stockholder.

In addition, the Company leases equipment under various leases for periods
ranging from one to five years. Some of these leases contain options to
purchase the equipment at the termination of the lease at a price equal to fair
market value.

F-14
<PAGE>

MILLITECH CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

Total rental expense charged to operations under operating leases was
approximately $439,000, $521,000, $624,000, $317,000 (unaudited) and $270,000
(unaudited) for the years ended December 31, 1996, 1997 and 1998 and for the
six months ended June 30, 1998 and 1999, respectively.

10. Incentive Compensation Plan

The Company maintains an incentive compensation plan. All payouts are at the
Board of Directors' discretion. No compensation expense was recognized under
this plan for the years ended December 31, 1996, 1997 and 1998 or for the six
months ended June 30, 1998 and 1999.

11. Income Taxes

The provision for income taxes consists of the following (in thousands):

<TABLE>
<CAPTION>
December 31,
-------------------
1996 1997 1998
---- ----- -------
<S> <C> <C> <C>
Continuing operations:
Current tax expense
(benefit):
Federal................. $-- $ 3 $ --
State................... -- (16) --
---- ----- -------
-- (13) --
---- ----- -------
Deferred tax expense
(benefit):
Federal................. -- (529) (981)
State................... -- (98) (181)
---- ----- -------
-- (627) (1,162)
---- ----- -------
Income tax benefit related
to continuing
operations............... -- (640) (1,162)
---- ----- -------
Discontinued operations:
Current tax expense:
Federal................. $-- $ 763 $ 981
State................... 6 141 181
---- ----- -------
6 904 1,162
---- ----- -------
Deferred tax expense:
Federal................. 304 -- --
State................... 18 -- --
---- ----- -------
322 -- --
---- ----- -------
Income tax expense related
to discontinued
operations............... 328 904 1,162
---- ----- -------
Total income tax
expense................ $328 $ 264 $ --
==== ===== =======
</TABLE>

F-15
<PAGE>

MILLITECH CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

The provision for income taxes differs from the amount computed utilizing
the federal statutory rate of 34% as follows:

<TABLE>
<CAPTION>
Year ended
December 31,
---------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Federal statutory rate.. (34.0)% (34.0)% (34.0)%
State taxes, net of
federal effect......... (6.2) (4.3) (7.6)
Other................... (0.6) 7.6 (2.2)
Change in valuation
allowance.............. 54.3 35.9 43.8
----- ----- -----
13.5% 5.2% 0.0%
===== ===== =====
</TABLE>

The tax effects of temporary differences that give rise to deferred tax
assets (liabilities) at December 31, 1997 and 1998 are as follows (in
thousands):

<TABLE>
<CAPTION>
1997 1998
------------------ -------------------
Current Noncurrent Current Noncurrent
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Inventory reserves................... $ 263 $ -- $ 1,134 $ --
Vacation liability................... 130 -- 173 --
Warranty............................. 75 -- 198 --
Allowance for reserve accounts....... 84 -- 148 --
Accrued contract costs............... 157 -- 121 --
Other................................ 117 (38) 253 (85)
Investment........................... -- -- -- (173)
Depreciation......................... -- 110 -- 138
Tax credit carryovers................ -- 226 -- 383
Net operating loss carryforwards..... -- 4,223 -- 7,231
----- ------- ------- -------
Gross deferred tax benefit........... 826 4,521 2,027 7,494
Valuation allowance.................. (826) (4,521) (2,027) (7,494)
----- ------- ------- -------
$ -- $ -- $ -- $ --
===== ======= ======= =======
</TABLE>

At December 31, 1998, the Company has approximately $18,996 ($11,563 in
1997) of net operating loss carryforwards and $288 ($200 in 1997) of investment
and research and development tax credit carryforwards available for federal
income tax purposes. There are approximately $14,584 of net operating losses
($6,999 in 1997) and approximately $96 in investment and research and
development tax credit carryforwards available in 1998 ($12 in 1997) for state
tax purposes.

Expiration of these carryforwards commenced in 1998 and will continue
through 2013. It is possible that the net operating loss carryforward amounts
that may be used in a single year may be limited.

12. Preferred Stock

The Company has issued and outstanding Class A, B, D and E preferred stock.
Each of the classes has redemption rights, a liquidation preference, conversion
rights, and dividend rights:

. Each Class A, B, D and E share may be converted at the option of the
holder into a share of common stock at a price of $3.25, $3.25, $1.80
and $2.25, respectively. Conversion would occur automatically upon a
public offering resulting in gross proceeds of at least $15,000,000 and
with an offering price

F-16
<PAGE>

MILLITECH CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

of at least $9.75, $9.75, $9.75 and $4.50 per share for the Class A, B, D,
and E shares, respectively. Each Class D and E share would automatically
be converted into common stock upon the conversion of 90% or more of the
authorized stock of the class.

. The Class A, B, D and E shares have a liquidation preference in the
amount of $3.25, $3.25, $1.80 and $2.25, respectively, plus all declared
and unpaid dividends.

. The holders of Class A, B, D and E shares are entitled to receive, when
and as declared by the Board of Directors, non-cumulative annual cash
dividends of $.26, $.26, $.144 and $.18 per share, respectively. No
dividends have been declared by the Board of Directors.

. Certain of the classes of preferred stock have liquidation rights,
voting rights and cash dividend rights in preference to the other
preferred stock.

During 1997, the stockholders authorized 400,000 shares of preferred stock
to be known as Class C preferred stock. The Class C shares are entitled to one
vote per share at any stockholders' meeting. During 1998, the stockholders
reduced the authorized shares of Class C to zero and at December 31, 1998,
there were no Class C preferred shares outstanding.

During 1997, the Company issued 7,200,000 shares of Class D preferred stock
at $1.80 per share for an aggregate of $12,960,000. As part of the Class D
preferred stock issue, the holders of the Company's subordinated convertible
notes agreed to convert the principal amount of $3,000,000 and accrued interest
of $43,000 into 1,690,656 shares of Class D preferred stock (see Note 8). The
balance of the proceeds, equal to $9,917,000, was received in cash.

During 1998, the Company issued 3,274,841 shares of Class E preferred stock
at $2.25 per share for an aggregate of $7,368,000.

The Company shall offer to redeem the Class A and Class B preferred shares
at the rate of 20% per year at $3.25 per share, plus an amount equal to all
declared and unpaid dividends. All Class A and Class B redemptions can be
waived at the option of two-thirds of the respective Class A or Class B
preferred stockholders. As part of the agreement in 1998 to issue Class E
preferred stock, the Class A and Class B preferred stockholders elected to
postpone their redemption rights until 2003.

On October 21, 2003 and on the first and second anniversaries thereof, the
Company shall offer to redeem from each Class D and Class E preferred holder, a
maximum of one-third, two-thirds and one hundred percent, respectively, of the
total number of shares held by each stockholder at a price equal to the greater
of $1.80 and $2.25, respectively, plus all declared and unpaid dividends, or
the fair market value as determined by the Board of Directors. The Class D
preferred stockholders agreed to postpone their redemption from 2002 to 2003,
as part of the 1998 Class E preferred stock issuance.

F-17
<PAGE>

MILLITECH CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

The aggregate amounts of potential required future redemptions as of
December 31, 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
Class A Class B Class D Class E
------------- ------------- -------------- -------------
Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999............... -- $ -- -- $ -- -- $ -- -- $ --
2000............... -- -- -- -- -- -- -- --
2001............... -- -- -- -- -- -- -- --
2002............... -- -- -- -- -- -- -- --
2003............... 609 1,980 158 513 2,400 4,320 1,092 2,456
Thereafter......... 2,437 7,919 632 2,053 4,800 8,640 2,183 4,912
----- ------ --- ------ ----- ------- ----- ------
3,046 $9,899 790 $2,566 7,200 $12,960 3,275 $7,368
===== ====== === ====== ===== ======= ===== ======
</TABLE>

13. Stock Warrants

The Company has issued stock warrants for its preferred and common stock as
follows:

<TABLE>
<CAPTION>
Class A Class E
Preferred Stock Preferred Stock Common Stock
------------------- --------------- -------------------
Exercise
Exercise Number Price Exercise
Number of Price Per of Per Number of Price Per
Shares Share Shares Share Shares Share
--------- --------- ------ -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Exercisable at December
31, 1995............... 28,000 $3.25 -- -- 125,000 $0.50
Granted................. -- -- -- -- 1,200,000 0.50
------ ----- ------ ----- --------- -----
Exercisable at December
31, 1996............... 28,000 3.25 -- -- 1,325,000 0.50
Granted................. -- -- -- -- 600,000 0.50
------ ----- ------ ----- --------- -----
Exercisable at December
31, 1997............... 28,000 3.25 -- -- 1,925,000 0.50
Granted................. -- -- -- -- -- --
------ ----- ------ ----- --------- -----
Exercisable at December
31, 1998............... 28,000 3.25 -- -- 1,925,000 0.50
Granted................. -- -- 44,445 $2.25 240,000 0.50
------ ----- ------ ----- --------- -----
Exercisable at June 30,
1999 (unaudited)....... 28,000 $3.25 44,445 $2.25 2,165,000 $0.50
====== ===== ====== ===== ========= =====
</TABLE>

F-18
<PAGE>

MILLITECH CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

The Company issued 1,200,000, 600,000, and 40,000 (unaudited) common stock
warrants during 1996, 1997 and the six months ended June 30, 1999 in
conjunction with subordinated convertible debt of $2,000,000 and $1,000,000 and
a subordinated note of $400,000, respectively (see Note 8). In addition,
200,000 common stock warrants were issued during the six months ended June 30,
1999 in conjunction with the bridge financing (see Note 7).

The outstanding common stock warrants have an exercise price of $.50 and
expire as follows:

<TABLE>
<CAPTION>
Expiration
Number of Warrants Date
------------------ --------------
<S> <C>
125,000....................................................... December 2000
1,200,000..................................................... September 2006
840,000....................................................... July 2007
</TABLE>

The outstanding Class A preferred stock warrants have an exercise price of
$3.25 and expire in June 2003 (See Note 8). The outstanding Class E preferred
stock warrants have an exercise price of $2.25 and expire in May 2006 (see Note
8).

14. Stock Options

The Company has stock option plans that provide for the granting of options
to certain employees, directors and consultants. The plans permit the granting
of options to purchase a maximum of 5,740,000 shares of common stock at prices
and require that the options be exercisable at such prices and at such times as
determined by the Board of Directors, not to exceed ten years from date of
issuance.

As of December 31, 1998, 2,405,955 options are available for issuance under
these plans. However, the Class D preferred stockholders' agreement limits the
number of additional options that may be issued without the approval of the
Class D stockholders. As of December 31, 1998, under this agreement,
approximately 881,000 of the total 2,405,955 options available may be granted
by the Board of Directors without approval by the Class D stockholders. The
stock options for employees generally have a vesting requirement of four years
whereby 20% of the options granted vest at the time of issuance and the
remainder vest at a rate of 20% per year on the anniversary date of the
issuance.

F-19
<PAGE>

MILLITECH CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

All outstanding options have an exercise price of $.50 per share. The
aggregate stock option transactions for these plans are as follows:

<TABLE>
<CAPTION>
Number of
Shares
---------
<S> <C>
Balance, December 31, 1995........................................ 983,300
Granted......................................................... 375,000
Exercised....................................................... (11,500)
Canceled or expired............................................. (366,900)
---------
Balance, December 31, 1996........................................ 979,900
Granted......................................................... 410,000
Exercised....................................................... (85,700)
---------
Balance, December 31, 1997 (745,700 exercisable).................. 1,304,200
Granted......................................................... 1,880,773
Exercised....................................................... (4,526)
Canceled or expired............................................. (705,728)
---------
Balance, December 31, 1998 (1,323,070 exercisable)................ 2,474,719
Granted......................................................... 249,362
Exercised....................................................... (12,440)
Canceled or expired............................................. (130,990)
---------
Balance, June 30, 1999 (1,571,991 exercisable)(unaudited)......... 2,580,651
=========
</TABLE>

The weighted average contractual life of options outstanding at December 31,
1998 is 6.8 years.

Additionally, the Company has options outstanding at December 31, 1998 to a
former shareholder/employee to purchase 270,000 shares of the Company's common
stock for $.50 per share. This option was granted in 1996 under the terms of a
sales agreement (see Note 18).

The Company granted options to non-employees during the six months ended
June 30, 1999 and accordingly recognized $88,000 (unaudited) in non-cash
compensation expense.

The Company applies APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations in accounting for its stock-based
compensation plans. Had compensation cost for the Company's stock option plans
been determined in accordance with SFAS No. 123, Accounting for Stock-Based
Compensation, the Company's pro forma net loss and net loss per share would
have been as follows:

<TABLE>
<CAPTION>
Year ended December 31,
-------------------------
1996 1997 1998
------- ------- -------
(in thousands, except
per share data)
<S> <C> <C> <C>
Net loss:
As reported..................................... $(2,769) $(5,370) $(9,529)
Pro forma....................................... (2,795) (5,412) (9,662)
Net loss per share:
As reported..................................... (2.56) (5.66) (9.68)
Pro forma....................................... (2.59) (5.71) (9.82)
</TABLE>

The above pro forma effects may not be representative of the effects for
future years, as option grants typically vest over several years and additional
options are generally granted each year.

F-20
<PAGE>

MILLITECH CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

The fair value of each option grant has been estimated on the date of grant
using the minimum value pricing model with the following weighted average
assumptions:

<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate........................... 6.84% 6.47% 5.58%
Expected life..................................... 8 years 8 years 8 years
Volatility........................................ 0% 0% 0%
Dividend yield.................................... -- -- --
</TABLE>

The weighted average fair value of those options granted in 1996, 1997 and
1998 was $0.21, $0.20 and $0.18, respectively.

15. Common and Preferred Stock Reserved

During 1998, the stockholders authorized an additional 5,000,000 shares of
common stock.

As a result of the outstanding preferred stock, outstanding stock warrants,
stock option plans and restricted stock purchase agreement, the Company has
reserved 18,700,073 shares of common stock at December 31, 1997 and 22,263,841
shares at December 31, 1998, and 28,000 shares of Class A preferred stock at
December 31, 1997 and 1998.

During the six months ended June 30, 1999, the stockholders voted to
authorize 7,500,000 (unaudited) shares of preferred stock, $.01 par value to
increase the authorized shares of the Series E preferred stock to 8,000,000
(unaudited) and to increase the authorized shares of common stock to 36,000,000
(unaudited).

16. Segment Information

During 1998, the Company adopted the provisions of FASB Statement No. 131,
Disclosures about Segments of an Enterprise and Related Information. FASB
Statement No. 131 establishes standards for disclosures about operating
segments, products and services, geographic areas and major customers.

Prior to the Company's decision to discontinue its millimeter-wave products
(MMWP) business segment (see Note 2), the Company developed and manufactured
products in two business segments, the MMWP and broadband wireless access (BWA)
segments. As a result of this decision, the Company now operates in only the
BWA segment. Products of the BWA segment include hub and customer premises
equipment.

The BWA segment's sales by country are (in thousands):

<TABLE>
<CAPTION>
Year ended Six months ended
December 31, June 30,
------------------ -----------------------
1996 1997 1998 1998 1999
---- ------ ------ ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
United States..................... $173 $ 225 $1,153 $ 209 $ 823
Canada............................ 1 -- 713 415 1,936
Other countries................... 27 1,508 520 413 3
---- ------ ------ ------ ------
$201 $1,733 $2,386 $1,037 $2,762
==== ====== ====== ====== ======
</TABLE>

The Company's research and production facilities and accompanying long-lived
assets are located in the United States.

F-21
<PAGE>

MILLITECH CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

Sales to individual customers in excess of 10% of total BWA segment revenues
are presented in the following table (in thousands):

<TABLE>
<CAPTION>
Year ended Six months ended
December 31, June 30,
------------------ -----------------------
1996 1997 1998 1998 1999
---- ------ ------ ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Individual customers in excess
of 10% of revenues:
Customer A.................... $ 20 $ -- $ -- $ -- $ --
Customer B.................... 95 -- -- -- --
Customer C.................... 59 -- -- -- --
Customer D.................... 27 674 -- -- --
Customer E.................... -- 584 -- -- --
Customer F.................... -- -- 296 296 --
Customer G.................... -- -- 614 -- 604
Customer H.................... -- -- 713 415 1,935
---- ------ ------ ------ ------
201 1,258 1,623 711 2,539
Other customers................ -- 475 763 326 223
---- ------ ------ ------ ------
Total sales.................... $201 $1,733 $2,386 $1,037 $2,762
==== ====== ====== ====== ======
</TABLE>

17. Employee Savings and Profit-Sharing Plan

The Company sponsors an employee savings and profit-sharing plan for all
employees. Full-time employees become eligible for participation after one-half
year of service. The Company provides a 50% matching of employee contributions,
up to a maximum of $2,000 ($1,750 in 1997). An additional contribution is
determined at the discretion of the Board of Directors.

