10-K405

                                    FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D. C. 20549

(MARK ONE)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

FOR THE FISCAL YEAR ENDED JUNE 30, 1999.

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934.

FOR THE TRANSITION PERIOD              TO

                         COMMISSION FILE NUMBER 0-07428

                         ADAPTIVE BROADBAND CORPORATION

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                          ----------------------------
                 DELAWARE                              94-1668412
      (STATE OR OTHER JURISDICTION OF               (I.R.S. EMPLOYER
      INCORPORATION OR ORGANIZATION)               IDENTIFICATION NO.)

                1143 BORREGAS AVENUE, SUNNYVALE, CALIFORNIA 94089
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (408) 732-4000

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                          COMMON STOCK, $.10 PAR VALUE
                                (TITLE OF CLASS)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
                                             ---  ---

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

         The aggregate market value of the voting stock held by nonaffiliates
of the registrant was approximately $409,447,000 as of August 31, 1999,
excluding 1,967,000 shares outstanding at August 31, 1999 of the registrant's
common stock held by directors, executive officers and holders of more than
10% of the registrant's common stock. Exclusion of shares held by any person
should not be construed to indicate that such person possesses the power,
direct or indirect, to direct or cause the direction of the management or
policies of the




registrant, or that such person is controlled by or under common control with
the registrant.

         Indicate the number of shares outstanding of the registrant's common
stock, as of the latest practicable date: On August 31, 1999, there were
14,813,000 shares of common stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

(1)      Portions of the registrant's Annual Report to Shareholders for fiscal
         year ended June 30, 1999. (Part II of Form 10-K)

(2)      Portions of definitive proxy statement filed with Securities and
         Exchange Commission relating to the registrant's 1999 Annual Meeting of
         Shareholders. (Part III of Form 10-K)

ITEM 1.  BUSINESS

GENERAL

         Adaptive Broadband Corporation (the "Company") is a supplier of
terrestrial wireless and satellite-based systems to support data communications,
broadcast digital TV and telemetry networks. The Company also provides products
for satellite-based and terrestrial wireless ultra-high speed Internet access,
transport and worldwide Internet backbones.

         During the past two years, the Company has begun to shift its market
and product focus to concentrate on wireless broadband solutions, while
continuing to address the market for its core satellite and terrestrial
microwave products. During fiscal year 1999, the Company completed its
transition from a holding company to an integrated organization operating in
one business segment with two major product groups: satellite communications
and terrestrial wireless communications. Effective April 29, 1999, the
Company changed its corporate name to Adaptive Broadband Corporation from
California Microwave, Inc. The Company's stock symbol of ADAP was listed on
the Nasdaq National Market trading system on April 29, 1999.

         In June 1997, the Company announced its plans to divest its Microwave
Networks Division ("MN") and its Satellite Transmission Systems Division ("STS")
and the financial statements of the Company were restated to reflect the
accounts of MN and STS as discontinued operations. The sale of STS to L-3
Communications Corporation in exchange for $27.0 million in cash was completed
on February 5, 1998, and the sale of MN to Tadiran, Ltd. in exchange for $31.5
million in cash was completed on April 21, 1998. In May 1998, the Company sold
the Services Division to Telscape International, Inc. for $8.2 million in cash.
In April 1999, the Company sold its Government Division to Northrop Grumman
Corporation for $93 million in cash. Final accounting for the Government
Division and MN divestitures is subject to completion of the post-closing
procedures provided for in the Northrop and Tadiran agreements. Adaptive
Broadband received approximately $160 million in proceeds through the
divestiture of these businesses. Subsequently, the Company has used a portion of
the proceeds to invest in the



development of new products through acquisition and internal development;
eliminated all short-term debt and continued its share repurchase program
initiated in February 1998. See "Risk Factor--Post-Closing Procedures and
Litigation Related to Discontinued Operations."

         On August 20, 1998, the Company acquired, for $10.9 million in cash,
Adaptive Broadband Limited ("ABL"), a United Kingdom-based company developing
high-speed wireless Internet connectivity technology. On November 19, 1998, the
Company acquired, for $7.7 million in cash, Crown Satellite ("Crown"), which is
developing and supplying products and software for the network delivery of
Internet Protocol "IP" data and multimedia services, from Crown International,
Inc.

         On February 5, 1998, the Company announced its intention to purchase,
in the open market, up to three million shares of its common stock. On October
6, 1998, the Company announced an increase in the number of shares authorized
for repurchase to six million. At June 30, 1999, approximately 2.7 million
shares of common stock had been repurchased since the commencement of the
repurchase program.


INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

RISK FACTORS

         Statements of the Company in this Annual Report on Form 10-K that are
not historical facts, including statements about management's expectations for
fiscal year 2000 and beyond, market demand for products, product development
plans, competitive pressures and the regulatory environment are forward-looking
statements that involve certain risks and uncertainties. Words such as
"believes," "anticipates," "plans," "expects," "intends" and similar expressions
are intended to identify forward-looking statements, but are not the exclusive
means of identifying such statements. The Company assumes no obligation to
update any forward-looking statement. Factors that could cause the Company's
actual results to differ materially from management's projections, forecasts,
estimates and expectations include, but are not limited to, the following:

FLUCTUATIONS IN QUARTERLY RESULTS

         The Company has experienced and will in the future experience
significant fluctuations in sales and operating results from quarter to quarter.
Factors that could cause the Company's sales and operating results to vary
significantly from period to period include: mix of systems and products sold;
timing of significant orders and deliveries of new and existing products and
systems; receipt of documents to support export shipments, such as export
licenses, import documentation and letters of credit; fluctuating market demand;
price competition; new product introductions by the Company or by the Company's
competitors; fluctuations in foreign currency exchange rates; disruptions in
delivery of products manufactured by subcontractors or of components or
subsystems provided by third-party suppliers; seasonal factors that may affect
capital spending by customers, such as the varying fiscal year ends of customers
and the reduction in business during the summer months; the relatively long
sales cycles for certain of the Company's products; changes in timing and amount
of sales incentive compensation;



political instability; regulatory developments; conditions affecting the
telecommunications industry generally or general economic conditions;
acquisitions and other factors described in this section.

         The Company's future revenues in any period are likely to be derived
from a smaller number of transactions with relatively high average revenues per
order. Therefore, the loss of any orders or delays in closing such transactions
could have a more significant impact on the Company's quarterly revenues and
results of operations than historically.

         Due to the relatively fixed nature of many of the Company's costs,
including personnel and facilities costs, and because operating expenses are
based on anticipated revenue, a decline in revenue, failure to achieve expected
revenue in any fiscal quarter or unanticipated variations in the timing of
recognition of specific revenues can cause significant variations in operating
results from quarter to quarter. In certain of the Company's operations,
inventory levels are established and expenditures are made based on forecasted
demand rather than on customer orders, and the Company may be limited in its
ability to reduce inventory and expenses if such forecasted demand is not
realized. Similarly, under the Company's manufacturing agreement for its
AB-Access-TM- product, if the Company fails to purchase projected quantities of
the manufactured products, the agreement provides for an increase in the
per-unit purchase price. Accordingly, lower-than-anticipated demand could
adversely affect the Company's margins for that product.

         To prepare for the future, the Company must continue to invest
resources heavily in acquired and new businesses for the development of new high
speed wireless broadband products and technologies, the evaluation of these
products, plant, equipment, inventory, personnel and other items required to
efficiently produce these new products and to provide necessary marketing and
administrative service and support. As a result, in addition to the Company's
fixed costs, its expenses will be increased by costs associated with the initial
development and production of new products. In the event of a shortfall in
revenues, these factors could have a material adverse effect on the Company's
business, results of operations and financial condition. The Company believes,
therefore, that period-to-period comparisons of its operating results should not
be relied upon as an indication of future performance.

         For all the foregoing factors, as well as other unanticipated factors,
it is possible that in future quarters the Company's results of operations could
fail to meet the expectations of public market analysts or investors. In such
event, or in the event that adverse conditions prevail or are perceived to
prevail generally or with respect to the Company's business, the price of the
Company's Common Stock will likely be materially adversely affected.

MANAGEMENT OF CHANGING BUSINESS OPERATIONS

         The Company's strategy is to shift its focus from providing traditional
microwave radio and satellite receiver and transmission products to providing
enhanced microwave radio products, Internet Protocol transport solutions and
high-speed wireless telecommunications networks. As part of this strategy, the
Company has, in the last two years, sold four of its non-strategic businesses
and acquired Adaptive Broadband Limited, a developer of high-speed wireless
Internet connectivity technology, based in the United Kingdom, and Crown
Satellite, a developer of broadband satellite download products. Implementation
of the Company's new strategy, particularly in a rapidly evolving market, will
require effective planning and management, as well as significant additional
expenses and financial and operational resources. To date, the Company's
revenues from sales of these new products have been immaterial and



there can be no assurance that the Company will be able to generate
substantial revenues and profits from these new products or otherwise
successfully enter this new market. Failure to develop and introduce enhanced
new products in a cost-effective and timely manner or to achieve market
acceptance of these products would have a material adverse effect on the
Company's business, results of operations and financial condition.

LENGTHY SALES CYCLE

         A customer's decision to purchase many of the Company's products
typically involves a significant technical evaluation, formal internal
procedures associated with large capital expenditure approvals and testing and
acceptance of new systems that affect key operations. For these and other
reasons, the sales cycle associated with the Company's products can be lengthy
and subject to a number of significant risks over which the Company has little
or no control. The Company's new products are expected to have even longer sales
cycles and involve demonstrations, field trials and other evaluation periods,
which will further lengthen the sales cycle. Because of the growing sales cycle
and the potential for more reliance on a relatively small number and large size
of customers' orders, if revenues forecast from a specific customer for a
particular quarter are not realized in that quarter, the Company's operating
results for that quarter could be materially adversely affected.

DEPENDENCE ON LIMITED NUMBER OF CUSTOMERS

         The Company expects that it will become more dependent upon a
relatively limited number of customers for a substantial portion of its revenues
in future periods. The loss of a major customer or the reduction, delay or
cancellation of orders from one or more of the Company's significant customers
could materially adversely affect the Company's business, results of operations,
and financial condition.

RAPID TECHNOLOGICAL CHANGE

         The market for telecommunications products and services is subject to
rapid technological change, evolving industry standards, rapid changes in
customer requirements and frequent product and service introductions and
enhancements. The Company's future success will depend in part on its ability to
anticipate and respond to these changes by enhancing its existing products and
services and by developing and introducing on a timely and cost-effective basis,
new products, features and services that address the needs of its customer base.
There can be no assurance that the Company will be successful in identifying,
developing and marketing new products, product enhancements and related services
that respond to technological change or evolving industry standards or that
adequately meet new market demands.

DEPENDENCE ON RAPIDLY EVOLVING TELECOMMUNICATIONS AND INTERNET INDUSTRIES

         The Company's future success is dependent upon the continued growth of
the telecommunications industry, particularly with regard to the Internet. The
global telecommunications and Internet industries are evolving rapidly, and it
is difficult to predict potential growth rates or future trends in technology
development. There can be no assurance that the deregulation, privatization and
economic globalization of the worldwide telecommunications market that has
resulted in increased competition and escalating demand for new technologies and
services will continue in a manner favorable to the Company or its



business strategies. In addition, there can be no assurance that the growth
in demand for Internet services and the resulting need for high speed or
enhanced telecommunications products will continue at its current rate or at
all.

DEPENDENCE ON PRODUCT ACCEPTANCE

         The Company's future success is substantially dependent on whether
high-speed wireless telecommunications products gain market acceptance as a
means to provide telecommunications voice and data service. Because these
markets are relatively new, it is difficult to predict which market segments
will develop or expand. The Company has recently invested and expects to
continue to invest significant time and resources in the development of new
products for this market. In the event that service providers adopt technologies
other than the high-speed and other wireless technologies that the Company
offers, the Company may not be able to sustain or expand its business.

         Service providers continually evaluate alternative technologies,
including wire-based technologies such as digital subscriber line, cable modem,
optical fiber cable and high-speed wires leased from the traditional service
providers in a given locale, as well as different wireless technologies. Failure
of service providers to accept the Company's products would have a material
adverse effect on the Company's business, results of operations and financial
condition.

DEPENDENCE ON THIRD-PARTY MANUFACTURERS

         The Company intends to primarily rely on independent manufacturers
to provide full turnkey manufacturing of the Company's AB-Access product,
SpectraCast-Registered Trademark- products and potentially other new or
existing products. The Company currently has qualified only one manufacturer
for its AB-Access product. The Company has a supply agreement with this
third-party manufacturer to manufacture the AB-Access product for an initial
term of two years, with rolling one-year renewals unless one party disagrees.
In the event, however, that this subcontractor were to experience financial,
operational, production or quality assurance difficulties or allocate
production resources to others in lieu of the Company or experience a
catastrophic event that resulted in a reduction or interruption in
manufacturing services to the Company, the Company's business, results of
operations and financial condition would be materially adversely affected.
There can be no assurance that manufacturing services from alternative
sources will be able to meet the Company's future requirements or that
existing or alternative sources will continue to be available to the Company
at favorable prices.

DEPENDENCE ON COMPONENT AVAILABILITY, SUBCONTRACTOR PERFORMANCE AND KEY
SUPPLIERS

         Timely delivery of the Company's products is dependent upon the
availability of quality components and subsystems used by the Company in its
products. The Company obtains certain components and subsystems from single, or
a limited number of, sources. The Company operates without a substantial
inventory of components and subsystems, but believes that most components and
subsystems are available from existing or alternative suppliers and
subcontractors.

         The Company does not have any long-term supply agreements with these
vendors to ensure uninterrupted supply of these components. Inability to develop
alternative sources for these components or to obtain sufficient quantities of
components could result in delays or reductions in product shipments. In the
event of a reduction or interruption in the supply of a key



component, a significant amount of time could be required to qualify
alternative suppliers and receive an adequate flow of replacement components.
Reconfiguration of the Company's products to adapt to new components may also
be required and could entail substantial time and expense. In either event,
the Company's business, results of operations and financial condition would
be materially adversely affected. In addition, the process of manufacturing
certain of these components is extremely complex, and the Company's reliance
on the suppliers of these components exposes the Company to potential
production difficulties and quality variations, which could negatively affect
cost and timely delivery of the Company's products.

INTERNATIONAL SALES

         International sales represented 41% and 50% of total sales for fiscal
1999 and 1998, respectively. The Company expects that international sales will
continue to account for a signification proportion of future revenues. These
sales expose the Company to certain risks, including the difficulty and expense
of staffing and maintaining foreign sales offices and distribution channels,
fluctuations in foreign currency exchange rates, political instability,
availability of suitable export financing, export/import license requirements
and other U.S. and foreign regulations that may apply to the export of the
Company's products, longer customer payment cycles, greater difficulty in
accounts receivable collection, changes in regulatory requirements or in
economic or trade policy, costs related to localizing products for foreign
countries, potentially weaker protection for intellectual property in certain
foreign countries, the burden of complying with a wide variety of foreign laws
and practices, tariffs and other trade barriers, and potentially adverse tax
consequences, including restrictions on repatriation of earnings. As an example,
the recent deterioration of economic conditions in Brazil has adversely affected
the Company's sales. If the risks listed above materialize to a significant
extent, the Company's business, results of operations and financial condition
would be adversely affected.

         In addition, many countries require communications equipment used in
their country to comply with their own particular regulations, including safety
regulations, radio frequency allocation schemes and standards. If the Company
cannot develop products that work with different standards, the Company may be
unable to sell its products. If compliance proves to be more expensive or time
consuming than the Company anticipates, its business would be adversely
affected. Inability to obtain necessary regulatory approvals in foreign markets
on a timely basis could have a material adverse effect on the Company's
business, results of operations and financial condition.

         The Company attempts to reduce the risk of doing business in foreign
countries by seeking contracts denominated in dollars, advance payments and
irrevocable letters of credit in its favor. There can be no assurance that these
activities will be successful. To date the Company has assumed very little
foreign exchange risk but could do so in the future if deemed necessary to sell
the Company's products. The Company also has foreign operations that have
expenditures denominated in local currencies. Fluctuations in foreign currency
exchange rates may contribute to fluctuations in the Company's operating
results. For example, changes in foreign currency exchange rates could adversely
affect revenues, net income, earnings per share and cash flow of the Company's
operations in the affected markets. Similarly, such fluctuations may cause the
Company to raise prices or the local price may effectively be increased by such
fluctuations, which could adversely affect demand for the Company's products and
services. In addition, if exchange or price controls or other restrictions are
imposed in countries in which the



Company does business, the Company's business, results of operations and
financial condition would be materially adversely affected.

COMPETITION

         The market for telecommunications products and systems is rapidly
evolving and highly competitive. Increased competition is likely to result in
price reductions, shorter product life cycles, reduced gross margins, longer
sales cycles and potential loss of market share, any of which would adversely
affect the Company's business. As a provider of high-speed and other wireless
telecommunications equipment, the Company competes directly or indirectly with a
number of large telecommunications equipment suppliers, including Harris
Corporation, Hughes and Motorola, as well as with smaller start-up companies. In
addition, well-capitalized companies such as Lucent, Cisco and Nokia are
potential entrants into the market. Further, certain of the Company's customers
have technological capabilities in the Company's product areas and could choose
to replace the Company's products with their own. Many of the Company's
competitors and potential competitors have significantly greater financial,
marketing and operating resources than the Company. The Company's wireless
solutions also compete with products based on other technologies, such as
digital subscriber lines, fiber optic cable, cable modems and high-speed wires
leased from traditional telecommunications service providers.

         The Company expects its competitors to continue to improve the
performance of their current products and to introduce new products or new
technologies that may supplant or provide lower-cost alternatives to the
Company's products. To be competitive, the Company must continue to invest
significant resources in research and development, sales and marketing and
customer support. There can be no assurance that the Company will have
sufficient resources to make these investments or that it will be able to make
the technological advances necessary to be competitive. As a result, the Company
may not be able to compete effectively.

BRIEF TENURE OF MANAGEMENT; DEPENDENCE ON KEY PERSONNEL

         The majority of the Company's senior management team joined the Company
within the last 30 months. In addition, during the same period, a new Board of
Directors has been elected. Most of these individuals have not previously worked
together, and there can be no assurance that they will be able to work together
effectively or successfully manage the Company's transition or implement its new
strategy. The Company's performance is substantially dependent on the
performance of its executive officers and other key employees. The Company does
not have key man life insurance on any employees. Loss of the services of any of
its executive officers or other key employees could have a material adverse
effect on the Company.

         The Company's success depends in part on its ability to attract, hire,
train, retain and motivate qualified technical, management and sales personnel
with appropriate levels of managerial and technical capabilities. The Company
believes that a significant level of expertise is required to develop and market
the Company's products and services effectively. Recruiting qualified personnel
is an intensely competitive and time-consuming process. The Company competes for
such personnel with a number of other companies, many of which have
substantially greater resources than the Company. There can be no assurance that
the Company will be successful in attracting and retaining the technical,
management and sales personnel it requires to conduct and expand its operations
successfully on a timely basis. The failure to



attract, hire, train, retain and motivate qualified technical, management and
sales personnel in the future would have a material adverse effect on the
Company's business, financial condition and results of operations.

LIMITED PROTECTION OF PROPRIETARY RIGHTS

         The Company's success and its ability to compete effectively is
dependent in part upon its proprietary technology. The Company relies on a
combination of patent, trademark, copyright and trade secret laws, as well as
nondisclosure agreements and other contractual restrictions, to establish and
protect its proprietary rights. The Company generally enters into nondisclosure
and invention assignment agreements with its employees and consultants and into
nondisclosure agreements with its customers and suppliers. There can be no
assurance that the measures the Company undertakes will be adequate to protect
its proprietary technology.

RISKS OF THIRD-PARTY CLAIMS OF INFRINGEMENT

         The telecommunications industry is characterized by a relatively high
level of litigation based on allegations of infringement of proprietary rights.
While to date, the Company has not been subject to any material claims of
infringement or misappropriation of intellectual property of third parties,
there can be no assurance that third parties will not assert infringement claims
against the Company, that any such assertion of infringement will not result in
litigation or that the Company would prevail in such litigation. Furthermore,
any such claims, with or without merit, could result in substantial cost to the
Company and diversion of its personnel, require the Company to develop new
technology, or require the Company to enter into royalty or licensing
arrangements. Such royalty or licensing agreements, if required, may not be
available on terms acceptable to the Company or at all. In the event of a
successful claim of infringement or misappropriation against the Company and
failure or inability of the Company to develop non-infringing technology or to
license the infringed, misappropriated or similar technology at a reasonable
cost, the Company's business, results of operations and financial condition
would be materially adversely affected. In addition, the Company indemnifies its
customers against claimed infringement of patents, trademarks, copyrights and
other proprietary rights of third parties. Any requirement for the Company to
indemnify a customer could have a material adverse effect on the Company's
business, results of operations and financial condition.

RISKS RELATING TO POTENTIAL ACQUISITIONS

         As part of its business strategy, the Company has in the past and may
in the future make acquisitions of, or significant investments in, companies,
products or technologies that it believes are complementary. Any such future
transactions would be accompanied by the risks commonly encountered in making
acquisitions of companies, products and technologies. Such risks include, among
others, the difficulties associated with assimilating the personnel and
operations of acquired companies, the potential disruption of the Company's
ongoing business, the distraction of management and other resources, the
integration of personnel and technology of an acquired company, difficulties in
evaluating the technology of a potential target, inability to motivate and
retain new personnel, the maintenance of uniform standards, controls, procedures
and policies, the potential impairment of relationships with employees and
customers and the risks that the Company will otherwise not realize the expected
benefits of the acquisitions. There can be no assurance that the Company will be
successful in overcoming these risks or any other



problems encountered in connection with any such acquisitions. Furthermore,
future acquisitions by the Company could result in the issuance of dilutive
equity securities, the incurrence of debt or contingent liabilities or
amortization expenses related to goodwill and other intangible assets, any of
which could have a material adverse effect on the Company's business, results
of operations and financial condition or on the market price of the Company's
Common Stock.

ACCOUNTING CHARGES RELATED TO ACQUISITIONS AND DISPOSITIONS

         Many attractive acquisition candidates are high-technology companies
that tend to have small amounts of tangible assets and, as a result, if those
acquisitions were accounted for as purchases, the Company's acquisition of such
companies could result in significant goodwill charges. In that event, a
significant amount of goodwill would be amortized, which would adversely affect
the Company's financial results.

         In connection with the acquisitions of ABL and Crown, the Company
allocated a significant portion of the purchase price to purchased in-process
research and development. The Company has received an inquiry from the SEC,
dated December 31, 1998, related to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1998 and Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998. A primary focus of the inquiry was to request
additional information regarding the Company's in-process research and
development costs from the purchase of ABL in August 1998. In addition, the
inquiry requested information about the Company's fiscal 1998 restructuring
charge, intangible asset impairment charge and accounting for discontinued
operations, as well as certain other accounting and disclosure clarifications.
The Company responded on February 3, 1999. No additional communication or
inquiry from the SEC has been received. The Company believes that it has
properly valued and accounted for the in-process research and development and
that the accounting and disclosure related to the other inquiries are
appropriate. There can be no assurance, however, that such inquiry will not
result in restatement of the Company's financial statements, including, for
example, a reduction in the charge for purchased research and development and
an increase in the amount allocated to intangible assets, such as goodwill,
which would be amortized and could adversely affect the Company's future
results of operations.

POST-CLOSING PROCEDURES AND LITIGATION RELATED TO DISCONTINUED OPERATIONS

         In April 1999, the Company completed the sale of its Government
Division to Northrop Grumman Corporation ("Northrop Grumman") for $93.0 million
in cash, plus up to an additional $5 million cash payment, contingent on
performance of the divested business. During fiscal 1998, the Company's
Satellite Transmission System Division was sold to L-3 Communications
Corporation ("L-3") for $27.0 million in cash, and its Microwave Networks
Division was sold to Tadiran, Ltd. ("Tadiran") for $31.5 million in cash. The
Company recorded an additional provision of $15.1 million (net of income taxes)
for additional losses on disposition of these divisions. The provision was
primarily for adjustments to the combined losses on sale and to higher than
anticipated operating losses prior to disposition of both divisions.

         Final accounting for the Government Division and MN divestitures is
subject to completion of the post-closing procedures provided for in the
Northrop Grumman and Tadiran agreements. The Company has accrued for transaction
costs related to the Government Division sale and future price adjustments that
may occur in the post-closing procedures. At June 30, 1999, the discontinued
operations reserves for the Government Division and MN divestitures



were $6.9 million and $2.5 million, respectively. No assurance can be given
that the completion of these procedures will not have a material adverse
effect on the Company's results of operations, financial condition or cash
flows.

         In July 1999, Northrop Grumman filed a lawsuit against the Company
alleging that the Company failed to disclose certain events and information as
required by the terms of the agreement pursuant to which Northrop Grumman
acquired the Government Division in April 1999. No damages have been specified.
The Company believes that it has strong defenses and plans to vigorously defend
the lawsuit filed by Northrop Grumman, and no provisions have been made for
expenses that may be incurred to resolve the lawsuit. However, there can be no
assurance that the final resolution of the Northrop Grumman allegations will not
have a material adverse effect on the Company's results of operations, financial
condition or cash flows.

         In May 1995, the Company's MN division entered into certain agreements
with Nokia Telecommunications Oy ("Nokia"), pursuant to which MN was to provide
to Nokia certain microwave radios and related software and services and was to
carry out certain development programs. In September 1997, Nokia informed MN of
a purported failure of certain of the products sold to Nokia to meet certain
contractual specifications. MN was sold to Tadiran in April 1998 and, under the
terms of the sale agreement, Tadiran assumed and indemnified the Company with
respect to the Nokia claims. Tadiran has now taken the position that the Company
is responsible for the Nokia claims, based upon allegations that the Company
failed to provide adequate disclosures and financial reserves with respect to
such claims. In September 1998, the Company received notice from Nokia that
Nokia has decided to terminate the May 1995 agreements. Also in September 1998,
Nokia began arbitration proceedings to recover damages, which are claimed to be
$40.6 million, which include loss of profits and goodwill, and damage to trade
and manufacturing secrets. The Company believes that it has strong defenses and
plans to vigorously defend the Nokia claims. In May 1999, the Company began
arbitration proceedings against Tadiran, primarily to determine that Tadiran is
responsible for the Nokia claims. The Company believes that it has strong claims
against Tadiran, and no accruals have been recorded for expenses that may be
incurred to resolve the dispute. However, there can be no assurance that the
final resolution of this matter will not have a material adverse effect on the
Company's results of operations, financial condition or cash flows.

GOVERNMENT REGULATION

         Radio communications, including satellite communications, are subject
to regulation by United States and foreign laws and international treaties. The
Company's products and systems must conform to domestic and international
requirements established to avoid interference among users of microwave
frequencies and to permit interconnection of equipment. In addition, domestic
and international authorities regulate the allocation of the radio frequency
spectrum. Products to support new services can be marketed only if permitted by
suitable frequency allocations and regulations, and the process of establishing
new regulations is complex and lengthy. Certain customers have had difficulty
obtaining allocation of spectrum for their services, which adversely affects
their demand for the Company's products. Accordingly, delay or failure of the
Company's customers to obtain suitable allocations of available spectrum could
have a material adverse effect on the Company's business, results of operations
and financial condition.



COST OVERRUNS AND POSSIBLE CANCELLATION OF ORDERS

         A growing proportion of the Company's sales are made pursuant to
contracts that require performance by the Company over several quarters or
years. The prices of products and systems sold under these contracts are based
in part on the Company's estimate of its cost to produce these items. If the
Company were to incur higher costs than estimated in performing under these
contracts, it could have a material adverse effect on the Company's results of
operations and financial condition.

         Customers of the Company often enter into purchase orders in advance of
manufacture of the equipment ordered. Cancellations of orders by customers may,
depending upon the timing of the cancellation, leave the Company with unsaleable
products or idle capacity, which would adversely affect its business, results of
operations and financial condition.

NEED TO REDUCE COST OF PRODUCTS

         Market acceptance of the Company's products, and the Company's future
success, will depend in significant part on reductions in the per-unit cost of
the Company's products. Certain of the Company's competitors currently offer
certain products at prices lower than those of some of the Company's products.
While the Company has initiated cost reduction programs to offset pricing
pressures on its products, there can be no assurance that these cost reduction
efforts will continue to keep pace with competitive pricing pressures or lead to
improve gross margins. If the Company is unable to continue to obtain cost
reductions, its gross margins and profitability will be adversely affected.

ACCOUNTS RECEIVABLE

         The Company may, under certain circumstances, be unable to enforce a
policy of receiving payment within a limited number of days of issuing invoices.
For example, customers may be unwilling or unable to pay for products on a
timely basis if they are dissatisfied with the product or if they are
experiencing financial difficulties. The Company has had difficulties in some
cases in the past in receiving payment in accordance with its policies. Any
inability to timely collect its receivables could cause the Company to be short
of cash to fund operations or could ultimately require the Company to write off
as uncollectible certain accounts receivable, which could have a material
adverse effect on the Company's business, results of operations and financial
condition.

RISKS OF PRODUCT DEFECTS, PRODUCT RETURNS AND PRODUCT LIABILITY

         Products as complex as those offered by the Company frequently contain
undetected errors, defects or failures, especially when first introduced or when
new versions are released. In the past, such errors have occurred in the
Company's products, and there can be no assurance that errors will not be found
in the Company's current and future products. The occurrence of such errors,
defects or failures could result in product returns and other losses to the
Company or its customers. Such occurrence could also result in the loss of or
delay in market acceptance of the Company's products, which could have a
material adverse effect on the Company's business, results of operations and
financial condition. The Company's products generally carry a one -year
warranty, which includes factory services as needed for replacement of parts.
Due to the relatively recent introduction of the AB-Access, TransIt-TM-,
SpectraCast, TwinStream-TM- and CodeRunner-TM- products, the Company has limited
experience with the problems that could arise



with these products. In addition, the Company's purchase agreements with its
customers typically contain provisions designed to limit the Company's
exposure to potential product liability claims. It is possible, however, that
the limitation of liability provisions contained in the Company's purchase
agreements may not be effective as a result of federal, state or local laws
or ordinances or unfavorable judicial decisions. Although the Company has not
experienced any significant product liability claims to date, the sale and
support of the Company's products entail the risk of such claims. A
successful product liability claim brought against the Company could have a
material adverse effect on the Company's business, results of operations and
financial condition.

RISK RELATED TO YEAR 2000 READINESS

         The inability of the Company's products to properly manage and
manipulate data relating to the year 2000 could result in increased warranty
costs, customer dissatisfaction issues, potential lawsuits and other material
costs and liabilities. The failure of the Company's internal systems to achieve
year 2000 readiness could result in a material disruption of its operations. Any
failure of the internal systems or products of its suppliers or subcontractors
related to the year 2000 could have a material adverse effect on the Company's
business, results of operations and financial condition.

FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING

         The Company's operations to date have required substantial amounts of
capital. The Company expects to spend substantial funds to support the growth of
its products, to develop new products and otherwise to implement its strategic
plan. The Company anticipates that its existing capital resources and credit
facilities should enable it to maintain its current and planned operations for
at least the next 12 months.

         The Company's capital requirements will depend on numerous factors,
including potential changes in strategic direction, the progress of the
Company's research and development programs, the commercial acceptance of its
products, the resources the Company devotes to advanced technologies and the
demand for its products. To the extent that funds are insufficient, the Company
would have to raise additional funds to meet its capital requirements. If
additional funds are raised through the issuance of equity securities, the
percentage ownership of the stockholders of the Company will be reduced,
stockholders may experience additional dilution and such equity securities may
have rights, preferences or privileges senior to those of the holders of the
Company's Common Stock. No assurance can be given that additional financing will
be available on acceptable terms, if at all. If adequate funds are not
available, the Company may have to, among other things, reduce substantially or
eliminate expenditures for the development and marketing of its products.

TELECOMMUNICATIONS INDUSTRY OVERVIEW

         TELECOMMUNICATIONS MARKET. The demand for improved telecommunications
is increasing worldwide as emerging economies seek to modernize, as increasingly
information-intensive developed and developing countries introduce new
telecommunications services and as the spread of the Internet has accelerated
and expanded. The Company believes that the global markets for network
computing, telecommunications and broadcasting are converging, providing
opportunities for new technologies in the area of information access, transport
and delivery.



Additionally, privatization, deregulation and regulatory initiatives have
all enhanced competition, permitted the opening of new markets and providing
incentives for the development of new products.

         ALTERNATIVE TRANSMISSION MEDIA. Customers for telecommunications
equipment must weigh the relative costs and advantages of the three presently
available transmission media: copper cable, fiber optic cable and wireless
systems based on terrestrial radio, both microwave and millimeter wave, and
satellite communications technologies. Each medium has certain advantages over
the others--and each suffers certain disadvantages when compared to the others.
Adaptive Broadband's principal focus historically has been in the satellite and
terrestrial microwave radio areas, with over 99% of fiscal 1999 revenues derived
from sales of these products. The Company's strategy is to shift its market and
product focus to the wireless broadband access area, employing terrestrial radio
microwave and satellite communications technologies, while continuing to address
the market for its core satellite and terrestrial microwave products.

         Rarely is a complete communications system based solely on one of these
media. Transmission is normally routed through a combination of media, each
employed where it fits most cost-effectively within the communications network.
For example, a microwave radio studio-to-transmitter link used by a television
broadcaster may connect to a satellite system used to distribute programs
domestically and overseas. In addition, the various media provide routing
alternatives for the other media, as in the case of satellite backup facilities
for undersea fiber optic cables.

STRATEGY

         Adaptive Broadband's strategy is to provide wireless-based solutions to
send and receive complex data, through the design and manufacture of capital
equipment products for public and private communications systems. Historically,
the Company has concentrated its efforts on sales of products and services for
communications infrastructure rather than on consumer terminals and equipment.
In the future, the Company plans to introduce versions of its wireless broadband
access products to meet consumers' needs for portability and mobility.

         In April 1998, the executive team formulated a new, integrated,
long-term strategy, which takes advantage of the Company's existing market
positions in satellite and terrestrial microwave products and current and
next-generation technologies. See "Risk Factors-Management of Changing Business
Operations." This strategy has the following key elements:

         GLOBAL INFORMATION TECHNOLOGY BANDWIDTH REQUIREMENTS. The Company
believes that the wireless telecommunications market offers numerous
opportunities for new products because of the growing need for increased
bandwidth, or carrying capacity, for digital data. In particular, continual
improvements in computing technology create increasingly sophisticated bandwidth
requirements for moving data around the world. For instance, telecommunications
infrastructure requires ever-increasing complex data types--such as audio, video
and graphics files--for



computer users. "Burst transactions," such as point-of-sale or ATM
activities, create peaks of data-transmission activity that are well suited
for multiple address satellite and terrestrial radio systems. "Asymmetrical"
and one-way data movement, common in Internet usage, create patterns that
take advantage of radio's bandwidth-on-demand capabilities. The Company
intends to capitalize on its present position as a radio-based bandwidth
solutions provider to supply products for bandwidth-intensive applications,
such as applications that address Internet usage, digital TV, remote data
collection, and new mobile air, sea, and terrestrial systems, as well as a
host of commercial data transmission applications for financial networks and
inventory management systems.

         LEVERAGE MARKET POSITION. The Company concentrates on providing
networking solutions based on terrestrial wireless radio and satellite
communications technologies. In its particular niches in these areas, the
Company seeks to meet customers' special needs with application-specific
products. The Company intends to capitalize on its position and experience in
the market for satellite and terrestrial microwave products to address the
market for wireless broadband products. The Company believes that through new
product offerings and enhancements, it can deepen and broaden the niches it
serves, in addition to addressing its new area of focus, wireless broadband,
high-speed Internet access.

         OPERATIONAL ADJUSTMENTS. The Company intends to continue to implement
managerial and operational adjustments to strengthen financial performance.
These operational adjustments are designed to shorten the product development
cycle; eliminate redundant products with low customer demand; complete
fault-tolerant software applications; reduce inventories; and fill market needs
adjacent to current niches. These issues are all part of developing internal
processes to improve customer satisfaction.

         SINGLE OPERATING ENTITY. Adaptive Broadband was historically highly
decentralized. This organizational structure was intended to allow each division
to be responsive to particular markets and customers. Each division typically
maintained its own sales, marketing, product development, finance,
administration and manufacturing functions. In 1999, the Company completed the
shift from that model to a single operating entity model, where manufacturing,
sales and marketing, research and development, finance and administrative
functions are consolidated in order to pursue larger opportunities more
cost-effectively. The Company has organized around four strategic product
groupings--AB-Internet Series-TM-, AB-Video Series-TM-, AB-Data Network
Series-TM-, and AB-Infrastructure Series-TM-.

         INCREASING FOCUS ON DOMESTIC MARKET. The Company's products are
marketed on a worldwide basis. International revenue was $63.6 million, $87.6
million and $71.3 million for fiscal years 1999, 1998 and 1997, representing
41%, 50% and 45% of total revenues, respectively. Adaptive Broadband intends
to focus initially on the U.S. domestic market for wireless broadband
solutions to reduce its dependence on volatile international economies. The
Company believes that a substantial portion of its sales in future years will
come from the international sector due to communications infrastructure
requirements in developing countries and the growing worldwide need for
wireless-based bandwidth solutions.



PRODUCTS

     Adaptive Broadband develops products for the broadband wireless market.
The Company's products are able to send large amounts of voice, video and
data traffic over the airwaves using microwave and satellite technology. The
Company currently derives revenues from two market areas: satellite
communications and terrestrial wireless. As discussed elsewhere, Adaptive
Broadband is organized around a series of products that span the two market
areas. The four series are described below.

AB-INFRASTRUCTURE SERIES

         In its AB-Infrastructure Series, the Company designs,
manufactures, and markets satellite modems and transceiver products and services
primarily to telecommunications carriers and Internet service providers. It also
develops and supplies products and software for the network delivery of Internet
Protocol (IP) data and multimedia services. These products and services enable
customers to provide voice, video and data services via satellite.

         The Company manufactures a broad line of electronic products used in
earth stations. The products are sold to satellite communications earth station
suppliers and to operators of communication networks to upgrade existing earth
stations. It is a leading producer of high-speed (up to 155 million bits per
second) digital modems and frequency converters used in satellite communications
networks. Its products are used in INTELSAT systems, satellite backup facilities
for undersea fiber optic cable, digital video and for many private network
applications.

         Adaptive Broadband's ISO 9001-certified satellite communications
  products are designed to satisfy the needs of the commercial, industrial and
  military marketplaces. The Company's MIDAS-TM- solution offers today's global
  marketplace the satellite capabilities to enable long-range
  bandwidth-on-demand applications such as Internet access, Ethernet backbone,
  fiber optic circuit restoral and overflow/congestion reduction in addition to
  servicing high-speed LAN interconnections. Adaptive Broadband's integrated
  satellite paging solution is a point-to-multipoint satellite communication
  network that provides paging data broadcast from the hub to remote and
  geographically dispersed sites in the satellite footprint. The simultaneous,
  high-speed transmission of stock quote data from the New York Stock Exchange
  to securities brokerages around the world is one application of this powerful
  technology. The Company's satellite modems also enable sophisticated digital
  video broadcasting, for transmitting images and sound using electronic news
  gathering.

         Adaptive Broadband's AB-Infrastructure Series also provides critical
communications solutions to facilitate telecommunications and commerce in
underdeveloped countries that cannot afford the high expense of fiber optic
networks or have limited physical access for alternative designs. Dozens of
nations around the world utilize Adaptive Broadband satellite and terrestrial
radio networks to communicate within their native regions and abroad.

AB-DATA NETWORK SERIES

         In its AB-Data Network Series, the Company designs, manufactures and
markets terrestrial point-to-point and point-to-multipoint microwave data
radios. Its point-to-point radios are used to extend the reach of a
communications system in areas where low capacity,



multi-channel voice or data communications links are required.
Point-to-multipoint radio systems are used principally to connect central
computers to remote computer terminals or to physical measurement and control
devices. Typical applications include remote monitoring and automated
operation of oil and gas production and distribution, water-wastewater
treatment systems and control of electric utility power generation facilities
for customers such as public utilities, oil and gas companies, and other
commercial entities.

         Adaptive Broadband has expanded its technology platform in
point-to-point and point-to-multipoint products to develop new solutions to
meet the need for real-time transaction processing. The Company's new TransIT
product offers retail and financial network customers an innovative and
economical solution for processing multiple applications simultaneously over
common high-capacity networks. This high-speed product is targeted for use in
ATMs and point-of-sale terminals, lottery systems, travel agencies and web
stores.

AB-VIDEO SERIES

         The Company designs, manufactures, and markets microwave radios to
U.S. and international broadcast and cable television markets for use
principally in portable electronic news gathering and analog and digital
studio-to-transmitter applications. With the advent of government-mandated
digital television (DTV), within five to seven years, analog broadcast
transmission is expected to diminish. Traditionally, the broadcast industry
has associated DTV with high definition television (HDTV). HDTV promises
twice the resolution of standard definition television, with a richer
spectrum of colors and multi-channel digital CD quality sound. To become a
reality, increased bandwidth and sophisticated digital modulation techniques
must be incorporated into new technologies to produce the superior image
quality and other features required for HDTV.

         Government deadlines have compelled the television industry to
upgrade and migrate their current analog systems to digital networks. In
response, Adaptive Broadband has released a line of microwave radio products
that allows broadcasters to build upon their existing infrastructures to
enable a smooth, cost-effective transition from analog studio-to-transmitter
links (STLs) and electronic newsgathering (ENG). The Company's CodeRunner and
TwinStream solutions represent the industry's first dual-carrier radio
systems to support analog NTSC and 19.39 Mbps ATSC transport streams,
allowing broadcasters to provide both types of programming within a 25 MHz
microwave channel. Broadcasters can incorporate this technology into their
existing microwave channel without adding additional spectrum or making
costly upgrades -- while enhancing image quality and stability for numerous
applications.

AB-INTERNET SERIES

         The Company's AB-Internet Series, comprised of the terrestrial-based
AB-Access and the satellite-based SpectraCast, was developed as a result of the
August 1998 technology acquisition of Adaptive Broadband Limited, based in
Cambridge, U.K. and the November 1998 acquisition of Crown Satellite, based in
Elkhart, IN respectively. During fiscal 1999, less than 1% of the Company's
revenues were derived from sales of the AB-Internet Series.



The Company's AB-Access transceiver enables heavy data transmission for the
final network connection to an end user (the "last mile") at rates
as high as 25 Mbps, a speed in excess of 400 times those available with
conventional modem networks. At this bandwidth, users will be able to download
full-streaming video, download data files, use real-time video conferencing and
surf the Worldwide Web - all at the same time over a single connection. This
wireless point-to-multipoint system for fixed data networks enables users to
bypass existing telecommunications infrastructure, so the initial investment is
significantly lower than that required for "wired" alternatives. This low-cost
wireless infrastructure means that a complete network can be installed as
quickly as in days or weeks, instead of the typical months or years. And because
AB-Access' architecture is expandable in increments, the network can grow as the
business grows or as bandwidth needs evolve.

Although the Company's fundamental AB-Access platform addresses a wide frequency
spectrum - from 2.0 - 42.0 GHz -- the product strategy is targeted toward
markets that have low start-up costs and high potential for expansion,
specifically the U-NII (Unlicensed National Information Infrastructure) and MMDS
(Multi Media Distribution System) bands in the U.S. and 3.5 GHz in other areas
of the world.

Adaptive Broadband believes that AB-Access' advanced subscriber management
features may make the product particularly attractive to carriers, Competitive
Local Exchange Carriers (CLECs) and Internet Service Providers (ISPs) because it
allows end users (new subscribers) to be brought on-line quickly with a single,
integrated unit. This feature is designed to reduce service providers' costs by
enabling fast and easy installation. Flexible tariffing will allow service
providers to bill subscribers not only for on-air time, but also by amount of
bandwidth usage, time-of-day, or other criteria.

Complementary to its "last mile" terrestrial wireless counterpart, Adaptive
Broadband's latest satellite-based networking solution -- SpectraCast
- --addresses the need for long-distance, high-bandwidth downloads like Web
content, streaming video, multimedia, distance learning and telemedicine.
Acquired as part of the acquisition of Crown Satellite in November 1998,
SpectraCast incorporates Internet Protocol (IP) and server technologies,
providing a satellite communications product capable of enabling high-speed
broadband Internet backbones, Internet data transport and virtual private
networks. Built upon a strategic platform of data transport multiplexers, IP
gateways, Ethernet-enabled receivers and network management software,
SpectraCast is designed to deliver IP multicasting capabilities to enable
enterprises to simplify the delivery of ultra-high speed IP traffic over
sophisticated networks. Satellite solutions can either augment an existing
terrestrial network or serve as a brand new network, and offer similar benefits
to those offered by terrestrial wireless solutions -- low deployment and
operations cost and ultra-high speed. See "Risk Factors-Dependence on Product
Acceptance."

SALES, MARKETING AND CUSTOMER SUPPORT

         Adaptive Broadband's sales and marketing strategy varies with the
particular market



served and involves direct sales by the Company's own sales force, sales
through representatives, value-added resellers, or a combination of the
foregoing. The Company also has entered into sales distribution agreements
with respect to certain of its satellite communications and wireless
products. Information contained in Note 2 to the Company's Consolidated
Financial Statements is incorporated by reference herein from the Company's
1999 Annual Report to Shareholders.

         The Company considers its ability to create and maintain long-term
customer relationships an important component of its overall strategy in each of
its markets. Relationships with customers are established and maintained by the
Company's technical and marketing staff. The Company's strategy also includes
its commitment to provide ongoing customer support for its systems and products.
This support involves providing direct access to the Company's engineering staff
or trained technical representatives located throughout the world to resolve
technical or operational problems. The Company intends to continue to expand its
marketing efforts and distribution channels worldwide. See "Risk
Factors--Dependence on Limited Number of Customers," "-Dependence on
International Sales" and "-Lengthy Sales Cycle."

MANUFACTURING

         As part of its "Value Focused" operational strategy, Adaptive
Broadband outsources the manufacturing of certain products, when appropriate.
The Company's new digital video microwave radios were among the first to be
manufactured for the Company by an outside party. In August 1999, the Company
announced a contract with Solectron Corporation to manufacture Adaptive
Broadband's AB-Access broadband wireless service equipment. This arrangement
is intended to give Adaptive Broadband the capability to meet high-volume
demand in both the U-NII (unlicensed national information infrastructure) and
MMDS (multi-channel multi-point distribution service) frequency bands. See
"Risk Factors--Dependence on Third-Party Manufacturer."

         The Company's internal manufacturing operations consist principally of
assembly and testing of electronic systems built from fabricated parts, printed
circuits and electronic components. Both manual and various automated methods
are employed, depending primarily upon production volume. The Company employs
formal Total Quality Management programs and other training programs, and its
product manufacturing operations have qualified for International Standards
Organization ("ISO") quality procedure registration to ISO 9001, a standard
sometimes imposed by foreign buyers.

         Electronic components and raw materials used in the Company's products
are generally obtained from a large number of suppliers. Some components are
standard items and others are manufactured to the Company's specifications by
subcontractors. The Company obtains certain components and subsystems from a
single, or a limited number of, sources. The Company operates without a
substantial inventory of components and subsystems. Although no assurances can
be given, the Company believes that most components and subsystems are available
from existing or alternative suppliers and subcontractors. See "Risk
Factors--Dependence on



Component Availability, Subcontractor Performance and Key Suppliers."

COMPETITION

         Adaptive Broadband is engaged in a highly competitive business. Many of
the Company's competitors have significantly greater financial, marketing and
operating resources than the Company. In addition, certain of the Company's
customers have technological capabilities in the Company's product areas and
could choose to replace the Company's products with their own. In some
instances, especially AB-Internet Series, the main competitors are suppliers of
other technologies, such as digital subscriber lines deployed over copper
telephone lines and cable modems. In addition, many competitors participate in
the wireless broadband market, but focus on different areas of the frequency
spectrum. Among the primary competition for the Company's series of products
are:

- -     AB-Infrastructure Series: Comtech, Radyne ComStream, SSE, Telecom
- -     AB-Data Network Series: Alligator, Data Radio, Motorola, Wireless Inc.
- -     AB-Video Series: Continental Microwave Ltd., Itelco, Nucomm
- -     AB-Internet Series:

         AB-Access: ADC Telecommunications, Harris Corporation, Hybrid Networks,
         Inc., Netro, Spike Technologies, Phasecom, Stanford Telecom
         SpectraCast: Gilat, Harmonic Data, Hughes Network Systems

         In addition, well-capitalized companies such as Lucent, Cisco, and
Nokia are potential entrants into the wireless broadband market. The Company
believes that competition in its markets is based primarily on price,
performance, reputation, on-time delivery, reliability and customer support.
See "Risk Factors--Competition."

RESEARCH AND DEVELOPMENT

         Research and development expenses were $25.0 million, $18.0 million and
$16.4 million in fiscal 1999, 1998 and 1997, respectively, representing 16%, 10%
and 10% of total sales, respectively, for the same periods. The increase in
research and development spending in 1999 was mainly attributable to the
Company's investment in research and development of AB-Access products,
including supporting the expanded number of AB-Access field trials for
prospective customers. Additionally, the Company has increased investment in
development of broadband satellite products, such as the SpectraCast products
and the Multimedia Integrated Digital Access Systems (MIDAS). The increase in
research and development expenses as a percentage of revenue in 1999 over 1998
was also due to the reduction in 1999 revenues. The Company expects to continue
to commit substantial resources to product development and engineering in future
periods. As a result, the Company anticipates that research and development
expenses will increase in future periods as it continues to focus its efforts on
developing wireless broadband data network products to address the digital
voice, video and data markets. In addition, management may consider acquiring
additional technologies complementary to the Company's business through
strategic acquisitions. See "Risk Factors--Rapid Technological Change" and
"-Dependence on Product Acceptance."




PATENTS AND LICENSES

    Historically, patents and licenses have been of substantially less
significance in the Company's business than have been the timely application
of its technology and the design, development and marketing capabilities of
its personnel. When the Company's technology offers a distinct competitive
advantage, it does employ the use of patents, such as its patent-pending
TwinStream digital and analog radio product. Additionally, the Company is
seeking patent protection for the technologies and techniques employed in
AB-Access. See "Risk Factors--Limited Protection of Proprietary Rights" and
"-Risks of Third-Party Claims of Infringement."

EMPLOYEES

    At June 30, 1999, Adaptive Broadband had 846 employees, 476 of whom were
engaged in production and production support, 177 in research and development
and other engineering support, 102 in marketing and 91 in general and
administration functions. In support of the Company's strategic plan to
pursue new commercial markets, Adaptive Broadband initiated a 6% reduction in
force during the fourth quarter of the fiscal year. None of the employees is
represented by a labor union. The Company believes that its employee
relations are good.

REGULATION

    Radio communications, including satellite communications, are subject to
regulation by United States and foreign laws and international treaty. The
Company's equipment must conform to domestic and international requirements
established to avoid interference among users of microwave frequencies and to
permit interconnection of equipment.

    The use of microwave signals depends upon the availability of frequencies
that permit interference-free operation. In many developed countries, the
unavailability of frequency spectrum has historically inhibited the growth of
microwave systems. However, two factors are alleviating this problem. First,
the proliferation of fiber optics for high capacity systems has reduced the
demand for microwave frequencies for such systems, thus freeing up frequency
spectrum for new types of services. Second, many government regulatory
agencies are reallocating frequencies from one type of use to another, thus
providing incentive for new communications services. See "Risk
Factors--Government Regulation."

BACKLOG

    Rules require that you estimate amount of backlog not expected to be
filled in current fiscal year. At June 30, 1999, the Company's backlog of
undelivered orders was $37.4 million compared with $26.0 million at June 30,
1998. Of the $37.4 million fiscal 1999 backlog, $17.4 million or 47% is for
Satellite Communications Products and $20.0 million or 53% is for Terrestrial
Wireless Products. In the Company's experience, its backlog at any given time is
not necessarily indicative of prospective period revenues. The Company generally
records an order




in backlog when the Company receives a firm contract or purchase order which
identifies product quantities and delivery dates (which are required to be
within 12 months as mandated by Adaptive Broadband policy). While from time
to time a substantial portion of the Company's backlog has been comprised of
large orders, the cancellation of any of which could have a material adverse
effect on the Company's operating results. The Company historically has not
experienced significant changes in its backlog from cancellations or
revisions of orders. See "Risk Factors - Dependence on Limited Number of
Customers" and "- Cash Overruns and Potential Cancellation of Orders."

ITEM 2.  PROPERTIES

    The table below describes the location and general character of the
principal plants and materially important physical properties that are owned
or leased by the Company as of June 30, 1999:




                                               Lease           No. of        Square
      Occupant                                 Expires         Buildings     Footage     Location
- --------------------------------------------------------------------------------------------------------------
                                                                             
1.    Corporate Headquarters                   2000                 1          41,472    Sunnyvale, CA

2.    Satellite Communications Product Group   2006                 2         113,580    Tempe, AZ
                                               2000                 1           1,944    Tempe, AZ
                                               1999                 1           7,551    Elkhart, IN
                                               1999                 1           1,944    Phoenix, AZ

3.    Terrestrial Wireless Product Group       (owned)              1          56,060    Rochester, NY
                                               2002                 1          71,500    Chelmsford, MA
                                               2004                 1          49,100    Billerica, MA

4.    Sales Support                            2000                 1             750    Ellicott City, MD
                                               Month-to-month       1             112    Southlake, TX
                                               2000                 1             217    Woburn, MA
                                               2009                 1          12,448    Cambridge, UK
                                               1999                 1           1,143    Beijing, China
                                               2000                 1           4,000    Ocean Reef, Australia
                                               2000                 1             270    Singapore



The Company believes that its facilities are adequate for its present needs.

ITEM 3.  LEGAL PROCEEDINGS

    In July 1999, Northrop Grumman filed a lawsuit against the Company
alleging that the Company failed to disclose certain events and information
as required by the terms of the agreement pursuant to which Northrop Grumman
acquired the Government Division in April 1999. No damages have been
specified. The Company believes that it has strong defenses and




plans to vigorously defend the lawsuit filed by Northrop Grumman. No
provisions have been made for expenses that may be incurred to resolve the
lawsuit, and, although no assurance can be given, the Company believes final
resolution of the Northrop Grumman allegations will not have a material
adverse effect on the Company's financial position, results of operations, or
cash flows.

    In May 1995, the Company's MN division entered into certain agreements
with Nokia Telecommunications Oy (Nokia) pursuant to which MN was to provide
to Nokia certain microwave radios and related software and services, and was
to carry out certain development programs. In September 1997, Nokia informed
MN of a purported failure of certain of the products sold to Nokia to meet
certain contractual specifications. MN was sold to Tadiran in April 1998 and
under the terms of the sale agreement, Tadiran assumed and indemnified the
Company with respect to the Nokia claims. Tadiran has now taken the position
that the Company is responsible for the Nokia claims, based upon allegations
that the Company failed to provide adequate disclosures and financial
reserves with respect to such claims. In September 1998, the Company received
notice from Nokia that Nokia has decided to terminate the May 1995
agreements. Also in September 1998, Nokia began arbitration proceedings to
recover damages, which are claimed to be $40.6 million, which include loss of
profits and goodwill, and damage to trade and manufacturing secrets. The
Company believes that it has strong defenses and plans to vigorously defend
the Nokia claims. In May 1999, the Company began arbitration proceedings
against Tadiran, primarily to determine that Tadiran is responsible for the
Nokia claims. The Company believes that it has strong claims against Tadiran.
No accruals have been recorded for expenses that may be incurred to resolve
the dispute, and, although no assurance can be given, the Company believes
final resolution of this matter will not have a material adverse effect on
the Company's financial position, results of operations or cash flows.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Not applicable.

ITEM 4A.  EXECUTIVE OFFICERS OF THE REGISTRANT

         The names and ages of all executive officers of the Company, and all
positions with the Company held by such persons, are as follows:




Name                                Age      Position
- ----                                ---      --------
                                       
Frederick D. Lawrence               51       Chairman of the Board, President
                                             and Chief Executive Officer

Donna S. Birks                      43       Executive Vice President and Chief
                                             Financial Officer

George G. Arena                     46       Executive Vice President




Dr. Daniel L. Scharre               48       Executive Vice President and Chief Technology
                                             Officer and Chief Executive Officer of Adaptive
                                             Broadband Limited, a wholly owned subsidiary

Kenneth  J. Wees                    56       Vice President, General Counsel and
                                             Secretary


         Frederick D. Lawrence joined the Company as Chairman of the Board,
President and Chief Executive Officer in July 1997. From May 1996 to July
1997, Mr. Lawrence served as Chief Executive Officer of ComStream, Inc., an
international supplier of satellite communications networks and products and
from February 1994 to April 1996, he served as President of the Transmission
Group for ADC Telecommunications, which included five independent business
units producing products for high speed video, voice, data and wireless
communications. From 1982 to 1994, Mr. Lawrence held executive positions in
networks operations and engineering at Sprint Corporation and its operating
companies, dealing in local telephone, cellular and long distance. Prior to
this, Mr. Lawrence worked at AT&T from 1970 to 1982 in a variety of
positions. He holds a BSEE degree from Western Michigan University.

         Donna S. Birks joined the Company in December 1997 as Executive Vice
President and Chief Financial Officer. From August 1994 to June 1997, Ms.
Birks was Vice President, Administration and Chief Financial Officer of
ComStream Inc., an international supplier of satellite communications
networks and products. From January 1992 to August 1994, Ms. Birks was Vice
President and Chief Financial Officer of Macrovision Corporation, a video
technology licensing company and she currently serves as a director of
Macrovision. From December 1982 to January 1992, Ms. Birks served in several
senior executive positions at Contel ASC (purchased by GTE Spacenet in 1991),
a satellite communications transmission company. She holds a B.S. in Business
Administration form from George Mason University, a M.S. in Finance from
American University and is a Certified Public Accountant.

         George G. Arena joined the Company in 1985 as Vice President, Sales
and Marketing for its Microwave Data Systems (MDS) subsidiary. Later, he
became Sr. Vice President, Operations and then President of MDS in 1994. He
became an Executive Vice President of California Microwave, Inc. and
President of its Terrestrial Wireless Division (a combination of MDS and the
Company's Microwave Radio Communications unit) in April 1998. Mr. Arena holds
a M.B.A. from the Rochester Institute of Technology and a B.S. in Industrial
Distribution from Clarkson College of Technology.

         Dr. Daniel L. Scharre joined the Company in September 1997 as Vice
President and Chief Technology Officer. In April 1998, Dr. Scharre became
Executive Vice President of the Company and in August 1998, he was appointed
Chief Executive Officer of the Company's U.K.-based wholly owned subsidiary,
Adaptive Broadband Limited. From November 1996 to September 1997, Dr. Scharre
was Vice President and Chief Technical Officer of ComStream, Inc. From February
1994 to November 1996, Dr. Scharre was Vice President and General Manager of
Ilex Systems, a satellite communications and equipment company. From June 1988
to December 1993, he held executive positions at Loral Western Development Labs,
where he led and managed the development of a digital satellite communications
system. He has a B.S. in




physics from Caltech, a Ph.D. in physics from the University of California at
Berkeley and a M.B.A. from Santa Clara University.

         Kenneth J. Wees joined the Company in May 1998 as Vice President and
General Counsel, and became Secretary in September 1998. From September 1991
to May 1998, Mr. Wees served as General Counsel of Cable & Wireless, Inc.,
the American subsidiary of Cable and Wireless plc, an international supplier
of voice, data, messaging and Internet services. Prior to this, he worked at
GTE and Booz Allen & Hamilton in a variety of legal positions. Mr. Wees holds
a B.A. degree from Marquette University and a Juris Doctor degree from
American University's Washington College of Law.

PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

         The stock and stock price information on page 41 of Adaptive
Broadband's 1999 Annual Report to Shareholders is incorporated herein by
reference.

ITEM 6.  SELECTED FINANCIAL DATA

         The selected financial data on page 40 of Adaptive Broadband's 1999
Annual Report to Shareholders is incorporated herein by reference.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

         The management's discussion and analysis of financial condition and
results of operations on pages 33 through 39 of Adaptive Broadband's 1999
Annual Report to Shareholders is incorporated herein by reference. For
factors affecting any forward-looking statements contained in such discussion
and analysis, see "Business - Information Regarding Forward Looking
Statements" in Item 1 of Part 1 of this Form 10-K Annual Report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's investment portfolio and long-term debt
obligations. The Company maintains a strict investment policy designed for
the safety and preservation of its invested funds by limiting default risk,
market risk, and reinvestment risk. The Company's investments consist
primarily of commercial paper, U.S. Treasury notes and money market funds,
all with maturities at the date of purchase of 90 days or less. Floating rate
investments may produce less income than expected if interest rates fall. The
table below presents notional amounts and related weighted-average interest
rates by year of maturity for the Company's investment portfolio and
long-term debt obligations (in thousands, except percentages).








                                     2000         2001       2002          2003
                                                               
Cash and cash equivalents           48,887         --         --            --
Average rate                          5.1%         --         --            --

Total investment securities         48,887         --         --            --
Average rate                          5.1%         --         --            --

Convertible Subordinated Notes        --           --         --           $57,500
Fixed rate                            --           --         --             5.25%


The Company mitigates default risk by attempting to invest in high credit
quality securities and by positioning its portfolio to respond to a
significant reduction in a credit rating of any investment issuer or
guarantor. The Company's portfolio includes only marketable securities with
active secondary or resale markets to ensure portfolio liquidity and
maintains a prudent amount of diversification.

The Company has no cash flow exposure due to rate changes for its $57.5 million
Convertible Subordinated Notes.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The consolidated financial statements on pages 20 through 31, and
the financial results by fiscal quarter information on page 41, of Adaptive
Broadband's 1999 Annual Report to Shareholders are incorporated herein by
reference.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

         None.