The Company's contributions to this plan amounted to approximately $132,000,
$147,000 and $191,000 for the years ended December 31, 1996, 1997 and 1998 and
$121,000 (unaudited) and $149,000 (unaudited) for the six months ended June 30,
1998 and 1999, respectively.

18. Related-Party Transactions

The Company had sales to a preferred stockholder of approximately $728,000,
$1,028,000 and $953,000 during 1996, 1997 and 1998, and $555,000 (unaudited)
and $702,000 (unaudited) for the six months ended June 30, 1998 and 1999,
respectively. Included in accounts receivable at December 31, 1997 and 1998 are
approximately $378,000 and $160,000 due from these sales. These transactions
comprise subcontracts associated with the preferred stockholder's contracts
with the U.S. Government, and are contracted in accordance with federal
contracting guidelines. The sales and related accounts receivable from this
customer are included in discontinued operations.

The Company holds a promissory note receivable of $250,000 as the result of
a 1996 license and sales agreement with a limited liability company established
and partly owned by a former stockholder/employee. The Company also owns a
19.9% interest in the company. At December 31, 1997 and 1998, the Company has
reserved for the entire amount due on the note receivable of approximately
$213,000 and $200,000, respectively, and has no value assigned to its 19.9%
interest in the limited liability company. The Company has instituted legal
action to collect the amounts due plus damages.

F-22
<PAGE>

MILLITECH CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

19. Subsequent Events (unaudited)

Bridge Financing

In July 1999, the Company received an aggregate of $1,000,000 in proceeds
from subordinated promissory notes issued to certain preferred stockholders,
common stockholders, officers and directors. The notes bear interest at 9.75%
and are to be paid in full on the earlier of December 31, 1999 or the sale of
the Company's equity securities having an aggregate sales price of at least
$5,000,000. Holders of the subordinated promissory notes also received warrants
to purchase an aggregate of 200,000 shares of the Company's common stock at
$.50 per share. The warrants expire in July 2007.

Revolving Line of Credit

In August 1999, the Company entered into a revolving line of credit
agreement with a bank. The agreement provides for an initial borrowing of up to
$1,000,000, which is increased by $500,000 upon the Company's raising an
additional $3,000,000 in stockholders' equity and increased by $500,000 upon
receipt of a machinery and equipment appraisal, for a total amount available of
$2,000,000. Interest is payable on the outstanding balance of the line at prime
plus 1%. The line is collateralized by all assets of the Company and expires on
August 19, 2000. The agreement requires the Company to comply with certain
covenants, including net income and tangible net worth.

In connection with the revolving line of credit agreement, the bank received
a warrant to purchase 44,445 shares of the Company's Series E preferred stock
at $2.25 per share. The warrant expires in August 2006.

Series E Preferred Stock

In September 1999, the Company sold 6,666,667 shares of its Series E
preferred stock for $15,000,000, prior to issuance expenses. Of the total
proceeds, approximately $2,000,000 will be used to retire the $2,000,000 in
subordinated promissory notes from the bridge financing and approximately
$13,000,000 will be used for general corporate purposes. The terms of the
additional Series E shares issued are the same as the Series E shares
previously issued (see Note 12).

F-23
<PAGE>

[Logo of Telaxis Communications Corporation]
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth the expenses (other than the underwriting
compensation expected to be incurred) in connection with the offering described
in this Registration Statement. All of the amounts (except the SEC Registration
Fee, the NASD Filing Fee and The Nasdaq Stock Market's National Market Listing
Fee) are estimates.

<TABLE>
<S> <C>
SEC Registration Fee................................................... $20,141
NASD Filing Fee........................................................ 7,745
The Nasdaq Stock Market's National Market Listing Fee.................. *
Blue Sky Fees and Expenses............................................. 7,500
Printing and Engraving Costs........................................... *
Legal Fees and Expenses................................................ *
Accounting Fees and Expenses........................................... *
Transfer Agent and Registrar Fees and Expenses......................... *
Miscellaneous.......................................................... *
-------
Total................................................................ $ *
=======
</TABLE>

Item 14. Indemnification of Directors and Officers.

Section 67 of Chapter 156B of the Massachusetts General Laws, or the
Massachusetts Business Corporation Law (the "MBCL"), provides that the
indemnification of directors, officers, employees and other agents of a
corporation, and persons who serve at its request as directors, officers,
employees or other agents of another organization, or who serve at its request
in any capacity with respect to any employee benefit plan, may be provided by
it to whatever extent shall be specified in or authorized by (i) the articles
of organization or (ii) a by-law adopted by the stockholders or (iii) a vote
adopted by the holders of a majority of the shares of stock entitled to vote on
the election of directors. Except as the articles of organization or by-laws
otherwise require, indemnification of any such persons who are not directors of
the corporation may be provided by it to the extent authorized by the
directors. Such indemnification may include payment by the corporation of
expenses incurred in defending a civil or criminal action or proceeding in
advance of the final disposition of such action or proceeding, upon receipt of
an undertaking by the person indemnified to repay such payment if he shall be
adjudicated not to be entitled to indemnification, which undertaking may be
accepted without reference to the financial ability of such person to make
repayment. Any such indemnification may be provided although the person to be
indemnified is no longer an officer, director, employee or agent of the
corporation or of such other organization or no longer serves with respect to
any such employee benefit plan. Section 67 further provides that no
indemnification shall be provided for any person with respect to any matter as
to which he shall have been adjudicated in any proceeding not to have acted in
good faith in the reasonable belief that his action was in the best interest of
the corporation or, to the extent that such matter relates to service with
respect to any employee benefit plan, in the best interests of the participants
or beneficiaries of such employee benefit plan.

The Company's by-laws provide that the Company shall indemnify each person
who is, or shall have been, a director, officer, employee or agent of the
Company, or who is serving or shall have served, at the request of the Company,
as a director or officer of another organization or in any capacity with
respect to any employee benefit plan of the Company, against all liabilities
and expenses (including judgments, fines, penalties, amounts paid or to be paid
in settlement and reasonable attorney's fees) imposed upon or incurred by any
such person in connection with or arising out of claims made, or any action,
suit or proceeding threatened or brought against him or in which he may be
involved by reason of any action taken omitted by him as a director, officer,
employee or agent, or as a result of any service with respect to any such
employee benefit plan.

II-1
<PAGE>

Section 13(b)(1 1/2) of Chapter 156B of the MBCL permits a corporation to
include in its articles of organization a provision eliminating or limiting the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 61 or
62 of the MBCL (relating to unlawful payment of dividends, unlawful stock
purchase and redemption and loans to insiders) or (iv) for any transaction from
which the director derived an improper personal benefit. Article VI of the
Company's Articles of Organization provides that the Company's directors shall
not be liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, expect in the circumstances set forth
in the MBCL.

Section 67 of the MBCL also affords a Massachusetts corporation the power to
obtain insurance on behalf of its directors and officers against liabilities
incurred by them in those capacities. The Company currently maintains a
directors and officers liability insurance policy.

The Underwriting Agreement filed as Exhibit 1.1 provides that the
Underwriters named therein will indemnify and hold harmless the Company and
each director, officer or controlling person of the Company from and against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"), and the Underwriting Agreement provides that
such Underwriters will contribute to certain liabilities of such persons under
the Securities Act.

Item 15. Recent Sales of Unregistered Securities.

The Company has issued or sold the following unregistered securities within
the past three years:

. an aggregate of 6,666,667 shares of Class E preferred stock at $2.25 per
share in September 1999 to 47 accredited investors;

. a warrant to purchase 44,445 shares of Class E preferred stock at $2.25
per share in August 1999 to a commercial lender;

. warrants to purchase an aggregate of 200,000 shares of common stock at
$.50 per share in July 1999 to 12 accredited investors;

. a warrant to purchase 40,000 shares of common stock at $.50 per share in
June 1999 to one accredited investor;

. a warrant to acquire 44,445 shares of Class E preferred stock at $2.25
per share in May 1999 to a lease financing company;

. warrants to purchase an aggregate of 200,000 shares of common stock at
$.50 per share in April 1999 to 14 accredited investors;

. an aggregate of 3,274,841 shares of Class E preferred stock at $2.25 per
share in October, November and December 1998 to 32 accredited investors;

. an aggregate of 7,200,000 shares of Class D preferred stock at $1.80 per
share in November and December 1997 to 38 accredited investors;

. warrants to acquire an aggregate of 1,800,000 shares of common stock at
$.50 per share in September 1996 and July 1997 to 23 accredited
investors;

. stock options to purchase an aggregate of 2,504,635 shares of common
stock at an exercise price of $.50 between October 1, 1996 and September
2, 1999 to a total of 193 consultants, employees and directors under the
Company's 1996 and 1997 stock plans;

. stock options to purchase an aggregate of 780,225 shares of common stock
at an exercise price of $1.25 between July 14, 1999 and September 2,
1999 to a total of 12 consultants, employees and directors under the
Company's 1997 stock plan;

II-2
<PAGE>

. stock options to purchase an aggregate of 354,629 shares of common stock
at an exercise price of $2.25 between August 24, 1999 and September 13,
1999 to a total of 191 consultants, employees and directors under the
Company's 1997 stock plan;

. 225,000 shares of restricted common stock at $1.25 per share under our
1997 Stock Plan to one employee in September 1999; and

. an aggregate of 289,966 shares at prices ranging from $0.50 to $1.25 to
our employees, directors and consultants upon the exercise of options
held by those individuals and issued under one or more of our stock
plans.

Each of the sales described above were completed without registration under
the Securities Act in reliance upon one or more of the following exemptions:

. Section 4(2) of the Securities Act or Rule 506 of Regulation D
promulgated under the Securities Act for transactions not involving a
public offering; or

. Rule 701 promulgated under the Securities Act with respect to certain of
the options and shares of common stock issued to the Company's
employees, directors and consultants.

None of the sales of the securities issued by the Company have involved the
use of an underwriter, and no commissions were paid in connection with the sale
of any of the securities issued by the Company.

Item 16. Exhibits and Financial Statement Schedules.

(a) Exhibits

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.*

3.1 Restated Articles of Organization of the Company.*

3.2 By-laws of the Company, as amended.

4.1 Form of certificate evidencing ownership of Common Stock of the
Company.*

5.1 Opinion of Mirick, O'Connell, DeMallie & Lougee, llp.*

10.1 1986 Stock Plan of the Company.

10.2 1987 Stock Plan of the Company.

10.3 1988 Stock Plan of the Company.

10.4 1996 Stock Plan of the Company.

10.5 1997 Stock Plan of the Company.

10.6 1999 Stock Plan of the Company.

10.7 Employment Agreement by and between the Company and John L. Youngblood
dated January 25, 1994.

10.8 Reseller Agreement by and between the Company and Newbridge Networks
Corporation dated August 7, 1998.*

10.9 Professional Services Agreement by and between the Company and
Newbridge Networks Corporation dated August 7, 1998.*

10.10 Revised Purchase Order by and between the Company and Motorola dated
September 20, 1999.*

10.11 Memorandum of Understanding by and between the Company and Hughes
Network Systems Limited dated August 12, 1998.*

</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.12 Memorandum of Understanding by and between the Company and California
Amplifier, Inc. dated March 11, 1999.

10.13 Lease by and between the Company and Edward J. O'Leary-Raymond M.
Vincunas Partnership dated January 16, 1990.

10.14 Lease by and between the Company and Lloyd C. Green and Mildred E.
Green dated June 30, 1998.

10.15 Revolving Line of Credit Agreement by and between the Company and
Boston Federal Savings Bank dated August 20, 1999.

10.16 Fourth Amended and Restated Registration Rights Agreement dated
September 17, 1999.

10.17 Registration Rights Agreement by and between the Company and Boston
Federal Savings Bank dated August 20, 1999.

10.18 Registration Rights Agreement by and between the Company and Phoenix
Leasing Incorporated dated May 19, 1999.

10.19 Purchase Agreement by and between the Company and Massachusetts
Technology Development Corporation dated June 1988.*
10.20 First Amendment to the Purchase Agreement by and between the Company
and Massachusetts Technology Development Corporation dated December
28, 1988.*
10.21 Second Amendment to the Purchase Agreement by and between the Company
and Massachusetts Technology Development Corporation dated June 17,
1999.*
10.22 Senior Loan and Security Agreement by and between the Company and
Phoenix Leasing Corporation dated May 19, 1999.*
10.23 Subordinated Note and Warrant Purchase Agreement by and between the
Company and Massachusetts Capital Resource Company dated December 7,
1992.*
10.24 Subordinated Note Purchase Agreement by and between the Company and
Massachusetts Capital Resource Company dated August 15, 1994.*

23.1 Consent of PricewaterhouseCoopers llp.

23.2 Consent of Mirick, O'Connell, DeMallie & Lougee, LLP (incorporated in
the Opinion filed as Exhibit 5.1 above).*

24.1 Power of Attorney (included on the signature page of this Registration
Statement).

27.1 Financial Data Schedule.
</TABLE>
- ---------------------
* To be filed by amendment.

(b) Financial Statement Schedules

Schedule II - Valuation and Qualifying Accounts

All other financial statement schedules have been omitted because they are
not required, not applicable, or the information to be included in the
financial statement schedules is included in the Financial Statements or the
notes thereto.

II-4
<PAGE>

Item 17. Undertakings.

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 provisions described in Item 14, or otherwise, the
registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance on Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it is declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.

II-5
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston, Commonwealth of
Massachusetts, on September 27, 1999.

Millitech Corporation

By: /s/ John L. Youngblood
----------------------------------
John L. Youngblood
President and Chief Executive
Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that MILLITECH CORPORATION, a corporation
organized under the laws of the Commonwealth of Massachusetts (the
"Corporation"), and the undersigned officers and directors of the Corporation,
individually and in their respective capacities indicated below, hereby make,
constitute and appoint John L. Youngblood and Dennis C. Stempel its and their
true and lawful attorneys, their separate or joint signatures sufficient to
bind, with power of substitution, to execute, deliver and file in its or their
behalf, and in each person's respective capacity or capacities as shown below,
with the Securities and Exchange Commission (or any other governmental
authority) a Registration Statement on Form S-1 under the Securities Act of
1933, as amended, any amendments to and any and all documents in support of or
supplemental to said registration statement by the Corporation, and any
additional registration statements filed pursuant to Rule 462(b); and the
Corporation and each said person hereby grant to said attorneys full power and
authority to do and perform each and every act and thing whatsoever as any one
of said attorneys may deem necessary or advisable to carry out the full intent
of this Power of Attorney to the same extent and with the same effect as the
Corporation or the undersigned officers and directors of the Corporation might
or could do personally in its or their capacity or capacities as aforesaid; and
the Corporation of each of said persons hereby ratify, confirm and approve all
acts and things that any one of said attorneys may do or cause to be done by
virtue of this Power of Attorney and its signature or their signatures as the
same may be signed by any one of said attorneys to said registration statement
and any and all documents in support of or supplemental to said Registration
Statement and any and all amendments thereto.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ John L. Youngblood President, Chief Executive September 27, 1999
______________________________________ Officer and Director
John L. Youngblood

/s/ Dennis C. Stempel Vice President, Chief September 27, 1999
______________________________________ Financial Officer,
Dennis C. Stempel Treasurer, and Principal
Accounting Officer

/s/ Albert E. Paladino Director September 27, 1999
______________________________________
Albert E. Paladino
</TABLE>

II-6
<PAGE>

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ Allan M. Doyle, Jr. Director September 27, 1999
______________________________________
Allan M. Doyle, Jr.

/s/ Robert C. Fleming Director September 27, 1999
______________________________________
Robert C. Fleming

/s/ James W. Fordyce Director September 27, 1999
______________________________________
James W. Fordyce

/s/ David A. Norbury Director September 27, 1999
______________________________________
David A. Norbury

/s/ Matthew S. Robison Director September 27, 1999
______________________________________
Matthew S. Robison
</TABLE>

II-7
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of Millitech Corporation:

In connection with our audits of the financial statements of Millitech
Corporation as of December 31, 1998 and 1997, and for each of the three years
in the period ended December 31, 1998 which financial statements are included
in the Prospectus, we have also audited the financial statement schedule listed
in Item 16(b) herein. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related financial statements.

/s/ PricewaterhouseCoopers LLP

Springfield, Massachusetts
March 5, 1999, except for Note 2
as to which the date is August 24, 1999

S-1
<PAGE>

Item 16(b) Schedule II

MILLITECH CORPORATION

VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1996, 1997 and 1998
(in thousands)

<TABLE>
<CAPTION>
Column C
Column A Column B Additions Column D Column E
- ------------------------ ---------- --------------------- ---------- ----------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
----------- ---------- ---------- ---------- ---------- ----------
1996
<S> <C> <C> <C> <C> <C>
Inventory reserve....... $1,858 $ (22) $ (82) $1,754
Allowance for doubtful
accounts............... 100 162 (1) 261
Warranty reserve........ 342 191 (191) 342
------ ------ --- ----- ------
$2,300 $ 331 $(274) $2,357
====== ====== === ===== ======
<CAPTION>
1997
<S> <C> <C> <C> <C> <C>
Inventory reserve....... $1,754 $ 877 $(650) $1,981
Allowance for doubtful
accounts............... 261 (51) -- 210
Warranty reserve........ 342 229 (229) 342
------ ------ --- ----- ------
$2,357 $1,055 $(879) $2,533
====== ====== === ===== ======
<CAPTION>
1998
<S> <C> <C> <C> <C> <C>
Inventory reserve....... $1,981 $2,236 $ (45) $4,172
Allowance for doubtful
accounts............... 210 176 (18) 368
Warranty reserve........ 342 284 (134) 492
------ ------ --- ----- ------
$2,533 $2,696 $(197) $5,032
====== ====== === ===== ======
</TABLE>

S-2
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.*

3.1 Restated Articles of Organization of the Company.*

3.2 By-laws of the Company, as amended.

4.1 Form of certificate evidencing ownership of Common Stock of the
Company.*

5.1 Opinion of Mirick, O'Connell, DeMallie & Lougee, LLP.*

10.1 1986 Stock Plan of the Company.

10.2 1987 Stock Plan of the Company.

10.3 1988 Stock Plan of the Company.

10.4 1996 Stock Plan of the Company.

10.5 1997 Stock Plan of the Company.

10.6 1999 Stock Plan of the Company.

10.7 Employment Agreement by and between the Company and John L. Youngblood
dated January 25, 1994.

10.8 Reseller Agreement by and between the Company and Newbridge Networks
Corporation dated August 7, 1998.*

10.9 Professional Services Agreement by and between the Company and
Newbridge Networks Corporation dated August 7, 1998.*

10.10 Revised Purchase Order by and between the Company and Motorola dated
September 20, 1999.*

10.11 Memorandum of Understanding by and between the Company and Hughes
Network Systems Limited dated August 12, 1998.*

10.12 Memorandum of Understanding by and between the Company and California
Amplifier, Inc. dated March 11, 1999.*

10.13 Lease by and between the Company and Edward J. O'Leary-Raymond M.
Vincunas Partnership dated January 16, 1990.

10.14 Lease by and between the Company and Lloyd C. Green and Mildred E.
Green dated June 30, 1998.

10.15 Revolving Line of Credit Agreement by and between the Company and
Boston Federal Savings Bank dated August 20, 1999.

10.16 Fourth Amended and Restated Registration Rights Agreement dated
September 17, 1999.

10.17 Registration Rights Agreement by and between the Company and Boston
Federal Savings Bank dated August 20, 1999.

10.18 Registration Rights Agreement by and between the Company and Phoenix
Leasing Incorporated dated May 19, 1999.

10.19 Purchase Agreement by and between the Company and Massachusetts
Technology Development Corporation dated June 1988.*.
10.20 First Amendment to the Purchase Agreement by and between the Company
and Massachusetts Technology Development Corporation dated December
28, 1988.*
10.21 Second Amendment to the Purchase Agreement by and between the Company
and Massachusetts Technology Development Corporation dated June 17,
1999.*
</TABLE>
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.22 Senior Loan and Security Agreement by and between the Company and
Phoenix Leasing Corporation dated May 19, 1999.*
10.23 Subordinated Note and Warrant Purchase Agreement by and between the
Company and Massachusetts Capital Resource Company dated December 7,
1992.*
10.24 Subordinated Note Purchase Agreement by and between the Company and
Massachusetts Capital Resource Company dated August 15, 1994.*

23.1 Consent of PricewaterhouseCoopers LLP.

23.2 Consent of Mirick, O'Connell, DeMallie & Lougee, LLP (incorporated in
the Opinion filed as Exhibit 5.1 above).*

24.1 Power of Attorney (included on the signature page of this Registration
Statement).

27.1 Financial Data Schedule.
</TABLE>
- ---------------------
* To be filed by amendment.

<PAGE>

EXHIBIT 3.2

As amended March 21, 1984
As amended February 18, 1987
As amended June 9, 1992
As amended November 18, 1997

BY-LAWS
-------

MILLITECH CORPORATION

ARTICLE I
-----------

STOCKHOLDERS
--------------

1. Place of Meetings. All meetings of stockholders shall be held within
-----------------
Massachusetts unless the Articles of Organization permit the holding of
stockholder meetings outside Massachusetts, in which event such meetings may be
held either within or without Massachusetts. Meetings of stockholders shall be
held at the principal office of the corporation unless a different place is
fixed by the Directors or the President and stated in the notice of the meeting.

2. Annual Meetings. The annual meeting of stockholders shall be held on the
---------------
last Monday in April in each year (or if that be a legal holiday in the place
where the meeting is to be held, on the next succeeding full business day) at
ten o'clock a.m., unless a different hour and date (which date shall be within
six months after the end of the fiscal year of the corporation) is fixed by the
Directors or the President and stated in the notice of the meeting. The purposes
for which the annual meeting is to be held, in addition to those prescribed by
law, by the Articles of Organization or by these By-Laws, may be specified by
the Directors or the President. If no annual meeting is held in accordance with
the foregoing provisions, a special meeting may be held in lieu thereof and any
action taken at such meeting shall have the same effect as if taken at the
annual meeting.

3. Special Meetings. Special meetings of stockholders may be called by the
----------------
President or by the Directors. Upon written application of one or more
stockholders who are entitled to vote and who hold at least ten percent (10%) of
the capital stock entitled to vote at the meeting, special meetings shall be
called by the Clerk, or in case of the death, absence, incapacity or refusal of
the Clerk, by any other officer.

4. Notice of Meetings. A written notice of every meeting of stockholders,
------------------
stating the place, date and hour thereof and the purposes for which the meeting
is to be held, shall be given by the Clerk or other person calling the meeting
at least seven (7) days before the meeting to each stockholder entitled to vote
thereat and to each stockholder who, by law, by the Articles of

<PAGE>

Organization or by these By-Laws, is entitled to such notice, by leaving such
notice with him or at his residence or usual place of business, or by mailing it
postage prepaid and addressed to him at his address as it appears upon the books
of the corporation. Whenever any notice is required to be given to a stockholder
by law, by the Articles of Organization or by these By-Laws, no such notice need
be given if a written waiver of notice, executed before or after the meeting by
the stockholder or his attorney thereunto duly authorized, is filed with the
records of the meeting.

5. Quorum. Unless the Articles of Organization otherwise provide, a
------
majority in interest of all stock issued, outstanding and entitled to vote on
any matter shall constitute a quorum with respect to that matter; except that if
two or more classes of stock are outstanding and entitled to vote as separate
classes, then in the case of each such class a quorum shall consist of a
majority in interest of the stock of that class issued, outstanding and entitled
to vote.

6. Adjournments. Any meeting of stockholders may be adjourned to any
------------
other time and to any other place at which a meeting of stockholders may be held
under these By-Laws by the stockholders present or represented at the meeting,
although less than a quorum, or by any officer entitled to preside or to act as
Clerk of such meeting, if no stockholder is present. It shall not be necessary
to notify any stockholder of any adjournment. Any business which could have
been transacted at any meeting of the stockholders as originally called may be
transacted at any adjournment thereof.

7. Voting and Proxies. Each stockholder shall have one vote for each
------------------
share of stock entitled to vote held by him of record according to the records
of the corporation, and a proportionate vote for a fractional share so held by
him, unless otherwise provided by the Articles of Organization. Stockholders may
vote either in person or by written proxy dated not more than six (6) months
before the meeting named therein. Proxies shall be filed with the Clerk of the
meeting or of any adjournment thereof before being voted. Except as otherwise
limited therein, proxies shall entitle the persons named therein to vote at any
adjournment of such meeting but shall not be valid after final adjournment of
such meeting. A proxy with respect to stock held in the name of two or more
persons shall be valid if executed by one of them unless, at or prior to
exercise of the proxy, the corporation receives a specific written notice to the
contrary from any one of them. A proxy purported to be executed by or on behalf
of a stockholder shall be deemed valid unless challenged at or prior to its
exercise.

8. Action at Meeting. When a quorum is present, the holders of a majority
-----------------
of the stock present or represented and voting on a matter (or if there are two
or more classes of stock entitled to vote as separate classes, then in the case
of each such class the

-2-
<PAGE>

holders of a majority of the stock of that class present or represented and
voting on a matter), except where a larger vote is required by law, by the
Articles of Organization or by these By-Laws, shall decide any matter to be
voted on by the stockholders. Any election by stockholders shall be determined
by a plurality of the votes cast by the stockholders entitled to vote at the
election. No ballot shall be required for such election unless requested by a
stockholder present or represented at the meeting and entitled to vote in the
election. The corporation shall not directly or indirectly vote any share of its
stock.

9. Inspectors of Election. The Board of Directors, in advance of any
----------------------
meeting of stockholders, may appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at the meeting may, and on the request of any stockholder
entitled to vote thereat shall, appoint one or more inspectors. In case any
person appointed fails to appear or act, the vacancy may be filled by
appointment made by the Board in advance of the meeting or at the meeting by the
person presiding thereat. Each inspector, before entering upon the discharge of
his duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his ability. No director or officer of the corporation shall be eligible to act
as an inspector of an election of directors of such corporation.

The inspectors shall determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all Stockholders. On request of the person presiding at
the meeting or any stockholder entitled to vote thereat, the inspectors shall
make a report in writing of any challenge, question or matter determined by them
and execute a certificate of any fact found by them.

10. Action Without Meeting. Any action to be taken by stockholders may be
----------------------
taken without a meeting if all stockholders entitled to vote on the matter
consent to the action by a writing filed with the records of the meetings of
stockholders. Such consent shall be treated for all purposes as a vote at a
meeting.

ARTICLE II
----------

DIRECTORS
---------

1. Powers. The business of the corporation shall be managed by a Board of
------
Directors who may exercise all the powers of the

-3-
<PAGE>

corporation except as otherwise provided by law, by the Articles of
Organization, or by these By-Laws. In the event of a vacancy in the Board of
Directors, the remaining Directors, except as otherwise provided by law, may
exercise the powers of the full Board until the vacancy is filled.

2. Election. A Board of Directors consisting of seven (7) persons shall be
--------
elected by the stockholders at the annual meeting or any special meeting in lieu
thereof.

3. Vacancies. Any vacancy in the Board of Directors, including a vacancy
---------
resulting from the enlargement of the Board, unless and until filled by the
stockholders, may be filled by the Directors.

4. Enlargement of the Board. The number of the Board of Directors may be
------------------------
increased and one or more additional Directors elected at any special meeting of
the stockholders.

5. Tenure. Except as otherwise provided by law, by the Articles of
------
Organization, or by these By-Laws, Directors shall hold office until the next
annual meeting of stockholders and thereafter until their successors are chosen
and qualified. Any Director may resign by delivering his written resignation to
the corporation at its principal office or to the President, Clerk or Secretary.
Such resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.

6. Removal. A Director may be removed from office (a) with or without cause
-------
by vote of a majority of the stockholders entitled to vote in the election of
Directors, provided that the Directors of a class elected by a particular class
of stockholders may be removed only by the vote of the holders of a majority of
the shares of such class, or (b) for cause by vote of a majority of the
Directors then in office. A Director may be removed for cause only after
reasonable notice and opportunity to be heard before the body proposing to
remove him.

7. Meetings. Regular meetings of the Directors may be held without call or
--------
notice at such places, within or without Massachusetts, and at such times as the
Directors may from time to time determine, provided that any Director who is
absent when such determination is made shall be given notice of the
determination. A regular meeting of the Directors may be held without a call or
notice at the same place as the annual meeting of stockholders or the special
meeting held in lieu thereof, following such meeting of stockholders.

Special meetings of the Directors may be held at any time and place,
within or without Massachusetts, designated in a call by the President,
Treasurer or two or more Directors.

-4-
<PAGE>

8. Notice of Special Meetings. Notice of all special meetings of the
--------------------------
Directors shall be given to each Director by the Secretary, or if there be no
Secretary by the Clerk or Assistant Clerk, or in case of the death, absence,
incapacity or refusal of such persons, by the officer or one of the Directors
calling the meeting. Notice shall be given to each Director in person or by
telephone or by telegram sent to his business or home address at least fory-
eight (48) hours in advance of the meeting, or by written notice mailed to his
business or home address at least seventy-two (72) hours in advance of the
meeting. Notice need not be given to any Director if a written waiver of notice,
executed by him before or after the meeting, is filed with the records of the
meeting, or to any Director who attends the meeting without protesting prior
thereto or at its commencement the lack of notice to him. A notice or waiver of
notice of a Directors' meeting need not specify the purposes of the meeting.

9. Quorum. At any meeting of the Directors, a majority of the Directors
------
then in office shall constitute a quorum. Less than a quorum may adjourn any
meeting from time to time without further notice.

10. Action at Meeting. At any meeting of the Directors at which a quorum
-----------------
is present, the vote of a majority of those present, unless a different vote is
specified by law, by the Articles of Organization or by these By-Laws, shall be
sufficient to take any action.

11. Meeting by Conference. Members of the Board or any committee designated
---------------------
thereby may participate in a meeting of such Board or committee by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting.

12. Action by Consent. Any action by the Directors may be taken without a
-----------------
meeting if a written consent thereto is signed by all the Directors and filed
with the records of the Directors' meetings. Such consent shall be treated as a
vote of the Directors for all purposes.

13. Committees. The Directors may, by vote of a majority of the Directors
----------
then in office, elect from their number an executive committee or other
committees and may by like vote delegate thereto some or all of their powers
except those which by law, the Articles of Organization or these By-Laws, they
are prohibited from delegating. Except as the Directors may otherwise
determine, any such committee may make rules for the conduct of its business
but, unless otherwise provided by the Directors or in such rules, its business
shall be conducted as nearly as may be in the same manner as is provided by
these By-Laws for the Directors.

-5-
<PAGE>

ARTICLE III
-----------

OFFICERS
--------

1. Enumeration. The officers of the corporation shall consist of a Chief
-----------
Executive Officer, a President, a Treasurer, a Clerk and such other officers,
including a Chairman of the Board, one or more Vice Presidents, Assistant
Treasurers, Assistant Clerks and Secretary as the Directors may determine.

2. Election. The Chief Executive Officer, President, Treasurer and Clerk
--------
shall be elected annually by the Directors at their first meeting following the
annual meeting of stockholders. Other officers may be appointed by the Directors
at such meeting or at any other meeting.

3. Qualification. The President shall be a Director. No officer need be a
-------------
stockholder. Any two or more offices may be held by the same person, provided
that the President and Clerk shall not be the same person. The Clerk shall be a
resident of Massachusetts unless the corporation has a resident agent appointed
for the purpose of service of process. Any officer may be required by the
Directors to give bond for the faithful performance of his duties to the
corporation in such amount and with such sureties as the Directors may
determine.

4. Tenure. Except as otherwise provided by law, by the Articles of
------
Organization or by these By-Laws, the President, Treasurer and Clerk shall hold
office until the first meeting of the Directors following the annual meeting of
stockholders and thereafter until their successors are chosen and qualified; and
all other officers shall hold office until the first meeting of the Directors
following the annual meeting of stockholders unless a different term is
specified in the vote choosing or appointing them. Any officer may resign by
delivering his written resignation to the corporation at its principal office or
to the President, Clerk or Secretary, and such resignation shall be effective
upon receipt unless it is specified to be effective at some other time or upon
the happening of some other event.

5. Removal. The Directors may remove any officer with or without cause by
-------
a vote of a majority of the entire number of Directors then in office, provided
that an officer may be removed for cause only after reasonable notice and
opportunity to be heard by the Board of Directors prior to action thereon.

6. Chairman of the Board. If the Directors appoint a Chairman of the
---------------------
Board, he shall, when present, preside at all meetings of the Directors and
shall have such other powers and duties as are usually vested in the office of
Chairman of the Board or as may be vested in him by the Board of Directors.