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information relating to directors of Adaptive Broadband required
to be furnished pursuant to this item is incorporated by reference from
portions of the Company's definitive Proxy Statement for its annual meeting
of shareholders to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A within 120 days after June 30, 1999 (the "Proxy
Statement") under the caption "Election of Directors." Certain information
relating to executive officers of the Company is set forth in Item 4A of Part
I of this Form 10-K under the caption "Executive Officers of the Registrant."

ITEM 11.  EXECUTIVE COMPENSATION




         Incorporated by reference from portions of the Proxy Statement
under the captions "Compensation of Directors and Executive Officers,"
"Compensation Committee Interlocks and Insider Participation" and "Certain
Stockholders-Section 16(a) Beneficial Ownership Reporting Compliance."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF
ADAPTIVE BROADBAND CORPORATION

         Incorporated by reference from portions of the Proxy Statement
under the captions "Certain Stockholders" and "Compensation of Directors and
Executive Officers."

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Incorporated by reference from portion of the Proxy Statement
under the caption "Compensation of Directors and Executive Officers-Employment
Arrangements."

                                  PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

    (a) 1. FINANCIAL STATEMENTS

                Included in Part II of this report by incorporation by reference
                from the Adaptive Broadband Corporation 1999 Annual Report to
                Shareholders

                Report of Ernst & Young LLP, Independent Auditors (page 32 of
                1999 Annual Report to Shareholders)

                Consolidated statements of operations for each of the three
                years in the period ended June 30, 1999 (page 20 of 1999
                Annual Report to Shareholders)

                Consolidated balance sheets as of June 30, 1999 and 1998 (page
                21 of 1999 Annual Report to Shareholders)

                Consolidated statements of shareholders' equity for each of the
                three years in the period ended June 30, 1999 (page 22 of 1999
                Annual Report to Shareholders)

                Consolidated statements of cash flows for each of the three
                years in the period ended June 30, 1999 (page 23 of 1999
                Annual Report to Shareholders)

                Notes to Consolidated Financial Statements (pages 24 through 31
                of 1999




                        Annual Report to Shareholders)

With the exception of the information incorporated by reference into Items 5,
6, 7 and 8 of this Form 10-K, the Adaptive Broadband Corporation 1999 Annual
Report to Shareholders is not deemed filed as part of this report.

         (a) 2.   FINANCIAL STATEMENT SCHEDULES

                      Included in Part IV of this report:

                       Schedules for the three years ended June 30, 1999
                  Schedule II -- Valuation and Qualifying Accounts

                  All other schedules are omitted because they are not
required, or are not applicable, or the information is included in the
consolidated financial statements or notes to consolidated financial
statements.

         (a) 3.   EXHIBITS

         3.1      Restated Certificate of Incorporation. (Exhibit to the
                  Company's Form 8 dated February 19, 1993, constituting
                  Amendment No. 1 to the Company's Registration Statement on
                  Form 8-A for the Common Stock; incorporated herein by
                  reference.)

         3.2      Bylaws. (Exhibit to the Company's Form 10-K for its fiscal
                  year ended June 30, 1994; incorporated herein by reference.)

         4.4      Rights Agreement dated as of July 21, 1999 among Adaptive
                  Broadband Corporation and BankBoston, N.A. (Exhibit to the
                  Company's Form 8-K filed on July 21, 1999; incorporated
                  herein by reference.)

         4.5      Form of Indenture, including form of Convertible Subordinated
                  Note, relating to $57,500,000 of Convertible Subordinated
                  Notes. (Exhibit to the Company's Form S-3 filed on November
                  17, 1993; incorporated herein by reference.)

         10.1     Employee Stock Purchase Plan, as amended through August
                  1998.** (Exhibit to the Company's Form 10-K for its fiscal
                  year ended June 30, 1998; incorporated herein by reference.)

         10.2     1986 Stock Option Plan, as amended.** (Exhibit to the
                  Company's Form 10-K for its fiscal year ended June 30, 1991;
                  incorporated herein by reference.)

         10.3     Lease of the property located at 2105 West Fifth, Tempe,
                  Arizona. (Exhibit to the Company's Form 10-K for its fiscal
                  year ended June 30, 1991; incorporated herein by reference.)



         10.4     Lease of the premises located at 20 Alpha Road, Chelmsford,
                  MA. (Exhibit to the Company's Form 10-K for the fiscal year
                  ended June 30, 1992; incorporated herein by reference.)

         10.5     Letter agreement with Philip F. Otto** dated September 22,
                  1992. (Exhibit to the Company's Form 10-K for its fiscal year
                  ended June 30, 1992; incorporated herein by reference.)

         10.6     Amendment to letter agreement with Philip F. Otto**, dated
                  July 30, 1993. (Exhibit to Company's Form 10-K for its fiscal
                  year ended June 30, 1993; incorporated herein by reference.)

         10.7     Amendment to letter agreement with Philip F. Otto**, dated
                  August 15, 1994. (Exhibit to the Company's Form 10-K for its
                  fiscal year ended June 30, 1994; incorporated herein by
                  reference.)

         10.8     Lease of premises located at 2114 West 7th Street, Tempe,
                  Arizona. (Exhibit to the Company's Form 10-K for the fiscal
                  year ended June 30, 1996; incorporated herein by reference.)

         10.9     Lease of premises located at 175 West Wall Street, Glendale
                  Heights, Illinois. (Exhibit to the Company's Form 10-K for
                  its fiscal year ended June 30, 1996; incorporated herein by
                  reference.)

         10.10    1992 Stock Option Plan, as amended. ** (Exhibit to Company's
                  Form 10-K for the fiscal year ended June 30, 1997;
                  incorporated herein by reference.)

         10.11    Amendment to letter agreement with Philip F. Otto,** dated
                  January 10, 1997. (Exhibit to the Company's Form 10-K for its
                  fiscal year ended June 30, 1997; incorporated herein by
                  reference).

         10.12    Letter Agreement with Frederick D. Lawrence**, dated July 16,
                  1997. (Exhibit to Company's Form 10-K for its fiscal year
                  ended June 30, 1997; incorporated herein by reference).

         10.13    Severance Agreement entered into in May 1999 with Donald
                  Anderson.**

         10.14    Letter Agreement with Donna S. Birks, dated December 12,
                  1997.** (Exhibit to Company's Form 10-K for its fiscal year
                  ended June 30, 1998; incorporated herein by reference).

         10.15    Severance Agreement entered into in July 1999 with Donna S.
                  Birks.**

         10.16    Severance Agreement entered into in July 1999 with George
                  Arena.**



         10.17    Severance Agreement entered into in July 1999 with Daniel
                  Scharre.**

         10.18    Severance Agreement entered into in July 1999 with Kenneth
                  Wees.**

         10.19    Promissory Note issued to Frederick D. Lawrence, as amended
                  through September 21, 1999

         10.20    Asset Purchase Agreement between L-3 Communications
                  Corporation and California Microwave, Inc. dated as of
                  December 19, 1997 and amendment thereto. (Exhibits to the
                  Company's Form 8-K filed on February 13, 1998; incorporated
                  herein by reference.)

         10.21    Asset Purchase Agreement between Tadiran Ltd. and California
                  Microwave, Inc., dated as of March 1, 1998 and amendment
                  thereto. (Exhibit to the Company's Form 8-K filed on April 27,
                  1998; incorporated herein by reference.)

         10.22    Stock Purchase Agreement between Telscape International, Inc.,
                  California Microwave Services Division, Inc. and California
                  Microwave, Inc. dated as of May 8, 1998. (Exhibit to the
                  Company's Form 8-K filed on June 5, 1998; incorporated herein
                  by reference.)

         10.23    Agreement, dated August 20, 1998, between (1) Olivetti
                  Research Limited, Olivetti Telemedia S.p.A. and Oracle
                  Corporation and (2) Pitcomp 174 Limited (a wholly-owned
                  subsidiary of the Company), to be renamed Adaptive Broadband
                  Limited. (Exhibit to the Company's Form 10-Q for the period
                  ended September 30, 1998; incorporated herein by reference.)

         10.24    Asset purchase agreement, dated November 19, 1998, between
                  California Microwave, Inc. and Crown International, Inc.
                  (Exhibit to the Company's Form 10-Q for the period ended
                  December 31, 1998; incorporated herein by reference.)

         10.25    Asset Purchase Agreement dated March 10, 1999 between Northrop
                  Grumman Corporation and California Microwave, Inc. (Exhibit to
                  the Company's Form 8-K filed on March 17, 1999; incorporated
                  herein by reference.)

         10.26    Lease of premises located in Billerica Office Park, Billerica,
                  Massachusetts.

         10.27    Lease of premises located in The Westbrook Center, Milton
                  Road, Cambridge, England.

         13       Annual Report to Shareholders (pages incorporated by
                  reference).

         21       List of subsidiaries.



         23       Consent of Ernst & Young LLP, Independent Auditors.

         24       Power of Attorney.

         27       Financial Data Schedule for the fiscal year ended
                  June 30, 1999.

         Exhibits are available from the Registrant upon request.

         **       Compensatory plan or arrangement.

         (b)      REPORTS ON FORM 8-K

                  The following reports on Form 8-K were filed during the last
                  fiscal quarter of fiscal 1999:

                           Form 8-K filed on July 21, 1999 announcing the
                           adoption of a new Share Purchase Rights Plan.






SIGNATURES

                  Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:  September 24, 1999                  ADAPTIVE BROADBAND CORPORATION.


                                            By /s/ FREDERICK D. LAWRENCE
                                                   Frederick D. Lawrence
                                                   Chairman, President and
                                                   Chief Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.


 /s/ Frederick D. Lawrence          President and Chief           September 24,
- --------------------------          Executive Officer (principal  1999
FREDERICK D. LAWRENCE               executive officer) and
                                    Director



/s/ Donna S. Birks                  Executive Vice President      September 24,
- ------------------                  and Chief Financial Officer   1999
DONNA S. BIRKS                      (principal financial and
                                    accounting officer)








/s/ William B. Marx, Jr.*           Director                      September 24,
- -------------------------                                         1999
WILLIAM B. MARX, JR.


/s/ Terry W. Ward*                  Director                      September 24,
- -------------------                                               1999
TERRY W. WARD




/s/ Frederick W. Whitridge, Jr.*    Director                      September 24,
- --------------------------------                                  1999
FREDERICK W. WHITRIDGE,
JR.


/s/ George A. Joulwan*              Director                      September 24,
- ----------------------                                            1999
GEORGE A. JOULWAN


/s/ Leslie G. Denend*               Director                      September 24,
- ---------------------                                             1999
LESLIE G. DENEND


*By /s/ KENNETH J. WEES
    --------------------
     KENNETH J. WEES
     Attorney-in-fact




                         ADAPTIVE BROADBAND CORPORATION
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                      Years ended June 30, 1999, 1998, 1997
                             (Dollars in thousands)



                                              Balance at      Additions        Other                          Balance
                                               beginning       Charged       Additions                        at end
                                                of year       to income     (transfers)      Deductions       of year

                                              ------------   -------------  -------------   --------------  ------------
                                                                                             
1999
- ----
Allowance for doubtful accounts               $     1,166    $        566   $          0      $       602   $     1,130
Estimated liability for warranties                  2,098           3,820              0            3,459         2,459
Restructuring reserves                              7,043           3,325         (3,724)(3)        3,841         2,803
Discontinued operations reserve                     6,748           7,000              0            2,660        11,088


1998
- ----
Allowance for doubtful accounts               $       943    $        719   $        (88)(1)  $       408   $     1,166
Estimated liability for warranties                  1,791           3,577            (50)(1)        3,220         2,098
Restructuring reserves                              7,512           4,107              0            4,576         7,043
Discontinued operations reserve                    12,538          25,214              0           31,004         6,748


1997
- ----
Allowance for doubtful accounts                       798             365              0              220           943
Estimated liability for warranties                  1,054           3,637              0            2,900         1,791
Restructuring reserves                              2,876             300          5,520 (2)        1,184         7,512
Discontinued operations reserve                         0               0         12,538 (2)            0        12,538



(1)      Sales of Service Division during 1998.
(2)      Transfers from discontinued operations.
(3)      Sales of Government Division during 1999.



                                  EXHIBIT INDEX

EXHIBIT                                DESCRIPTION
- --------------------------------------------------

3.1      Restated Certificate of Incorporation. (Exhibit to the Company's
         Form 8 dated February 19, 1993, constituting Amendment No. 1 to the
         Company's Registration Statement on Form 8-A for the Common Stock;
         incorporated herein by reference.)

3.2      Bylaws. (Exhibit to the Company's Form 10-K for its fiscal year ended
         June 30, 1994; incorporated herein by reference.)

4.4      Rights Agreement dated as of July 21, 1999 among Adaptive Broadband
         Corporation and BankBoston, N.A. (Exhibit to the Company's Form 8-K
         filed on July 21, 1999; incorporated herein by reference.)

4.5      Form of Indenture, including form of Convertible Subordinated Note,
         relating to $57,500,000 of Convertible Subordinated Notes. (Exhibit
         to the Company's Form S-3 filed on November 17, 1993; incorporated
         herein by reference.)

10.1     Employee Stock Purchase Plan, as amended through August 1998.**
         (Exhibit to the Company's Form 10-K for its fiscal year ended June
         30, 1998; incorporated herein by reference.)

10.2     1986 Stock Option Plan, as amended.** (Exhibit to the Company's Form
         10-K for its fiscal year ended June 30, 1991; incorporated herein by
         reference.)

10.3     Lease of the property located at 2105 West Fifth, Tempe, Arizona.
         (Exhibit to the Company's Form 10-K for its fiscal year ended June
         30, 1991; incorporated herein by reference.)

10.4     Lease of the premises located at 20 Alpha Road, Chelmsford, MA.
         (Exhibit to the Company's Form 10-K for the fiscal year ended June
         30, 1992; incorporated herein by reference.)

10.5     Letter agreement with Philip F. Otto** dated September 22, 1992.
         (Exhibit to the Company's Form 10-K for its fiscal year ended June
         30, 1992; incorporated herein by reference.)

10.6     Amendment to letter agreement with Philip F. Otto**, dated July 30,
         1993. (Exhibit to Company's Form 10-K for its fiscal year ended
         June 30, 1993; incorporated herein by reference.)

10.7     Amendment to letter agreement with Philip F. Otto**, dated August
         15, 1994.



         (Exhibit to the Company's Form 10-K for its fiscal year
         ended June 30, 1994; incorporated herein by reference.)

10.8     Lease of premises located at 2114 West 7th Street, Tempe, Arizona.
         (Exhibit to the Company's Form 10-K for the fiscal year ended June
         30, 1996; incorporated herein by reference.)

10.9     Lease of premises located at 175 West Wall Street, Glendale
         Heights, Illinois. (Exhibit to the Company's Form 10-K for its
         fiscal year ended June 30, 1996; incorporated herein by reference.)

10.10    1992 Stock Option Plan, as amended. ** (Exhibit to Company's Form 10-K
         for the fiscal year ended June 30, 1997; incorporated herein by
         reference.)

10.11    Amendment to letter agreement with Philip F. Otto,** dated January
         10, 1997. (Exhibit to the Company's Form 10-K for its fiscal year
         ended June 30, 1997; incorporated herein by reference).

10.12    Letter Agreement with Frederick D. Lawrence**, dated July 16, 1997.
         (Exhibit to Company's Form 10-K for its fiscal year ended June 30,
         1997; incorporated herein by reference).

10.13    Severance Agreement entered into in May 1999 with Donald Anderson.**

10.14    Letter Agreement with Donna S. Birks, dated December 12, 1997.**
         (Exhibit to Company's Form 10-K for its fiscal year ended June 30,
         1998; incorporated herein by reference).

10.15    Severance Agreement entered into in July 1999 with Donna S. Birks.**

10.16    Severance Agreement entered into in July 1999 with George Arena.**

10.17    Severance Agreement entered into in July 1999 with Daniel Scharre.**

10.18    Severance Agreement entered into in July 1999 with Kenneth Wees.**

10.19    Promissory Note issued to Frederick D. Lawrence, as amended through
         September 21, 1999

10.20    Asset Purchase Agreement between L-3 Communications Corporation and
         California Microwave, Inc. dated as of December 19, 1997 and
         amendment thereto. (Exhibits to the Company's Form 8-K filed on
         February 13, 1998; incorporated herein by reference.)

10.21    Asset Purchase Agreement between Tadiran Ltd. and California
         Microwave, Inc.,



         dated as of March 1, 1998 and amendment thereto. (Exhibit to the
         Company's Form 8-K filed on April 27, 1998; incorporated herein by
         reference.)

10.22    Stock Purchase Agreement between Telscape International, Inc.,
         California Microwave Services Division, Inc. and California Microwave,
         Inc. dated as of May 8, 1998. (Exhibit to the Company's Form 8-K filed
         on June 5, 1998; incorporated herein by reference.)

10.23    Agreement, dated August 20, 1998, between (1) Olivetti Research
         Limited, Olivetti Telemedia S.p.A. and Oracle Corporation and (2)
         Pitcomp 174 Limited (a wholly-owned subsidiary of the Company), to
         be renamed Adaptive Broadband Limited. (Exhibit to the Company's
         Form 10-Q for the period ended September 30, 1998; incorporated
         herein by reference.)

10.24    Asset purchase agreement, dated November 19, 1998, between
         California Microwave, Inc. and Crown International, Inc. (Exhibit
         to the Company's Form 10-Q for the period ended December 31, 1998;
         incorporated herein by reference.)

10.25    Asset Purchase Agreement dated March 10, 1999 between Northrop
         Grumman Corporation and California Microwave, Inc. (Exhibit to the
         Company's Form 8-K filed on March 17, 1999; incorporated herein by
         reference.)

10.26    Lease of premises located in Billerica Office Park, Billerica,
         Massachusetts.

10.27    Lease of premises located in The Westbrook Center, Milton Road,
         Cambridge, England.

13       Annual Report to Shareholders (pages incorporated by reference).

21       List of subsidiaries.

23       Consent of Ernst & Young LLP, Independent Auditors.

24       Power of Attorney.

27       Financial Data Schedule for the fiscal year ended June 30, 1999.

Exhibits are available from the Registrant upon request.

**     Compensatory plan or arrangement.

EX-10.13

[LOGO]

                                            Adaptive Broadband Corp.
                                            1143 Borregas Avenue
                                            Sunnyvale, CA  94089  USA
                                            (408) 732-4000  Fax: (408) 732-4244
                                            http://www.adaptivebroadband.com
                                            -----------------------------------






May 27, 1999



Don Anderson
2114 West 7th Street
Tempe, AZ  85281


Dear Don,

On April 14, 1999, I informed you of my intention to terminate your employment
for reasons discussed with you at that time.

The following sets forth a severance agreement ("Agreement") offering
assistance in supporting your transition to new employment but places certain
obligations on you in return.

1.       Your employment with Adaptive Broadband Corporation ("ADAP", formerly
         California Microwave, Inc.) will terminate on the earlier of (i) June
         30, 1999 or (ii) the date on which you begin employment of any nature
         or duration elsewhere.

2.       Commencing on July 1, 1999 and ending on the earlier of (i) June 30,
         2000 or (ii) the date on which you accept regular employment with any
         company or (iii) the date on which you accept employment of any nature
         or duration with Radyne Comstream, SSET, Gilat or Hughes Network
         Systems, competitors of ADAP, ADAP will:

         a)       Provide you with weekly payments in the amount of $4,423.08.

         b)       Continue your medical, dental, EAP, and VSP insurance plan
                  participation. This insurance benefits participation will
                  stop at the end of the month during which ADAP payments
                  cease. After insurance coverage stops, you will have the
                  option to continue insurance coverage for 18 months through
                  COBRA.

         c)       Award any EIP bonus that is approved for you for FY99.





         d)       Provide you with your 401(k) match and stock purchase shares
                  based on your participation in the period ending June 30,
                  1999.

         e)       Pay out accrued Personal Time Off based on your balance on
                  June 30, 1999.

3.       ADAP will provide "tail" E&O insurance to indemnify you against any and
         all claims against you as an officer of the Company.

4.       Between July 1, 1999 and the earlier of (i) June 30, 2000 or (ii) the
         date on which you accept regular employment, you will receive
         out-placement counseling at a cost to ADAP not to exceed $15,000. The
         counseling provided by Hagberg Consulting Group will continue for the
         period originally contracted by ADAP, approximately one year from the
         date of commencement.

5.       If, prior to June 30, 2000, you accept employment of any nature or
         duration elsewhere, you shall immediately notify ADAP in writing,
         specifying the date of acceptance, the name of the employer and the
         nature of the work relationship.

6.       In exchange for the above consideration from ADAP, the receipt and
         sufficiency of which is hereby acknowledged, you and you on behalf of
         your heirs, personal representatives, and assigns, hereby voluntarily
         and irrevocably release, acquit and forever discharge ADAP, and all of
         ADAP's affiliated and related entities, and their officers, directors,
         agents, representatives, attorneys, servants, employees, predecessors,
         successors, assigns and all persons acting herein specifically named
         or not, from any and all claims, demands, liabilities, debts,
         judgments, damages, expenses, actions, causes of action or suits of
         any kind whatsoever which you, your heirs, personal representatives
         and assigns, and each of them, may have had or may now have, whether
         known or unknown, including, but not limited to, common law claims,
         statutory claims, claims for wages or earnings or benefits, claims for
         overtime, claims or causes of action under Title VII of the Civil
         Rights Acts of 1964, claims or causes of action under the Civil Rights
         Act of 1991, claims for wrongful termination (including constructive
         termination), defamation, or invasion of privacy, claims or causes of
         action under the Employee Retirement Income Security Act of 1974
         ("ERISA"), as amended, claims or causes of action under the Fair Labor
         Standards Act ("FLSA"), claims or causes of action under the American
         with Disabilities Act ("ADA"), claims or causes of action under the
         Older Workers Benefit Protection Act ("OWBPA"), and claims or causes
         of action under the California Fair Employment and Housing Act, the
         California Family Rights Act, the California Labor Code, any other
         federal, state or municipal statute or ordinance, and claims or causes
         of action under any tort, contract or other theory, which arise out of
         or are connected in any way, directly or indirectly, with your
         employment by ADAP or your termination of such employment. You
         acknowledge that through this Agreement you are receiving
         consideration from ADAP beyond that to which you would otherwise be
         entitled.


                                                                             2


7.       The general release above extends to all claims which existed before
         the date of this Agreement, and therefore, you expressly waive all
         rights under Section 1542 of the California Civil Code. Section 1542
         reads as follows:

                  "A general release does not extend to claims which the
                  creditor does not know or suspect to exist in his favor at
                  the time for executing the release which, if just known to
                  him, would have materially affected his settlement with the
                  debtor."

8.       You and ADAP agree not to make any negative or disparaging statement
         or comment about the other, its affiliates and their related persons
         and entities to any person, entity or organization.

9.       You have been advised by ADAP to consult with an attorney prior to
         entering into this Agreement and have had full opportunity to do so.
         In entering into this Agreement, you acknowledge you are not relying
         on any statement, representation or promise by ADAP or any
         representative of ADAP which is not expressly set forth herein.

10.      You and ADAP will keep the terms of this Agreement strictly
         confidential. You may disclose them to no one except to immediate
         family (who have agreed to the same confidentiality obligations) or as
         may be reasonably necessary for the purpose of obtaining professional
         advice, meeting legal reporting requirements or pursuant to judicial
         process, court order or subpoena.

11.      This Agreement shall be governed by California law and may not be
         amended, modified, superseded, terminated or waived in whole or in
         part except in a writing signed by a duly authorized representative of
         the party against whom the amendment, modification, supersession,
         termination or waiver is asserted.

12.      This Agreement sets forth the entire Agreement between you and ADAP
         and supersedes any and all prior agreements or understandings, written
         or oral, between you and ADAP pertaining to the subject matter of this
         Agreement.

13.      You acknowledge that you have been given 21 days to review and study
         this Agreement prior to its execution and that you have the right to
         revoke this Agreement within 7 days following its execution. You
         acknowledge that you have had the opportunity and the time to discuss
         this Agreement with an attorney and you have been encouraged to do so
         by ADAP, and that no monies payable by ADAP pursuant to the terms of
         this Agreement shall be disbursed to you until the expiration of the
         time limits prescribed in this paragraph. You acknowledge that you are
         executing this Agreement voluntarily, free from duress, undue pressure
         or influence, harassment and intimidation. You acknowledge that this
         Agreement represents an important legal and binding agreement, and you
         enter into it voluntarily and with full knowledge of its intent and
         terms.


                                                                             3


14.      If any provision of this Agreement or the application thereof is held
         invalid, the invalidity shall not affect other provisions or
         applications of the Agreement which can be given effect without the
         invalid provisions or application, and to this end this Agreement is
         declared to be severable.

If you agree with the above provisions, please so indicate by signing both
copies of this letter and returning one copy to me no later than June 17, 1999.


                                              Sincerely,

                                              Adaptive Broadband Corporation




                                              George Arena
                                              Executive Vice President

THIS AGREEMENT CONTAINS A RELEASE OF KNOWN AND UNKNOWN CLAIMS.


Agreed and Accepted

- --------------------------------
Don Anderson


- --------------------------------
Date


                                                                             4

EX-10.15

                                                                   Exh. 10.15

                         ADAPTIVE BROADBAND CORPORATION

                               SEVERANCE AGREEMENT


THIS SEVERANCE AGREEMENT is entered into as of July 2, 1999 (the "Effective
Date"), between ADAPTIVE BROADBAND CORPORATION, a Delaware corporation ("ADAP")
and Donna Birks (the "Employee").

                                     RECITAL

The Employee serves as ADAP's Executive Vice President and Chief Financial
Officer. ADAP and the Employee desire to set forth the terms of the Employee's
severance compensation if the Employee's employment is ended as a result of a
Change in Control. If a Change in Control occurs, the Employee and other key
employees may be more vulnerable to dismissal or other negative consequences
without regard to the quality of their past or prospective service. The Board of
Directors (the "Board") believes that it is in the best interest of ADAP and its
stockholders to ensure fair treatment to ADAP's key executives and to reduce any
adverse effects upon their performance that may be caused by the perceived risks
of a merger, acquisition or other major structural change.

The parties agree as follows:

1.       DEFINITIONS. For purposes of this Agreement, the following terms will
         have the meanings set forth below.

         1.1      A "CHANGE IN CONTROL" will occur if (a) any Person (as defined
                  in Section 2(a)(2) of the Securities Act of 1933, as amended)
                  other than ADAP, is or becomes the beneficial owner, directly
                  or indirectly (including by holding securities which are
                  exercisable for or convertible into shares of capital stock of
                  ADAP), of 30 % or more of the combined voting power of the
                  outstanding shares of capital stock of ADAP entitled to vote
                  generally in the election of directors ; or, (b) a Transaction
                  is consummated; or, (c) Continuing Directors cease to
                  constitute at least a majority of the Board: or, (d) a
                  majority of the ADAP's Outside Directors determine that a
                  Change in Control has occurred.



         1.2      "CONTINUING DIRECTORS" shall mean the directors of ADAP in
                  office on January 1, 1999 and any successor to any such
                  director whose nomination or selection was approved by a
                  majority of the directors in office at the time of the
                  director's nomination or selection and who is not an
                  "affiliate" or "associate" (as defined in Rule 12b-2 under the
                  Securities Exchange Act of 1934, as amended) of any person who
                  is the beneficial owner, directly or indirectly (including by
                  holding securities which are exercisable for or convertible
                  into shares of capital stock of ADAP), of 10% or more of the
                  combined voting power of the outstanding shares of capital
                  stock of ADAP entitled to vote generally in the election of
                  directors.

         1.3      "DISABILITY" means that the Employee has met the
                  qualifications for ADAP's long-term disability benefit.

         1.4      "GOOD REASON" includes any of the following:

                  (a)      the assignment to the Employee of duties inconsistent
                           with, or a substantial alteration in the nature or
                           status of, the Employee's responsibilities
                           immediately before a Change in Control;

                  (b)      a reduction in the Employee's salary or other
                           benefits as in effect on the date of a Change in
                           Control;

                  (c)      the Employee's relocation to a work site requiring an
                           increase in one-way commute from Employee's residence
                           of more than thirty-five (35) miles; or

                  (d)      a breach by ADAP of this Agreement if the breach has
                           not been cured within 30 days after written notice by
                           the Employee to ADAP setting forth with specificity
                           the nature of the breach.

         1.5      "OUTSIDE DIRECTOR" is a member of ADAP's Board of Directors
                  who is not, and who during the past six months was not, an
                  employee or officer of ADAP.

         1.6      "TERMINATION FOR CAUSE" is termination of the Employee's
                  employment as a result of (a) the Employee's willful
                  misconduct or the Employee's dishonesty towards, fraud upon,
                  crime against or



                  deliberate or attempted injury or bad faith action with
                  respect to ADAP; or (b) the Employee's conviction for a
                  felony (whether in connection with ADAP's affairs or
                  otherwise).

         1.7      "TERMINATION UPON A CHANGE IN CONTROL" is (a) termination by
                  the Employee of Employee's employment for Good Reason within
                  one year after the occurrence of a Change in Control; or (b)
                  declination by the Employee of an offer of employment from
                  ADAP, or ADAP's successor, for Good Reason at the time of a
                  Change in Control if the Employee would not have been
                  permitted to remain in Employee's existing position following
                  such declination; or (c) termination by ADAP, or ADAP's
                  successor, of the Employee's employment within one year after
                  the occurrence of a Change in Control other than a Termination
                  for Cause or a termination resulting from the Employee's death
                  or Disability. The one-year period provided for herein shall
                  be six months in the event that a Change in Control arises out
                  of a Transaction defined in Section 1.8 (c) hereof.

         1.8      "TRANSACTION" is (a) a consolidation or merger of ADAP if the
                  shareholders of ADAP immediately before the merger or
                  consolidation do not immediately after the merger or
                  consolidation own equity securities of the surviving or
                  acquiring corporation or a parent party possessing 50% or more
                  of the voting power of the surviving or acquiring corporation
                  or parent party; (b) a sale, lease, exchange or other transfer
                  (in one transaction or a series of related transactions) of
                  50% or more of the assets of ADAP; or (c) the sale or other
                  disposition of business units within any 12-month period that
                  contributed for that 12-month period more than 45% of ADAP's
                  revenues. The Transaction requirements defined in parts (b)
                  and (c) above shall specifically exclude the sale of the
                  Information Systems division and its associated assets, and
                  the designated percentage thresholds for assets and revenues
                  stated herein (50% and 45%, respectively) shall be calculated
                  without including this division's assets or revenues in the
                  base.

2.       TERM. If no Change in Control has occurred, this Agreement will expire
         on December 31, 2000. If a Change in Control occurs prior to December
         31, 2000, this Agreement will continue in effect, and will not
         terminate, until either the Employee has received the severance
         compensation provided for below or has ceased to be eligible for such
         compensation by reason of there not having been a Termination Upon a
         Change in Control.

3.       TERMINATION UPON A CHANGE IN CONTROL. If a Termination Upon a Change in
         Control



         occurs, the Employee will immediately be paid all (a) accrued salary,
         (b) bonus compensation equal to the higher of (i) the annual EIP bonus
         based on ADAP's operating plan as approved by the Board during the
         first quarter of the fiscal year during which the Change in Control
         occurs, provided that the EVA growth for such fiscal year as of the
         most recently completed fiscal quarter is equal to that specified
         in the operating plan for such period, or (ii) the annual bonus or
         other equivalent incentive compensation payment established for the
         Employee by ADAP's successor and based on the operating plan of ADAP's
         successor at the beginning of the bonus's performance period during
         which Employee's termination occurs, (c) vested deferred compensation
         (other than pension plan or profit sharing plan benefits, which will be
         paid in accordance with the applicable plan), unless the Employee is
         eligible for a delayed payout as authorized by the plan, (d) benefits
         then due under any plans of ADAP or ADAP's successor in which the
         Employee is a participant, (e) accrued Personal Time Off pay or
         vacation pay and (f) reimbursements for any appropriate business
         expenses incurred by the Employee in connection with his duties, all to
         the date of termination ("Accrued Compensation"). Repayment of any
         existing company loans shall be extended if necessary to delay
         repayment until the beginning of regular employment during the period
         of severance compensation provided for in Section 4. The Employee will
         also be entitled to the severance compensation described in Section 4.

4.       SEVERANCE COMPENSATION. If a Termination Upon a Change in Control
         occurs, ADAP shall pay monthly severance compensation to the Employee
         for a period ending 24 months after termination, or ending 12 months
         after termination if the Termination Upon a Change in Control (i) is
         initiated by the Employee as specified in Sections 1.7 (a) or 1.7 (b)
         and (ii) is by reason of a Transaction defined in Section 1.8 (c), in
         an aggregate amount determined by adding (a) the Employee's monthly
         base salary at the time of termination and (b) an amount equal to the
         monthly `Perk Pot' benefit to which the Employee was entitled as an
         officer of ADAP at the time of the Change in Control, and (c) the
         amount of $2400.00 in lieu of other employee benefits (including health
         benefits) the Employee was receiving from ADAP at the time of the
         Change in Control. If the Employee begins regular employment prior to
         the expiration of the aforesaid 24 month period, or 12 month period if
         the Termination Upon a Change in Control (i) is initiated by the
         Employee as specified in Sections 1.7 (a) or 1.7 (b) and (ii) is by
         reason of a Transaction defined in Section 1.8 (c), then the severance
         compensation provided for in this Section 4 shall end as of the later
         of (i) the date of such regular employment or (ii) the date which is
         one-half the number of months past he beginning of severance
         compensation provided for in this Section 4. Employee agrees to
         promptly notify ADAP of any such regular employment and to reimburse
         ADAP for any payments made by ADAP hereunder that cover any period
         during which the Employee was a regular employee.

5.       ACCELERATION OF OPTIONS. If a Termination Upon a Change in Control
         occurs, all stock options held by the Employee immediately before the
         termination will become fully vested and the stock options will be
         exercisable for the periods specified with respect to termination of
         employment in the plans covering the options.



6.       OTHER BENEFITS. Neither this Agreement nor the severance compensation
         that it provides for will reduce any amounts otherwise payable, or in
         any way diminish the Employee's rights as an employee of ADAP, whether
         existing now or hereafter, under any benefit, incentive, retirement,
         stock option, stock bonus or stock purchase plan or under any
         employment agreement or other plan or arrangement, provided, however,
         that the rights granted to the Employee and the obligations assumed by
         ADAP under this Agreement will be in lieu of, and not in addition to,
         any severance or other termination payments to which the Employee may
         be entitled under any employment agreement or other plan or arrangement
         that the Employee may now or hereafter have with ADAP.

7.       EMPLOYMENT STATUS. This Agreement does not constitute a contract of
         employment. It does not impose on ADAP any obligation to retain the
         Employee as an employee, to change the status of the Employee's
         employment or to change ADAP's policies regarding termination of
         employment.

8.       MISCELLANEOUS.

         a.       SEVERABILITY. If a court or other body of competent
                  jurisdiction determines that any provision of this Agreement
                  is invalid or unenforceable, that provision will be adjusted
                  rather than voided, if possible, so that it is enforceable to
                  the maximum extent possible, and all other provisions of the
                  Agreement will be deemed valid and enforceable to the fullest
                  extent possible.

         b.       WITHHOLDING. Compensation and benefits to the Employee under
                  this Agreement will be reduced by all federal, state, local
                  and other withholdings or similar taxes as required by
                  applicable law.

         c.       ARBITRATION. The parties will submit all controversies, claims
                  and matters of difference in any way related to this
                  Agreement, its performance or breach, to arbitration in San
                  Francisco, California, according to the rules and practices of
                  the American Arbitration Association from time to time in
                  effect. Any awards in such arbitration shall be final and
                  binding on all parties. The arbitrators shall allocate the
                  costs of the arbitration in such manner as they deem
                  equitable. The arbitrators may require the reimbursement of
                  all or a portion of the reasonable legal fees incurred by the
                  prevailing party in the arbitration proceeding and any legal
                  proceedings which are taken to enforce the arbitral award.

         d.       ENTIRE AGREEMENT: MODIFICATIONS. (i) This Agreement is the
                  entire agreement between the parties with respect to the
                  matters covered hereby, and may be amended, modified,
                  superseded or canceled, or its terms waived, only by a written
                  instrument executed by each party or, in the case of a waiver,
                  by the



                  party waiving compliance. (ii) Failure of a party at any time
                  to require performance of any provision of this Agreement will
                  not affect the right at a later time to enforce the same.
                  (iii) No waiver of a breach of this Agreement, whether by
                  conduct or otherwise, in any one or more instances will be
                  construed as a further or continuing waiver of the or of any
                  other term of this Agreement. (iv) This Agreement shall inure
                  to the benefit of and be binding upon the successors and
                  assigns of the parties hereto.

         e.       APPLICABLE LAW. This Agreement will be construed under and
                  governed by the laws of the State of California without regard
                  or reference to the rules of conflicts of law that would
                  require the application of the laws of any other jurisdiction.

9.       PRIOR AGREEMENTS. The Employee and ADAP (named "California Microwave,
         Inc." prior to April 29, 1999) acknowledge an offer of employment
         letter dated December 12, 1997, and a prior severance agreement dated
         May 18, 1998. The Employee and ADAP hereby agree that the provisions of
         the offer of employment letter which provide a severance benefit if the
         Employee's employment is terminated without cause shall not be affected
         by this Agreement, provided, however, that the Employee shall be
         entitled only to the severance benefit either thereunder, or under this
         Agreement, as designated in writing by the Employee no later than ten
         (10) calendar days after termination. If no such designation is so
         made, then only the severance benefit under this Agreement shall apply.
         Regardless of which severance benefit applies, the provisions regarding
         Excess Parachute Payment shall apply to the severance benefit, as set
         forth in the last sentence of the ninth paragraph of the offer of
         employment letter. The Employee and ADAP hereby terminate their prior
         severance agreement dated May 18, 1998, as of the day immediately prior
         to the Effective Date of this Agreement, and neither the Employee nor
         ADAP shall have any rights or obligations thereunder.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.

ADAPTIVE BROADBAND CORPORATION


/s/ Frederick D. Lawrence
- --------------------------------        --------------------------------
Frederick D. Lawrence                   Donna Birks
Chairman and Chief Executive Officer    Executive Vice President and Chief
                                        Financial Officer

EX-10.16

[LOGO]

                         ADAPTIVE BROADBAND CORPORATION

                               SEVERANCE AGREEMENT


THIS SEVERANCE AGREEMENT is entered into as of July 2, 1999 (the "Effective
Date"), between ADAPTIVE BROADBAND CORPORATION, a Delaware corporation ("ADAP")
and George Arena (the "Employee").

                                     RECITAL

The Employee serves as ADAP's Executive Vice President, Operations/Product
Management and Development. ADAP and the Employee desire to set forth the terms
of the Employee's severance compensation if the Employee's employment is ended
as a result of a Change in Control. If a Change in Control occurs, the Employee
and other key employees may be more vulnerable to dismissal or other negative
consequences without regard to the quality of their past or prospective service.
The Board of Directors (the "Board") believes that it is in the best interest of
ADAP and its stockholders to ensure fair treatment to ADAP's key executives and
to reduce any adverse effects upon their performance that may be caused by the
perceived risks of a merger, acquisition or other major structural change.

The parties agree as follows:

1.       DEFINITIONS. For purposes of this Agreement, the following terms will
         have the meanings set forth below.

         1.1      A "CHANGE IN CONTROL" will occur if (a) any Person (as defined
                  in Section 2(a)(2) of the Securities Act of 1933, as amended)
                  other than ADAP, is or becomes the beneficial owner, directly
                  or indirectly (including by holding securities which are
                  exercisable for or convertible into shares of capital stock of
                  ADAP), of 30 % or more of the combined voting power of the
                  outstanding shares of capital stock of ADAP entitled to vote
                  generally in the election of directors ; or, (b) a Transaction
                  is consummated; or, (c) Continuing Directors cease to
                  constitute at least a majority of the Board: or, (d) a
                  majority of the ADAP's Outside Directors determine that a
                  Change in Control has occurred.





         1.2      "CONTINUING DIRECTORS" shall mean the directors of ADAP in
                  office on January 1, 1999 and any successor to any such
                  director whose nomination or selection was approved by a
                  majority of the directors in office at the time of the
                  director's nomination or selection and who is not an
                  "affiliate" or "associate" (as defined in Rule 12b-2 under the
                  Securities Exchange Act of 1934, as amended) of any person who
                  is the beneficial owner, directly or indirectly (including by
                  holding securities which are exercisable for or convertible
                  into shares of capital stock of ADAP), of 10% or more of the
                  combined voting power of the outstanding shares of capital
                  stock of ADAP entitled to vote generally in the election of
                  directors.

         1.3      "DISABILITY" means that the Employee has met the
                  qualifications for ADAP's long-term disability benefit.

         1.4      "GOOD REASON" includes any of the following:

                  (a)      the assignment to the Employee of duties inconsistent
                           with, or a substantial alteration in the nature or
                           status of, the Employee's responsibilities
                           immediately before a Change in Control;

                  (b)      a reduction in the Employee's salary or other
                           benefits as in effect on the date of a Change in
                           Control;

                  (c)      the Employee's relocation to a work site requiring an
                           increase in one-way commute from Employee's residence
                           of more than thirty-five (35) miles; or

                  (d)      a breach by ADAP of this Agreement if the breach has
                           not been cured within 30 days after written notice by
                           the Employee to ADAP setting forth with specificity
                           the nature of the breach.

         1.5      "OUTSIDE DIRECTOR" is a member of ADAP's Board of Directors
                  who is not, and who during the past six months was not, an
                  employee or officer of ADAP.

         1.6      "TERMINATION FOR CAUSE" is termination of the Employee's
                  employment as a result of (a) the Employee's willful
                  misconduct or the Employee's dishonesty towards, fraud upon,
                  crime against or





                  deliberate or attempted injury or bad faith action with
                  respect to ADAP; or (b) the Employee's conviction for a
                  felony (whether in connection with ADAP's affairs or
                  otherwise).

         1.7      "TERMINATION UPON A CHANGE IN CONTROL" is (a) termination by
                  the Employee of Employee's employment for Good Reason within
                  one year after the occurrence of a Change in Control; or (b)
                  declination by the Employee of an offer of employment from
                  ADAP, or ADAP's successor, for Good Reason at the time of a
                  Change in Control if the Employee would not have been
                  permitted to remain in Employee's existing position following
                  such declination; or (c) termination by ADAP, or ADAP's
                  successor, of the Employee's employment within one year after
                  the occurrence of a Change in Control other than a Termination
                  for Cause or a termination resulting from the Employee's death
                  or Disability. The one-year period provided for herein shall
                  be six months in the event that a Change in Control arises out
                  of a Transaction defined in Section 1.8 (c) hereof.

         1.8      "TRANSACTION" is (a) a consolidation or merger of ADAP if the
                  shareholders of ADAP immediately before the merger or
                  consolidation do not immediately after the merger or
                  consolidation own equity securities of the surviving or
                  acquiring corporation or a parent party possessing 50% or more
                  of the voting power of the surviving or acquiring corporation
                  or parent party; (b) a sale, lease, exchange or other transfer
                  (in one transaction or a series of related transactions) of
                  50% or more of the assets of ADAP; or (c) the sale or other
                  disposition of business units within any 12-month period that
                  contributed for that 12-month period more than 45% of ADAP's
                  revenues. The Transaction requirements defined in parts (b)
                  and (c) above shall specifically exclude the sale of the
                  Information Systems division and its associated assets, and
                  the designated percentage thresholds for assets and revenues
                  stated herein (50% and 45%, respectively) shall be calculated
                  without including this division's assets or revenues in the
                  base.

2.       TERM. If no Change in Control has occurred, this Agreement will expire
         on December 31, 2000. If a Change in Control occurs prior to December
         31, 2000, this Agreement will continue in effect, and will not
         terminate, until either the Employee has received the severance
         compensation provided for below or has ceased to be eligible for such
         compensation by reason of there not having been a Termination Upon a
         Change in Control.

3.       TERMINATION UPON A CHANGE IN CONTROL. If a Termination Upon a Change in
         Control





         occurs, the Employee will immediately be paid all (a) accrued
         salary, (b) bonus compensation equal to the higher of (i) the annual
         EIP bonus based on ADAP's operating plan as approved by the Board
         during the first quarter of the fiscal year during which the Change
         in Control occurs, provided that the EVA growth for such fiscal year
         as of the most recently completed fiscal quarter is equal to that
         specified in the operating plan for such period, or (ii) the annual
         bonus or other equivalent incentive compensation payment established
         for the Employee by ADAP's successor and based on the operating plan
         of ADAP's successor at the beginning of the bonus's performance
         period during which Employee's termination occurs, (c) vested
         deferred compensation (other than pension plan or profit sharing
         plan benefits, which will be paid in accordance with the applicable
         plan), unless the Employee is eligible for a delayed payout as
         authorized by the plan, (d) benefits then due under any plans of
         ADAP or ADAP's successor in which the Employee is a participant, (e)
         accrued Personal Time Off pay or vacation pay and (f) reimbursements
         for any appropriate business expenses incurred by the Employee in
         connection with his duties, all to the date of termination ("Accrued
         Compensation"). Repayment of any existing company loans shall be
         extended if necessary to delay repayment until the beginning of
         regular employment during the period of severance compensation
         provided for in Section 4. The Employee will also be entitled to the
         severance compensation described in Section 4.

4.       SEVERANCE COMPENSATION. If a Termination Upon a Change in Control
         occurs, ADAP shall pay monthly severance compensation to the Employee
         for a period ending 24 months after termination, or ending 12 months
         after termination if the Termination Upon a Change in Control (i) is
         initiated by the Employee as specified in Sections 1.7 (a) or 1.7 (b)
         and (ii) is by reason of a Transaction defined in Section 1.8 (c), in
         an aggregate amount determined by adding (a) the Employee's monthly
         base salary at the time of termination and (b) an amount equal to the
         monthly `Perk Pot' benefit to which the Employee was entitled as an
         officer of ADAP at the time of the Change in Control, and (c) the
         amount of $2400.00 in lieu of other employee benefits (including health
         benefits) the Employee was receiving from ADAP at the time of the
         Change in Control. If the Employee begins regular employment prior to
         the expiration of the aforesaid 24 month period, or 12 month period if
         the Termination Upon a Change in Control (i) is initiated by the
         Employee as specified in Sections 1.7 (a) or 1.7 (b) and (ii) is by
         reason of a Transaction defined in Section 1.8 (c), then the severance
         compensation provided for in this Section 4 shall end as of the later
         of (i) the date of such regular employment or (ii) the date which is
         one-half the number of months past he beginning of severance
         compensation provided for in this Section 4. Employee agrees to
         promptly notify ADAP of any such regular employment and to reimburse
         ADAP for any payments made by ADAP hereunder that cover any period
         during which the Employee was a regular employee.

5.       ACCELERATION OF OPTIONS. If a Termination Upon a Change in Control
         occurs, all stock options held by the Employee immediately before the
         termination will become fully vested and the stock options will be
         exercisable for the periods specified with respect to termination of
         employment in the plans covering the options.





6.       OTHER BENEFITS. Neither this Agreement nor the severance compensation
         that it provides for will reduce any amounts otherwise payable, or in
         any way diminish the Employee's rights as an employee of ADAP, whether
         existing now or hereafter, under any benefit, incentive, retirement,
         stock option, stock bonus or stock purchase plan or under any
         employment agreement or other plan or arrangement, provided, however,
         that the rights granted to the Employee and the obligations assumed by
         ADAP under this Agreement will be in lieu of, and not in addition to,
         any severance or other termination payments to which the Employee may
         be entitled under any employment agreement or other plan or arrangement
         that the Employee may now or hereafter have with ADAP.

7.       EMPLOYMENT STATUS. This Agreement does not constitute a contract of
         employment. It does not impose on ADAP any obligation to retain the
         Employee as an employee, to change the status of the Employee's
         employment or to change ADAP's policies regarding termination of
         employment.

8.       MISCELLANEOUS.

         a.       SEVERABILITY. If a court or other body of competent
                  jurisdiction determines that any provision of this Agreement
                  is invalid or unenforceable, that provision will be adjusted
                  rather than voided, if possible, so that it is enforceable to
                  the maximum extent possible, and all other provisions of the
                  Agreement will be deemed valid and enforceable to the fullest
                  extent possible.

         b.       WITHHOLDING. Compensation and benefits to the Employee under
                  this Agreement will be reduced by all federal, state, local
                  and other withholdings or similar taxes as required by
                  applicable law.

         c.       ARBITRATION. The parties will submit all controversies, claims
                  and matters of difference in any way related to this
                  Agreement, its performance or breach, to arbitration in San
                  Francisco, California, according to the rules and practices of
                  the American Arbitration Association from time to time in
                  effect. Any awards in such arbitration shall be final and
                  binding on all parties. The arbitrators shall allocate the
                  costs of the arbitration in such manner as they deem
                  equitable. The arbitrators may require the reimbursement of
                  all or a portion of the reasonable legal fees incurred by the
                  prevailing party in the arbitration proceeding and any legal
                  proceedings which are taken to enforce the arbitral award.

         d.       ENTIRE AGREEMENT: MODIFICATIONS. (i) This Agreement is the
                  entire agreement between the parties with respect to the
                  matters covered hereby, and may be amended, modified,
                  superseded or canceled, or its terms waived, only by a written
                  instrument executed by each party or, in the case of a waiver,
                  by the





                  party waiving compliance. (ii) Failure of a party at any
                  time to require performance of any provision of this
                  Agreement will not affect the right at a later time to
                  enforce the same. (iii) No waiver of a breach of this
                  Agreement, whether by conduct or otherwise, in any one or
                  more instances will be construed as a further or continuing
                  waiver of the breach or of any other term of this
                  Agreement. (iv) This Agreement shall inure to the benefit
                  of and be binding upon the successors and assigns of the
                  parties hereto.

         e.       APPLICABLE LAW. This Agreement will be construed under and
                  governed by the laws of the State of California without regard
                  or reference to the rules of conflicts of law that would
                  require the application of the laws of any other jurisdiction.

9.       Prior Severance Agreement. The Employee and ADAP (named "California
         Microwave, Inc." prior to April 29, 1999) acknowledge their prior
         severance agreement dated May 18, 1998. The Employee and ADAP hereby
         terminate such prior severance agreement as of the day immediately
         prior to the Effective Date of this Agreement, and neither the Employee
         nor ADAP shall have any rights or obligations thereunder.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.

ADAPTIVE BROADBAND CORPORATION


/s/ Frederick D. Lawrence
- --------------------------------             --------------------------------
Frederick D. Lawrence                        George Arena
Chairman and Chief Executive Officer         Executive Vice President,
                                             Operations/Product Management and
                                             Development

EX-10.17

                                                                 EXHIBIT 10-17

                         ADAPTIVE BROADBAND CORPORATION

                               SEVERANCE AGREEMENT


THIS SEVERANCE AGREEMENT is entered into as of July 2, 1999 (the "Effective
Date"), between ADAPTIVE BROADBAND CORPORATION, a Delaware corporation ("ADAP")
and Daniel Scharre (the "Employee").

                                     RECITAL

The Employee serves as ADAP's Executive Vice President and Chief Technology
Officer. ADAP and the Employee desire to set forth the terms of the Employee's
severance compensation if the Employee's employment is ended as a result of a
Change in Control. If a Change in Control occurs, the Employee and other key
employees may be more vulnerable to dismissal or other negative consequences
without regard to the quality of their past or prospective service. The Board of
Directors (the "Board") believes that it is in the best interest of ADAP and its
stockholders to ensure fair treatment to ADAP's key executives and to reduce any
adverse effects upon their performance that may be caused by the perceived risks
of a merger, acquisition or other major structural change.

The parties agree as follows:

1.       DEFINITIONS. For purposes of this Agreement, the following terms will
         have the meanings set forth below.

         1.1      A "CHANGE IN CONTROL" will occur if (a) any Person (as defined
                  in Section 2(a)(2) of the Securities Act of 1933, as amended)
                  other than ADAP, is or becomes the beneficial owner, directly
                  or indirectly (including by holding securities which are
                  exercisable for or convertible into shares of capital stock of
                  ADAP), of 30 % or more of the combined voting power of the
                  outstanding shares of capital stock of ADAP entitled to vote
                  generally in the election of directors ; or, (b) a Transaction
                  is consummated; or, (c) Continuing Directors cease to
                  constitute at least a majority of the Board: or, (d) a
                  majority of the ADAP's Outside Directors determine that a
                  Change in Control has occurred.




         1.2      "CONTINUING DIRECTORS" shall mean the directors of ADAP in
                  office on January 1, 1999 and any successor to any such
                  director whose nomination or selection was approved by a
                  majority of the directors in office at the time of the
                  director's nomination or selection and who is not an
                  "affiliate" or "associate" (as defined in Rule 12b-2 under the
                  Securities Exchange Act of 1934, as amended) of any person who
                  is the beneficial owner, directly or indirectly (including by
                  holding securities which are exercisable for or convertible
                  into shares of capital stock of ADAP), of 10% or more of the
                  combined voting power of the outstanding shares of capital
                  stock of ADAP entitled to vote generally in the election of
                  directors.

         1.3      "DISABILITY" means that the Employee has met the
                  qualifications for ADAP's long-term disability benefit.

         1.4      "GOOD REASON" includes any of the following:

                  (a)      the assignment to the Employee of duties inconsistent
                           with, or a substantial alteration in the nature or
                           status of, the Employee's responsibilities
                           immediately before a Change in Control;

                  (b)      a reduction in the Employee's salary or other
                           benefits as in effect on the date of a Change in
                           Control;

                  (c)      the Employee's relocation to a work site requiring an
                           increase in one-way commute from Employee's residence
                           of more than thirty-five (35) miles; or

                  (d)      a breach by ADAP of this Agreement if the breach has
                           not been cured within 30 days after written notice by
                           the Employee to ADAP setting forth with specificity
                           the nature of the breach.

         1.5      "OUTSIDE DIRECTOR" is a member of ADAP's Board of Directors
                  who is not, and who during the past six months was not, an
                  employee or officer of ADAP.

         1.6      "TERMINATION FOR CAUSE" is termination of the Employee's
                  employment as a result of (a) the Employee's willful
                  misconduct or the Employee's dishonesty towards, fraud upon,
                  crime against or




                  deliberate or attempted injury or bad faith action with
                  respect to ADAP; or (b) the Employee's conviction for a felony
                  (whether in connection with ADAP's affairs or otherwise).

         1.7      "TERMINATION UPON A CHANGE IN CONTROL" is (a) termination by
                  the Employee of Employee's employment for Good Reason within
                  one year after the occurrence of a Change in Control; or (b)
                  declination by the Employee of an offer of employment from
                  ADAP, or ADAP's successor, for Good Reason at the time of a
                  Change in Control if the Employee would not have been
                  permitted to remain in Employee's existing position following
                  such declination; or (c) termination by ADAP, or ADAP's
                  successor, of the Employee's employment within one year after
                  the occurrence of a Change in Control other than a Termination
                  for Cause or a termination resulting from the Employee's death
                  or Disability. The one-year period provided for herein shall
                  be six months in the event that a Change in Control arises out
                  of a Transaction defined in Section 1.8 (c) hereof.

         1.8      "TRANSACTION" is (a) a consolidation or merger of ADAP if the
                  shareholders of ADAP immediately before the merger or
                  consolidation do not immediately after the merger or
                  consolidation own equity securities of the surviving or
                  acquiring corporation or a parent party possessing 50% or more
                  of the voting power of the surviving or acquiring corporation
                  or parent party; (b) a sale, lease, exchange or other transfer
                  (in one transaction or a series of related transactions) of
                  50% or more of the assets of ADAP; or (c) the sale or other
                  disposition of business units within any 12-month period that
                  contributed for that 12-month period more than 45% of ADAP's
                  revenues. The Transaction requirements defined in parts (b)
                  and (c) above shall specifically exclude the sale of the
                  Information Systems division and its associated assets, and
                  the designated percentage thresholds for assets and revenues
                  stated herein (50% and 45%, respectively) shall be calculated
                  without including this division's assets or revenues in the
                  base.

2.       TERM. If no Change in Control has occurred, this Agreement will expire
         on December 31, 2000. If a Change in Control occurs prior to December
         31, 2000, this Agreement will continue in effect, and will not
         terminate, until either the Employee has received the severance
         compensation provided for below or has ceased to be eligible for such
         compensation by reason of there not having been a Termination Upon a
         Change in Control.

3.       TERMINATION UPON A CHANGE IN CONTROL. If a Termination Upon a Change in
         Control




         occurs, the Employee will immediately be paid all (a) accrued salary,
         (b) bonus compensation equal to the higher of (i) the annual EIP bonus
         based on ADAP's operating plan as approved by the Board during the
         first quarter of the fiscal year during which the Change in Control
         occurs, provided that the EVA growth for such fiscal year as of the
         most recently completed fiscal quarter is equal to that specified in
         the operating plan for such period, or (ii) the annual bonus or other
         equivalent incentive compensation payment established for the Employee
         by ADAP's successor and based on the operating plan of ADAP's successor
         at the beginning of the bonus's performance period during which
         Employee's termination occurs, (c) vested deferred compensation (other
         than pension plan or profit sharing plan benefits, which will be paid
         in accordance with the applicable plan), unless the Employee is
         eligible for a delayed payout as authorized by the plan, (d) benefits
         then due under any plans of ADAP or ADAP's successor in which the
         Employee is a participant, (e) accrued Personal Time Off pay or
         vacation pay and (f) reimbursements for any appropriate business
         expenses incurred by the Employee in connection with his duties, all to
         the date of termination ("Accrued Compensation"). Repayment of any
         existing company loans shall be extended if necessary to delay
         repayment until the beginning of regular employment during the period
         of severance compensation provided for in Section 4. The Employee will
         also be entitled to the severance compensation described in Section 4.

4.       SEVERANCE COMPENSATION. If a Termination Upon a Change in Control
         occurs, ADAP shall pay monthly severance compensation to the Employee
         for a period ending 24 months after termination, or ending 12 months
         after termination if the Termination Upon a Change in Control (i) is
         initiated by the Employee as specified in Sections 1.7 (a) or 1.7 (b)
         and (ii) is by reason of a Transaction defined in Section 1.8 (c), in
         an aggregate amount determined by adding (a) the Employee's monthly
         base salary at the time of termination and (b) an amount equal to the
         monthly `Perk Pot' benefit to which the Employee was entitled as an
         officer of ADAP at the time of the Change in Control, and (c) the
         amount of $2400.00 in lieu of other employee benefits (including health
         benefits) the Employee was receiving from ADAP at the time of the
         Change in Control. If the Employee begins regular employment prior to
         the expiration of the aforesaid 24 month period, or 12 month period if
         the Termination Upon a Change in Control (i) is initiated by the
         Employee as specified in Sections 1.7 (a) or 1.7 (b) and (ii) is by
         reason of a Transaction defined in Section 1.8 (c), then the severance
         compensation provided for in this Section 4 shall end as of the later
         of (i) the date of such regular employment or (ii) the date which is
         one-half the number of months past he beginning of severance
         compensation provided for in this Section 4. Employee agrees to
         promptly notify ADAP of any such regular employment and to reimburse
         ADAP for any payments made by ADAP hereunder that cover any period
         during which the Employee was a regular employee.

5.       ACCELERATION OF OPTIONS. If a Termination Upon a Change in Control
         occurs, all stock options held by the Employee immediately before the
         termination will become fully vested and the stock options will be
         exercisable for the periods specified with respect to termination of
         employment in the plans covering the options.




6.       OTHER BENEFITS. Neither this Agreement nor the severance compensation
         that it provides for will reduce any amounts otherwise payable, or in
         any way diminish the Employee's rights as an employee of ADAP, whether
         existing now or hereafter, under any benefit, incentive, retirement,
         stock option, stock bonus or stock purchase plan or under any
         employment agreement or other plan or arrangement, provided, however,
         that the rights granted to the Employee and the obligations assumed by
         ADAP under this Agreement will be in lieu of, and not in addition to,
         any severance or other termination payments to which the Employee may
         be entitled under any employment agreement or other plan or arrangement
         that the Employee may now or hereafter have with ADAP.

7.       EMPLOYMENT STATUS. This Agreement does not constitute a contract of
         employment. It does not impose on ADAP any obligation to retain the
         Employee as an employee, to change the status of the Employee's
         employment or to change ADAP's policies regarding termination of
         employment.

8.       MISCELLANEOUS.

         a.       SEVERABILITY. If a court or other body of competent
                  jurisdiction determines that any provision of this Agreement
                  is invalid or unenforceable, that provision will be adjusted
                  rather than voided, if possible, so that it is enforceable to
                  the maximum extent possible, and all other provisions of the
                  Agreement will be deemed valid and enforceable to the fullest
                  extent possible.

         b.       WITHHOLDING. Compensation and benefits to the Employee under
                  this Agreement will be reduced by all federal, state, local
                  and other withholdings or similar taxes as required by
                  applicable law.

         c.       ARBITRATION. The parties will submit all controversies, claims
                  and matters of difference in any way related to this
                  Agreement, its performance or breach, to arbitration in San
                  Francisco, California, according to the rules and practices of
                  the American Arbitration Association from time to time in
                  effect. Any awards in such arbitration shall be final and
                  binding on all parties. The arbitrators shall allocate the
                  costs of the arbitration in such manner as they deem
                  equitable. The arbitrators may require the reimbursement of
                  all or a portion of the reasonable legal fees incurred by the
                  prevailing party in the arbitration proceeding and any legal
                  proceedings which are taken to enforce the arbitral award.

         d.       ENTIRE AGREEMENT: MODIFICATIONS. (i) This Agreement is the
                  entire agreement between the parties with respect to the
                  matters covered hereby, and may be amended, modified,
                  superseded or canceled, or its terms waived, only by a written
                  instrument executed by each party or, in the case of a waiver,
                  by the




                  party waiving compliance. (ii) Failure of a party at any time
                  to require performance of any provision of this Agreement will
                  not affect the right at a later time to enforce the same.
                  (iii) No waiver of a breach of this Agreement, whether by
                  conduct or otherwise, in any one or more instances will be
                  construed as a further or continuing waiver of the breach or
                  of any other term of this Agreement. (iv) This Agreement shall
                  inure to the benefit of and be binding upon the successors and
                  assigns of the parties hereto.

         e.       APPLICABLE LAW. This Agreement will be construed under and
                  governed by the laws of the State of California without regard
                  or reference to the rules of conflicts of law that would
                  require the application of the laws of any other jurisdiction.