-6-

<PAGE>

7. Chief Executive Officer. The Chief Executive Officer of the Corporation
-----------------------
shall, subject to the direction of the Directors, have general supervision and
control of its business.

8. President. The President, unless designated as the Chief Executive
---------
Officer of the Corporation, shall be the Chief Operating Officer of the
Corporation and shall, subject to the direction of the Directors and the Chief
Executive Officer, have general supervision and control of its business. Unless
otherwise provided by the Directors, the President shall preside, when present,
at all meetings of stockholders and of the Directors (except as provided in
Section 6 of this Article III).

9. Vice President. The Vice President or, if there shall be more than one,
--------------
the Vice Presidents in the order determined by the Directors shall, in the
absence or disability of the President, perform the duties and exercise the
powers of the President and shall perform such other duties, and shall have such
other powers, as the Directors may from time to time prescribe.

10. Treasurer and Assistant Treasurers. The Treasurer shall, subject to the
----------------------------------
direction of the Directors, have general charge of the financial affairs of the
corporation and shall cause to be kept accurate books of account. He shall have
custody of all funds, securities and valuable documents of the corporation,
except as the Directors may otherwise provide.

The Assistant Treasurer or, if there shall be more than one, the
Assistant Treasurers in the order determined by the Directors, shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and shall have such
other powers as the Directors may from time to time prescribe.

11. Clerk and Assistant Clerks. The Clerk shall keep a record of the
--------------------------
meetings of stockholders. Unless a transfer agent is appointed, the Clerk shall
keep or cause to be kept in Massachusetts at the principal office of the
corporation or at his office the stock and transfer records of the corporation
in which are contained the names of all stockholders and the record address and
the amount of stock held by each.

If there is no Secretary or Assistant Secretary, the Clerk shall keep a
record of the meetings of the Directors.

The Assistant Clerk, or if there shall be more than one, the Assistant
Clerks in the order determined by the Directors shall, in the absence or
disability of the Clerk, perform the duties and exercise the powers of the Clerk
and shall perform such other duties, and shall have such other powers, as the
Directors may from time to time prescribe.

-7-

<PAGE>

12. Secretary and Assistant Secretaries. If a Secretary is appointed, he
-----------------------------------
shall attend all meetings of the Directors and shall keep a record of the
meetings of the Directors. He shall, when required, notify the Directors of
their meetings and shall have such other powers, and shall perform such other
duties, as the Directors may from time to time prescribe.

The Assistant Secretary or, if there shall be more than one, the
Assistant Secretaries in the order determined by the Directors shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties, and shall have such
other powers, as the Directors may from time to time prescribe.

13. Other Powers and Duties. Each officer shall, subject to these By-Laws,
-----------------------
have in addition to the duties and powers specifically set forth in these
By-Laws such duties and powers as are customarily incident to his office and
such duties and powers as the Directors may from time to time designate.

ARTICLE IV
----------

CAPITAL STOCK
-------------
1. Certificates of Stock. Each stockholder shall be entitled to a
---------------------
certificate of the capital stock of the corporation in such form as may be
prescribed from time to time by the Directors. The certificate shall be signed
by the President or a Vice President, and by the Treasurer or an Assistant
Treasurer, but when a certificate is countersigned by a transfer agent or a
registrar, other than a Director, officer or employee of the corporation, such
signatures may be facsimiles. In case any officer who has signed or whose
facsimile signature has been placed on such certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the time of its
issue.

Every certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Articles of Organization, the By-Laws or
any agreement to which the corporation is a party, shall have conspicuously
noted on the face or back of the certificate either the full text of the
restriction or a statement of the existence of such restrictions and a statement
that the corporation will furnish a copy thereof to the holder of such
certificate upon written request and without charge. Every certificate issued
when the corporation is authorized to issue more than one class or series of
stock shall set forth on its face or back either the full text of the
preferences, voting powers, qualifications and special and relative rights of
the shares of each class and series authorized to be issued, or a statement of
the existence of such preferences,

-8-
<PAGE>

powers, qualifications and rights, and a statement that the corporation will
furnish a copy thereof to the holder of such certificate upon written request
and without charge.

2. Transfers. Subject to the restrictions, if any, stated or noted on the
---------
stock certificates, shares of stock may be transferred on the books of the
corporation by the surrender to the corporation or its transfer agent of the
certificate therefor, properly endorsed, or accompanied by a written assignment
and power of attorney properly executed, with necessary transfer stamps affixed
and with such proof of the authenticity of signature as the corporation or its
transfer agent may reasonably require. Except as may be otherwise required by
law, by the Articles of Organization or by these By-Laws, the corporation shall
be entitled to treat the record holder of stock as shown on its books as the
owner of such stock for all purposes, including the payment of dividends and the
right to vote with respect thereto, regardless of any transfer, pledge or other
disposition of such stock, until the shares have been transferred on the books
of the corporation in accordance with the requirements of these By-Laws.

It shall be the duty of each stockholder to notify the corporation of
his post office address and of his taxpayer identification number.

3. Record Date. The Directors may fix in advance a time not more than sixty
-----------
(60) days preceding the date of any meeting of stockholders, or the date for the
payment of any dividend, or the making of any distribution to stockholders, or
the last day on which the consent or dissent of stockholders may be effectively
expressed for any purpose, as the record date for determining the stockholders
having the right to notice of and to vote at such meeting, and any adjournment
thereof, or the right to receive such dividend or distribution, or the right to
give such consent or dissent. In such case only stockholders of record on such
record date shall have such right, notwithstanding any transfer of stock on the
books of the corporation after the record date. Without fixing such record date,
the Directors may for any of such purposes close the transfer books for all or
any part of such period.

4. Replacement of Certificates. In case of the alleged loss or destruction
---------------------------
or the mutilation of a certificate of stock, a duplicate certificate may be
issued in place thereof upon such terms as the Directors may prescribe,
including the presentation of reasonable evidence of such loss, destruction or
mutilation, and the giving of such indemnity as the Directors may require, for
the protection of the corporation or any transfer agent or registrar.

-9-
<PAGE>

5. Issue of Capital Stock. Unless otherwise voted by the stockholders, the
----------------------
whole or any part of any unissued balance of the authorized capital stock of the
corporation, or the whole or any part of the capital stock of the corporation
held in its treasury, may be issued or disposed of by vote of the Directors in
such manner, for such consideration, and on such terms as the Directors may
determine.

ARTICLE V
---------
MISCELLANEOUS PROVISIONS
------------------------

1. Fiscal Year. Except as from time to time otherwise determined by the
-----------
Directors, the fiscal year of the corporation shall end on December 31.

2. Seal. The seal of the corporation shall, subject to alteration by the
----
Directors, bear its name, the word "Massachusetts" and the year of its
incorporation.

3. Execution of Instruments. All deeds, leases, transfers, contracts,
------------------------
bonds, notes and other obligations authorized to be executed by an officer of
the corporation in its behalf shall be signed by the President or the Treasurer,
except as the Directors may generally or in particular cases otherwise
determine.

4. Voting of Securities. Except as the Directors may otherwise designate,
--------------------
the President or Treasurer may waive notice of and act as, or appoint any person
or persons to act as, proxy or attorney-in-fact for this corporation (with or
without power of substitution) at any meeting of stockholders or shareholders of
any other corporation or organization, the securities of which may be held by
this corporation.

5. Corporate Records. The original or attested copies of the Articles of
-----------------
Organization, By-Laws and records of all meetings of the incorporators and
stockholders, and the stock and transfer records which shall contain the names
of all stockholders and the record address and the amount of stock held by each
shall be kept in Massachusetts at the principal office of the corporation or at
an office of its transfer agent or of the Clerk. Said copies and records need
not all be kept in the same office. They shall be available at all reasonable
times to the inspection of any stockholder for any proper purpose, but not to
secure a list of stockholders for the purpose of selling said list or copies
thereof, or of using the same for a purpose other than in the interest of the
applicant, as a stockholder, relative to the affairs of the corporation.

-10-

<PAGE>

6. Evidence of Authority. A certificate by the Clerk or Secretary or
---------------------
Assistant Clerk or Assistant Secretary, or a temporary Clerk or temporary
Secretary, as to any action taken by the stockholders, Directors, Executive
Committee or any officer or representative of the corporation shall, as to all
persons who rely thereon in good faith, be conclusive evidence of such action.

7. Articles of Organization. All references in these By-Laws to the
------------------------
Articles of Organization shall be deemed to refer to the Articles of
Organization of the corporation as amended and in effect from time to time.

8. Transactions With Interested Parties. In the absence of fraud, no
------------------------------------
contract or other transaction between this corporation and any other corporation
or any firm, association, partnership or person shall be affected or invalidated
by the fact that any Director or officer of this corporation is pecuniarily or
otherwise interested in, or is a Director, member or officer of, such other
corporation or of such firm, association or partnership, or is a party to or is
pecuniarily or otherwise interested in such contract or other transaction, or is
in any way connected with any person or persons, firm, association, partnership
or corporation pecuniarily or otherwise interested therein; provided that the
fact that he individually or as a Director, member or officer of such
corporation, firm, association or partnership is such a party or is so
interested shall be disclosed to or shall have been known by the Board of
Directors or a majority of such members thereof as shall be present at a meeting
of the Board of Directors at which action upon any such contract or transaction
shall be taken; any Director may be counted in determining the existence of a
quorum and may vote at any meeting of the Board of Directors of this corporation
for the purpose of authorizing any such contract or transaction with like force
and effect as if he were not so interested, or were not a Director, member or
officer of such other corporation, firm, association or partnership, provided
that any vote with respect to such contract or transaction must be adopted by a
majority of the Directors then in office who have no interest in such contract
or transaction.

9. Indemnification. Each person at any time a Director, officer, employee
---------------
or agent of the corporation and any person who serves at its request as a
director, officer, employee or other agent of another organization, or who
serves at its request in any capacity with respect to any employee benefit plan,
including each former Director, officer, employee or agent who was such before,
on or after the date of the adoption of this By-Law shall, to the extent
permitted by law and without prejudice to any other rights he might have, be
entitled to be reimbursed by the corporation for, and indemnified by the
corporation against, all judgments, fines, penalties, costs and expenses
reasonably incurred by him in connection with or arising out of any claims made,
or any action, suit or proceeding threatened or brought against him or in which
he may be involved as a party or otherwise by reason of any action

-11-
<PAGE>

alleged to have been taken or omitted by him as a Director, officer, employee or
agent, or in any capacity with respect to any employee benefit plan, whether or
not he continues to be a Director, officer, employee or agent, or to serve in
any capacity with respect to any employee benefit plan, at the time of incurring
such costs and expenses, including amounts paid or incurred by him in connection
with reasonable settlements (other than amounts paid to the corporation itself)
of any claim, action, suit or proceeding. Any rights to reimbursement and
indemnification granted under this section to any such Director, officer,
employee or agent shall extend to his heirs, executors and administrators. No
such reimbursement or indemnification shall be provided for any person with
respect to any matter as to which he shall have been adjudicated in any
proceedings not to have acted in good faith in the reasonable belief that his
action was in the best interests of the corporation, or to the extent that such
matter relates to service with respect to an employee benefit plan, in the best
interests of the participants or beneficiaries of such employee benefit plan.
Reimbursement or indemnification hereunder may, in the discretion of the Board
of Directors, include payments by the corporation of costs and expenses incurred
in defending a civil or criminal action or proceeding in advance of the final
disposition of such action or proceeding upon receipt of an undertaking by the
person indemnified to repay such payment if he shall be adjudicated to be not
entitled to indemnification hereunder, which undertaking may be accepted without
reference to the financial ability of such person to make repayment. Nothing
herein contained is intended to, or shall, prevent a settlement by the
corporation prior to final adjudication of any claim, including claims for
reimbursement or indemnification under this By-Law, against the corporation when
such settlement appears to be in the interest of the corporation. Each such
person shall, by reason of his continuing such service or accepting such
election or employment, have the right to be reimbursed and indemnified by the
corporation, as above set forth with the same force and effect as if the
corporation, to induce him to continue so to serve or to accept such election or
employment, specifically agreed in writing to reimburse and indemnify him in
accordance with the foregoing provisions of this section. No Director or officer
of the corporation shall be liable to anyone for making any determination as to
the existence or absence of liability of the corporation hereunder or for making
or refusing to make any payment hereunder in reliance upon advice of counsel.

10. Amendments. These By-Laws may be amended or repealed new by-laws
----------
adopted either (a) by the stockholders at any regular or special meeting of the
stockholders by the affirmative vote of the holders of at least a majority in
interest of the capital stock then outstanding and then entitled to vote,
provided that notice of the proposed amendment or repeal and adoption stating
the change or the substance thereof shall have been given in the notice of such
meeting or in the waiver of notice with respect to such meeting, or (b) by vote
of a majority of the Board of Directors then in office, provided that (i) the
Board of Directors

-12-

<PAGE>

may not amend or repeal any provision of these By-Laws which by law, by the
Articles of Organization or by these By-Laws requires action by the
stockholders, (ii) not later than the time of giving notice of the meeting of
stockholders next following the amendment or repeal of these By-Laws and
adoption of new by-laws by the Board of Directors, notice thereof stating the
change or the substance of such change shall be given to all stockholders
entitled to vote on amending these By-Laws, and (iii) any amendment or repeal of
these By-Laws by the Board of Directors and any by-law adopted by the Board of
Directors may be amended or repealed by the stockholders.

-13-

<PAGE>

Exhibit 10.1
INCENTIVE STOCK OPTION PLAN OF 1986
-----------------------------------

ARTICLE I. Purposes
- --------------------

This Incentive Stock Option Plan of 1986 is designed to enable Millitech
Corporation and its Affiliates to continue to be able, by granting options to
purchase stock in the Corporation to employees of the Corporation and its
Affiliates, to attract and retain persons of ability as key employees (including
officers and directors who are employees) and to motivate such employees to
exert their best efforts on behalf of the Corporation and its Affiliates.

ARTICLE II. Definitions
- ------------------------

"Plan" means the Millitech Corporation Incentive Stock Option Plan of 1986.

"Corporation" means Millitech Corporation, a Massachusetts corporation.

"Affiliate" means any corporation which owns fifty percent (50%) of the
voting power of the Corporation or any other corporation (other than the
Corporation) in an unbroken chain of beginning with the Corporation
if each of the corporations other than the last if such chain owns stock
possessing at least fifty percent (50%) of the voting power in one of the other
corporations in such chain.

"Board" means the Board of Directors of the Corporation.

"Eligible Employee" means any person employed by the Corporation or any of
its Affiliates who satisfies all of the requirements of Article IV.

"Committee" means the Employee's Stock Option Committee established to
administer the Plan as provided in Article III.

"Stock" means shares of common stock of the Corporation ($.01 par value)
and such other stock as shall be substituted therefor as provided in Section F
of Article VIII hereof.

"Agreement" means the incentive stock option agreement executed between the
Corporation and a Grantee as provided in Article VIII.

"Fair Market Value" means the amount a ready buyer would pay a willing
seller for Stock at a given time and is to be determined by the Board from time
to time on the basis of: (1) recent sales of Stock, if any, and (2) such facts
and opinions as the Board shall deem relevant.

"Grantee" means an "Eligible Emloyee" to whom an option has been granted.
<PAGE>

"Disability" shall mean "Permanent and Total Disability" as defined in
Section 105(d)(4) of the Internal Revenue Code, as amended.

"Option Period" means the maximum period of time within which a stock
option may be exercised.

"Date of Grant" means the date on which the granting of an option is
authorized by the Board or such later date as may be specified by the Board in
such authorization.

"Ten Percent Shareholder-Employee" means an Eligible Employee who owns
immediately before the option is granted, more than ten percent (10%) of the
combined voting power, of the Corporation or its Affiliates.

ARTICLE III. Administration
- ----------------------------

The Committee shall administer the Plan and shall consist of the
Compensation Committee of the Board. A majority of the Committee shall
constitute a quorum. The acts of a majority of the members present at any
meeting at which a quorum is present or acts approved in writing by a majority
of the Committee shall be deemed acts of the Committee. The Committee is
authorized to adopt such rules and regulations as are not inconsistent with the
Plan and to take such action in the administration of the Plan as it shall deem
proper.

ARTICLE IV. Eligibility
- ------------------------

Key employees of the Corporation or any of its Affiliates (including
officers or directors who are employees) who in the opinion of the Committee are
important to the operation and financial success of the business of the
Corporation or of any of its affiliates shall be eligible to be granted options
to purchase Stock under the Plan. Subject to the provisions of the Plan, the
Board, upon the recommendation of the Committee, shall, from time to time,
select from such Eligible Employees those to whom options shall be granted and
determine the number of shares to be subject to each option.