9.       Prior Severance Agreement. The Employee and ADAP (named "California
         Microwave, Inc." prior to April 29, 1999) acknowledge their prior
         severance agreement dated May 18, 1998. The Employee and ADAP hereby
         terminate such prior severance agreement as of the day immediately
         prior to the Effective Date of this Agreement, and neither the Employee
         nor ADAP shall have any rights or obligations thereunder.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.

ADAPTIVE BROADBAND CORPORATION


 /s/ Frederick D. Lawrence
- --------------------------------               --------------------------------
Frederick D. Lawrence                          Daniel Scharre
Chairman and Chief Executive Officer           Executive Vice President and
                                               Chief Technology Officer

EX-10.18

[LETTERHEAD]

                         ADAPTIVE BROADBAND CORPORATION

                               SEVERANCE AGREEMENT


THIS SEVERANCE AGREEMENT is entered into as of July 2, 1999 (the "Effective
Date"), between ADAPTIVE BROADBAND CORPORATION, a Delaware corporation ("ADAP")
and Kenneth Wees (the "Employee").

                                     RECITAL

The Employee serves as ADAP's Vice President, General Counsel. ADAP and the
Employee desire to set forth the terms of the Employee's severance compensation
if the Employee's employment is ended as a result of a Change in Control. If a
Change in Control occurs, the Employee and other key employees may be more
vulnerable to dismissal or other negative consequences without regard to the
quality of their past or prospective service. The Board of Directors (the
"Board") believes that it is in the best interest of ADAP and its stockholders
to ensure fair treatment to ADAP's key executives and to reduce any adverse
effects upon their performance that may be caused by the perceived risks of a
merger, acquisition or other major structural change.

The parties agree as follows:

1.     DEFINITIONS. For purposes of this Agreement, the following terms will
       have the meanings set forth below.

              1.1    A "CHANGE IN CONTROL" will occur if (a) any Person (as
                     defined in Section 2(a)(2) of the Securities Act of
                     1933, as amended) other than ADAP, is or becomes the
                     beneficial owner, directly or indirectly (including by
                     holding securities which are exercisable for or
                     convertible into shares of capital stock of ADAP), of 30
                     % or more of the combined voting power of the
                     outstanding shares of capital stock of ADAP entitled to
                     vote generally in the election of directors ; or, (b) a
                     Transaction is consummated; or, (c) Continuing Directors
                     cease to constitute at least a majority of the Board:
                     or, (d) a majority of the ADAP's Outside Directors
                     determine that a Change in Control has occurred.



              1.2    "CONTINUING DIRECTORS" shall mean the directors of ADAP
                     in office on January 1, 1999 and any successor to any
                     such director whose nomination or selection was approved
                     by a majority of the directors in office at the time of
                     the director's nomination or selection and who is not an
                     "affiliate" or "associate" (as defined in Rule 12b-2
                     under the Securities Exchange Act of 1934, as amended)
                     of any person who is the beneficial owner, directly or
                     indirectly (including by holding securities which are
                     exercisable for or convertible into shares of capital
                     stock of ADAP), of 10% or more of the combined voting
                     power of the outstanding shares of capital stock of ADAP
                     entitled to vote generally in the election of directors.

              1.3    "DISABILITY" means that the Employee has met the
                     qualifications for ADAP's long-term disability benefit.

              1.4    "GOOD REASON" includes any of the following:

                     (a)    the assignment to the Employee of duties
                            inconsistent with, or a substantial alteration in
                            the nature or status of, the Employee's
                            responsibilities immediately before a Change in
                            Control;

                     (b)    a reduction in the Employee's salary or other
                            benefits as in effect on the date of a Change in
                            Control;

                     (c)    the Employee's relocation to a work site requiring
                            an increase in one-way commute from Employee's
                            residence of more than thirty-five (35) miles; or

                     (d)    a breach by ADAP of this Agreement if the breach has
                            not been cured within 30 days after written notice
                            by the Employee to ADAP setting forth with
                            specificity the nature of the breach.

              1.5    "OUTSIDE DIRECTOR" is a member of ADAP's Board of Directors
                     who is not, and who during the past six months was not, an
                     employee or officer of ADAP.

              1.6    "TERMINATION FOR CAUSE" is termination of the Employee's
                     employment as a result of (a) the Employee's willful
                     misconduct or the Employee's dishonesty towards, fraud
                     upon, crime against or



                     deliberate or attempted injury or bad faith action with
                     respect to ADAP; or (b) the Employee's conviction for a
                     felony (whether in connection with ADAP's affairs or
                     otherwise).

              1.7   "TERMINATION UPON A CHANGE IN CONTROL" is (a) termination by
                    the Employee of Employee's employment for Good Reason within
                    one year after the occurrence of a Change in Control; or (b)
                    declination by the Employee of an offer of employment from
                    ADAP, or ADAP's successor, for Good Reason at the time of a
                    Change in Control if the Employee would not have been
                    permitted to remain in Employee's existing position
                    following such declination; or (c) termination by ADAP, or
                    ADAP's successor, of the Employee's employment within one
                    year after the occurrence of a Change in Control other than
                    a Termination for Cause or a termination resulting from the
                    Employee's death or Disability. The one-year period provided
                    for herein shall be six months in the event that a Change in
                    Control arises out of a Transaction defined in Section 1.8
                    (c) hereof.

              1.8   "TRANSACTION" is (a) a consolidation or merger of ADAP if
                    the shareholders of ADAP immediately before the merger or
                    consolidation do not immediately after the merger or
                    consolidation own equity securities of the surviving or
                    acquiring corporation or a parent party possessing 50% or
                    more of the voting power of the surviving or acquiring
                    corporation or parent party; (b) a sale, lease, exchange or
                    other transfer (in one transaction or a series of related
                    transactions) of 50% or more of the assets of ADAP; or (c)
                    the sale or other disposition of business units within any
                    12-month period that contributed for that 12-month period
                    more than 45% of ADAP's revenues. The Transaction
                    requirements defined in parts (b) and (c) above shall
                    specifically exclude the sale of the Information Systems
                    division and its associated assets, and the designated
                    percentage thresholds for assets and revenues stated herein
                    (50% and 45%, respectively) shall be calculated without
                    including this division's assets or revenues in the base.

2.     TERM. If no Change in Control has occurred, this Agreement will expire on
       December 31, 2000. If a Change in Control occurs prior to December 31,
       2000, this Agreement will continue in effect, and will not terminate,
       until either the Employee has received the severance compensation
       provided for below or has ceased to be eligible for such compensation by
       reason of there not having been a Termination Upon a Change in Control.

3.     TERMINATION UPON A CHANGE IN CONTROL. If a Termination Upon a Change in
       Control



       occurs, the Employee will immediately be paid all (a) accrued salary,
       (b) bonus compensation equal to the higher of (i) the annual EIP bonus
       based on ADAP's operating plan as approved by the Board during the
       first quarter of the fiscal year during which the Change in Control
       occurs, provided that the EVA growth for such fiscal year as of the
       most recently completed fiscal quarter is equal to that specified in
       the operating plan for such period, or (ii) the annual bonus or other
       equivalent incentive compensation payment established for the Employee
       by ADAP's successor and based on the operating plan of ADAP's
       successor at the beginning of the bonus's performance period during
       which Employee's termination occurs, (c) vested deferred compensation
       (other than pension plan or profit sharing plan benefits, which will
       be paid in accordance with the applicable plan), unless the Employee
       is eligible for a delayed payout as authorized by the plan, (d)
       benefits then due under any plans of ADAP or ADAP's successor in which
       the Employee is a participant, (e) accrued Personal Time Off pay or
       vacation pay and (f) reimbursements for any appropriate business
       expenses incurred by the Employee in connection with his duties, all
       to the date of termination ("Accrued Compensation"). Repayment of any
       existing company loans shall be extended if necessary to delay
       repayment until the beginning of regular employment during the period
       of severance compensation provided for in Section 4. The Employee will
       also be entitled to the severance compensation described in Section 4.

4.     SEVERANCE COMPENSATION. If a Termination Upon a Change in Control
       occurs, ADAP shall pay monthly severance compensation to the Employee
       for a period  ending 24 months after termination, or ending 12 months
       after termination if the Termination Upon a Change in Control (i) is
       initiated by the Employee as specified in Sections 1.7 (a) or 1.7 (b)
       and (ii) is by reason of a Transaction defined in Section 1.8 (c), in
       an aggregate amount determined by adding (a) the Employee's monthly
       base salary at the time of termination and (b) an amount equal to the
       monthly `Perk Pot' benefit to which the Employee was entitled as an
       officer of ADAP at the time of the Change in Control, and (c) the
       amount of $2400.00 in lieu of other employee benefits (including
       health benefits) the Employee was receiving from ADAP at the time of
       the Change in Control. If the Employee begins regular employment prior
       to the expiration of the aforesaid 24 month period, or 12 month period
       if the Termination Upon a Change in Control (i) is initiated by the
       Employee as specified in Sections 1.7 (a) or 1.7 (b) and (ii) is by
       reason of a Transaction defined in Section 1.8 (c), then the severance
       compensation provided for in this Section 4 shall end as of the later
       of (i) the date of such regular employment or (ii) the date which is
       one-half the number of months past he beginning of severance
       compensation provided for in this Section 4. Employee agrees to
       promptly notify ADAP of any such regular employment and to reimburse
       ADAP for any payments made by ADAP hereunder that cover any period
       during which the Employee was a regular employee.

5.     ACCELERATION OF OPTIONS. If a Termination Upon a Change in Control
       occurs, all stock options held by the Employee immediately before the
       termination will become fully vested and the stock options will be
       exercisable for the periods specified with respect to termination of
       employment in the plans covering the options.



6.     OTHER BENEFITS. Neither this Agreement nor the severance compensation
       that it provides for will reduce any amounts otherwise payable, or in any
       way diminish the Employee's rights as an employee of ADAP, whether
       existing now or hereafter, under any benefit, incentive, retirement,
       stock option, stock bonus or stock purchase plan or under any employment
       agreement or other plan or arrangement, provided, however, that the
       rights granted to the Employee and the obligations assumed by ADAP under
       this Agreement will be in lieu of, and not in addition to, any severance
       or other termination payments to which the Employee may be entitled under
       any employment agreement or other plan or arrangement that the Employee
       may now or hereafter have with ADAP.

7.     EMPLOYMENT STATUS. This Agreement does not constitute a contract of
       employment. It does not impose on ADAP any obligation to retain the
       Employee as an employee, to change the status of the Employee's
       employment or to change ADAP's policies regarding termination of
       employment.

8.     MISCELLANEOUS.

       a.     SEVERABILITY. If a court or other body of competent jurisdiction
              determines that any provision of this Agreement is invalid or
              unenforceable, that provision will be adjusted rather than voided,
              if possible, so that it is enforceable to the maximum extent
              possible, and all other provisions of the Agreement will be deemed
              valid and enforceable to the fullest extent possible.

       b.     WITHHOLDING. Compensation and benefits to the Employee under this
              Agreement will be reduced by all federal, state, local and other
              withholdings or similar taxes as required by applicable law.

       c.     ARBITRATION. The parties will submit all controversies, claims and
              matters of difference in any way related to this Agreement, its
              performance or breach, to arbitration in San Francisco,
              California, according to the rules and practices of the American
              Arbitration Association from time to time in effect. Any awards in
              such arbitration shall be final and binding on all parties. The
              arbitrators shall allocate the costs of the arbitration in such
              manner as they deem equitable. The arbitrators may require the
              reimbursement of all or a portion of the reasonable legal fees
              incurred by the prevailing party in the arbitration proceeding and
              any legal proceedings which are taken to enforce the arbitral
              award.

       d.     ENTIRE AGREEMENT: MODIFICATIONS. (i) This Agreement is the entire
              agreement between the parties with respect to the matters covered
              hereby, and may be amended, modified, superseded or canceled, or
              its terms waived, only by a written instrument executed by each
              party or, in the case of a waiver, by the



              party waiving compliance. (ii) Failure of a party at any time
              to require performance of any provision of this Agreement will
              not affect the right at a later time to enforce the same. (iii)
              No waiver of a breach of this Agreement, whether by conduct or
              otherwise, in any one or more instances will be construed as a
              further or continuing waiver of the breach or of any other term
              of this Agreement. (iv) This Agreement shall inure to the
              benefit of and be binding upon the successors and assigns of
              the parties hereto.

       e.     APPLICABLE LAW. This Agreement will be construed under and
              governed by the laws of the State of California without regard or
              reference to the rules of conflicts of law that would require the
              application of the laws of any other jurisdiction.

9.     Prior Severance Agreement. The Employee and ADAP (named "California
       Microwave, Inc." prior to April 29, 1999) acknowledge their prior
       severance agreement dated May 26, 1998. The Employee and ADAP hereby
       terminate such prior severance agreement as of the day immediately prior
       to the Effective Date of this Agreement, and neither the Employee nor
       ADAP shall have any rights or obligations thereunder.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.

ADAPTIVE BROADBAND CORPORATION


  /s/  Frederick D. Lawrence
- --------------------------------           --------------------------------
Frederick D. Lawrence                      Kenneth Wees
Chairman and Chief Executive Officer       Vice President, General Counsel

EX-10.19

                                                                  EXHIBIT 10.19

                                            Adaptive Broadband Corporation
                                            1143 Borregas Avenue
                                            Sunnyvale, CA  94089  USA
[LOGO]                                      (408) 732-4000  Fax: (408) 732-4244
                                            -----------------------------------



                                PROMISSORY NOTE


$150,000.00                                               Sunnyvale, California
                                                              September 9, 1999

         On or before July 16, 2001, for value received, the undersigned,
Frederick Lawrence (hereinafter referred to as "Maker"), promises to pay to
Adaptive Broadband Corporation ("Payee"), or to order, at the corporate
headquarters of Payee or at such other place as Payee may designate in writing,
the principal sum of $150,000.00 with interest on the unpaid principal balance
from the date of this Note until this Note is paid in full at the initial rate
of 4.87% per annum.

         Interest chargeable hereunder shall be calculated on the basis of a
360-day year for actual days elapsed with rate adjustments made monthly to avoid
income tax liability for the Maker. Interest shall accrue and shall be forgiven
on July 16, 2000 and July 16, 2001, providing that Payee has remained an
employee of Maker throughout the periods ending on these dates. A gross-up
payment to offset the estimated tax associated with such forgiveness shall be
made to Payee by Maker within 30 days of the date that forgiveness occurs. All
principal and interest due hereunder is payable in lawful money of the United
States of America.

         All unpaid principal and any unforgiven interest under this Note shall
be due and payable on the earlier of (1) July 16, 2001 or (2) if Maker
voluntarily terminates his employment or is terminated for cause, 90 days
following the date of such termination. However, in the event of a Change in
Control, as that term is defined in Payee's employment offer letter dated July
16, 1997, all unpaid principal and any unforgiven interest under this Note shall
be forgiven and gross-up payment to offset the estimated tax associated with
such forgiveness shall be made to Payee by Maker within 30 days of the date that
forgiveness occurs.

         In the event any dispute arises with regard to this Note, the
prevailing party shall be entitled to recovery of reasonable attorney fees.

         This Note shall be governed by, construed under and enforced in
accordance with the laws of the State of California.



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




                                            Frederick Lawrence




                                                                  [LOGO]

                                                          Interoffice Memorandum
                                                          ----------------------

DATE: September 22, 1999

TO: Fred Lawrence

CC: Personnel File of Fred Lawrence

FROM: Bob Parrish

- --------------------------------------------------------------------------------
SUBJECT:  OUTSTANDING LOAN OF $150,000
- --------------------------------------------------------------------------------

On August 18, 1999 the Board of Directors validated the recommendation of the
Compensation Committee to extend the term of the loan made to you at the time
of your hire in the amount of $150,000. The principle amount will now be due
and payable on or before July 16, 2001, as described in the attached note. As
with the previous loan, interest will be forgiven annually providing that you
remain an employee and a gross-up payment to offset the estimated tax
associated with that forgiveness will be made within 30 days of the date that
forgiveness occurs.

The Board further agreed to forgive the repayment altogether should there be
a change in control prior to the new repayment date, consistent with the
provisions of your recently forgiven loan having a principle amount of
$316,667.

If you agree with the revised provisions, please sign the attached note and
return to me at your earliest convenience.

EX-10.26

                                                                   EXHIBIT 10.26


                                     LEASE
                                      BY
                YVON CORMIER, TRUSTEE OF Y-CEE INVESTMENT TRUST
                                      TO
                        ADAPTIVE BROADBAND CORPORATION


                               TABLE OF CONTENTS




                                                                       Page
                                                                 
1.   Identifications ....................................................3
2.   Lease; the Premises ................................................3
3.   Tenant Fit Up; Costs and Reimbursement .............................5
4.   Term ...............................................................7
5.   Use of the Premises; Licenses and Permits .........................10
6.   Basic Rent; Additional Rent .......................................11
7.   Taxes .............................................................16
8.   Insurance; Waivers of Subrogation .................................16
9.   Utilities .........................................................19
10.  Repairs ...........................................................20
11.  Compliance with Laws and Regulations ..............................23
12.  Alterations by Tenant .............................................24
13.  Landlord's Access .................................................25
14.  Indemnities .......................................................26
15.  Casualty Damage ...................................................27
16.  Condemnation ......................................................30
17.  Landlord's Covenant of Quiet Enjoyment;
     Title .............................................................33
18.  Tenant's Obligation to Quit .......................................33
19.  Transfers of Tenant's Interest ....................................34
20.  Transfers of Landlord's Interest ..................................36


                                      -1-



21.  Mortgagees' Rights ................................................37
22.  Tenant's Default; Landlord's Remedies .............................40
23.  Remedies Cumulative; Waivers; .....................................44
24.  Notices ...........................................................44
25.  Recording .........................................................45
26.  Estoppel Certificates .............................................46
27.  Hazardous Materials and Compliance with
       Environmental Laws ..............................................46
28.  Other Utilities....................................................49
29.  Option to Extend Term / Additional Space ..........................49
30.  Security Deposit ..................................................53
31.  Brokerage .........................................................53
32.  Additional Provisions .............................................53
33.  Personal Property of Tenant .......................................55
34.  Delays - Force Majeure.............................................55
35.  Attorney's Fees ...................................................56
36.  Accord and Satisfaction ...........................................56
37.  Financing Agreements ..............................................56
38.  Bind and Inure; Limited Liability of Landlord .....................56
39.  Authority .........................................................58
40.  Captions ..........................................................58
41.  Integration .......................................................58
42.  Severability; Choice of Law, and Forum ............................58

     Exhibit A    -   Floor Plan

     Exhibit B    -   Landlord's Work for Tenant Fit-Up

     Exhibit C    -   Interior Specifications for Landlord's Build-Out
                      and General Work Letter




                                      -2-



                                     LEASE

1.       IDENTIFICATIONS:

         This LEASE made as of the 7th Day of May, 1999, by and between the
         following parties:

                                 THE PARTIES:

         (a)      The name and address of the Landlord is:
                  Yvon Cormier, Trustee of Y-CEE INVESTMENT TRUST, u/d/t dated
                  January 12, 1979 and recorded at Middlesex County Northern
                  Registry of Deeds at Book 2348, Page 327, as Amended
                  59 Chandler Circle
                  Andover, Massachusetts 01810

         (b)      The name and address of the Tenant is:
                  Adaptive Broadband Corporation
                  1143 Borregas Avenue
                  Sunnyvale, California 94089

2.       LEASE; THE PREMISES:

         In consideration of the Basic Rent, Additional Rent, and other
payments and covenants of the Tenant hereinafter set forth, and upon the
following terms and conditions, it being the intent of the parties hereto
that this instrument be deemed a "triple net lease" except as hereinafter
provided, the Landlord hereby leases to the Tenant and the Tenant hereby
leases from the Landlord certain premises comprising 49,100 sq. ft. the total
rentable area in the Building ("the Premises"), known and otherwise numbered
Building 6 of Billerica Office Park ("Building"), the same more definitively
described in a Floor Plan attached hereto as Exhibit A ("Floor Plan"), on a
parcel of land (the "Property") in Billerica Office Park, so-called, in the
Towns of


                                      -3-



Billerica and Tewksbury, Middlesex County, Massachusetts, together with the
right to use other improvements constructed on the Property, including the
exclusive right to use 147 parking areas adjacent to the Building based upon
a ratio of 3 spaces per 1,000 rentable sq. ft. in the Premises. In addition,
the Tenant shall be allowed to use non-designated parking spaces until such
time as they are assigned by the Landlord to future Tenants at the building.

         The Premises are leased together with the right, in common with the
Landlord and all others claiming under the Landlord or otherwise from time to
time lawfully entitled thereto, to use Billerica Park Drive (together with
any additional and substitute ways now or hereafter laid out in Billerica
Park for common use, the "Common Drives") for all purposes for which public
ways may now or hereafter be used in the Towns of Billerica and Tewksbury.
The Landlord reserves the rights to relocate the Common Drives and to
install, maintain, repair, replace and grant easements for utility lines,
pipes and conduits in the Common Drives and across the Property for the
benefit of other properties, all without any measurable interference with or,
any interruption of the use and enjoyment of the Premises or access to the
Premises by the Tenant as contemplated hereby subject to the same conditions
as Landlord's right to relocate common drives and place and grant easements
for utility lines. Landlord further reserves the right at any time to submit
all or a portion of the Common Drives to a declaration of common easements
for the benefit of the Property and the other properties in Billerica Park
serviced by the Common Drives, in which event the Tenant shall, if (i) all
such other properties in Billerica Park are afforded substantially the same
rights and benefits in the Common Drives, (ii) the expenses of


                                      -4-



maintenance, landscaping, plowing and sanding are fairly and reasonably
allocated among the Property and such other properties and (iii) such
declaration shall not adversely affect the rights of Tenant hereunder
(specifically including the Tenant's exclusive rights to use the 147 parking
areas adjacent to the Building) be bound by the same and shall pay as
Additional Rent hereunder its pro-rata (as defined hereafter) share of such
expenses as are from time to time allocable to the Property under such
declaration, provided those charges are typical of those assessed to similar
properties at Billerica Park. The Tenant's Pro-Rata Share of expenses as
delineated aforesaid shall be based on a fraction the numerator of which
shall be the total amount of square feet leased to the Tenant at the Building
and the denominator of which shall be the aggregate total of rentable square
feet in Building 6.

3.       TENANT FIT-UP; COSTS AND REIMBURSEMENT:

         Upon execution of this Lease, the Landlord shall, at its sole cost
and expense, complete a fit-up of the interior portion of the Premises in
order to accommodate the Tenant's proposed business operations according to
those Plans and Specifications attached hereto ("Landlord's Work") marked
Exhibit "B" and Interior Specifications for Landlord's Build-Out and General
Work Letter marked Exhibit "C" and which by execution hereafter, the Tenant
represents it has reviewed and approved. Should the Tenant request any
additional work beyond the scope of the fit-up set forth on either Exhibit "B"
or Exhibit "C", by means of Change Order or otherwise, the Tenant shall be
obligated to the pay the Landlord for the same according to the terms and
conditions of a written proposal which shall be executed by the parties prior
to commencement of the additional work. In connection therewith, the amount
for such


                                      -5-



additional work shall be reimbursed to the Landlord, with interest added
thereto at the rate of 9% per annum, payable in equal monthly installments
over the Base Term of the Lease. Such monthly payments shall be deemed
"Additional Rent" in the same manner as those charges described in Section 6
hereafter.

         All such plans and specifications, the cost of which shall likewise
be borne by the Landlord, shall be drawn in accordance with good engineering
practices and applicable laws and building codes. In addition thereto, the
Landlord shall assure that all work done at the Building and Premises is
completed in a good and workmanlike manner in compliance with all laws,
regulations and orders of government authorities and that only new first
class materials are used by any contractor(s) hired by it to perform the
Landlord's Work as more particularly described on Exhibit B and the Plans and
Specifications referred to herein.

         Furthermore, and in conjunction with the Landlord's Work, it shall
be the sole and exclusive responsibility of the Landlord to obtain and pay
the cost of any permits necessary for it to begin and complete work as may be
required by the Towns of either Billerica and/or Tewksbury and, likewise, it
shall be the sole and exclusive responsibility of the Landlord to assure that
all final inspections which may be required by either municipality take place
in a timely fashion so as not delay issuance of any occupancy permit which
might be required. Landlord will obtain an unconditional certificate of
occupancy permit from the Town of Billerica and Tewksbury, as applicable, for
the space by the Commencement Date. In connection therewith, the Tenant, by
execution hereafter, acknowledges that no Certificate of Occupancy can issue
until


                                      -6-



the Tenant has completed its fit-up work.

         Landlord shall, at its sole cost and expense, and within ten days
after written notice, commence to repair and replace, as necessary, all
materials, workmanship, fixtures or equipment placed by Landlord in the
Premises which shall prove to be defective as to materials or workmanship
during the period of twelve (12) months after the Commencement Date (or
12 months after installation if after the Commencement Date) after obtaining
any consent of any Mortgagee or other person or entity from whom such consent
may be required.

4.       TERM:

         The Term of this Lease (the "Term"), shall be five (5) years
effective from the Commencement Date ("Commencement Date") defined herein and
shall end on that date which is the last day of the sixtieth (60th) full
calendar month following the Commencement Date (the "Expiration Date") unless
extended or sooner terminated in accordance with the terms and provisions of
this Lease

         (i) Except as otherwise provided in clause (ii) hereinbelow, the
"Commencement Date" shall be August 1, 1999. The "Substantial Completion
Date" shall be the day on which (a) Landlord has obtained and delivered to
Tenant a valid, permanent certificate of use and occupancy from the
applicable governmental authorities for the Tenant's occupancy of the
Premises, (b) the Landlord's Work has been completed by Landlord as aforesaid
except for minor items of work (and, if applicable, adjustments of equipment
and fixtures) that can be completed after occupancy has been taken by Tenant
without causing undue interference with the operation of Tenant's business in
the Premises (i.e., so-called "Punch List Items"), and (c) the Premises are
vacant, free of debris and


                                      -7-



broom-clean. Landlord shall promptly complete all Punch List Items and, in
any event, within thirty (30) days after the Commencement Date.
Notwithstanding the foregoing to the contrary, the following items must be
completed prior to the Substantial Completion Date:

                  (1) carpets shall have been laid and installed where
specified on Plan;

                  (2) all exterior and all other doors shall have been
installed, with all locks in working order and all keys delivered to Tenant;

                  (3) all painting shall have been completed (except
touch-up);

                  (4) all electric facilities, plumbing and sprinklers shall
have been installed and working;

                  (5) all HVAC, including, without limitation, any
supplemental HVAC, shall be installed and initially balanced and in working
order. The Landlord shall warrant for one year the workmanship and the
materials related to the HVAC system installed and shall be responsible for
any required repairs to the HVAC system during such warranty period. However,
thereafter, the Tenant shall be solely and exclusively liable for normal
maintenance and repair of the HVAC system, including but not limited to
obtaining a service contract.

                  (6) all of Tenant's signs and directory listings shall be
installed by the Landlord in the foyer/lobby but not the exterior of the
Building; in addition, the Landlord shall not be required to install any sign
which contains a Logo of the Tenant. Installation of any exterior sign shall
be subject to compliance by the Tenant to any and all applicable zoning
ordinance or by-law promulgated by either the Towns of Billerica or Tewksbury
related to the same, if any there may be.


                                      -8-



                  "Year" or "Years" shall mean each twelve (12) month period
beginning on the first day of the calendar month immediately following the
month in which the Commencement Date occurs and each twelve (12) month period
thereafter, beginning on the anniversary of the first day of the calendar
month immediately following the month in which the Commencement Date occurs,
provided, however, the first "Year" shall include the number of days from the
Commencement Date through the last day of the calendar month in which the
Commencement Date occurs.

         (ii) Notice of Substantial Completion Date. Landlord shall deliver
to Tenant a written notice of the anticipated Substantial Completion Date at
least fifteen (15) days prior to the actual Substantial Completion Date (the
"15-Day Notice"). In no event shall the Commencement Date occur before the
date contained in the 15-Day Notice. If, in Landlord's reasonable judgment,
it appears that the Landlord's Work will not be completed on or before the
date specified in the 15-Day Notice, Landlord shall deliver to Tenant
additional written notice(s) (the "Subsequent Notice(s)") of the anticipated
Substantial Completion Date (the "Revised Date(s)"). If a Subsequent Notice
is required to be given hereunder, in no event will the Commencement Date
occur until the expiration of ten (10) business days after the Revised
Date(s). In the event that the Substantial Completion Date shall occur after
August 1, 1999, then the Substantial Completion Date shall be the
Commencement Date.

              By execution hereafter, and subject to the provisions of
Section 34, and provided this Lease is executed by both parties on or before
May 7, 1999, the Landlord represents that it will use its best efforts to
complete all work so that the Substantial Completion Date is no later


                                      -9-



than July 22, 1999. Provided that the Tenant has not interfered with the
Landlord so as to have caused a delay for the Landlord in completing its
build-out for the Tenant, the Landlord agrees that if the Substantial
Completion Date shall not have occurred by July 22, 1999, the Commencement
Date shall thereupon become August 22, 1999.

         (iii) Possession for Tenant Move-In Work. Landlord shall ensure,
upon written notice to it from the Tenant, that the Tenant and its
contractors have access to the Building and the Premises prior to the
Commencement Date at no charge for the purpose of installing special
equipment, furniture, telephone equipment, computer equipment, cables and the
like, provided that such activities by Tenant shall be conducted in such a
manner so as to not unreasonably interfere with the Landlord's Work.

5.       USE OF THE PREMISES; LICENSES AND PERMITS:

         The Tenant shall use the Premises only for offices, general
engineering, research and development, light manufacturing, warehousing,
(collectively "Permitted Uses") and such other uses as are or may be
permitted by the Zoning By-Laws for the towns of Billerica and Tewksbury all
to the extent now and hereafter from time to time permitted under applicable
laws, by-laws, ordinances, codes, rules, regulations, orders and other lawful
requirements of governmental bodies having jurisdiction. The Landlord
represents that as of the date of this Lease, and covenants that as of the
Substantial Completion Date, the Premises may be used for all Permitted Uses
under the Billerica and Tewksbury Zoning By-laws applicable to the Building
and that the Premises, Property and Building conform with all applicable
laws, codes, by-laws, rules, ordinances, statutes and regulations including
but not


                                      -10-



limited to the Americans With Disabilities Act. The Tenant, its subtenants,
licensees, invitees and any other users of the Premises shall apply in their own
names for and obtain at their own expense any and all licenses, permits and
other approvals which may be required from such governmental bodies solely in
connection with operation of the Tenant's business at the Premises during the
Term.

6.       BASIC RENT; ADDITIONAL RENT:

         Effective with the Commencement Date, and for the period August 1,
1999 through July 31, 2002 of this Lease as defined by Section 4 above
(except as provided for in the second paragraph of this clause), the Tenant
shall pay to the Landlord as Basic Rent, the sum of Three Hundred Forty Three
Thousand Seven Hundred and 00/100 ($343,700.00) Dollars per year in monthly
installments of Twenty Eight Thousand Six Hundred Forty-One and 67/100
(28,641.67) Dollars, the same calculated at the rate of $7.00 per square foot
for 49,100 rentable square feet of area at the Building more particularly
described on Exhibit A.

         For the period August 1, 2002 through July 31, 2004 of this Lease as
defined by Section 4 above (except as provided for in the second paragraph of
this clause), the Tenant shall pay to the Landlord as Basic Rent, the sum of
Three Hundred Sixty-Eight Thousand Two Hundred Fifty and 00/100 ($368,250.00)
Dollars per year in monthly installments of Thirty Thousand Six Hundred
Eighty-Seven and 50/100 ($30,687.50) Dollars, the same calculated at the rate
of $7.50 per square foot for 49,100 rentable square feet of area at the
Building more particularly described on Exhibit A.

         As more specifically set forth hereafter, each yearly amount of Basic
Rent is to be Triple Net. Basic Rent shall be payable without

                                    -11-



counterclaim, deduction, defense setoff or abatement, except as otherwise
expressly provided herein, in advance on the first day of each month in equal
installments (except in the case of a partial month at the beginning of the
Term, in which event the Tenant shall pay the appropriate pro rata proportion of
such installment) to the Landlord at the address set forth above or to such
other party or such other address as the Landlord may thereafter from time to
time specify by notice to the Tenant. If the name or address of the party
entitled to receive Basic Rent and Additional Rent shall be changed, the Tenant
may, until ten (10) days after receipt of such notice or such change, continue
to pay Basic Rent and Additional Rent to the party and the address to which, and
in the manner in which, the preceding installment of Basic Rent was paid.

         To the end this Lease is Triple Net, Basic Rent shall be received by
the Landlord net of all costs and expenses related to the Premises other than as
expressly set forth herein. The Tenant agrees to pay, for that area leased to it
and exclusively dedicated to its use, its proportionate share (initially 49.1%
except in the case of real estate taxes for which the Tenant shall pay 59.9% of
the tax bill issued from the town of Tewksbury) of leased space, of real estate
taxes and insurance premiums of the Landlord for the Building. In addition, the
Tenant shall pay to the Landlord the fixed sum of $.75 per square foot of space
in the Premises, which totals $36,825.00 per year payable in monthly
installments of $3,068.75, to cover Tenant's pro rata share of the costs (except
those of a capital nature) of routine repairs and maintenance, landscaping,
quarterly window washing, costs of snow plowing and liability insurance premiums
for the parking areas and other

                                    -12-



exterior common areas of Billerica Park. The Additional Rent shall constitute
Tenant's full and complete liability for all operating and capital costs in
anyway associated with the Premises, Building and Property other than "Tenant's
Share of Water and Sewer Charges" described in Paragraph 9 hereinbelow. The
Additional Rent described above shall be paid to the Landlord in the same manner
as Basic Rent. The Landlord shall in each case, at the time of demand for
payment, provide the Tenant with evidence of the payment for any such charges,
costs, expenses and obligations. In connection with the Tenant's obligation to
pay Additional Rent, the Landlord shall provide an annual statement to the
Tenant prepared in accordance with generally accepted accounting principles and
certified by an officer of the Landlord no later than ninety days after the end
of each year. Notwithstanding anything in this Lease to the contrary, the Tenant
shall have no liability for the Landlord's mortgage debt service or other
financing costs, any brokerage expenses of the Landlord or any repairs which are
the obligation of the Landlord under Paragraph 10 or any capital improvements or
assessments except as otherwise provided in this Lease.

         Specifically excluded from Additional Rent and the responsibility of
the Landlord are:

         1. The cost of correcting defects (other than defects in Tenant's
work), except conditions (not occasioned by construction defects) resulting from
ordinary wear and tear shall not be deemed defects for this purpose;

         2. Salaries of officers and executives of the Landlord whether or not
connected with the Operation of the Property;

         3. The initial cost of tools and equipment used in the Operation

                                    -13-





of the Property;

         4. Depreciation;

         5. Expenses relating to the construction of the initial leasehold
improvement for the Tenant;

         6. Interest, fees or principal on indebtedness and any ground lease
rents;

         7. Expenses for which the Landlord, by the terms of this Lease or any
other lease, makes a separate charge;

         8. Real estate taxes, other than as provided for by the Lease;

         9. The cost of any electric current (subject to Section 9 hereafter)
furnished to Tenant and other Building tenants exclusive of (i) the lobby
which is to be a common area and (ii) outside lighting for the parking lot;

         10. The cost of any services or systems for that portion of the
Building occupied by the Landlord or affiliates of the Landlord (exclusive of
space occupied by the Landlord or affiliates of the Landlord in connection with
the Operation of the Building) and which are not provided generally to other
tenants in the Building;

         11. Leasing fees or commissions, advertising and promotional expenses,
and legal fees incurred in connection with leasing space in the Building;

         12. Costs incurred in performing work or furnishing services for any
tenant (including Tenant), whether at such tenant's or Landlord's expense, to
the extent that such work or service is in excess of any work or service that
Landlord is obligated to furnish to Tenant at Landlord's expense (e.g., if
Landlord agrees to provide extra cleaning to another tenant, the cost thereof
would be excluded since Landlord is

                                    -14-



not obligated to furnish extra cleaning to Tenant);

         13. The cost of repairs or replacements incurred by reason of fire or
other casualty or condemnation;

         14. Association fees and dues;

         15. Expenses for painting and redecorating for other tenants;

         16. Legal expenses in enforcing the terms of the Lease for any other
tenant;

         17. Penalties and interest for late payment of real estate taxes, water
and sewer charges, or any other obligation of Landlord;

         18. Water and sewer charges to any tenant on a direct meter basis which
are paid by the tenant;

         19. The cost of any item or service to the extent to which Landlord is
entitled to be reimbursed or compensated by insurance, any tenant, or any third
party, or would have been entitled to reimbursement or compensation if Landlord
maintained the insurance which it is required to maintain hereunder;

         20. Expenses due to Landlord's default under any lease or other
agreement relating to the Building, the Lot, or the Premises, and

         21. All other items that, under generally accepted accounting
principles, are properly classified as capital expenditures, except as expressly
otherwise provided in this Lease; and

         22. All other items not expressly included in Additional Rent under
this Lease.

         The Tenant shall pay to the Landlord upon demand as Additional Rent
interest on any payments of Basic Rent or Additional Rent not paid within 10
[ten] days after Landlord's notice that the same are due at a rate (herein
called the "Lease Interest Rate") equal to five percent

                                    -15-



(5%) per annum computed from the date such payment was due until such payment is
made, each of such payment(s) of interest being payable as Additional Rent with
the payment of Basic Rent next coming due. Notwithstanding the foregoing, if no
such demand is made in writing delivered in hand to the Tenant within the period
of thirty (30) days following the date any payment of Basic Rent or Additional
Rent was due, the Landlord shall be deemed to have waived the right to be paid
any interest on such payment in respect of periods prior to such demand.

         Rent for any partial month shall be equitably pro-rated. Rent shall be
paid by check mailed by the first business day of each month to the Landlord at
the above address or any other address provided to Tenant by Landlord in
accordance with this Lease.

7.       REAL ESTATE TAXES: See Section 6.

8.       INSURANCE; WAIVERS OF SUBROGATION:

         The Landlord shall carry appropriate general liability insurance as
well as property and casualty insurance, including without limitation fire,
extended coverage and "all-risk" or ISO Special Form, excluding earthquake and
flood, on the Premises, Building, Property and Improvements with the same limits
of coverage as set forth for the Tenant herein. The Landlord shall further
obtain and maintain insurance for the Building and Improvements, including a
boiler, machinery, energy systems policy and a sprinkler leakage policy, with
full replacement cost as determined by its Insurer.

         Tenant shall, at its own cost and expense, obtain, prior to the
commencement of the Term, and throughout the Term shall maintain, with companies
qualified to do business in Massachusetts and reasonably acceptable to the
Landlord and to any Mortgagee(s), for the benefit as

                                    -16-



named insureds of the Landlord, the Tenant and any Mortgagees as their
respective interests may appear, provided, however, that Tenant shall be allowed
to designate Landlord and Mortgagee as Additional Insureds as their respective
interests may appear on such policy(ies) instead of designating each as a
specific Additional Named Insured on such policy, the following:

         (i) comprehensive general liability and property insurance (with
contractual liability rider) against claims for bodily injury, death or property
damage occurring to, upon or about the Premises in limits of $2,000,000.00 per
occurrence for bodily injury or death and property damage or such higher limits
as may result from the operation of clause (iii) below, the risk of loss to all
all Tenant's contents of, and personal property and trade fixtures located in,
the Premises being upon the Tenant, and the Landlord having no liability with
respect thereto;

         (ii) so called "property" or "casualty" insurance, with losses payable
to the Landlord or any first Mortgagee, against loss or damage to the presently
existing (prior to Tenant's occupation) interior Improvements and to any other
buildings, structures and improvements from time to time constituting a part of
the Premises, such as may result from fire and such other casualties as are
normally covered by "extended coverage" (to wit: the same fire, extended and
all-risk coverage as required for insurance to be carried by the Landlord)
endorsements, such casualty or property insurance to be in an amount equal to
the replacement cost of the Improvements and any other buildings and structures
or improvements from time to time constituting part of the Premises. Replacement
cost shall be redetermined as frequently as the Landlord or any Mortgagee may
from time to time

                                    -17-



reasonably request; and

         (iii) at the written request of the Landlord, such other insurance
coverages and such additional coverage amounts as any Mortgagee may reasonably
require the Landlord to obtain provided such coverage is customary and usual
with respect to commercial buildings similar to the subject property.

         At the commencement of the Term and thereafter not less than ten (10)
days prior to the expiration dates of the policies theretofore furnished
originals or duplicates or certificates (contractually binding upon the insurer
and not merely informational) thereof issued by the insurers, shall be delivered
to the Landlord. All such policies and certificates shall provide that they are
non-cancellable without at least thirty (30) days' prior written notice to the
Landlord and any Mortgagees. Tenant shall have the right to substitute insurance
policies of equal coverage.

         If either the Landlord or the Tenant is the party seeking release under
the next paragraph, the provisions of the following clause shall apply only to
the extent that the Landlord or the Tenant (as applicable) is not in default
under the terms and conditions of this Lease at the time at which it (the
Landlord or the Tenant) seeks a release under the following provisions.

         The Landlord and the Tenant each hereby release the other from any
liability for any loss or damage to the Premises or other property and for
injury to or death of persons occurring on or about the Premises or in any
manner growing out of or connected with the Tenant's use and occupation of the
Premises or the condition thereof, whether or not caused by the negligence or
other fault of the Landlord, the Tenant or

                                    -18-



other respective agents, employees, subtenants, licensees, invitees or
assignees; provided, however, that this release (i) shall apply notwithstanding
the indemnities set forth in Paragraph 14, but only to the extent that such loss
or damage to the Premises or other property or injury to or death of persons is
covered by insurance which protects the Landlord or the Tenant or both of them
as the case may be; (ii) shall not be construed to impose any other or greater
liability upon either the Landlord or the Tenant than would have existed in the
absence hereof; and (iii) shall be in effect only to the extent and so long as
the applicable insurance policies provide that this release shall not affect the
right of the insureds to recover under such policies, which clauses shall be
obtained by the parties hereto whenever available.

9.       UTILITIES:

         The Landlord represents and warrants and covenants that all building
systems at the Premises, Building and Property are in good condition and repair,
without defects, at the time of commencement of the Lease and the Substantial
Completion Date; the Premises, Building and Property contain in-place utilities
for the Tenant to operate its business which the Tenant has inspected; and all
permits required therefor have been obtained and are and will remain throughout
the term and any option period in full force and effect. Should the Landlord not
comply with its duties set forth in the preceding sentence, the Tenant shall
have the right to issue Notice to the Landlord, setting forth a Claim of Default
and upon receipt of such Notice, the Landlord shall have 30 days to cure the
alleged Default, failing which, the Tenant shall be allowed to enforce similar
remedies, as set forth in Section 10 hereafter. In connection with the in-place
utilities, the Tenant shall

                                    -19-



be solely liable and responsible for installation of such other utilities which
may be needed to operate its business should the same not be in existence on the
date of execution of this Lease. The Tenant expressly acknowledges that its
intended use of the Premises is for commercial purposes and the Landlord shall
have no duty to furnish the Tenant with utility services of any kind, except as
to water, sewer, gas, telephone [subject to telephone company], electric and
HVAC services. The Tenant shall pay a pro-rata share, 49.1%, of the water and
sewer charges billed to the Landlord from the Town of Billerica, as assessed
against Building 6. Landlord will ensure that on or before the substantial
Completion Date, separate gas and electrical meters shall be provided for the
Tenant and the Tenant in turn agrees to be billed directly by the applicable
utility company.

10.      REPAIRS:

         The Landlord shall, at its own cost and expense, and during the term of
the Lease, maintain and make all necessary repairs to the roof, foundations,
beams, girders, and other structural elements of the Building, mullions,
exterior runoff water and related drainage systems, all exterior areas,
including Parking Lots and walkways [subject to the Tenant paying for those
ordinary repairs as Additional Rent per the terms contained on Page 11 and Page
12 of the Lease], all other Common Areas and facilities [subject to assessment
of the same as an element of Additional Rent] and exterior walls of the Premises
only (exclusive of signs which may be installed by the Tenant). However, the
Landlord shall have no obligation to repair any damage resulting directly from
negligent acts of the Tenant, its agents, employees, contractors, and invitees
unless covered by Landlord's insurance policy.

                                    -20-


         In connection herewith, the Landlord represents (i) The property shall
be maintained consistent with generally accepted practices associated with a
first class research and development building (ii) it shall provide snow plowing
for the parking areas (iii) it shall remove snow and ice from walkways (iv) it
shall provide landscaping services so that the property is maintained in a neat
and clean condition. The same, however, shall be deemed a common area
maintenance charge subject to inclusion as Additional Rent.

         From and after the commencement of and during the Term, the Tenant
shall, at its own cost and expense: make all other repairs, non-structural,
interior and exterior, necessary to keep the Premises, including all electrical
other than common systems, mechanical, heating, ventilating and air conditioning
(including any roof top unit), plumbing (other than in common areas) and other
building systems [excluding sewer and gas systems and all capital repairs and
replacements] serving the Premises, in as good condition, order and repair as
the same are at the commencement of the Term or thereafter may be put,
reasonable wear and use, damage by fire or other casualty caused by the Landlord
and repairs which are expressly the obligation of the Landlord hereunder only
excepted (it being understood, however, that the foregoing exception for
reasonable wear and use shall not relieve the Tenant from the obligation to keep
the Premises in good order, repair and condition).

         If the Landlord shall fail to cure any default by the Landlord in its
obligations under this Paragraph 10, thirty (30) days after notice from the
Tenant to the Landlord of such default (or, in the event of imminent danger of
injury to persons or damage to property, after telephone notice of such default)
or to commence such cure and


                                       -21-


diligently prosecute the same to completion, in the absence of any Terminable
Default on the part of the Tenant hereunder, the Tenant may, at its option, cure
such default for the Landlord's account as was specified in such notice, in
which event the Tenant may offset against the Basic Rent next accruing under
this Lease, cumulatively until exhausted, the reasonable costs and expenses it
can demonstrate were incurred in good faith in the cure of such default plus
interest thereon at the Lease Interest Rate, but in no event shall any such
offset reduce the amount of Basic Rent payable below the amount from time to
time necessary for the Landlord to make payments of principal, interest and
other expenses payable under any first Mortgage perfected against the Premises,
including any real estate taxes or other expenses which are or could become a
lien upon the Premises, except to the extent such taxes and other expenses are
actually paid by the Tenant. The Landlord shall provide the Tenant with evidence
of such payments as the Tenant may reasonably require. Notwithstanding the
foregoing, if the Landlord disputes the Tenant's allegation of default or the
Tenant's right to take any action under this paragraph, any action taken by the
Tenant under this paragraph or the costs and expenses incurred in any action
taken by the Tenant under this paragraph, shall not afford the Tenant the right
to offset any amounts due the Landlord until (i) the parties in good faith
attempt to meet and resolve any such dispute within 10 days after notice from
the Landlord to the Tenant or within ten days after the 30-day period, or
telephone notice specified above, whichever first occurs; or (ii) determination
of such dispute by a court of appropriate jurisdiction.

         Notwithstanding anything to the contrary as contained in this


                                       -22-


Paragraph, the Landlord shall be solely and exclusively liable for all repairs
and replacements which are capital in nature.

11.      COMPLIANCE WITH LAWS AND REGULATIONS:

         The Tenant agrees that its obligations to make payment of the Basic
Rent, Additional Rent and all other charges on its part to be paid, and to
perform all of the covenants and agreements on its part to be performed during
the Term hereunder shall not, except as set forth in Paragraph 16 in the event
of condemnation by public authority, be affected by any present or future law,
by-law, ordinance, code, rule, regulation, order or other lawful requirement
regulating or affecting the use which may be made of the Premises.

         During the Term, the Tenant and Landlord shall comply, each at its own
cost and expense, with: all applicable laws, by-laws, ordinances, codes, rules,
regulations, orders, and other lawful requirements of the governmental bodies
having jurisdiction (other than such as are the obligation of the Landlord
hereunder), whether or not foreseeable, and whether or not they involve any
changes in governmental policy, which are applicable to the Premises, the
fixtures and equipment therein and thereon, or the Tenant's particular use
thereof; the orders, rules and regulations of the New England Fire Insurance
Rating Association or any other body hereafter constituted exercising similar
functions, which may be applicable to the Premises, the fixtures and equipment
therein or thereon or the use thereof; and the requirements of all policies of
public liability, fire and all other types of insurance at any time in force
with respect to the Premises and the fixtures and equipment therein and thereon.
Notwithstanding the foregoing, the Tenant shall not be responsible for future
laws, by-laws, ordinances, codes, rules,


                                       -23-


regulations, orders and other lawful requirements of governmental bodies having
jurisdiction that require a structural change to the Premises, Building or
Property or other capital outlay.

12.      ALTERATIONS BY TENANT:

         The Tenant shall erect no signs (other than one at the driveway to the
Building and on the facade of the Building, subject to approval of the Landlord
[which approval shall not be unreasonably withheld, conditioned or delayed] and
subject to any applicable ordinances related to signs as promulgated by either
the towns of Billerica or Tewksbury) and shall make no alterations, additions or
improvements in or to any portion of the Premises without the Landlord's prior
written consent subject to the provisions of this Paragraph 12, which consent
shall not be unreasonably withheld, conditioned or delayed. In connection
therewith, the Landlord shall have ten days, from receipt of written notice from
the Tenant detailing the proposed alterations, to approve or reject the same.
The Landlord shall be deemed to have given his approval to any proposed
alterations unless he shall have objected to the same within the time set forth
herein. As part of any request for such consent, the Tenant shall provide the
Landlord with plans and specifications drawn in accordance with good engineering
practice (only if it would be usual and appropriate to prepare plans and
specifications given the nature and extent to the proposed alterations,
additions or improvements), reasonable evidence of suitable insurance and, lien
bonds or other suitable assurances of the Tenant's obligation and wherewithal to
complete the same at no expense to the Landlord and without failure to pay any
contractor engaged to do the work.

         The Landlord agrees that in the absence of a Terminable Default on


                                       -24-


the part of the Tenant hereunder, its consent shall not be required for
interior, non-structural alterations to the Building from time to time
constituting a part of the Premises if the same are consistent with the use of
the Premises as contemplated hereby and with the heating, ventilating and air
conditioning and other engineering and mechanical systems in the Building. At
the time Tenant requests Landlord's consent to any future alterations,
installations, removals, additions or improvements, Landlord agrees it will only
require Tenant to remove such alteration, installment, removal, addition or
improvement at the end of the Lease Term provided the Landlord, in his sole
discretion, determines such improvements will impair his ability to re-let the
Premises to another tenant.

13.      LANDLORD'S ACCESS:

         The Tenant agrees to permit the Landlord and any Mortgagees and their
authorized representatives to enter the Premises (i) at all reasonable times
during usual business hours after not less than two business days' prior oral or
written notice for the purposes of inspecting the same, but not more often than
annually, exercising such other rights as it or they may have hereunder or under
any mortgages (provided such rights are consistent with the Landlord's rights
hereunder) and, during the last six (6) months of the Term or after any
Terminable Default (inclusive of any applicable notice period) hereunder on the
part of the Tenant, to show the Premises to other prospective tenants,
purchasers or mortgagees and (ii) at any time and without notice in the event of
emergency (in which event the Landlord shall attempt to give oral notice by
telephone.) In connection therewith, Landlord shall use all commercially
reasonable efforts to protect


                                       -25-


Tenant's property and personnel from loss and injury and to avoid
interfering with conduct of Tenant's business.

14.      INDEMNITIES:

         The Tenant and Landlord agree as follows: each shall indemnify and save
the other harmless from and against any and all losses, claims, liability,
expenses and damages (other than consequential damages) which either directly or
indirectly, in whole or in part arise out of or result from (i) the negligence,
or recklessness, or willful misconduct of either party, its agents, servants and
employees (ii) any act or occurrence in or about the Premises, unless caused by
the negligence, recklessness, or willful misconduct of the applicable party, its
agents, servants, contractors or employees (iii) the breach of any provision of
this Lease by either party or any of its agents, servants, employees or
contractors [Notwithstanding the same, the Tenant shall not indemnify the
Landlord for the Landlord's breach of Lease nor shall the Landlord indemnify the
Tenant for the Tenant's breach of Lease] (iv) judgments, citations, fines or
other penalties rendered or assessed against one or the other (with the
exception of any claims under the applicable party's workmen's compensation
insurance policy) as a result of one of the party's failure to comply with all
federal, state and local laws, safety and health regulations relating to either
party's use or occupation of the Premises. In connection herewith, both the
Landlord and Tenant agree to give the other prompt notice of any such violation
which may be asserted by a governmental agency.

         The Landlord and Tenant further agree to indemnify the other from and
against all costs, expenses (including reasonable attorneys' fees) and other
liabilities incurred in connection with any such indemnified


                                       -26-


claim or action and/or proceeding brought thereon. If the Landlord shall breach
this covenant and fail to reimburse the Tenant for such costs and expenses after
written demand, the Tenant shall be allowed to offset the same against basic or
additional rent. If the Tenant shall breach this covenant and fail to reimburse
the Landlord for such costs and expenses after written demand, the Landlord may
declare a Default under this Lease based upon non-payment of rent.

         Nothing contained above is intended to require indemnification for any
property claim for which insurance is required to be maintained under the terms
this Lease. The rights and obligations of the Landlord and Tenant under this
Paragraph 14 shall survive the expiration and/or earlier termination of this
Lease.

15.      CASUALTY DAMAGE:

         A.     Tenant's Right to Terminate: If the Premises or the Building
shall be damaged or destroyed by fire, windstorm or any other insured
casualty, the Tenant shall immediately give written notice thereof to
Landlord and unless this Lease is terminated as hereinafter provided, the
Landlord, at his own expense, shall repair or rebuild the same so as to
restore the Premises to substantially the same condition they were in
immediately prior to such damage or destruction, subject however, to zoning
and building laws then in existence, provided that the Landlord shall not be
responsible for any delay in such repair or reconstruction which may result
from any cause beyond its reasonable control, and provided further that the
Landlord shall not be required to expend more than the net amount of
insurance proceeds, if any received, by Landlord for such purposes, plus the
amount of any deductible, so long as the Landlord maintains the insurance
required of it under this Lease and so


                                       -27-


long as the Landlord uses best commercial efforts to promptly get the maximum
allowable proceeds related thereto. Notwithstanding the foregoing, the Landlord
within 30 days after receipt of said written notice of damage, shall inform the
Tenant whether or not said damage can be repaired within 120 days, based upon a
reasonable estimate of the Landlord's architect and engineer. If the Landlord
notifies the Tenant it cannot repair or rebuild the Premises so as to restore
the same to substantially the same condition they were in immediately prior to
the destruction within said 120 days or (i) if the Premises is not restored
within 120 days from the date the Landlord notifies the Tenant of its intent to
restore, or (ii) if there is no notice at all from the Landlord within 30 days
from the date of loss, then in any such events, the Tenant may elect to cancel
this Lease upon five days written notice to the Landlord.

         B.     Landlord's Right to Terminate: If the Premises or the
Building are substantially damaged by fire or casualty (the term
"substantially damaged" meaning damage of such character that the same
cannot, in the ordinary course, reasonably be expected to be repaired within
120 days from the time that repair work would commence or if either the
Premises or Building shall be damaged or destroyed to the extend of 25% or
more on a square footage basis by any cause, (whether insured against by the
Landlord or not) the Landlord may elect by written notice to the Tenant, to
be provided to Tenant within 30 days of Landlord's receipt of said damage,
either to terminate this Lease or to repair or rebuild on the conditions set
forth in the above clause. The Tenant shall likewise be afforded the right to
terminate the Lease if more than 25% of either the Premises or Building shall
be damaged or destroyed.


                                       -28-


         C.     Tenant's Obligations to Repair: In the event that the
Premises or Building is damaged or destroyed by any cause, then, unless this
Lease is terminated as provided above, the Tenant at its own expense
[but in no event beyond the net amount of insurance proceeds, if any, received
by the Tenant for such purposes, less any applicable deductible] and proceeding
with all reasonable dispatch shall repair or replace all trade fixtures,
equipments, signs or other property installed by or belonging to the Tenant
which shall be damaged to destroyed.

         D.     Abatement of Rent: If the Premises shall be damaged by fire
or other casualty, the Base Rent and Additional Rent payable by the Tenant
shall abate or be reduced proportionately for the period in which, by reason
of such damage, there is substantial interference with the operation of the
Tenant's use of the Premises, having regard to the extent to which Tenant may
be required to discontinue its use of the Premises, but such abatement or
reduction shall end if and when Landlord shall have substantially restored
the Premises except if the Tenant has elected to cancel the Lease pursuant to
Section 15A (exclusive of any of Tenant's fixtures, furnishings, equipment and
the like or work to be performed therein by Tenant) to substantially the
condition in which the Premises were in prior to such damage, so long as
Tenant has been provided 120 days from the date it is afforded access to the
Premises to complete the Tenant's repairs. In no event shall Landlord be
obligated in connection with the restoration of the Premises, as stated
herein, to expend an amount in excess of the proceeds of insurance recovered
with respect thereto so long as the Landlord maintains the insurance required
of it under the Lease and provided it uses its best commercial efforts


                                       -29-


to promptly process a claim with its insurer. In the event the Premises shall be
damaged by fire or other casualty directly resulting from negligence of the
Tenant, its agents, contractors, employees or invitees, and this Lease shall not
be terminated by the Landlord as a result of such damage, Tenant shall not be
released from any of its obligations hereunder including, without limitation,
its duty to pay the Base Rent and Additional Rent payable by Tenant, without
abatement or reduction.

         E.     Award: Landlord shall have and hereby reserves and accepts and
Tenant hereby grants and assigns to Landlord, all rights to recover damages to
the Premises, Building or Property and the leasehold interest hereby created,
from Landlord's insurance and to compensation accrued or hereafter to accrue by
reason of such damage or destruction, as aforesaid, and by way of confirming the
foregoing, Tenant hereby grants and assigns, and covenants with Landlord, to
grant and assign to Landlord all rights to such damages or compensation from
Landlord's insurance. Nothing contained herein shall be construed to prevent
Tenant from prosecuting in any proceedings a claim for the value of the Tenant's
inventory, furnishings, equipment or usual trade fixtures installed in the
Premises by Tenant and at Tenant's expense, provided that such action shall not
affect the amount of compensation otherwise recoverable by Landlord.

16.      CONDEMNATION:

         If a substantial portion of the useable floor areas of the building, or
of the parking area, from time to time constituting part of the Premises shall
be taken, such that the same shall materially and adversely interfere with the
Tenant's ability to conduct business on the


                                       -30-




Premises as contemplated under the Lease, or if the Tenant's access to
the Premises shall be deprived for one (1) month or more, by eminent domain or
appropriated by public authority, the Tenant may terminate this Lease by giving
written notice to the Landlord within thirty (30) days after such taking or
appropriation becomes final and Tenant is informed of same by Landlord in
writing, the Landlord enclosing with such notice the applicable notifications of
taking from the appropriating public authority. In the event of any such
termination, this Lease shall terminate as of the date the Tenant must surrender
possession or, if later, the date the Tenant actually surrenders possession, or
the date Tenant's access is deprived and the Basic Rent and Additional Rent
reserved shall be apportioned and paid to and as of such date.

         If all or any part of the Improvements or any other improvements from
time to time constituting part of the Premises is taken or appropriated by
public authority as aforesaid and this Lease is not terminated as set forth
above, the Landlord shall, subject to the rights of any Mortgagees, apply any
such damages and compensation awarded (net of the costs and expenses, including
reasonable attorneys' fees, incurred by the Landlord in obtaining the same) to
secure, close and restore so much of the Improvements or other improvements
constituting part of the Premises as remain to an architectural whole except
that in no event shall the Landlord be obligated to expend more for such
replacement than the net amount of any such damages, compensation or award which
the Landlord may have received as damages in respect to the Improvements and any
other improvements from time to time constituting part of the Premises as they
existed immediately prior to


                                     -31-





such taking or appropriation; in such event, there shall be an equitable
abatement of Basic Rent in proportion to the loss of useable floor area in the
Improvements after giving effect to such replacement, from and after the date
the Tenant must surrender possession (or access is deprived) or, if later, the
date the Tenant actually surrenders possession and except further, that if, in
such event, for any reason any Mortgagee retains any portion of such damages or
award and the Landlord fails within thirty (30) days after a request by notice
from the Tenant to agree to secure and close the remaining improvements as
aforesaid, then the Tenant shall have an additional period of sixty (60) days
after the expiration of such thirty (30) day period within which to terminate
this Lease, in which event, this Lease shall thereupon be void and without
recourse to the parties as to obligations thereafter accruing. The Tenant agrees
that the foregoing rights shall be its sole remedies, both at law and in equity,
for the failure of any Mortgagees and the Landlord to fulfill its obligations to
secure and close the remaining improvements as aforesaid.