ARTICLE V. Stock
- -----------------

Options may be granted pursuant to the Plan to purchase a total of 200,000
shares of Stock (subject to adjustment as provided in Section F of Article VIII)
subject to such options may be authorized and unissued Stock or Stock held
in the treasury of the Corporation. If an option expires or terminates without
being exercised, the remaining shares of Stock covered thereby shall remain
available for the grant of additional options under the Plan.

2
<PAGE>

ARTICLE VI. Duration
- ---------------------

Options may be granted as provided in this Plan at such time or times as
may be determined by the Board upon recommendation of the Committee but any such
grants must be within ten (10) years from the date this Plan is approved by the
shareholders of the Corporation or adopted by the Board, whichever-first occurs.
Any options outstanding at the expiration of such ten (10) year period may be
exercised within the periods prescribed in Article VIII.

ARTICLE VII
- -----------

A. The maximum value of Stock for which any Eligible Employee may be
granted options in any calendar year under the Plan shall not exceed
$100,000.00.

B. If $100,000 exceeds the aggregate fair market value (determined as of
the Date of Grant) of the Stock for which an Eligible Employee was granted
options in any calendar year after 1980 (under all incentive stock option plans
of the Corporation or its Affiliates) one-half (i) of such excess shall be
unused limit carryover to each of the three (3) succeeding calendar years. The
amount of the unused limit carryover for any calendar year which may be taken
into account in any succeeding calendar year shall be the amount of such
carryover reduced by the amount of the carryover which was used in prior
calendar years. For purposes of calculating the amount of any unused limit
carryover set forth above, the amount of options granted during any calendar
year shall be treated as first using up the $100,000 limitation for the calendar
year in which the option was granted and then shall be treated as using up any
unused limit carryovers to such year in order of the calendar years in which the
carryover arose.

ARTICLE VIII. Stock Option Agreement
- -------------------------------------

Each option granted under the plan shall be evidenced by an incentive stock
option agreement between the Corporation and the Grantee of the option
containing provisions determined by the Committee and approved by the Board, but
shall be subject to the following terms and conditions.

A. Option Price
------------

The option price of each option shall be not less than the Fair Market
Value of the Stock on the Date of Grant of such option, except that the option
price of each option granted to a Ten Percent Shareholder-Employee shill be not
less than 110% of the Fair Market Value of the Stock on the Date of Grant of
such option.

B. Option Period
------

Options granted pursuant to the Plan are not exercisable until they
become vested. Vested options are exercisable within such period or periods
subject to the vesting schedule

3
<PAGE>

below), not to exceed ten (10) years from its Date of Grant, as shall be set
forth in the incentive stock option agreement ("Option Period"). Twenty percent
(20%) of the total number of shares granted in an option shall become vested in
each year on the anniversary date of the Date of Grant, beginning on the first
anniversary of the Date of Grant. As long as a Grantee remains an employee of
the Corporation, forty percent (40%), sixty percent (60%), eighty percent (80%)
and one hundred percent (100%) of the total number of shares granted in an
option become vested and exercisable on the second, third, fourth and fifth
anniversaries, respectively, of the Date of Grant. Notwithstanding the
foregoing, however, any option granted to a Ten Percent Shareholder-Employee
shall not be exercisable more than five (5) years from the Date of Grant.

C. Limitations on Exercise
-----------------------

(1) The option shall cease to vest and all rights to exercise the
option shall terminate on the date that the Grantee for any reason shall cease
to be an employee of the Corporation or of any of its Affiliates ("Termination
Date"), except as provided in the following subparagraphs:

(a) If the Grantee ceases to be employed by the Corporation or any of
its Affiliates for any reason other than death, Disability, voluntary
Resignation or discharge for cause, that percentage of the option that is vested
on the Termination Date may be exercised by the Grantee within three (3) months
after such cessation of employment and within the Option Period.

(b) If the Grantee shall die within the Option Period while employed
by the Corporation or any of its Affiliates, or within the Option Period and
within three (3) months after the Grantee ceases to be employed by the
Corporation or any of its Affiliates for any reason other than discharge for
cause or voluntary resignation, that percentage of the option that is vested on
the Termination Date may be exercised within the option Period but not later
then one (1) year after the date of the Grantee's death by his legal
representative or representatives or by the person or persons entitled to do so
under his last will and testament, or, if the Grantee shall fail to make
testamentary disposition of such action or shall die intestate, by the person or
persons entitled to receive said option under the applicable intestacy laws.

(c) If the Grantee shall cease to be employed by the Corporation or
any of its Affiliates by reason of his Disability, that percentage of the option
that is vested on the Termination Date may be exercised by the Grantee within
the Option Period but not later than one (1) year after the date he ceases to be
employed by the Corporation.

(d) An option may not be exercised as provided in subparagraphs (a),
(b) and (c) above for more shares (subject to adjustment as provided in Section
F of this Article VIII) after the Termination Date than the Grantee was entitled
to purchase before the Termination Date.

(2) No option under the Plan shall be exercisable while there is
outstanding (within the meaning of Section 422A(c)(7) of the Internal Revenue
Code or any amendments

4
<PAGE>

thereto) any incentive stock option previously granted to the Grantee to
purchase Stock in the Corporation or any of its Affiliates or any corporation
which is a predecessor corporation of the Corporation or any Affiliate.

(3) The Committee shall require each Grantee to enter into an Employee
Stock Purchase Agreement with the Corporation with respect to the Stock
purchased by the Grantee pursuant to any option granted hereunder at the time of
the exercise of such option.

D. Payment
-------

The option price of Stock purchased upon any exercise of an option granted
hereunder shall be paid in full either in cash or by surrendering stock of the
Corporation owned by the Grantee equal in value to the exercise price upon
exercise of the option. The proceeds of a cash sale of Stock subject to the
options are to be added to the general funds of the Corporation and used for
its corporate purposes.

E. Non-Transferabililty
--------------------

Options shall not be transferable by the Grantee except by will or by laws
of descent and distribution and shall be exercisable during the Grantee's
lifetime only by him.

F. Adjustment
----------

In the event a dividend is declared upon the Stock payable in Stock, then
the shares of Stock then subject to each option (and the number of shares
reserved for issuance pursuant thereto) shall be increased proportionately
without any change in the aggregate purchase price therefor. In the event the
outstanding Stock shall be changed into or exchanged for a different number or
class of shares of stock of the Corporation or of another corporation, whether
through reorganization, recapitalization, stock split-up, combination of shares,
merger or consolidation, then there shall be substituted for each such share of
Stock then subject to each option (and for each share reserved for issuance
pursuant thereto) the number and class of shares of Stock into which each
outstanding share of Stock shall be so changed or exchanged, all without any
change in the aggregate purchase price for the shares then subject to such
option.

ARTICLE IX. Amendment and Discontinuance
- -----------------------------------------

The Board may at any time terminate this Plan or make such changes in it
and additions to it as the Board shall deem advisable; provided, however, that
except as provided in Section F of Article VIII hereof, the Board may not
without further approval by the holders of a majority of the shares of Stock of
the Corporation then outstanding and entitled to vote, increase the maximum
number of shares as to which options may be granted under this Plan or reduce
the minimum option price or extend the period during which options may be
granted or exercised or change the class of employees eligible to receive
options under this Plan. No termination or

5
<PAGE>

amendment of this Plan may, without the written consent of the holder of an
option then existing, terminate this option or materially and adversely affect
his rights under the option.

ARTICLE X. Stock Ownership
- ---------------------------

A Grantee shall be entitled to the privilege of stock ownership only as to
such shares of Stock as are issued and delivered to him upon exercise of his
option.

ARTICLE XI. Requirements of Law
- --------------------------------

The granting of options and issuance of shares of Stock upon the exercise
of an option shall be subject to compliance with all of the applicable
requirements of law with respect to the issuance and sale of such shares.

ARTICLE XII. Effective Date
- ----------------------------

This Plan shall become effective on February 21, 1986 provided that it
shall have been approved by the stockholders within twelve (12) months.

<PAGE>

Exhibit 10.2
MILLITECH CORPORATION

1987 STOCK PLAN
---------------

1. Purposes. This 1987 Stock Plan is designed to enable MILLITECH CORPORATION,
--------
a Massachusetts corporation with its principal place of business located in
South Deerfield, Massachusetts (the "Company") and its Affiliates to continue to
be able to attract and retain persons of ability as key employees, officers,
directors and consultants and to motivate such persons to exert their best
efforts on behalf of the Company and its Affiliates by providing them with
awards of stock in the Company and/or opportunities to purchase stock in the
Company, all in the manner provided herein.

2. Definitions.
-----------

"Affiliate" means any corporation which owns fifty percent (50%) of the
voting power of the Company or any other corporation (other than the Company) in
an unbroken chain of corporation beginning with the Corporation if each of the
corporations other than the last in such chain owns stock possessing at least
fifty percent (50%) of the voting power in one of the other corporations in such
chain.

"Award" means Common Stock awarded hereunder to Eligible Recipients.

"Board" means the Board of Directors of the Company.

"Code" means the Internal Revenue Code of 1986, as amended. "Committee"
means the committee established to administer the Plan as provided in Section
3(a).

"Common Stock" means shares of common stock of the Company ($.01 par
value) and such other stock as shall be substituted therefor as provided in
Section 14.

"Company" shall have the meaning set forth in Section 1 hereof.

"Date of Grant" means the date on which the Committee authorizes the
granting of a Stock Right or such later date as may be specified by the
Committee at the time of such authorization; provided, however, that with
respect to Stock Rights granted pursuant to Section 3(d) such term shall mean
the date on which the granting of such Stock Right is authorized by the Board or
by the committee established pursuant to Section 3(d) to whom the Board has
delegated such authority.

"Disability" shall mean "Permanent and Total Disability" as defined in
Section 22(e)(3) of the Code.

"Disqualifying Disposition" shall have the meaning set forth in Section 21.
<PAGE>

"Eligible Recipient" means a person who satisfies the eligibility
requirements of Section 4 applicable to the Stock Right proposed to be granted
to him.

"Grantee" means an Eligible Recipient to whom a Stock Right has been
granted under this Plan.

"ISO" means an Option which qualifies as an incentive stock option under
Section 422A(b) of the Code.

"Non-Qualified Option" means an Option which does not qualify as an ISO.

"Option" means a right to purchase Common Stock granted to an Eligible
Recipient pursuant to this Plan.

"Optionee" means an Eligible Recipient to whom an Option has been granted
under this Plan.

"Plan" means the MILLITECH CORPORATION 1987 Stock Plan.

"Purchase" means an opportunity to make a direct purchase of Common Stock
granted to an Eligible Recipient pursuant to this Plan.

"Stock Option Agreement" means the agreement executed between the
Corporation and a Grantee pursuant to Section 13.

"Stock Rights" collectively refers to Options, Awards and Purchases.

3. Administration of the Plan.
--------------------------

(a) The Committee shall administer the Plan and shall consist of the Board or
of not less than three members of the Board who shall be appointed by and serve
at the pleasure of the Board. No member of the Committee, while a member,
shall be eligible to participate in the Plan except as provided in Section 3(c)
hereof. Subject to ratification of the grant or authorization of each Stock
Right by the Board (if so required by applicable state law), and subject to the
terms of the Plan, the Committee, if so appointed, shall have the authority to
(i) determine the employees of the Company and its Affiliates (from among the
class of employees eligible under Section 4 to receive ISOs) to whom ISOs may be
granted and to determine (from among the class of individuals and entities
eligible under Section 4 to receive Non-Qualified Options and Awards and to make
Purchases) to whom Non-Qualified options, Awards and authorizations to make
Purchases may be granted; (ii) determine the time or times at which Options or
Awards may be granted or Purchases made; (iii) determine the option price of
shares subject to each Option and the purchase price of shares subject to each
Purchase; (iv) determine whether each option granted shall be an ISO or a Non-
Qualified option; (v) determine (subject to Section 8) the time or times when
each Option shall become exercisable and the duration of the exercise period;
(vi) determine whether restrictions such as repurchase options are to be imposed

2
<PAGE>

on shares subject to Options, Awards and Purchases and the nature of such
restrictions, if any; and (vii) interpret the Plan and prescribe and rescind
rules and regulations relating to it. If the Committee decides to grant a Non-
Qualified option, it shall take whatever actions it deems necessary, under
Section 422A of the Code and the regulations promulgated thereunder, to ensure
that such Option is not treated as an ISO. The interpretation and construction
by the Committee of any provisions of the Plan or of any Stock Right granted
under it shall be final unless otherwise determined by the Board. The Committee
may from time to time adopt such rules and regulations for carrying out the Plan
as it may deem best. No member of the Board or the Committee shall be liable for
any action or determination made in good faith with respect to the Plan or any
Stock Right granted under it.

(b) The Committee may select one of its members as its chairman, and shall hold
meetings at such time and places as it may determine. A majority of the
Committee shall constitute a quorum. The acts of a majority of the members of
the Committee present at any meeting at which a quorum is present or acts
reduced to or approved in writing by a majority of the members of the Committee,
shall be the valid acts of the Committee. All references in this Plan to the
Committee shall mean the Board if no Committee has been appointed. From time to
time the Board may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new members
in substitution therefor, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan.

(c) Stock Rights may be granted to members of the Committee if such grants have
been approved by a majority vote of the members of the Board not then serving on
the Committee. All grants of Stock Rights to members of the Committee shall in
all other respects be made in accordance with the provisions of this Plan
applicable to other eligible persons. Members of the Board who are either (i)
eligible for Stock Rights pursuant to the Plan or (ii) have been granted Stock
Rights under the Plan may vote on any matters affecting the administration of
the Plan or the grant of any Stock Rights pursuant to the Plan, except that no
such member shall act upon the granting to himself of Stock Rights, but any such
member may be counted in determining the existence of a quorum at any meeting of
the Board during which action is taken with respect to the granting to him of
Stock Rights.

(d) Notwithstanding any other provision of this Section 3, in the event the
Company registers any class of any equity security pursuant to section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), any grants of
Options to directors made at any time from the effective date of such
registration until six months after the termination of such registration shall
be made only by the Board; provided, however, that if a majority of the Board is
Eligible to participate in the Plan or in any other stock option or other stock
plan of the Company or any Affiliate, or has been so eligible at any time within
the preceding year, any grant to directors of Options must be made by, or only
in accordance with the recommendation of, a committee consisting of three or
more persons, who may but need not be directors or employees of the Company,
appointed by the Board but having full authority to act in the matter, none of
whom is eligible to participate in this Plan or any other stock option or other
stock plan of the Company or any Affiliate, or has been eligible at any time
within the

3
<PAGE>

preceding year. The requirements imposed by the preceding sentence shall also
apply with respect to grants to officers who are not also directors. Once
appointed, such committee shall continue to serve until otherwise directed by
the Board.

4. Eligibility Requirements. ISOs may be granted to any employee of the
------------------------
Company or any Affiliate. Those officers and directors of the Company or any
Affiliate who are not employees may not be granted ISOs under the Plan. Non-
Qualified Options, Awards and authorizations to make Purchases may be granted to
any director (whether or not an employee), officer, employee or consultant of
the Company or any Affiliate. The Committee may take into consideration a
candidate's individual circumstances in determining whether to grant an ISO, a
Non-Qualified Option, an Award or an authorization to make a purchase. The
granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify him from, participation in any
other grant of Stock Rights.

5. Stock. The aggregate number of shares of Common Stock which may be issued
-----
pursuant to the Plan is 400,000, subject to adjustment as provided in Section
14. The Committee may grant ISOs and Non-Qualified Options and may authorize
Purchases and Awards with respect to such shares in such combinations and for
such amount of shares as it shall desire, provided that the number of shares
issuable upon exercise of such Options and Purchases and upon grant of such
Awards does not exceed such number, as adjusted. Stock subject to Options,
Awards and Purchases may be authorized but unissued shares of Common Stock or
Common Stock held in the treasury of the Company. If any Option granted under
the Plan shall expire or terminate for any reason without having been exercised
in full or shall cease for any reason to be exercisable in whole or in part, or
if the Company shall reacquire any unvested shares issued pursuant to Awards or
Purchases, the unpurchased shares subject to such Options and any unvested
shares so reacquired by the Company shall again be available for grants of Stock
Rights under the Plan.

6. Granting of Stock Rights. The Committee is authorized to grant Stock Rights
------------------------
under the Plan at such time or times as it may determine, provided that the
Committee shall not grant Stock Rights under the Plan after February 16, 1997.
The Committee shall have the right, with the consent of the Optionee, to convert
an ISO granted under the Plan to a Non-Qualified Option pursuant to Article 17.

7. Minimum Option Price; ISO Limitations.
-------------------------------------

A. The exercise price specified in the Stock option Agreement relating to each
ISO granted under the Plan shall not be less than the fair market value per
share of Common Stock on the Date of Grant. In the case of an ISO to be granted
to an Eligible Recipient owning stock possessing more than ten percent of the
total combined voting power of all classes of stock of the Company or any
Affiliate, the exercise price specified in the Stock Option Agreement relating
to such ISO shall not be less than 110 percent of the fair market value per
share of Common Stock on the Date of Grant.

4
<PAGE>

B. In no event shall the aggregate fair market value (determined at the time an
ISO is granted) of Common Stock for which ISOs granted to any Eligible Recipient
are exercisable for the first time by such Eligible Recipient during any
calendar year (under all stock option plans of the Company and any Affiliate)
exceed $100,000.

C. If on the Date of Grant the Company's Common Stock is publicly traded, "fair
market value" shall be determined as of the last business day for which the
prices or quotes discussed in this sentence are available prior to the Date of
Grant and shall mean (i) the average (on that date) of the high and low prices
of the Common Stock on the principal national securities exchange on which the
Common stock is traded, if the Common Stock is then traded on a national
securities exchange; or (ii) the last reported sale price (on that date) of the
Common Stock on the NASDAQ National Market System, if the Common Stock is not
then traded on a national securities exchange; or (iii) the closing bid price
(or average of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the Common Stock is not
reported on the NASDAQ National Market System. However, if the Common Stock is
not publicly traded on the Date of Grant, "fair market value" shall be deemed to
be the fair value of the Common Stock on the Date of Grant as determined by the
Committee after taking into consideration all factors which it deems
appropriate, including, without limitation, recent sale and offer prices of the
Common Stock in private Transactions negotiated at arm's length.

8. Option Duration. Subject to earlier termination as provided in Sections 10
---------------
and 11, each Option shall expire on the date specified by the Committee, but,
not more than (i) ten years and one day from the Date of Grant in the case of
Non-Qualified Options, (ii) ten years from the Date of Grant in the case of ISOs
generally, and (iii) five years from the Date of Grant in the case of ISOs
granted to an employee owning stock possessing more than ten percent of the
total combined voting power of all classes of stock of the Company or any
Affiliate. Subject to earlier termination as provided in elections 10 and 11,
the term of each ISO shall be the term set forth in the Stock Option Agreement
granting such ISO, unless any part of such ISO is converted into a Non-Qualified
option pursuant to Section 17 and pursuant to such conversion the Committee
elects to extend the exercise period applicable to such part.

9. Exercise of Option. Subject to the provisions of Sections 10 through 13,
------------------
each Option granted under the Plan shall be exercisable as follows:

A. The Option shall either be fully exercisable on the Date of Grant or shall
become exercisable thereafter in such installments as the Committee may specify.

B. Once an installment becomes exercisable it shall remain exercisable until
expiration or termination of the Option, unless otherwise specified by the
Committee.

C. Each Option or installment may be exercised at any time or from time to
time, in whole or in part, for up to the total number of shares with respect to
which it is then exercisable, provided that no partial exercise of such Option
or installment within

5
<PAGE>

any year shall be for less than 100 whole shares of Common Stock as constituted
on the Date of Grant (or the remaining shares of Common Stock purchasable under
the option if less than 100 shares).

D. The Committee shall have the right to accelerate the date of exercise of any
installment of any Option; provided that the Committee shall not accelerate the
exercise date of any installment of any Option granted to any employee as an ISO
(and not previously converted into a Non-Qualified Option pursuant to paragraph
Section 17) if such acceleration would violate the annual vesting limitation
contained in Section 422A(b)(7) of the Code, as described in Section 7(B).

10. Termination of Employment. If the Grantee of an ISO ceases to be employed
-------------------------
by the Company and all Affiliates other than by reason of death or disability,
no further installments of such Grantee's ISOs shall become exercisable, and the
Grantee's ISOs shall terminate after the passage of 90 days from the date of
termination of his or her employment, but in no event later than on their
specified expiration dates, except to the extent that such ISOs (or unexercised
installments thereof) have been converted into Non-Qualified option; pursuant to
Section 17. Leave of absence with the written approval of the Committee shall
not be considered an interruption of employment under the Plan, provided that
such written approval contractually obligates the Company or any Affiliate to
continue the employment of the employee after the approved period of absence.
Employment shall also be considered as continuing uninterrupted during any other
bona fide leave of absence (such as those attributable to illness, military
obligations or governmental service) provided that the period of such leave does
not exceed 90 days or, if longer, any period during which such Grantee's right
to reemployment is guaranteed by statute. ISOs granted under the Plan shall not
be affected by any change of employment within or among the Company and its
Affiliates, so long as the optionee continues to be an employee of the Company
or any Affiliate. Nothing in the Plan shall be deemed to give any Grantee of
any Stock Right the right to be retained in employment or other service by the
Company or any Affiliate for any period of time.

11. Death; Disability. If the Grantee of an ISO ceases to be employed by the
-----------------
Company and all Affiliates by reason of his death, any ISO previously granted
hereunder to such Grantee may be exercised, to the extent of the number of
shares with respect to which the Grantee could have exercised it on the date of
his or her death, by the Grantee's estate, personal representative or any
beneficiary who has acquired the ISO by will or by the laws of descent and
distribution, at any time prior to the earlier of the ISO's specified expiration
date or 365 days from the date of the Grantee's death.

If the Grantee of an ISO ceases to be employed by the Company and all
Affiliates by reason of his Disability, the Grantee shall have the right to
exercise any ISO held by him on the date of termination of employment, to the
extent of the number of shares with respect to which the Grantee could have
exercised it on that date, at any time prior to the earlier of the ISO's
specified expiration date or 365 days from the date of the termination of the
Grantee employment.

6
<PAGE>

12. Assignability. No Stock Right shall be assignable or transferable by the
-------------
Grantee thereof except by will or by the laws of descent and distribution, and
during the lifetime of the Grantee each Stock Right shall be exercisable only by
him.

13. Terms and Conditions of Options. Each option granted under the Plan shall
-------------------------------
be evidenced by a Stock Option Agreement in such form as the Committee may from
time to time approve. Each Stock Option Agreement shall conform to the terms
and conditions set forth in Sections 7 through 12 hereof and may contain such
other provisions (which may vary as between Grantees) as the Committee deems
advisable, including restrictions applicable to shares of Common Stock issuable
upon exercise of Options, provided such provisions are not inconsistent with the
terms of this Plan. The Committee may, in its discretion, make some or all of
the Non-Qualified Options granted under this Plan subject to the restrictions
set forth herein with respect to ISOs, or to such other termination and
cancellation provisions as the Committee may determine. The Committee may from
time to time confer authority and responsibility on one or more of its own
members and/or one or more officers of the Company to execute and deliver Stock
Option Agreements. The proper officers of the Company are authorized and
directed to take any and all action necessary or advisable from time to time to
carry out the terms of each Stock Option Agreement entered into pursuant to this
Plan.

14. Adjustments. Upon the happening of any of the following described events,
-----------
a Grantee's rights with respect to Stock Rights granted hereunder and with
respect to Common Stock acquired pursuant to exercise of a Stock Right granted
hereunder shall be adjusted as hereinafter provided, unless otherwise
specifically provided in any written agreement between the Grantee and the
Company relating to such Stock Right.

A. In the event shares of Common Stock shall be subdivided or combined into a
greater or smaller number of shares or if, upon a merger, consolidation,
reorganization, split-up, liquidation, combination, recapitalization or the like
of the Company, the shares of Common Stock shall be exchanged for other
securities of the Company or of another corporation, each Grantee of a Stock
Right shall be entitled, subject to the conditions herein stated, to purchase
such number of shares of Common Stock or amount of other securities of the
Company or such other corporation as were exchangeable for the number of shares
of Common Stock which such Grantee would have been entitled to purchase except
for such action, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or exchange.

B. In the event the Company shall issue any of its shares as a stock dividend
upon or with respect to the shares of stock of the class which at the time shall
be subject to a Stock Right hereunder, each Grantee upon exercising a Stock
Right shall be entitled to receive (for the purchase price paid upon such
exercise) the shares as to which he is exercising his Stock Right and, in
addition thereto (at no additional cost), such number of shares of the class or
classes in which such stock dividend or dividends were declared or paid, and
such amount of cash in lieu of fractional shares, as he would have received if
he had been the holder of the shares as to which he is exercising his Stock
Right at all times between the date of grant of such Stock Right and the date of
its exercise.

7
<PAGE>

C. If any person or entity owning restricted Common Stock obtained by exercise
of a Stock Right made hereunder receives new or additional or different shares
or securities in connection with a corporate transaction described in paragraph
A above or a stock dividend described in paragraph B above as a result of owning
such restricted Common Stock, such new or additional or different shares or
Securities shall be subject to all of the conditions and restrictions applicable
to the restricted Common Stock with respect to which such shares or securities
were issued.

D. Notwithstanding the foregoing, any adjustments made pursuant to paragraphs A
or B with respect to ISOs shall be made only after the Committee, after
consulting with counsel for the Company, determines whether such adjustments
would constitute a "modification" of such ISOs (as that term is defined in
Section 425 of the Code) or would cause any adverse tax consequences for the
Grantees of such ISOs. if the Committee determines that such adjustments made
with respect to ISOs would constitute a modification of such ISOs, it may
refrain from making such adjustments.

E. No adjustments shall be made for dividends paid in cash or in property other
than securities of the Company.

F. No fractional shares shall be issued under the Plan. Any fractional shares
which, but for this paragraph F, would have been issued to a Grantee pursuant to
a Stock Right shall be deemed to have been issued and immediately sold to the
Company for their fair market value, and the Grantee shall receive from the
Company cash in lieu of such fractional shares.

G. Upon the happening of any of the events described in paragraphs A or B
above, the class and the aggregate number of shares set forth in Section 5
hereof shall be appropriately adjusted to reflect the events described in such
paragraphs. The Committee shall determine the specific adjustments to be made
under this Section 14 and, subject to Section 3, its determination shall be
conclusive.

15. Means of Exercising Stock Rights. A Stock Right (or any part or
--------------------------------
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice shall identify the Stock Right
being exercised and specify the number of shares as to which such Stock Right is
being exercised, accompanied by full payment of the purchase price therefor
either (a) in United States dollars in cash or by check, or (b) at the
discretion of the Committee, through delivery of shares of Common Stock having
fair market value equal as of the date of the exercise to the cash exercise
price of the Stock Right, or (c) at the discretion of the Committee, by Delivery
of the Grantee's personal recourse note bearing interest payable not less than
annually at no less than 100% of the applicable Federal rate, as defined in
(S)1274(d) of the Code, or (d) at the discretion of the Committee, by any
combination of (a), (b) and (c) above. If the Committee exercises its
discretion to permit payment of the exercise price of an ISO by

8
<PAGE>

means of the methods set forth in clauses (b), (c), or (d) of the preceding
sentence, such discretion shall be exercised in writing at the time of the grant
of the ISO in question. The holder of a Stock Right shall not have the rights of
a shareholder with respect to the shares covered by his Stock Right until the
date of issuance of a stock certificate to him for such shares. Except as
expressly provided above in Section 14 with respect to changes in capitalization
and stock dividends, no adjustment shall be made for dividends or similar rights
for which the record date is before the date such stock certificate is issued.

16. Term and Amendment of Plan.
--------------------------

A. This plan was adopted by the Board and approved by the holders of a majority
of the outstanding shares of Common Stock and Preferred Stock of the Company on
February 17, 1987. The Plan shall expire on February 16, 1997 (except as to
Options outstanding on that date). Stock Rights may be granted under the Plan
prior to the date of stockholder approval of the Plan.

B. The Board may terminate or amend the Plan in any respect at any time, except
that the Board may not (a) increase the total number of shares that may be
issued under the Plan (except by adjustment pursuant to Section 14); (b) modify
the provisions of Section 4 regarding eligibility for grants of ISOs; (c) modify
the provisions of Section 7(A) regarding the exercise price (except by
adjustment pursuant to Section 14); or (d) extend the expiration date of the
Plan without obtaining the approval of the Company's Stockholders within 12
months before or after any such amendment. Except as provided in the last
sentence of paragraph A of this section, in no event may action of the Board or
Stockholders alter or impair the rights of a Grantee, without his consent, under
any Stock Right previously granted to him.

17. Conversion of ISOs into Non-Qualified Options; Termination of ISOs. The
------------------------------------------------------------------
Committee, at the written request of any Optionee, may in its discretion take
such actions as may be necessary to convert such Optionee's ISOs (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the Optionee is an employee of
the Company or any Affiliate at the time of such conversion. Such action may
include, but not be limited to, extending the exercise period or reducing the
exercise price of the appropriate installments of such Options. At the time of
such conversion, the Committee (with the consent of the Optionee) may impose
such conditions on the exercise of the resulting Non-Qualified Options as the
Committee in its discretion may determine, provided that such conditions shall
not be inconsistent with this Plan. Nothing in this Plan shall be deemed to
give any Optionee the right to have such Optionee's ISOs converted into Non-
Qualified Options, and no such conversion shall occur until and unless the
Committee takes appropriate action. The Committee, with the consent of the
Optionee, may also terminate any portion of any ISO that has not been exercised
at the time of such termination.

9
<PAGE>

18. Application of Funds. The proceeds received by the Company from the sale
--------------------
of shares pursuant to Options granted and Purchases authorized under the Plan
shall be used for general corporate purposes.

19. Governmental Regulation. The Company's obligation to sell and deliver
-----------------------
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.

20. Withholding of Additional Income Taxes. Upon the exercise of a Non-
--------------------------------------
Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition or the vesting of restricted Common Stock acquired on the exercise
of a Stock Right hereunder, the Company, in accordance with Section 3402(a) of
the Code, may require such Grantee to pay additional withholding taxes in
respect of the amount that is considered compensation includable in the
Grantee's gross income. The Committee in its discretion may condition (i) the
exercise of an Option, (ii) the grant of an Award, (iii) the making of a
Purchase of Common Stock for less than its fair market value, or (iv) the
vesting of restricted Common Stock acquired by exercising a Stock Right on the
Grantee's payment of such additional withholding taxes.

21. Notice to Company of Disqualifying Disposition. Each Stock Option
----------------------------------------------
Agreement entered into between the Company and the Grantee of an ISO granted
under this Plan shall provide that the Grantee agrees to notify the Company in
writing immediately after the Grantee makes a Disqualifying Disposition of any
Common Stock acquired pursuant to the exercise of such ISO. A Disqualifying
Disposition is any disposition (including any sale) by the Grantee of an ISO of
Common Stock acquired pursuant to the exercise of such ISO before the later of
(a) two years after the Date of Grant of such ISO or (b) one year after the date
the Grantee acquired such Common Stock by exercising the ISO, provided, however,
that the foregoing rules shall not apply to dispositions of such Common Stock
after the death of such Grantee by his or her legal representative, devisees or
heirs.

22. Governing Law; Construction. The validity and construct of the Plan and
---------------------------
Stock Option Agreements entered into hereunder shall be governed by the laws of
the Commonwealth of Massachusetts. In construing this Plan, the singular shall
include the plural and the masculine gender shall include the feminine and
neuter, unless the context otherwise requires.

<PAGE>

Exhibit 10.3

MILLITECH CORPORATION

1988 STOCK PLAN
---------------

1. Purposes. This 1988 Stock Plan is designed to enable MILLITECH CORPORATION, a
--------
Massachusetts corporation with its principal place of business located in South
Deerfield, Massachusetts (the "Company") and its Affiliates to continue to be
able to attract and retain persons of ability as key employees, officers,
directors and consultants and to motivate such persons to exert their best
efforts on behalf of the Company and its Affiliates by providing them with
awards of stock in the Company and/or opportunities to purchase stock in the
Company, all in the manner provided herein.

2. Definitions.
-----------

"Affiliate" means any corporation which owns fifty percent (50%) of the voting
power of the Company or any other corporation (other than the Company) in an
unbroken chain of corporation beginning with the Corporation if each of the
corporations other than the last in such chain owns stock possessing at least
fifty percent (50%) of the voting power in one of the other corporations in such
chain.

"Award" means Common Stock awarded hereunder to Eligible Recipients.

"Board" means the Board of Directors of the Company.

"Code" means the Internal Revenue Code of 1986, as amended. "Committee" means
the committee established to administer the Plan as provided in Section 3(a).