         The Landlord hereby reserves, and the Tenant hereby assigns to the
Landlord, any and all interest in and claims to the entirety of any damages or
other compensation by way of damages which may be awarded in connection with any
such taking or appropriation except so much of such damages or award as is
specifically and separately awarded to the Tenant and expressly attributable to
Improvements constructed and/or made by the Tenant as well as to the Tenant's
trade fixtures, personal property or moving expenses. Nothing contained herein
shall prohibit the Tenant from making claim in its own name against the
municipality for damages including but not limited to loss of business and an
amount


                                     -32-





equal to its unamortized costs of leasehold improvements on condition such
application does not interfere with the Landlord's paramount right to claim
damages in connection with any such taking. Notwithstanding anything to the
contrary set forth above, if the Tenant is deprived of access to the Property,
an abatement of basic and additional rent, effective on the date of deprivation,
shall take effect. In addition thereto, in the event of Condemnation, all Basic
and Additional Rent shall be abated.

17. LANDLORD'S COVENANT OF QUIET ENJOYMENT; TITLE:

         The Landlord covenants that the Tenant, upon paying the Basic Rent and
Additional Rent provided for hereunder and performing and observing all of the
other covenants and provisions hereof, may peaceably and quietly hold and enjoy
the Premises for the Term as aforesaid, subject, however, to all of the terms
and provisions of this Lease. The Landlord warrants that as Trustee of Y-CEE
INVESTMENT TRUST, u/d/t dated January 12, 1979 and recorded with the Middlesex
Northern District Registry of Deeds at Book 2348, Page 327 (as Amended by
instrument dated January 4, 1999), that he has the right and lawful authority to
enter into this Lease and further that the Landlord is the owner of the fee in
the Premises subject to no liens or encumbrances of record. In connection
herewith, the Landlord, from time to time upon request, shall furnish to the
Tenant evidence sufficient to establish that it owns the Premises, including a
list of encumbrances, if any, perfected and recorded against the same.

18. TENANT'S OBLIGATION TO QUIT:

         The Tenant shall, upon expiration of the Term or other termination of
this Lease, leave and peaceably and quietly surrender and deliver to


                                     -33-





the Landlord the Premises and any alterations, additions and improvements which
have been made by the Tenant to the Premises, and any replacements thereof in
the order, condition and repair required by Paragraph 10 hereof and the other
provisions of this Lease, except, however, that the Tenant shall first remove
any trade fixtures and equipment and any alterations, additions and improvements
which either the Tenant elects to remove or which the Landlord has required be
removed pursuant to the terms of Paragraph 12 hereof and Tenant if it so chooses
or if requested by the Landlord pursuant to the terms of Paragraph 12 hereof,
restoring the Premises in each case to substantially their condition prior to
the installation of such fixtures or the undertaking of such alterations,
additions or improvements, as the case may be reasonable wear and tear and
casualty excepted. The provisions of this Paragraph 18 shall expressly survive
the termination or expiration of the Term of this Lease.

19. TRANSFERS OF TENANT'S INTEREST:

         A. Subletting: Tenant shall have the right, subject to approval of the
Landlord which consent shall not be unreasonably withheld, conditioned or
delayed, to sublet all or any portion of the Premises or grant a license
therein, provided: (i) Tenant is not in default of the Lease beyond any
applicable cure period (ii) Tenant provides Landlord with prior written notice
of the Sublease or license, at least thirty (30) days prior to the commencement
date of the sublease or license (iii) Tenant delivers to Landlord an executed
copy of the sublease or license by the commencement date of the sublease or
license (iv) Tenant remains liable under the Lease.

                Notwithstanding the provisions of Section 26 hereafter,
Landlord shall,


                                     -34-





at Tenant's Request, provide Tenant with (i) an Estoppel Certificate stating
whether Landlord knows of any Default under the Lease at the time of the
proposed subletting [or assignment as hereinafter provided]. Should rent under
the Sublease to be paid the Tenant exceed the Basic Rent which the Tenant is
then paying to the Landlord, the Tenant agrees that it shall share the net
excess rental equally with the Landlord. In connection therewith, the Tenant
shall furnish the Landlord with an executed copy of the applicable Sublease.

         B. Assignment: Should the Tenant desire to assign all or any portion of
its interest in the Lease to a third party, it shall be required to notify the
Landlord of the same in writing and to furnish the Landlord timely any and all
materials it might reasonably request concerning the proposed Assignee's
financial condition and a detailed description of such entity's business
operations and proposed use of the Premises. The Landlord shall be required to
notify the Tenant in writing of its decision whether to agree to or reject the
proposed Assignment within fourteen (14) days of its receipt of all
documentation it might reasonably request be supplied to it from either the
Tenant and/or proposed Assignee. In connection therewith, Landlord shall not
unreasonably withhold, condition or delay its consent.

                  Any attempted assignment without the consent of the Landlord
and without an executed Assumption Agreement between it, the Tenant and the
Assignee, shall be deemed void.

                  Notwithstanding anything to the contrary, the Landlord need
not give its consent and Tenant need not obtain such consent to an assignment by
the Tenant, upon reasonable notification to the Landlord, to a subsidiary,
parent or affiliate of Tenant or to a successor to


                                     -35-





Tenant by means of merger, consolidation, corporate reorganization or the
purchase of all or substantially all of the Tenant's assets or shares of stock
on condition that such Assignee shall reasonably demonstrate, if requested by
Landlord in writing, sent to Tenant within five (5) days of the Landlord's
receipt of notice of such Assignment, to the fact that the Assignee's net worth
(determined in accordance with generally accepted accounting principles) is not
less than that of the Tenant at the time of such assignment and the transferee
assumes the terms of this Lease by execution of a separate writing, except to
the extent the Transferee assumes such terms by operation of law and provides
evidence of the same to the Landlord. In addition thereto, any transfer, pledge,
sale or other disposition and/or power to vote the outstanding shares of
corporate stock of the Tenant (and/or the issuance of new shares of stock in the
Tenant) shall not be deemed an Assignment.

20. TRANSFERS OF LANDLORD'S INTEREST:

         The Landlord shall have the right from time to time to sell or mortgage
its interest in the Building and Property, to assign its interest in this Lease,
or to assign from time to time the whole or any portion of the Basic Rent,
Additional Rent or other sums and charges at any time paid or payable hereunder
by the Tenant to the Landlord, to any Mortgagees or other transferees designated
by the Landlord (or, in the case of any purchasers at foreclosure sales or
grantees under deeds in lieu of foreclosure, by any Mortgagee) by duly recorded
instruments and after receipt of copies of such instruments as provided to
Tenant by Landlord or such transferees or assignees, the Tenant shall pay the
Basic Rent, Additional Rent and such other sums and charges so assigned, subject
to the terms of the Lease, upon demand to such Mortgagees and


                                     -36-





other transferees, purchasers and grantees at the addresses mentioned in and in
accordance with the terms of such instruments. Each foreclosing Mortgagee or
other transferee, purchaser or grantee shall, in writing, assume the obligations
of the Landlord under this Lease, subject, however, to the limitations upon
liability of the Landlord as set forth in Paragraph 27.

         Within ten (10) days following any transfer by Landlord of its
ownership interest in the property, Landlord shall provide Tenant with written
notice of such transfer and the name and address of the successor Landlord to
whom Tenant should send future rent payments and notices (the "Transfer
Notice"). In the event that the Landlord fails to provide the Transfer Notice,
(a) the Tenant shall not be liable to any successor Landlord for rent payments
paid to the former (predecessor) Landlord and (b) any successor Landlord shall
be bound by any notice sent to the former (predecessor) Landlord by the Tenant.

21. MORTGAGEES' RIGHTS:

         The Tenant hereby agrees that this Lease is and shall be subject and
subordinate to any mortgage (and to any amendments, extensions, increases,
refinancings or restructurings thereof) of the Premises, whether or not such
mortgage is filed subsequent to the execution, delivery or the recording of this
Lease or any notice hereof (the holder from time to time of any such mortgage
being in this Lease sometimes called the "Mortgagee"). The foregoing
subordination shall be self-operative and automatically effective as to any
Mortgage filed subsequent to the execution and delivery hereof by only if either
the Mortgagee agrees in a recordable writing or such mortgage provides that, for
so long as there exists no Terminable Default under this Lease on


                                     -37-





the part of the Tenant, the Mortgagee, in foreclosing against or taking
possession of the Premises or otherwise exercising its rights under such
mortgage, will not join the Tenant in any foreclosure proceedings (except to
the extent required by law) and will not terminate this Lease (except as
provided herein) or disturb the Tenant's possession of the Premises hereunder
in customary form or words of similar import and will make insurance proceeds
available as and to the extent provided in Paragraph 8. The Tenant hereby
agrees to execute, acknowledge and deliver in recordable form such
instruments confirming and evidencing the foregoing subordination as the
Landlord or any such Mortgagee may from time to time reasonably require, such
instrument(s) to require the approval of the Tenant which approval the Tenant
shall not unreasonably withhold.

         No notice from the Tenant of any default by the Landlord in its
obligations shall be valid, and the Tenant shall not attempt to terminate this
Lease, withhold Basic Rent or Additional Rent or exercise any other remedy which
may arise by reason of any such default, unless the Tenant first gives such
notice to all Mortgagees of whom Tenant has been given notice and provides such
Mortgagees with the same period(s) for cure as are available to the Landlord
after such notice within which to cure such default. The Tenant shall and does
hereby agree, upon default by the Landlord under any mortgage, to attorn to and
recognize the Mortgagee or anyone else claiming under such mortgage, including a
purchaser at a foreclosure sale, at its request as successor to the interest of
the Landlord under this Lease, to execute, acknowledge and deliver in recordable
form such evidence of this attornment, which shall nevertheless be
self-operative and automatically effective, as the


                                     -38-





Mortgagee or such successor may request and to make payments of Basic Rent and
Additional Rent hereunder directly to the Mortgagee or any such successor, as
the case may be, upon request. In such event, the Tenant shall not be liable to
the Landlord for any payment made to such Mortgagee. By any such request, such
Mortgagee or successor shall be deemed and construed without further agreement
to have assumed and agreed to carry out and perform all covenants and
obligations of the Landlord under this Lease thereafter arising, subject,
however, to the provisions of Paragraph 27 and provided the Landlord shall
remain liable under the Lease with the Mortgagee (if applicable) and/or its
successor concerning those duties required by Paragraph 27. Any Mortgagee may,
at any time, by giving written notice to and without any further consent from
the Tenant, subordinate its mortgage to this Lease, and thereupon the interest
of the Tenant under this Lease shall automatically be deemed to be prior to the
lien of such mortgage without regard to the relative dates of execution,
delivery or recording thereof or otherwise.

         In connection herewith, the Tenant acknowledges that any Mortgagee
reserves the right to use whatever reasonable format of a nondisturbance
agreement it might elect to employ and therefore the Landlord does not warrant
or otherwise represent what the precise provisions of that instrument might be
or what the same might provide. Notwithstanding the foregoing, any Subordination
and Nondisturbance Agreement prepared by the Mortgagee and presented to the
Tenant for execution shall include a provision that the Tenant's possession
shall not be disturbed and the Mortgagee shall abide by the terms and conditions
of this Lease if the Tenant is then in compliance with the terms of this
instrument [to wit: not in default beyond applicable notice and cure periods]
and continues


                                     -39-




to abide by the terms and conditions of the same. The costs of recording any
such nondisturbance agreement shall be borne by the Tenant. Landlord warrants
and represents that (i) there is no Mortgage affecting the Property as of this
date and (ii) there is no ground lease affecting the Property. Landlord agrees
to notify Tenant in writing of the name and address of any future Mortgagee.

22.      TENANT'S DEFAULT; LANDLORD'S REMEDIES:

         If (a) the Tenant shall default in the payment of any Basic Rent or
Additional Rent and such default shall continue for fourteen (14) days after
notice from the Landlord of such default without cure; or (b) the Tenant shall
default in the performance or observance of any of the other material covenants
contained in this Lease and on the Tenant's part to be performed or observed and
shall fail, within thirty (30) days after notice from the Landlord of such
default to cure such default, or if it is beyond the reasonable control of the
Tenant to cure such default within thirty (30) days, promptly to commence such
cure and thereafter to pursue such cure diligently to completion; or (c) if the
estate hereby created shall be taken on execution, or by other process of law,
or if the Tenant shall be involved in financial difficulties as evidenced

              (1) by its commencement of a voluntary case under Title 11 of the
United States Code as from time to time in effect, or by its authorizing, by
appropriate proceedings of trustees or other governing body, the commencement of
such voluntary case and those proceedings have not been vacated, Dismissed or
otherwise set aside within thirty (30) days from the date of commencement
thereof,
              (2) by its filing an answer or other pleading admitting or


                                     -40-


failing to deny the material allegations of a petition filed against it
commencing an involuntary case under said Title 11, or seeking, consenting to or
acquiescing in the relief therein provided, or by its failing to controvert
timely the material allegations of any such petition,

              (3)  by the entry of an order for relief in any involuntary case
commenced under said Title 11,

              (4)  by its seeking relief as a debtor under any applicable law,
other than said Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the rights of
creditors, or by its consenting to or acquiescing in such relief,

              (5)  by the entry of an order by a court of competent jurisdiction
(i) finding it to be bankrupt or insolvent, (ii) ordering or approving its
liquidation, reorganization or any modification or alteration of the rights of
its creditors, or (iii) assuming custody of, or appointing a receiver or other
custodian for, all or a substantial part of its property, or

              (6)  by its making an assignment for the benefit of, or entering
into a composition with, its creditors, or appointing or consenting to the
appointment of a receiver or other custodian for all or a substantial part of
its property; then, and in any of said cases (a), (b), or (c) (each of which,
subject to the following sentence is herein sometimes called a (Terminable
Default"), the Landlord may, to the extent permitted by law, immediately or at
any time thereafter and without demand or notice, terminate this Lease and enter
onto and upon the Premises, or any part thereof, repossess the same as the
Landlord's


                                       -41-


former estate, and expel the Tenant and those claiming through or under the
Tenant and remove its effects without being deemed guilty of any manner of
trespass, and without prejudice to any remedies which might otherwise be used
for arrears of rent or preceding breach of covenant.

         No termination or repossession provided for in this Paragraph 22 shall
relieve the Tenant, of its obligations and liabilities under this Lease, all of
which shall survive any such termination or repossession. In the event of any
such termination or repossession, the Tenant shall pay to the Landlord either
(i) in advance on the first day of each month, for what would have been the
entire balance of the Term, one-twelfth (1/12) (and a pro rata portion thereof
for any fraction of a month) of the Basic Rent, Additional Rent and all other
amounts for which the Tenant is obligated hereunder, less, in each case, the
actual net receipts by the Landlord by reason of any reletting of the Premises
after deducting the Landlord's reasonable expenses in connection with such
reletting, including, without limitation, removal, storage and repair costs and
reasonable broker's and attorneys' fees, or (ii) at the option of the Landlord
exercisable by the Landlord's giving notice to the Tenant within thirty (30)
days after any such termination, the present value of the amount by which the
payments of Basic Rent and the Additional Rent reasonably estimated to be
payable for the balance of the Term after the date of the exercise of said
option would exceed the payments reasonably estimated to be the fair rental
value of the Premises on the terms and conditions of this Lease over such
period, determined as of such date. In connection with reletting the Premises as
provided for herein, Landlord agrees to use all reasonable efforts in connection
with the same.


                                       -42-


         Without thereby affecting any other right or remedy of the Landlord
hereunder, in the event of (i) any default on the part of the Tenant in the
performance or observance of any non-monetary covenant contained in this Lease
and on the Tenant's part to be performed or observed and the failure of the
Tenant, within thirty (30) days after notice from the Landlord of such default,
to cure such default or if it is beyond the reasonable control of the Tenant to
cure such default within thirty (30) days or promptly to commence such cure and
thereafter to pursue such cure diligently to completion or (ii) any default on
the part of the Tenant which results in jeopardy to the Landlord's title to the
Premises or to the Landlord's interest under any mortgage of the Premises and
which remains uncured for three (3) business days after notice of such default
from the Landlord to the Tenant (or if it is beyond the reasonable control of
the Tenant to cure such default within three (3) business days, if the Tenant
shall not promptly commence such cure and thereafter diligently pursue such cure
to completion) or (iii) imminent danger of injury to persons or damage to
property as a result of any default on the part of the Tenant as to which the
Landlord has given telephone notice to the Tenant, or (iv) any Terminable
Default on the part of the Tenant hereunder, then in any of such events the
Landlord may, at its option, cure such default or Terminable Default for the
Tenant's account and the reasonable cost to the Landlord of such cure, together
with interest thereon at the Lease Interest Rate, shall be deemed to be
Additional Rent and shall be paid to the Landlord by the Tenant with the
installment of Basic Rent next accruing.

         If the Landlord shall be required to commence proceedings to enforce
its remedies as provided for herein (including preparation of


                                       -43-


any Notice of Default), it shall, in addition to damages, be entitled to receive
all its costs and its reasonable attorney's fees incurred by it in any such
action.

23.      REMEDIES CUMULATIVE; WAIVERS:

         The specific remedies to which the Landlord or Tenant may resort under
the terms of this Lease are cumulative and are not intended to be exclusive of
any other remedies or means of redress to which the Landlord or Tenant may be
lawfully entitled under any provision of this Lease or otherwise. The failure of
the Landlord or the Tenant to insist in any one or more cases upon the strict
performance of any of the covenants of this Lease shall not be construed as a
waiver or relinquishment for the future of such covenant. A receipt by the
Landlord, or payment by the Tenant, of Basic Rent or Additional Rent with
knowledge of the breach of any covenant hereof shall not be deemed a waiver of
such breach, and no waiver, change, modification or discharge by the Landlord of
the Tenant of any provision in this Lease shall be deemed to have been made or
shall be effective unless expressed in writing and signed by an authorized
representative of the Landlord or the Tenant as appropriate. In addition to the
other remedies provided for in this Lease, the Landlord and the Tenant shall be
entitled to the restraint by injunction of the covenants, conditions or
provisions of this Lease, or to a decree compelling performance of or compliance
with any of such covenants, conditions or provisions. In connection herewith,
the prevailing party, should litigation be initiated, shall entitled to an award
of its costs and its reasonable attorney's fees.

24.      NOTICES:

         Any notices, requests, approvals, specifications, demands or


                                       -44-


consents required or permitted hereunder shall be in writing and mailed, postage
prepaid, by registered or certified mail, return receipt requested, if to the
Landlord or to the Tenant at the address set forth herein for each (for Tenant
addressed to Facilities Manager), with copies of such notice(s) sent to
respective counsel for both the Landlord and Tenant, as follows: if to the
Landlord, Robert L. Marder, Esquire, 23 Central Avenue, Suite 408, Lynn, Ma.
01901; if to the Tenant to: Michael H. Messina, Esq., 175 Science Parkway,
Rochester, New York 14620; if to any Mortgagee at such address as it may specify
by such notice to the Landlord and the Tenant, or at such other address as any
of them may from time to time specify by like notice to the others. When this
Lease provides for any period to commence after notice, such period shall be
deemed to commence one day after postal records indicate delivery of such notice
was first sent as attested to by Post Office Stamped Receipt. When this Lease
requires that notice be given on or before a certain date or within a certain
period, such notice shall be deemed given on the date mailed as in this
Paragraph 24 provided. Time shall be of the essence of all notice provisions of
this Lease. Oral notifications by telephone where permitted by this Lease shall
be directed to Christopher Smith, Director of Operations.

25.      RECORDING:

         The Landlord and the Tenant hereby agree, each at the request of the
other or of any Mortgagee, promptly to execute, acknowledge and deliver a
recordable form or notice of lease, notices of any assignments of rents and
profits, notices of any amendments to this Lease and of such other information
as may from time to time be necessary under G.L. (Ter. ed.) Chapter 183, Section
4 or under similar additional or


                                       -45-


successor statutes for the protection of any interest of the Landlord; the
Tenant or any Mortgagee having a perfected interest in the Premises. The party
which seeks preparation of any such document(s) listed herein shall bear the
cost(s) of preparing and recording the same.

26.      ESTOPPEL CERTIFICATES:

         The Landlord and the Tenant hereby agree from time to time, but not
more than twice during any calendar year, each after not less than twenty (20)
days prior written notice from the other or any Mortgagee, to execute,
acknowledge and deliver, without charge, to the other party, the Mortgagee or
any other person designated by the other party, a statement in writing
certifying: that this Lease is unmodified and in full force and effect (or if
there have been modifications, identifying the same by the date thereof and
specifying the nature thereof); that to the knowledge of such party there exist
no defaults (or if there be any defaults, specifying the same); the amount of
the Basic Rent, the dates to which the Basic Rent, Additional Rent and other
sums and charges payable hereunder have been paid; and that such party to its
knowledge has no claims against the other party hereunder except for the
continuing obligations under this Lease (or if such party has any such claims,
specifying the same).

27.      HAZARDOUS MATERIALS AND COMPLIANCE WITH ENVIRONMENTAL LAWS:

         A.     The Landlord represents and warrants to the Tenant that the
Property, Premises and Building and its existing uses to the best of its
knowledge and belief (after due investigation and familiarity with previous uses
and Phase I testing) comply with, and Landlord is not in violation of, and has
not violated and covenants that it will not violate and will not knowingly
allows other to violate, in connection


                                       -46-


with its ownership, use, maintenance or operation of the Property, Premises and
Building and the conduct of business related thereto, any applicable federal,
state, county or local statutes, laws, regulations, rules, ordinances, codes,
standards, orders, licenses and permits of any governmental authorities relating
to environmental, health or safety matters (including without limitation
Hazardous Materials as defined hereafter) [collectively "Environmental Laws"].
Landlord and Tenant shall at their own expense promptly observe and comply with
all present and future Environmental Laws including without limitation the Clean
Air Act Amendments of 1990 and any regulations (as amended) and all regulations
and standards as are or may be promulgated thereunder.

         B.     Without limiting the foregoing, Landlord represents and
warrants to the Tenant that it, its agents, servants, contractors and employees
have (i) operated the Property, Premises and Building and have at all times
received, handled, used, stored, treated, transported and disposed of any
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any federal, state, country, regional, or local authority or which
even if not so prohibited, limited or regulated, poses a hazard to the health
and safety of the occupants of the Property, Premises and Building
(collectively "Hazardous Materials") in strict compliance with Environmental
Laws and (ii) removed (or will remove prior to the Commencement Date) from the
Property all Hazardous Materials.

         C.     Landlord represents and warrants to the Tenant there is no fact
pertaining to the physical condition of the Property, Premises and Building
known to it which (i) materially and adversely affects or materially and
adversely will affect the Property, Premises and Building


                                       -47-


or the use, enjoyment or value thereof or Landlord's ability to perform his
obligations contained in this Lease and (ii) which Landlord has not disclosed to
Tenant in writing prior to this Lease.

         D.     Landlord represents and warrants to Tenant that it has
received no notices of any violation or claimed violation of any of the
matters referred to above, including notices related to any pending
investigation, lawsuit or other action relating thereto and covenants that it
will forthwith give notice to the Tenant should it in the future receive any
notifications described aforesaid. In addition thereto, Landlord hereby
agrees to indemnify and hold Tenant harmless from and against any and all
"Remediation Costs" (as hereafter defined) sustained or incurred by Tenant in
the event that Tenant is required by any municipal, state or federal agency
to affect a Remediation of any Hazardous Substances which may be located
on the Property and the Building as of the date of this Lease and hereafter,
unless such Hazardous Substances are present or released as the direct result
of the acts or omissions of Tenant or any of Tenant's agents, servants,
employees, contractors or invitees.

         As used herein, the term "Remediation Costs" shall mean the cost of
remediation and clean-up of the Hazardous Substances which Tenant may incur as
the result of any order of the DEP, the U.S. Environmental Protection Agency or
any State, Federal or other Court of competent jurisdiction requiring that
Tenant affect a remediation of any Hazardous Substances including without
limitation all costs, fees [including legal fees] and expenses incurred by said
Tenant.

         E.     The provisions of this Section 27 shall survive the
expiration or earlier termination of this Lease.

                                       -48-


         F.     Landlord shall defend, indemnify and hold harmless
the Tenant, its employees, agents, officers, and directors from and against
any claims, demands, penalties, fines, liabilities, settlements, damages,
costs or expenses (including attorney's fees) arising out of or in any way
related to the breach of Landlord's representations, warranties and covenants
contained in this Section 27 including without limitation liability arising
out of or in any way related to hazardous materials permitted or suffered by
Landlord or by any of its employees, agents, officers, directors or invitees
at the Premises or the soil, water, vegetation, buildings, personal property,
persons, animals or otherwise and any personal injury (including wrongful
death) or property damage arising out of or related to such hazardous
materials unless the foregoing is caused by acts of the Tenant or the
Tenant's agents, servants, employees, representatives, contractors or
invitees.

28.      OTHER UTILITIES:

         Subject to approval from the Landlord, which approval shall not be
unreasonably withheld, conditioned or delayed, the Tenant, at its sole cost and
expense, shall have right to introduce into the Premises such other utilities as
it may be deem necessary for the conduct of its business. The Tenant shall pay
the cost of all such other utilities directly to the applicable utility
supplier.

29.      OPTION TO EXTEND TERM AND TO REQUEST ADDITIONAL SPACE:

         A.     Provided that Tenant is not in default under this Lease
beyond any applicable grace/cure period, then, in such event, the Tenant
shall have the option of notifying the Landlord not later than one hundred
eighty (180) days prior to the expiration of the Lease Term, as defined by
Section 4 above, of its intent to extend the term of this Lease for a period


                                       -49-


of five (5) years ("Option Period").

         During the term of the Option Period, the Tenant shall pay to the
Landlord, as Annual Basic Rent, 95% of the then fair market rental value of the
Premises, but in no event shall the rent for the Option Period be less than
$7.50 per square foot, triple net.

         B.     Provided that Tenant is not in default under this Lease
beyond any applicable grace/cure period, then in such event, the Tenant shall
have the following additional option:

                (i) the Tenant shall have the first option to lease additional
space ("Additional Space") at the Building once any tenant for such Additional
Space shall have vacated the same.

                  In connection therewith,

                           [1] the Landlord shall promptly notify the Tenant in
writing when it receives notice that any Tenant for that adjacent contiguous
space has given notice of its intent not to renew any lease for that area;

                           [2] the Tenant shall have ten (10) days from receipt
of said notice to advise the Landlord in writing whether it intends to exercise
such option for the Additional Space;

                           [3] should the Tenant notify the Landlord of its
intent to exercise the option for Additional Space, the parties shall thereupon
meet, and within five days from receipt of the Tenant's notice, shall execute a
letter of intent in the same format as that which was executed by them on or
about March 22, 1999, it being understood that the amount of base rent for the
Additional Space shall be market rental as determined by the Landlord;

                           [4] failing notice by the Tenant as described in
Section [2]


                                       -50-


above, the Landlord shall have the right to market the Additional Space and
to execute a Letter of Intent with any third party for the same.

              Reservation: The ability of the Tenant to exercise this right
shall terminate automatically with respect to a portion or all of the
uncommitted space at the Building, when the Landlord shall have executed a
Letter of Intent with any third party for a lease of such portion or all of
the remaining uncommitted space at the Building and thereafter a lease is
entered into between the Landlord and that other Third Party. Barring
execution of a Lease, the Tenant's right as aforesaid to lease the remaining
space or a portion thereof at the Building shall be revived. In connection
with the Tenant's rights set forth in this clause (i), the Landlord agrees he
shall not execute any Letter of Intent or lease with any third party for
lease of any portion of the then remaining leasable space in the Building
unless Landlord has previously notified Tenant in writing of the potential
interest of such third party (provided that such notice shall not be required
to include any confidential information) and has afforded the Tenant five
business days within which to exercise its first right to lease all the then
remaining leasable space in the Building.

         Notwithstanding anything to the contrary, all obligations of the
Tenant with respect to the Triple Net provision(s) of the Lease as defined by
Section 6 above and in other applicable portions of this instrument, as well
as all terms, conditions and covenants of this Lease, shall be applicable to
leasing of the Uncommitted Space without necessity that any separate writing
setting forth the same be executed by the Parties. Thereafter, the
Uncommitted Space shall be deemed to be part of the Premises for all
purposes, including without limitation, the option to


                                     -51-


extend under Section 29A above.

         If within thirty (30) days after receipt of written Notice by the
Tenant of its intent to extend the term of the Lease as provided for above or
to lease additional space, likewise described aforesaid, the Landlord and
Tenant shall be unable to agree upon the amount of the then fair market
rental for the Premises (to wit: the annual rate of Basic Rent which the
Landlord proposes to apply to the Option Period as well for the basic rent to
be charged for the additional space), the Landlord and Tenant shall within
ten (10) days each select an appraiser and those two shall within ten (10)
days select a third. The third appraiser shall thereupon, within thirty (30)
days of his selection, issue a written report to the Landlord and Tenant
informing each of the annual rate of Basic Rent as determined by two of the
three appraisers for the Option Period. The decision of the appraisers
referred to in the preceding sentence shall be binding upon the parties
(subject to other terms of the Lease and payment of additional rent as
described aforesaid).

         Each party shall pay fees and costs for its own appraiser and shall
pay one half (1/2) of those fees and costs charged by the third appraiser.

         For purposes of this clause, an "appraiser" shall be an individual
who has an "MAI" (Member of the Appraisal Institute) designation for a
minimum of two years and who is independent of both the Landlord and Tenant.
Such appraiser shall also be an individual with at least five years
experience in appraising commercial and industrial property in the Greater
Boston Area.

         Within five days after decision of the Appraisers related to rent to
be applicable for the Additional Space, or in the alternative within


                                     -52-



five days of Agreement between the Landlord and Tenant of base rent to be
charged for the Additional Space, whichever shall first occur, the Landlord
and Tenant shall execute an Addendum to the Lease incorporating thereto the
Additional Space.

         In addition thereto, all obligations of the Tenant with respect to
the triple net provision of the Lease, as defined in Section 6 above and in
other applicable portions of this instrument, shall remain in full force and
effect during the Option Period (or during the period it shall occupy the
additional space) as well as all other terms, conditions and covenants of
such Lease without necessity that any other writing be executed by the
parties.

30.      SECURITY DEPOSIT:

         None

31.      BROKERAGE:

         The Brokers named herein, Meredith & Grew Incorporated and
CB Richard Ellis Whittier Partners, by execution hereafter, each certifies
that it is duly licensed as a broker by the Commonwealth of Massachusetts and
hereby joins in this Agreement and becomes a party hereto insofar as any
provisions of this instrument expressly apply to it. Landlord shall be solely
liable for payment of commissions due the Brokers identified herein.

32.      ADDITIONAL PROVISIONS:

         A. The Tenant shall have 24 hour access to the Premises and parking
facilities each day of the year.

         B. Landlord covenants and agrees that in exercising any of its
rights and performing its obligations, set forth herein, Landlord shall use
commercially reasonable efforts to minimize its inconvenience and


                                     -53-



interference with Tenant's business and operations and use and enjoyment of
the common areas and shall not cause or permit any obstruction or diminution
of the Premises or access or egress thereto or therefrom.