"Common Stock" means shares of common stock of the Company ($.01 par value) and
such other stock as shall be substituted therefor as provided in Section 14.

"Company" shall have the meaning set forth in Section 1 hereof.

"Date of Grant" means the date on which the Committee authorizes the granting of
a Stock Right or such later date as may be specified by the Committee at the
time of such authorization; provided, however, that with respect to Stock Rights
granted pursuant to Section 3(d) such term shall mean the date on which the
granting of such Stock Right is authorized by the Board or by the committee
established pursuant to Section 3(d) to whom the Board has delegated such
authority.

"Disability" shall mean "Permanent and Total Disability" as defined in Section
22(e)(3) of the Code.

"Disqualifying Disposition" shall have the meaning set forth in Section 21.
<PAGE>

"Eligible Recipient" means a person who satisfies the eligibility requirements
of Section 4 applicable to the Stock Right proposed to be granted to him.

"Grantee" means an Eligible Recipient to whom a Stock Right has been granted
under this Plan.

"ISO" means an Option which qualifies as an incentive stock option under Section
422(b) of the Code.

"Non-Qualified Option" means an Option which does not qualify as an ISO.

"Option" means a right to purchase Common Stock granted to an Eligible Recipient
pursuant to this Plan.

"Optionee" means an Eligible Recipient to whom an Option has been granted under
this Plan.

"Plan" means the MILLITECH CORPORATION 1988 Stock Plan.

"Purchase" means an opportunity to make a direct purchase of Common Stock
granted to an Eligible Recipient pursuant to this Plan.

"Stock Option Agreement" means the agreement executed between the Corporation
and a Grantee pursuant to Section 13.

"Stock Rights" collectively refers to Options, Awards and Purchases.

3. Administration of the Plan.
--------------------------

(a) The Committee shall administer the Plan and shall consist of the Board or of
not less than three members of the Board who shall be appointed by and serve at
the pleasure of the Board. No member of the Committee, while a member, shall be
eligible to participate in the Plan except as provided in Section 3(c) hereof.
Subject to ratification of the grant or authorization of each Stock Right by the
Board (if so required by applicable state law), and subject to the terms of the
Plan, the Committee, if so appointed, shall have the authority to (i) determine
the employees of the Company and its Affiliates (from among the class of
employees eligible under Section 4 to receive ISOs) to whom ISOs may be granted
and to determine (from among the class of individuals and entities eligible
under Section 4 to receive Non-Qualified Options and Awards and to make
Purchases) to whom Non-Qualified options, Awards and authorizations to make
Purchases may be granted; (ii) determine the time or times at which Options or
Awards may be granted or Purchases made; (iii) determine the option price of
shares subject to each Option and the purchase price of shares subject to each
Purchase; (iv) determine whether each option granted shall be an ISO or a Non-
Qualified option; (v) determine (subject to Section 8) the time or times when
each Option shall become exercisable and the duration of the exercise period;
(vi) determine whether restrictions such as repurchase options are to be imposed

2
<PAGE>

3
<PAGE>

4. Eligibility Requirements. ISOs may be granted to any employee of the Company
------------------------
or any Affiliate. Those officers and directors of the Company or any Affiliate
who are not employees may not be granted ISOs under the Plan. Non-Qualified
Options, Awards and authorizations to make Purchases may be granted to any
director (whether or not an employee), officer, employee or consultant of the
Company or any Affiliate. The Committee may take into consideration a
candidate's individual circumstances in determining whether to grant an ISO, a
Non-Qualified Option, an Award or an authorization to make a purchase. The
granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify him from, participation in any
other grant of Stock Rights.

7. Minimum Option Price; ISO Limitations.
-------------------------------------

4
<PAGE>

8. Option Duration. Subject to earlier termination as provided in Sections 10
---------------
and 11, each Option shall expire on the date specified by the Committee, but,
not more than (i) ten years and one day from the Date of Grant in the case of
Non-Qualified Options, (ii) ten years from the Date of Grant in the case of ISOs
generally, and (iii) five years from the Date of Grant in the case of ISOs
granted to an employee owning stock possessing more than ten percent of the
total combined voting power of all classes of stock of the Company or any
Affiliate. Subject to earlier termination as provided in sections 10 and 11,
the term of each ISO shall be the term set forth in the Stock Option Agreement
granting such ISO, unless any part of such ISO is converted into a Non-Qualified
option pursuant to Section 17 and pursuant to such conversion the Committee
elects to extend the exercise period applicable to such part.

9. Exercise of Option. Subject to the provisions of Sections 10 through 13,
------------------
each Option granted under the Plan shall be exercisable as follows:

A. The Option shall either be fully exercisable on the Date of Grant or shall
become exercisable thereafter in such installments as the Committee may specify.

B. Once an installment becomes exercisable it shall remain exercisable until
expiration or termination of the Option, unless otherwise specified by the
Committee.

C. Each Option or installment may be exercised at any time or from time to time,
in whole or in part, for up to the total number of shares with respect to which
it is then exercisable, provided that no partial exercise of such Option or
installment within

5
<PAGE>

any year shall be for less than 100 whole shares of Common Stock as constituted
on the Date of Grant (or the remaining shares of Common Stock purchasable under
the option if less than 100 shares).

D. The Committee shall have the right to accelerate the date of exericse of any
installment of any Option; provided that the Committee shall not accelerate the
exercise date of any installment of any Option granted to any employee as an ISO
(and not previously converted into a Non-Qualified Option pursuant to paragraph
Section 17) if such acceleration would violate the annual vesting limitation
contained in Section 422(b)(7) of the Code, as described in Section 7(B).

10. Termination of Employment. If the Grantee of an ISO ceases to be employed by
-------------------------
the Company and all Affiliates other than by reason of death or
disability, no further installments of such Grantee's ISOs shall become
exercisable, and the Grantee's ISOs shall terminate after the passage of 90 days
from the date of termination of his or her employment, but in no event later
than on their specified expiration dates, except to the extent that such ISOs
(or unexercised installments thereof) have been converted into Non-Qualified
option; pursuant to Section 17. Leave of absence with the written approval of
the Committee shall not be considered an interruption of employment under the
Plan, provided that such written approval contractually obligates the Company or
any Affiliate to continue the employment of the employee after the approved
period of absence. Employment shall also be considered as continuing
uninterrupted during any other bona fide leave of absence (such as those
attributable to illness, military obligations or governmental service) provided
that the period of such leave does not exceed 90 days or, if longer, any period
during which such Grantee's right to reemployment is guaranteed by statute.
ISOs granted under the Plan shall not be affected by any change of employment
within or among the Company and its Affiliates, so long as the optionee
continues to be an employee of the Company or any Affiliate. Nothing in the
Plan shall be deemed to give any Grantee of any Stock Right the right to be
retained in employment or other service by the Company or any Affiliate for any
period of time.

If the Grantee of an ISO ceases to be employed by the Company and all Affiliates
by reason of his Disability, the Grantee shall have the right to exercise any
ISO held by him on the date of termination of employment, to the extent of the
number of shares with respect to which the Grantee could have exercised it on
that date, at any time prior to the earlier of the ISO's specified expiration
date or 365 days from the date of the termination of the Grantee employment.

6
<PAGE>

14. Adjustments. Upon the happening of any of the following described events, a
-----------
Grantee's rights with respect to Stock Rights granted hereunder and with respect
to Common Stock acquired pursuant to exercise of a Stock Right granted hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in any written agreement between the Grantee and the Company relating
to such Stock Right.

7
<PAGE>

E. No adjustments shall be made for dividends paid in cash or in property other
than securities of the Company.

G. Upon the happening of any of the events described in paragraphs A or B above,
the class and the aggregate number of shares set forth in Section 5 hereof shall
be appropriately adjusted to reflect the events described in such paragraphs.
The Committee shall determine the specific adjustments to be made under this
Section 14 and, subject to Section 3, its determination shall be conclusive.

15. Means of Exercising Stock Rights. A Stock Right (or any part or installment
--------------------------------
thereof) shall be exercised by giving written notice to the Company at its
principal office address. Such notice shall identify the Stock Right being
exercised and specify the number of shares as to which such Stock Right is being
exercised, accompanied by full payment of the purchase price therefor either (a)
in United States dollars in cash or by check, or (b) at the discretion of the
Committee, through delivery of shares of Common Stock having fair market value
equal as of the date of the exercise to the cash exercise price of the Stock
Right, or (c) at the discretion of the Committee, by Delivery of the Grantee's
personal recourse note bearing interest payable not less than annually at no
less than 100% of the applicable Federal rate, as defined in Section 1274(d) of
the Code, or (d) at the discretion of the Committee, by any combination of (a),
(b) and (c) above. If the Committee exercises its discretion to permit payment
of the exercise price of an ISO by

8
<PAGE>

16. Term and Amendment of Plan.
--------------------------

A. This plan was adopted by the Board and approved by the holders of a majority
of the outstanding shares of Common Stock and Preferred Stock of the Company on
March 9, 1988. The Plan shall expire on March 8, 1999 (except as to Options
outstanding on that date). Stock Rights may be granted under the Plan prior to
the date of stockholder approval of the Plan.

9
<PAGE>

18. Application of Funds. The proceeds received by the Company from the sale of
--------------------
shares pursuant to Options granted and Purchases authorized under the Plan shall
be used for general corporate purposes.

19. Governmental Regulation. The Company's obligation to sell and deliver shares
-----------------------
of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.

20. Withholding of Additional Income Taxes. Upon the exercise of a Non-Qualified
--------------------------------------
Option, the grant of an Award, the making of a Purchase of Common Stock for less
than its fair market value, the making of a Disqualifying Disposition or the
vesting of restricted Common Stock acquired on the exercise of a Stock Right
hereunder, the Company, in accordance with Section 3402(a) of the Code, may
require such Grantee to pay additional withholding taxes in respect of the
amount that is considered compensation includable in the Grantee's gross income.
The Committee in its discretion may condition (i) the exercise of an Option,
(ii) the grant of an Award, (iii) the making of a Purchase of Common Stock for
less than its fair market value, or (iv) the vesting of restricted Common Stock
acquired by exercising a Stock Right on the Grantee's payment of such additional
withholding taxes.

21. Notice to Company of Disqualifying Disposition. Each Stock Option Agreement
----------------------------------------------
entered into between the Company and the Grantee of an ISO granted under this
Plan shall provide that the Grantee agrees to notify the Company in writing
immediately after the Grantee makes a Disqualifying Disposition of any Common
Stock acquired pursuant to the exercise of such ISO. A Disqualifying
Disposition is any disposition (including any sale) by the Grantee of an ISO of
Common Stock acquired pursuant to the exercise of such ISO before the later of
(a) two years after the Date of Grant of such ISO or (b) one year after the date
the Grantee acquired such Common Stock by exercising the ISO, provided, however,
that the foregoing rules shall not apply to dispositions of such Common Stock
after the death of such Grantee by his or her legal representative, devisees or
heirs.

22. Governing Law; Construction. The validity and construct on of the Plan and
---------------------------
Stock Option Agreements entered into hereunder shall be governed by the laws of
the Commonwealth of Massachusetts. In construing this Plan, the singular shall
include the plural and the masculine gender shall include the feminine and
neuter, unless the context otherwise requires.

<PAGE>

EXHIBIT 10.4

MILLITECH CORPORATION

1996 STOCK PLAN
---------------

1. Purpose. This 1996 Stock Plan is designed to enable MILLITECH
-------
CORPORATION and its Affiliates to attract and retain capable key employees,
officers, directors and consultants and to motivate such persons to exert their
best efforts on behalf of the Company by providing them with compensation in the
manner provided in this Plan.

2. Definitions.
-----------

"Act" means the Securities Exchange Act of 1934, as amended.

"Award" means Common Stock awarded under this Plan.

"Affiliate" means any parent corporation or subsidiary corporation of the
Company as defined in Section 424 of the Code.

"Board" means the Board of Directors of the Company.

"Code" means the Internal Revenue Code of 1986, as amended.

"Committee" means the committee established to administer this Plan as
provided in Section 3 or, if no such committee is established, the Board.

"Common Stock" means shares of common stock of the Company and such
substitutions therefor as are determined by the Committee pursuant to Section 11
to be appropriate.

"Company" means Millitech Corporation, a Massachusetts corporation.

"Date of Grant" means the date on which the Committee authorizes the grant
of a Stock Right, or such later date as may be specified by the Committee at the
time of such authorization.

"Disability" means a disability that entitles the Grantee to disability
income benefits under the terms of any long-term disability plan maintained by
the Company which covers the Grantee, or if no such plan exists or is applicable
to the Grantee, the permanent and total disability of the Grantee within the
meaning of Section 22(e)(3) of the Code.
<PAGE>

"Disqualifying Disposition" means any disposition (including any sale) by
an Optionee of Common Stock acquired pursuant to the exercise of an ISO before
the later of (a) two years after the Date of Grant of the ISO or (b) one year
after the date the Optionee acquired such Common Stock by exercising the ISO.
The foregoing rules do not apply to dispositions of Common Stock after the death
of an Optionee by his or her legal representative, devisees or heirs.

"Grantee" means a person to whom a Stock Right has been granted under this
Plan.

"ISO" means an Option which qualifies as an incentive stock option under
Section 422(b) of the Code.

"Non-Qualified Option" means an Option which does not qualify as an ISO.

"Option" means a right to purchase Common Stock granted pursuant to this
Plan.

"Optionee" means a person to whom an Option has been granted under this
Plan.

"Plan" means the Millitech Corporation 1996 Stock Plan.

"Purchase" means the right to make a direct purchase of Common Stock
granted pursuant to this Plan.

"Stock Appreciation Right" means a right granted under Section 7.

"Stock Rights" collectively refers to Options, Awards, Purchases and Stock
Appreciation Rights.

3. Administration of the Plan.
--------------------------

(a) The Board may administer this Plan or may appoint a Committee to
administer this Plan. Members of the Committee, while members, will be eligible
to participate in this Plan only as provided in Section 3(d). The Committee
will have the authority to (i) determine the employees and other persons to whom
Stock Rights may be granted; (ii) determine when Options, Awards and Stock
Appreciation Rights may be granted or Purchases made; (iii) determine the
purchase price, if any, of Stock Rights and the shares underlying them; (iv)
determine the other terms and provisions of each Stock Right (which may vary
among Grantees in the Committee's discretion), including but not limited to the
timing, vesting and duration of the exercise period and the nature and duration
of transfer and/or forfeiture restrictions; (v) amend, modify, convert, or
replace any Stock Right to the extent allowed by law, (vi) accelerate a Stock
Right exercise date in whole or in part, subject only to the ISO acceleration
provisions of Section 422(d) of the Code (if applicable); (vii) employ
attorneys, consultants,

2
<PAGE>

accountants or other persons upon whose advice the Committee may rely; and
(viii) interpret this Plan and prescribe and rescind rules and regulations
relating to it. All actions taken and all interpretations and determinations
made by the Committee in good faith will be final and binding on all parties,
unless otherwise determined by the Board.

(b) No member of the Board or the Committee will be liable for any action
or determination made in good faith with respect to this Plan or any Stock Right
granted under it. Each member of the Committee will be indemnified and held
harmless by the Company against any cost or expense (including counsel fees)
reasonably incurred by such member or liability (including any sum paid in
settlement of a claim with the approval of the Company) arising out of any act
or omission to act in connection with this Plan unless arising out of such
member's own fraud or bad faith. Such indemnification will be in addition to
any rights of indemnification the members of the Committee may have as directors
or otherwise under the by-laws of the Company, or any agreement, vote of
stockholders or disinterested directors, or otherwise.

(c) The Committee may select one of its members as its chair, and will hold
meetings at its discretion. A majority of the Committee will constitute a
quorum. The acts of a majority of the members of the Committee present at any
meeting at which a quorum is present or acts reduced to or approved in writing
by a majority of the members of the Committee will be the valid acts of the
Committee. From time to time the Board may increase the size of the Committee
and appoint additional members, remove members (with or without cause) and
appoint replacement members, fill vacancies however caused, and remove all
members of the Committee and thereafter directly administer this Plan.

(d) Stock Rights may be granted to members of the Committee pursuant to
this Plan if such grants have been approved by a majority vote of the
disinterested members of the Board. If the Company is or becomes registered
under the Act, the Committee will be qualified as required by Rule 16b-3, as
amended, and other applicable rules under or successors to Section 16(b) of the
Act.

4. Stock. The aggregate number of shares of Common Stock which may be
-----
issued under this Plan is Six Hundred Thousand (600,000), subject to adjustment
as provided in Section 11. The Committee may grant Options and Stock
Appreciation Rights and may authorize Purchases and Awards with respect to such
shares in such combinations and for such amount of shares as it determines are
appropriate, provided that the aggregate number of shares issuable upon exercise
of such Options, Purchases and Stock Appreciation Rights and upon grant of such
Awards does not exceed such number, as adjusted. Stock subject to Stock Rights
may be authorized but unissued shares of Common Stock or Common Stock held in
the treasury of the Company. If any Option expires or terminates for any reason
without having been exercised in full or ceases for any reason to be exercisable
in whole or in part, or if the Company reacquires any unvested shares issued
pursuant to Stock Rights, then the unpurchased shares subject to such Option and
any unvested shares so reacquired by the Company will again be available for
grants of Stock Rights.

3
<PAGE>

5. Granting of Stock Rights. The Committee is authorized to grant Stock
------------------------
Rights to such employees, consultants and officers and directors (whether or not
an employee) of the Company or its Affiliates at such time or times as it may
determine, all in the sole exercise of its discretion. Each Stock Right will be
evidenced by a written agreement in such form as the Committee may from time to
time approve. Each agreement for an ISO will require the Optionee to notify the
Company in writing immediately after the Optionee makes a Disqualifying
Disposition of any Common Stock acquired pursuant to the exercise of the ISO.
The Committee may from time to time confer authority on one or more of its own
members and/or one or more officers of the Company to execute and deliver such
agreements. The officers of the Company are authorized and directed to take any
and all action necessary or advisable from time to time to carry out the terms
of each agreement entered into pursuant to this Plan.

6. Option Price and Term; ISO Limitations.
--------------------------------------

(a) The exercise price for each ISO share will be at least equal to the
fair market value per share on the Date of Grant. However, if the Optionee owns
more than ten percent of the total combined voting power of all classes of stock
of the Company or an Affiliate, the exercise price must be at least one hundred
ten percent (110%) of the fair market value per share on the Date of Grant,
determined without regard to any restriction other than a restriction which, by
its terms, will never lapse. The Committee may determine the exercise price of
Non-Qualified Options in its sole discretion.

(b) Each Option will expire on the date specified by the Committee.
However, any ISOs granted to an employee owning more than ten percent of the
total combined voting power of all classes of stock of the Company or an
Affiliate must expire not more than five years from the Date of Grant and all
other ISOs must expire not more than ten years from the Date of Grant.

(c) ISOs may be granted only to employees of the Company or an Affiliate.
Non-Qualified Options may be granted to any director or officer (whether or not
an employee), employee or consultant of the Company or an Affiliate.

(d) To the extent that the aggregate fair market value (determined as of
the Date of Grant) of Common Stock with respect to which ISOs (determined
without regard to this paragraph) are exercisable for the first time by any
Optionee during any calendar year under all plans of the Company and its
Affiliates exceeds $100,000, such ISOs will be treated as Non-Qualified Options.

4
<PAGE>

(e) The fair market value of a share of Common Stock on the Date of Grant
will be the mean between the highest and lowest quoted selling prices on such
date on the securities market where the Common Stock of the Company is traded,
or if there were no sales on the Date of Grant, on the next preceding date
within a reasonable period (as determined in the sole discretion of the
Committee) on which there were sales. In the event that there were no sales in
such a market within a reasonable period or if the Common Stock is not publicly
traded on the Date of Grant, the fair market value will be as determined in good
faith by the Committee in its sole discretion after taking into consideration
all factors which it deems appropriate including, without limitation, recent
sale and offer prices of the Common Stock in private transactions negotiated at
arm's length.

7. Stock Appreciation Rights.
-------------------------

(a) The Committee will have the authority to grant Stock Appreciation
Rights with or apart from the grant of Options under this Plan. Stock
Appreciation Rights may be paid in cash or shares of Common Stock, or any
combination of each, as the Committee may determine and will be subject to such
terms and conditions as the Committee may specify.

(b) Each Stock Appreciation Right granted with a specified Option will
entitle the Grantee to receive the following amount if and when the specified
Option becomes exercisable: unless the Committee determines otherwise, the
amount to be received by the Grantee will equal the difference between (i) the
fair market value of a share of Common Stock on the date of exercise of the
Right and (ii) the exercise price of a share under the specified Option.

(c) Each Stock Appreciation Right granted without reference to a specified
Option will entitle the Grantee to receive, unless the Committee determines
otherwise, the difference between (i) the fair market value of a share of Common
Stock on the date of exercise of the Right and (ii) the fair market value of a
share of Common Stock on the date the Right was granted.

(d) Notwithstanding the foregoing, for those Grantees subject to Section
16(b) of the Act, any transaction involving the exercise of a Stock Appreciation
Right will be structured to satisfy the requirements of Rule 16b-3.

8. Means of Exercising Stock Rights. A Stock Right (or any part thereof)
--------------------------------
will be exercised by giving written notice to the Company at its principal
office address identifying the Stock Right being exercised, specifying the
portion of the Stock Right being exercised (including the number of shares, if
any, for which Stock Right is being exercised), and accompanied by full payment
of the purchase price (if any) either (a) in United States cash or cash
equivalent or, at the discretion of the Committee, (b) in shares of Common Stock
having a fair market value on the date of exercise equal to the exercise price
of the Stock Right, (c) by delivery of the Grantee's promissory note, (d) by
written notice to the Company to withhold from those shares of Common Stock that
would otherwise be obtained on the exercise of such Stock Right the number of

5
<PAGE>

shares having a fair market value on the date of exercise equal to the exercise
price, or (e) by any combination of the foregoing. The holder of a Stock Right
will not have the rights of a shareholder with respect to any shares covered by
the Stock Right until the date of issuance of a stock certificate for such
shares. Except as otherwise determined by the Committee, no adjustment will be
made for dividends or similar rights for which the record date is before the
date such stock certificate is issued.

9. Termination of Employment; Limitations on Exercise.
--------------------------------------------------

(a) If a Grantee's employment with or service to the Company terminates
other than by reason of death or Disability, (i) no further vesting of the
Grantee's Options and Stock Appreciation Rights will occur subsequent to the
date of termination, (ii) the Grantee's ISOs will terminate 90 days after the
date of termination, or on their specified expiration dates, if earlier, (iii)
the Grantee's Non-Qualified Stock Options and Stock Appreciation Rights will
terminate one (1) year after the date of termination, or on their specified
expiration dates, if earlier, and (iv) all other types of Stock Rights will be
forfeited except to the extent otherwise provided by the Committee. Nothing in
this Plan will be deemed to give any Grantee the right to continued employment
with the Company.

(b) If a Grantee's employment or other service to the Company is terminated
due to the Grantee's death or Disability, any Options or Stock Appreciation
Rights granted under this Plan to such Grantee may be exercised, up to that
portion of the Option or Stock Appreciation Right which the Grantee could have
exercised on the date of death or Disability, by the Grantee, or in the case of
death, the Grantee's estate, personal representative or any beneficiary who has
acquired the Options or Stock Appreciation Rights by will or by the laws of
descent and distribution, at any time prior to the earlier of the specified
expiration date of the Option or Stock Appreciation Right or one year after the
Grantee's death or Disability. The Grantee's rights with respect to any other
type of Stock Rights held by the Grantee at the time of death or Disability will
be subject to such terms as the Committee shall determine.

10. Assignability. No Stock Right will be assignable or transferable by a
-------------
Grantee, either voluntarily or by operation of law, except by will or by the
laws of descent and distribution. During the lifetime of the Grantee no Stock
Right will be exercisable by or payable to anyone other than the Grantee or his
legal representative.

6
<PAGE>

event of any general offer to holders of Common Stock relating to the
acquisition of their shares, the Committee may make such adjustment as it deems
equitable in respect of outstanding Stock Rights including, in the Committee's
discretion, revision of outstanding Stock Rights, so that they may be
exercisable for the consideration payable in the acquisition transaction. Any
such determination by the Committee will be conclusive.

12. Amendment of Plan. The Board may terminate or amend this Plan in any
-----------------
manner allowed by law at any time, provided that no amendment to this Plan will
be effective without approval of the stockholders of the Company if stockholder
approval of the amendment is then acquired under Rule 16b-3 of the Act, Sections
162(m) or 422 of the Code, the rules of any stock exchange or other applicable
federal or state law. In no event may action of the Board or stockholders alter
or impair the rights of a Grantee, without the Grantee's consent, under any
Stock Right previously granted to such Grantee. Stock Rights may be granted
prior to the date of stockholder approval of this Plan.

13. Application Of Funds. All proceeds received by the Company with
--------------------
respect to Stock Rights will be used for general corporate purposes.

14. Governmental Regulation. The Company's obligation to sell and deliver
-----------------------
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares and the availability of a federal and appropriate state
securities law exemptions.

15. Withholding of Additional Income Taxes. It will be a condition of the
--------------------------------------
Company's obligation to issue Common Stock upon exercise of a Stock Right that
the person exercising the Stock Right pay, or make provision satisfactory to the
Company for the payment of, any taxes which the Company is obligated to collect
with respect to the issue of Common Stock upon such exercise.

16. Governing Law. This Plan and any agreements entered into under this
-------------
Plan will be governed and construed in accordance with the laws of the
Commonwealth of Massachusetts.

17. Effective Date. This Plan is effective as of ____________________,
--------------
1996, the date of its adoption by the Company's Board of Directors and its
approval by the Company's stockholders. Unless previously terminated, the Plan
will terminate at midnight on ________________________, 2006 and no Stock
Right may be granted after such date.

<PAGE>

EXHIBIT 10.5

MILLITECH CORPORATION

1997 STOCK PLAN
---------------

1. Purpose. This 1997 Stock Plan is designed to enable MILLITECH
-------
CORPORATION and its Affiliates to attract and retain capable key employees,
officers, directors and consultants and to motivate such persons to exert their
best efforts on behalf of the Company by providing them with compensation in the
manner provided in this Plan.

2. Definitions.
-----------

"Act" means the Securities Exchange Act of 1934, as amended.

"Award" means Common Stock awarded under this Plan.

"Affiliate" means any parent corporation or subsidiary corporation of the
Company as defined in Section 424 of the Code.

"Board" means the Board of Directors of the Company.

"Code" means the Internal Revenue Code of 1986, as amended.

"Committee" means the committee established to administer this Plan as
provided in Section 3 or, if no such committee is established, the Board.

"Common Stock" means shares of common stock of the Company and such
substitutions therefor as are determined by the Committee pursuant to Section 11
to be appropriate.

"Company" means Millitech Corporation, a Massachusetts corporation.

"Date of Grant" means the date on which the Committee authorizes the grant
of a Stock Right, or such later date as may be specified by the Committee at the
time of such authorization.

<PAGE>

"Grantee" means a person to whom a Stock Right has been granted under this
Plan.

"ISO" means an Option which qualifies as an incentive stock option under
Section 422(b) of the Code.

"Non-Qualified Option" means an Option which does not qualify as an ISO.

"Option" means a right to purchase Common Stock granted pursuant to this
Plan.

"Optionee" means a person to whom an Option has been granted under this
Plan.

"Plan" means the Millitech Corporation 1997 Stock Plan.

"Purchase" means the right to make a direct purchase of Common Stock
granted pursuant to this Plan.

"Stock Appreciation Right" means a right granted under Section 7.

"Stock Rights" collectively refers to Options, Awards, Purchases and Stock
Appreciation Rights.

3. Administration of the Plan.
--------------------------

(a) The Board may administer this Plan or may appoint a Committee to
administer this Plan. Members of the Committee, while members, will be eligible
to participate in this Plan only as provided in Section 3(d). The Committee
will have the authority to (i) determine the employees and other persons to whom
Stock Rights may be granted; (ii) determine when Options, Awards and Stock
Appreciation Rights may be granted or Purchases made; (iii) determine the
purchase price, if any, of Stock Rights and the shares underlying them; (iv)
determine the other terms and provisions of each Stock Right (which may vary
among Grantees in the Committee's discretion), including but not limited to the
timing, vesting and duration of the exercise period and the nature and duration
of transfer and/or forfeiture restrictions; (v) amend, modify, convert, or
replace any Stock Right to the extent allowed by law, (vi) accelerate a Stock
Right exercise date in whole or in part, subject only to the ISO acceleration
provisions of

2
<PAGE>

Section 422(d) of the Code (if applicable); (vii) employ attorneys, consultants,
accountants or other persons upon whose advice the Committee may rely; and
(viii) interpret this Plan and prescribe and rescind rules and regulations
relating to it. All actions taken and all interpretations and determinations
made by the Committee in good faith will be final and binding on all parties,
unless otherwise determined by the Board.

4. Stock. The aggregate number of shares of Common Stock which may be
-----
issued under this Plan is Three Million Seven Hundred Thousand (3,700,000),
subject to adjustment as provided in Section 11. The Committee may grant
Options and Stock Appreciation Rights and may authorize Purchases and Awards
with respect to such shares in such combinations and for such amount of shares
as it determines are appropriate, provided that the aggregate number of shares
issuable upon exercise of such Options, Purchases and Stock Appreciation Rights
and upon grant of such Awards does not exceed such number, as adjusted. Stock
subject to Stock Rights may be authorized but unissued shares of Common Stock or
Common Stock held in the treasury of the Company. If any Option expires or
terminates for any reason without having been exercised in full or ceases for
any reason to be exercisable in whole or in part, or if the Company reacquires
any unvested shares issued pursuant to Stock Rights, then the unpurchased shares
subject to such Option and any unvested shares so reacquired by the Company will
again be available for grants of Stock Rights.

3
<PAGE>

6. Option Price and Term; ISO Limitations.
--------------------------------------

4
<PAGE>

7. Stock Appreciation Rights.
-------------------------

5
<PAGE>

(d) by written notice to the Company to withhold from those shares of Common
Stock that would otherwise be obtained on the exercise of such Stock Right the
number of shares having a fair market value on the date of exercise equal to the
exercise price, or (e) by any combination of the foregoing. The holder of a
Stock Right will not have the rights of a shareholder with respect to any shares
covered by the Stock Right until the date of issuance of a stock certificate for
such shares. Except as otherwise determined by the Committee, no adjustment will
be made for dividends or similar rights for which the record date is before the
date such stock certificate is issued.

9. Termination of Employment; Limitations on Exercise.
--------------------------------------------------

(a) If a Grantee's employment with or service to the Company terminates
other than by reason of death or Disability, (i) no further vesting of the
Grantee's Options and Stock Appreciation Rights will occur subsequent to the
date of termination, (ii) the Grantee's ISOs will terminate on the date three
months after the date of termination, or on their specified expiration dates, if
earlier, (iii) the Grantee's Non-Qualified Stock Options and Stock Appreciation
Rights will terminate one (1) year after the date of termination, or on their
specified expiration dates, if earlier, and (iv) all other types of Stock Rights
will be forfeited except to the extent otherwise provided by the Committee.
Nothing in this Plan will be deemed to give any Grantee the right to continued
employment with the Company.

6
<PAGE>

stock dividends, split-ups, recapitalizations, mergers, consolidations,
combinations or exchanges of shares, separations, reorganizations, liquidations
and the like. In the event of any general offer to holders of Common Stock
relating to the acquisition of their shares, the Committee may make such
adjustment as it deems equitable in respect of outstanding Stock Rights
including, in the Committee's discretion, revision of outstanding Stock Rights,
so that they may be exercisable for the consideration payable in the acquisition
transaction. Any such determination by the Committee will be conclusive.

13. Application Of Funds. All proceeds received by the Company with
--------------------
respect to Stock Rights will be used for general corporate purposes.

16. Governing Law. This Plan and any agreements entered into under this
-------------
Plan will be governed and construed in accordance with the laws of the
Commonwealth of Massachusetts.

17. Effective Date. This Plan is effective as of June 11, 1997, the date
--------------
of its adoption by the Company's Board of Directors and its approval by the
Company's stockholders. Unless previously terminated, the Plan will terminate
at midnight on June 11, 2006 and no Stock Right may be granted after such date.

<PAGE>

Exhibit 10.6

MILLITECH CORPORATION

1999 STOCK PLAN
---------------

1. Purpose. This 1999 Stock Plan is designed to enable Millitech
-------
Corporation and its Affiliates to attract and retain capable key employees,
officers, directors and consultants and to motivate such persons to exert their
best efforts on behalf of the Company by providing them with compensation in the
manner provided in this Plan.

2. Definitions.
-----------

"Act" means the Securities Exchange Act of 1934, as amended.

"Award" means Common Stock awarded under this Plan.

"Affiliate" means any parent corporation or subsidiary corporation of the
Company as those terms are defined in Section 424 of the Code.