         C. Landlord shall hold in confidence all financial information
obtained from Tenant or Tenant's records, except in respect of the normal
kind of disclosure which in the regular course would be made to prospective
bona fide mortgagees and purchasers of the Building.

         D. Tenant shall have the right to install a satellite antenna dish
or other equipment with a similar cumulative size, with attachments thereto,
on the roof of the Building. All costs associated with installation and
maintenance of the same shall be borne by the Tenant. In addition thereto,
the Landlord shall have no liability for damage which may occur to the
antenna/satellite dish unless negligently, recklessly or intentionally caused
by its agents, servants or employees. Notwithstanding the Landlord's duty to
maintain and to repair the roof as set forth in Section 10, the Tenant shall be
solely and exclusive liable to affect any repairs to the roof and/or
damage to the Building which may result from the installation of the antenna
dish or other equipment referred to in this clause and, in addition thereto,
the Tenant shall indemnify and otherwise hold harmless the Landlord from all
claims which may be made against it by any other occupant of Building 6
whose demised premises may be damaged as a consequence of any damage to the
roof which may be caused by installation and maintenance of the satellite
dish by said Tenant.

         E. As part of the Landlord's work described in Section 5, the
Landlord shall, at Landlord's cost and expense, provide the Tenant one
dedicated tail board height loading dock with leveler and enclosed shipping
area.


                                     -54-



The design of the dock and enclosure shall be approved by both parties prior
to construction of the same.

33.      PERSONAL PROPERTY OF TENANT:

         All personal property placed or moved on or into the Demised
Premises shall be at the sole risk of the Tenant or owner thereof. Landlord,
any agent of the Landlord and/or any principal of the Landlord, shall not be
liable for any and all damage to said personal property of the Tenant arising
from any cause or by any source, except for the negligence, recklessness or
willful misconduct of the Landlord, its agents, servants, employees or
representatives.

34.      DELAYS - FORCE MAJEURE:

         In any case where either party hereto is required to do any act
(other than make a payment of money), delays caused by or resulting from Act
of God, weather, earthquake, war, civil commotion, fire or other casualty,
labor difficulties, general shortages of labor, materials or equipment,
government regulations or other causes beyond such party's reasonable control
(other than such party's financial condition) shall not be counted in
determining the time when the performance of such act must be completed,
whether such time be designated by a fixed time, a fixed period of time or a
"reasonable time," and the time for performance shall be extended as
reasonably required by the circumstances of such cause. In any case, where
work is to be paid for out of insurance proceeds or condemnation awards, due
allowance shall be made, both to the party required to perform such work and
to the party required to make such payment, and for reasonable delays not
attributable to said party in the collection of such proceeds and awards.


                                     -55-



35.      ATTORNEY'S FEES:

         Each party agrees to pay all reasonable costs of the prevailing
party in action brought to enforce the terms of this Lease, including without
limitation reasonable attorney's fees. This provision shall apply to trial
(including commencement of Summary Process Proceedings), injunctive hearing
and appellate proceedings.

36.      ACCORD AND SATISFACTION:

         In addition to those applicable provisions of Section 23, no payment
by the Tenant, or receipt by the Landlord, of a lesser amount that monthly
rent and additional monthly rent as provided for aforesaid shall be deemed to
be other than on account nor shall any endorsement or statement of any check
or letter accompanying any check or payment as rent and/or additional rent be
deemed an accord or satisfaction and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
rent or pursue any other remedy provided herein or by law, unless agreed to
by all parties in writing.

37.      FINANCING AGREEMENTS:

         Tenant may collaterally assign or mortgage its leasehold interest or
a grant a security interest in its furniture, fixtures, equipment and other
personal property owned by said Tenant. However, Tenant shall not enter into,
execute, or deliver any financing agreement that can be considered as a
priority to any mortgage Landlord may have placed, or may place in the
future, upon the Premises.

38.      BIND AND INURE; LIMITED LIABILITY OF LANDLORD:

         All of the covenants, agreements, stipulations, provisions,
conditions and obligations herein expressed and set forth shall be


                                     -56-



considered as running with the land and shall extend to, bind and inure to
the benefit of the Landlord and the Tenant, which terms as used in this Lease
shall include their respective successors and assigns where the context
hereof so admits.

         The Landlord shall not have any individual or personal liability for
the fulfillment of the covenants, agreements and obligations of the Landlord
hereunder, the Tenant's recourse and the Landlord's liability hereunder being
limited to the Premises, Property and Building. The term "Landlord" as used
in this Lease shall refer only to the owner or owners from time to time of
the Premises who shall be deemed and construed without further agreement to
have assumed and agreed to carry out and perform all covenants and
obligations of the Landlord arising under this Lease during the period of
such ownership (and, except in the case of foreclosing Mortgagees, purchasers
at foreclosure sales, grantees under deeds in lieu of foreclosure and their
successors and assigns, prior to such period if not carried out and performed
by the prior owner), subject, however, to the provisions of this Paragraph
38, it being understood that no such owner shall have any liability hereunder
for matters arising from and after the date such owner ceases to have any
interest in the Premises. In no event shall the Landlord be liable to the
Tenant for any special consequential or indirect damages suffered by the
Tenant or any other person or entity by reason of a default by the Landlord
under any provisions of this Lease. Likewise, the the Tenant shall not be
liable to the Landlord for any special, consequential or indirect damages
suffered by the Landlord or any other person or entity by reason of a default
by the Tenant under any provisions of this Lease.


                                     -57-



39.      AUTHORITY:

         The Landlord represents he has been specifically authorized by the
beneficiaries of Y-CEE INVESTMENT TRUST to execute this instrument.

         The Tenant represents its duly authorized officer, identified
hereafter, has been authorized to execute this instrument by the Board of
Directors of Adaptive Broadband Corporation.

40.      CAPTIONS:

         The captions for the numbered Paragraphs of this Lease are provided
for reference only and they do not constitute a part of this agreement or any
indication of the intentions of the parties hereto.

41.      INTEGRATION:

         The parties acknowledge that all prior written and oral agreements
between them and all prior representations made by either party to the other
have been incorporated in this instrument or otherwise satisfied prior to the
execution hereof.

42.      SEVERABILITY; CHOICE OF LAW, AND FORUM:

         If any provision of this Lease shall be declared to be void or
unenforceable either by law or by a court of competent jurisdiction, the
validity or enforceability of remaining provisions shall not thereby be
affected.

         This Lease is made under, and shall be construed in accordance with,
the laws of The Commonwealth of Massachusetts.

         In addition thereto, and should either the Landlord or Tenant
initiate litigation to seek enforcement of the terms, conditions and/or
covenants of the within Lease, the in such event the parties agree that
Jurisdiction, other than for Summary Process proceedings, shall vest solely
and exclusively with Essex County Superior Court Department for


                                     -58-



the Commonwealth of Massachusetts, each signatory hereafter having agreed to
the within forum selection clause.

         By execution hereafter, the Tenant submits to In Personam Jurisdiction
within the Commonwealth of Massachusetts in accord with G.L. c. 223A, Section 3
and appoints the occupant of the Premises, Microwave Communications, as its
duly authorized agent to accept service of process.

         IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed in multiple counterparts under seal as of the date first above
written.

                                       Landlord,
                                       TRUSTEE OF
                                       Y-CEE INVESTMENT TRUST

                                       /s/ Yvon Cormier Trustee
                                       -------------------------------
                                       Yvon Cormier,
                                       as Trustee as aforesaid,
                                       and not individually
                                               not individually


                                       Tenant,
                                       ADAPTIVE BROADBAND CORPORATION
                                       By: /s/ George Arena
                                           Executive Vice President
                                       -------------------------------
                                       Title


Broker,                                Broker,
CB RICHARD ELLIS                       MEREDITH & GREW
WHITTIER PARTNERS                      INCORPORATED
By:                                    By:

/s/ Bruce Levine                       /s/ Michael Gengela
- -------------------------------        -------------------------------


                                     -59-

EX-10.27

                                 DATED JUNE 29, 1999




                        MILTON PARK INVESTMENTS LIMITED (1)

                           ADAPTIVE BROADBAND LIMITED (2)

                         ADAPTIVE BROADBAND CORPORATION (3)




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

                      COUNTERPART/
                                     L E A S E

                                        -OF-

                                FIRST FLOOR BLOCK C
                     THE WESTBROOK CENTRE MILTON ROAD CAMBRIDGE

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







                                      MANCHES
                                   ALDWYCH HOUSE
                                     81 ALDWYCH
                                  LONDON WC2B 4RP

                                 TEL: 0171 404 4433

                                REF: PDS/14392/0076

                                  DATE: 17/06/1999






 PARTICULARS


 DATED JUNE 29, 1999


 HEADLEASE/UNDERLEASE                   This Lease is a head lease and is a new
                                        Lease under the Landlord and Tenant
                                        (Covenants) Act 1995


 PARTIES



 Landlord                               MILTON PARK INVESTMENTS LIMITED

                                        Registered office: Neil House Twining
                                        Road Trafford Park Manchester M17 1TE
                                        (Company registration number 01772741)

 Tenant                                 ADAPTIVE BROADBAND LIMITED

                                        Registered office: 47 Castle Street
                                        Reading RG1 7SR

                                        (Company registration number 03552746)

 GUARANTOR                              ADAPTIVE BROADBAND CORPORATION a
                                        company registered in the State of
                                        California USA

                                        Registered office: 1143 Borregas Avenue
                                        Sunnygrade CA 94089 USA

                                        (Company registration number        )

 PROPERTY AND CENTRE

 Property                               All the property known as the First
                                        Floor Block C of the Centre shown for
                                        identification edged red on the plan
                                        numbered '1' annexed and any
                                        alterations or additions to it together
                                        with all fixtures and fittings in the
                                        nature of Landlord's fixtures and
                                        fittings and plant and machinery and
                                        other service installations which are
                                        now or may in the future be affixed to
                                        or on the Property

 Centre                                 All the land and buildings known as the
                                        Westbrook Centre Milton Road Cambridge
                                        shown for identification edged blue on
                                        the plan numbered '2' annexed and
                                        registered at H M Land Registry under
                                        title number CB59294


 CONTRACTUAL TERM                       From and including the date hereof
                                        until the 23rd day of June 1999 and
                                        thereafter TEN YEARS from and including
                                        the 24th day of June 1999




 RENT
 Amount                                 From and including the date hereof the
                                        sum of ONE HUNDRED AND SEVENTY-EIGHT
                                        THOUSAND THREE HUNDRED AND FORTY POUNDS
                                        (L178,340) per annum exclusive

                                        From and including 29th September 1999
                                        TWO HUNDRED AND THIRTY SIX THOUSAND
                                        POUNDS (L236,000) per annum exclusive

 Rent Commencement Date                 the 29th day of June 1999

 First Rent Payment Date                the 29th day of June 1999

 PERMITTED USE                          offices within Class B1 of the Schedule
                                        to the Town and Country Planning (Use
                                        Classes) Order 1987 as originally
                                        enacted as the Landlord approves (such
                                        approval not to be unreasonably
                                        withheld or delayed) but EXCLUDING any
                                        or all of the following uses:

                                        (a)   Industrial use of any kind except
                                              for research and development
                                              purposes

                                        (b)   Use by any Government Department
                                              in connection with the provision
                                              of services to or regular access
                                              of the public (as distinct from
                                              using the Property for the
                                              purposes of administration and
                                              purposes ancillary thereto)

 RENT REVIEW DATE                       The 29th day of September 2004

 BASIC SERVICE CHARGE                   Every fifth anniversary of the term
                                        commencement date

 Amount                                 THIRTY TWO THOUSAND ONE HUNDRED AND
                                        TWENTY POUNDS (L32,120)

 Service Charge Year End Date           31st December




 PERMITTED PART                         Any part of the Property which is
                                        capable (having regard to its location
                                        and extent and to the rights intended
                                        to be appurtenant thereto) or providing
                                        self contained accommodation and which
                                        the Landlord has first approved such
                                        approval not to be unreasonably
                                        withheld or delayed  PROVIDED THAT at
                                        no time shall there be more than two
                                        sublettings of Permitted Parts




                                        INDEX

1.   DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..1

2.   INTERPRETATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..6

     2.1.   RIGHTS OF LANDLORD . . . . . . . . . . . . . . . . . . . . . . . ..6
     2.2.   ACT OR DEFAULT OF THE TENANT . . . . . . . . . . . . . . . . . . ..6
     2.3.   APPROVAL OF ANY SUPERIOR LANDLORD AND MORTGAGEE. . . . . . . . . ..6
     2.4.   CONSENT AND APPROVAL OF THE LANDLORD . . . . . . . . . . . . . . ..7
     2.5.   ENGLISH LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . ..7
     2.6.   GENDER AND NUMBER. . . . . . . . . . . . . . . . . . . . . . . . ..7
     2.7.   GENERAL AND PARTICULAR WORDS . . . . . . . . . . . . . . . . . . ..7
     2.8.   HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..7
     2.9.   JOINT AND SEPARATE OBLIGATIONS . . . . . . . . . . . . . . . . . ..7
     2.10.  LANDLORD'S LIABILITY . . . . . . . . . . . . . . . . . . . . . . ..7
     2.11.  LAST YEAR AND END OF THE TENANCY . . . . . . . . . . . . . . . . ..7
     2.12.  PERPETUITY PERIOD. . . . . . . . . . . . . . . . . . . . . . . . ..7
     2.13.  PERSON AND PARTY . . . . . . . . . . . . . . . . . . . . . . . . ..8
     2.14.  RIGHTS AND OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . ..8
     2.15.  STATUTE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..8
     2.16.  SUPERIOR LANDLORD. . . . . . . . . . . . . . . . . . . . . . . . ..8
     2.17.  TENANT NOT TO ALLOW ACT. . . . . . . . . . . . . . . . . . . . . ..9

3.   LETTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..9

     3.1.   LETTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..9
     3.2.   RIGHTS SUBJECTIONS AND RESERVATIONS. . . . . . . . . . . . . . . ..9

4.   TENANT'S RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..9

     4.1.   CONDUCTING MEDIA AND COMMON PARTS. . . . . . . . . . . . . . . . ..9
     4.2.   ENTRY FOR REPAIR . . . . . . . . . . . . . . . . . . . . . . . . .10
     4.3.   SUPPORT AND PROTECTION . . . . . . . . . . . . . . . . . . . . . .10
     4.4.   NAMEBOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
     4.5.   CAR PARKING. . . . . . . . . . . . . . . . . . . . . . . . . . . .10

5.   SUBJECTIONS AND LANDLORD'S RIGHTS . . . . . . . . . . . . . . . . . . . .10

     5.1.   ENTRY BY LANDLORD. . . . . . . . . . . . . . . . . . . . . . . . .11
     5.2.   LETTING BOARD ETC. . . . . . . . . . . . . . . . . . . . . . . . .12
     5.3.   GOODS LEFT ON THE PROPERTY . . . . . . . . . . . . . . . . . . . .12
     5.4.   CONDUCTING MEDIA . . . . . . . . . . . . . . . . . . . . . . . . .12
     5.5.   LIGHT AND SUPPORT ETC. . . . . . . . . . . . . . . . . . . . . . .12
     5.6.   LANDLORD'S RIGHT TO CARRY OUT WORKS ON OTHER PREMISES. . . . . . .12
     5.7.   VARIATION OF IMPLIED RIGHTS. . . . . . . . . . . . . . . . . . . .13
     5.8.   FIRE ESCAPE. . . . . . . . . . . . . . . . . . . . . . . . . . . .13

6.   TENANT'S COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .13

     6.1.   RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
     6.2.   OUTGOINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
     6.3.   INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
     6.4.   REPAIR AND DECORATION. . . . . . . . . . . . . . . . . . . . . . .14
     6.5.   MAINTENANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
     6.6.   REPAIR ON NOTICE . . . . . . . . . . . . . . . . . . . . . . . . .16
     6.7.   COMPLIANCE WITH STATUTORY REQUIREMENTS ETC . . . . . . . . . . . .16
     6.8.   RESTRICTIONS ON DEALINGS . . . . . . . . . . . . . . . . . . . . .17
     6.9.   REGISTRATION OF ASSIGNMENTS ETC. . . . . . . . . . . . . . . . . .20
     6.10.  INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .20
     6.11.  ALTERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .20
     6.12.  SIGNS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
     6.13.  COST OF REMOVAL BY LANDLORD OF UNAUTHORISED SIGNS ETC. . . . . . .21
     6.14.  SERVICE INSTALLATIONS. . . . . . . . . . . . . . . . . . . . . . .21
     6.15.  NUISANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22




     6.16.  USE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
     6.17.  OVERLOADING. . . . . . . . . . . . . . . . . . . . . . . . . . . .22
     6.18.  NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
     6.19.  PLANNING . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
     6.20.  ENCROACHMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . .23
     6.21.  DEFECTIVE PREMISES . . . . . . . . . . . . . . . . . . . . . . . .23
     6.22.  LANDLORD'S RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . .24
     6.23.  LANDLORD'S COSTS . . . . . . . . . . . . . . . . . . . . . . . . .24
     6.24.  INDEMNITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . .24
     6.25.  YIELD UP . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
     6.26.  VAT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
     6.27.  COMMON PARTS AND RETAINED PARTS. . . . . . . . . . . . . . . . . .25
     6.28.  REGULATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .25
     6.29.  SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

7.   LANDLORD'S COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . .26

     7.1.   QUIET ENJOYMENT. . . . . . . . . . . . . . . . . . . . . . . . . .26
     7.2.   PROVISION OF SERVICES. . . . . . . . . . . . . . . . . . . . . . .26
     7.3.   REPAIR OF MAIN STRUCTURE ETC . . . . . . . . . . . . . . . . . . .27

8.   INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

     8.1.   LANDLORD TO INSURE . . . . . . . . . . . . . . . . . . . . . . . .27
     8.2.   ADDITIONAL LANDLORD'S FIXTURES . . . . . . . . . . . . . . . . . .28
     8.3.   LANDLORD TO INFORM TENANT OF INSURANCE COVER . . . . . . . . . . .28
     8.4.   DAMAGE TO CENTRE . . . . . . . . . . . . . . . . . . . . . . . . .28
     8.5.   OPTION TO TERMINATE FOLLOWING DAMAGE BY AN INSURED RISK. . . . . .29
     8.6.   OPTION TO TERMINATE FOLLOWING DAMAGE BY AN EXCLUDED RISK . . . . .29
     8.7.   APPLICATION BY THE TENANT FOR NEW LEASE FOLLOWING TERMINATION. . .29
     8.8.   TENANT'S OBLIGATIONS IN RESPECT OF LANDLORD'S INSURANCES . . . . .30
     8.9.   TENANT'S INSURANCE . . . . . . . . . . . . . . . . . . . . . . . .31

9.   SUSPENSION OF RENT. . . . . . . . . . . . . . . . . . . . . . . . . . . .31

     9.1.   APPLICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .31
     9.2.   SUSPENSION . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
     9.3.   DISPUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31

10.  FORFEITURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

11.  DECLARATIONS WARRANTIES AND MISCELLANEOUS . . . . . . . . . . . . . . . .33

     11.1.  REPRESENTATIONS AND EXCLUSION OF USE WARRANTY. . . . . . . . . . .33
     11.2.  ACCIDENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
     11.3.  PAYMENTS RECOVERABLE AS RENT . . . . . . . . . . . . . . . . . . .33
     11.4.  SERVICE OF NOTICES . . . . . . . . . . . . . . . . . . . . . . . .33
     11.5.  JURISDICTION OF THE ENGLISH COURTS . . . . . . . . . . . . . . . .33
     11.6.  NO PRIOR AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . .34
     11.7.  TENANT'S OPTION TO TERMINATE . . . . . . . . . . . . . . . . . . .34

12.  ARBITRATION OR DETERMINATION BY EXPERT. . . . . . . . . . . . . . . . . .34

     12.1.  CONTRARY PROVISION . . . . . . . . . . . . . . . . . . . . . . . .34
     12.2.  ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .34
     12.3.  DETERMINATION BY AN EXPERT . . . . . . . . . . . . . . . . . . . .34
     12.4.  EXPERT'S TERMS OF APPOINTMENT. . . . . . . . . . . . . . . . . . .35
     12.5.  EXPERIENCE OF ARBITRATOR OR EXPERT . . . . . . . . . . . . . . . .36
     12.6.  NON-PAYMENT OF COSTS OF ARBITRATOR OR EXPERT . . . . . . . . . . .36

13.  RENT REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36

     13.1.  DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .36
     13.2.  UPWARDS ONLY RENT REVIEW . . . . . . . . . . . . . . . . . . . . .38
     13.3.  AGREEMENT OR DETERMINATION OF THE REVIEWED RENT. . . . . . . . . .39
     13.4.  INTERIM PAYMENTS UNTIL THE OPEN MARKET RENT IS DECIDED . . . . . .39




     13.5.  RENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . .39
     13.6.  MEMORANDUM OF REVIEWED RENT. . . . . . . . . . . . . . . . . . . .40
     13.7.  TIME NOT OF THE ESSENCE. . . . . . . . . . . . . . . . . . . . . .40

14.  SERVICE CHARGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40

     14.1.  DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .40
     14.2.  BASIC SERVICE CHARGE . . . . . . . . . . . . . . . . . . . . . . .40
     14.3.  ADJUSTMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
     14.4.  EXPENDITURE. . . . . . . . . . . . . . . . . . . . . . . . . . . .42
     14.5.  DEDUCTIONS IN ARRIVING AT EXPENDITURE. . . . . . . . . . . . . . .45
     14.6.  LANDLORD'S CONTRIBUTION TO EXPENDITURE . . . . . . . . . . . . . .45
     14.7.  CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . . . . . . .46
     14.8.  NO IMPLIED OBLIGATION. . . . . . . . . . . . . . . . . . . . . . .46

15.  GUARANTOR'S COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . .46

FIRST SCHEDULE - FORM OF AUTHORISED GUARANTEE AGREEMENT. . . . . . . . . . . .48

SECOND SCHEDULE - FORM OF GUARANTEE COVENANT . . . . . . . . . . . . . . . . .49




1.   DEFINITIONS

     In this Lease the following definitions apply:

     "1995 ACT"                    the Landlord and Tenant (Covenants)
                                   Act 1995

     "ARBITRATION"                 arbitration under clause 12.2

     "BASE RATE"                   the base rate from time to time of
                                   Lloyds Bank Plc or if there is no
                                   such rate the most closely
                                   comparable rate of interest to be
                                   determined (if not agreed) by
                                   Arbitration

     "BASIC SERVICE CHARGE"        the Basic Service Charge for the
                                   time being under clause 14.2

     "CENTRE"                      the land and building described in
                                   the Particulars (including any
                                   additions) of which the Property
                                   forms part together with any
                                   additions to the land and/or
                                   buildings comprising the Centre from
                                   time to time

     "COMMON PARTS"                the parts of the Centre that are
                                   provided and/or designated by the
                                   Landlord from time to time for
                                   common use by the tenants and
                                   occupiers of the Centre and their
                                   visitors including for example
                                   approaches entrances  entrance halls
                                   staircases  corridors  toilets lifts
                                   escalators  roads  ramps car parking
                                   areas and fire escapes

     "CONDUCTING MEDIA"            all conducting media including (but
                                   not limited to) pipes flues ducts
                                   wires cables drains sewers gutters
                                   gullies and channels and their
                                   ancillary plant and equipment

     "EXCLUDED RISK"               any risk which would have fallen
                                   within the definition of "Insured
                                   Risks" but for the Landlord
                                   exercising its reasonable discretion
                                   to exclude the risk from that
                                   definition

     "FAIR PROPORTION"             the fair proportion reasonably
                                   determined from time to time by the
                                   Landlord's Surveyor

     "GROUP COMPANY"               a company which is a member of the
                                   same group as the Landlord or the
                                   Tenant (as the case may be) and for
                                   the purpose of this definition:



                                      -2-


                                   (a)   a company is a "subsidiary" of
                                         another company if that other
                                         company

                                         (i)   holds a majority of the
                                               voting rights in it or

                                         (ii)  is a member of it and
                                               has the right to appoint
                                               or remove a majority of
                                               its board of directors
                                               or

                                         (iii) is a member of it and
                                               controls (alone or
                                               under an agreement
                                               with other shareholders
                                               or members) a majority
                                               of the voting rights
                                               in it

                                   (b)   two companies shall be taken
                                         to be members of the same
                                         group if and only if:

                                         (i)   one is a subsidiary of
                                               the other or

                                         (ii)  both are subsidiaries of
                                               a third or

                                         (iii) one is a subsidiary
                                               of a company which
                                               itself is a subsidiary
                                               of the other

     "INSURANCE RENT"              a sum equal to a Fair Proportion of
                                   the cost of the insurances described
                                   in clause 8.1 (including the cost of
                                   any insurance valuations)

     "INSURED RISKS"               (a)   fire explosion and lightning

                                   (b)   impact

                                   (c)   earthquake

                                   (d)   aircraft (other than hostile
                                         aircraft) and things dropped
                                         from aircraft

                                   (e)   flood storm and tempest

                                   (f)   bursting or overflowing of
                                         water tanks and apparatus



                                      -3-


                                   (g)   riot and civil commotion and

                                   (h)   malicious damage

                                   and any other risks against which
                                   the Landlord or any superior
                                   landlord may from time to time
                                   reasonably insure and an "Insured
                                   Risk" means one of the risks except
                                   that a risk will not be an "Insured
                                   Risk" to the extent that (in the
                                   reasonable opinion of the Landlord's
                                   Surveyor) insurance cover is not
                                   available in the normal market at a
                                   reasonable premium and the Landlord
                                   elects not to take out such
                                   insurance cover for the Centre

     "LANDLORD"                    the person named in the Particulars
                                   or any other person who at the
                                   relevant time is entitled to the
                                   immediate reversion to this Lease

     "LANDLORD'S SURVEYOR"         the person(s) from time to time
                                   appointed by the Landlord to act as
                                   its surveyor for any purpose under
                                   this Lease who may be an employee of
                                   the Landlord

     "LEASE"                       this lease as varied and
                                   supplemented by any document

     "ORIGINAL LANDLORD"           the person named as Landlord in the
                                   Particulars

     "ORIGINAL TENANT"             the person named as Tenant in the
                                   Particulars

     "PLANNING ACTS"               the Local Government Planning and
                                   Land Act 1980 the Town and Country
                                   Planning Act 1990 the Planning
                                   (Listed Buildings and Conservation
                                   Areas) Act 1990 the Planning
                                   (Hazardous Substances) Act 1990  the
                                   Planning (Consequential Provisions)
                                   Act 1990 and the Planning and
                                   Compensation Act 1991 and any later
                                   similar legislation

     "PLANNING CONTROL"            has the meaning given to it by the
                                   Town and Country Planning Act 1990

     "PRESIDENT OF THE RICS"       the President for the time being of
                                   The Royal Institution of Chartered
                                   Surveyors or the person for the time
                                   being authorised to act on his
                                   behalf



                                      -4-


     "PROPERTY"                    the premises described in the
                                   Particulars including:

                                   (a)   plaster surfaces and
                                         decorative and other finishes
                                         on walls columns and other
                                         structures

                                   (b)   the inner half of any non-
                                         loadbearing walls and other
                                         non-loadbearing structures
                                         dividing the Property from
                                         other parts of the Centre

                                   (c)   any non-loadbearing internal
                                         walls and other non-
                                         loadbearing structures wholly
                                         within the premises

                                   (d)   floors (including any raised
                                         floors and their supports
                                         floor boards floor screeds and
                                         other floor finishes) down to
                                         (but excluding) the floor
                                         slabs or floor joists

                                   (e)   ceilings (including any
                                         suspended ceilings and their
                                         fixings ceiling tiles and
                                         other ceiling finishes) up to
                                         (but excluding) the ceiling
                                         slabs or ceiling joists

                                   (f)   doors including their frames
                                         furniture and any glass

                                   (g)   window glass

                                   (h)   Conducting Media within the
                                         Centre which exclusively serve
                                         the premises and do not belong
                                         to suppliers and central
                                         heating radiators and other
                                         heating equipment within the
                                         Property and including the
                                         comfort cooling equipment
                                         serving the Property located
                                         both within and outside the
                                         Property

                                   (i)   landlord's fixtures in or
                                         forming part of the premises
                                         and

                                   (j)   any additions to the Property

                                   but excluding:

                                   (k)   loadbearing walls loadbearing
                                         columns



                                      -5-



                                         and other loadbearing
                                         structures (other than plaster
                                         surfaces and decorative and
                                         other finishes)

                                   (l)   tenant's fixtures

                                   (m)   Conducting Media within the
                                         premises which do not
                                         exclusively serve the premises
                                         and

                                   (n)   all other parts of the Centre
                                         not expressly included in
                                         items (a) to (j) (inclusive)
                                         of this definition

     "RETAINED PARTS"              all parts of the Centre other than
                                   those parts which are let or
                                   intended for letting and the
                                   "Retained Parts" include:

                                   (a)   the Common Parts

                                   (b)   any office accommodation for
                                         staff

                                   (c)   any staff rooms and storage
                                         premises used to provide
                                         services for the Centre

                                   (d)   any accommodation for resident
                                         staff

                                   (e)   any security system which is
                                         operated by the Landlord

                                   (f)   the Conducting Media except to
                                         the extent they form part of
                                         the Property or premises which
                                         are let or intended for
                                         letting

                                   (g)   the plant rooms and other
                                         areas which house or contain
                                         Conducting Media forming part
                                         of the Retained Parts and


                                   (h)   the walls foundations and
                                         roofs of the Centre except to
                                         the extent they form part of
                                         the Property or other premises
                                         which are let or intended for
                                         letting

     "SERVICE CHARGE"              the amount payable by the Tenant for
                                   services in the manner described in
                                   clause 14

     "SIGNS"                       signs notices placards stickers
                                   advertisements flags logos
                                   lettering and



                                      -6-


                                   numerals

     "THE STANDARD HOURS"          Every day from 7.30 am to 10.00 pm
                                   except (if the Landlord so
                                   reasonably decides) Bank and Public
                                   Holidays as reasonably varied from
                                   time to time by the Landlord

     "TENANCY"                     the contractual tenancy created by
                                   this Lease and any further tenancy
                                   of the Property during any period of
                                   holding over or extension or
                                   continuation of the contractual
                                   tenancy by statute or under common
                                   law

     "TENANT"                      the Original Tenant and its
                                   successors in title as tenant under
                                   this Lease

     "VAT"                         value added tax and any similar tax
                                   amending or replacing it

     And the definitions in the Particulars are incorporated into this Clause 1

2.   INTERPRETATION

     This clause contains directions for interpretation which apply unless a
     contrary intention is clear from the wording elsewhere in this Lease

     2.1.    RIGHTS OF LANDLORD

             References to the rights of the Landlord are deemed to include the
             same rights for any superior landlord and anyone reasonably
             authorised by the Landlord or a superior landlord

     2.2.    ACT OR DEFAULT OF THE TENANT

             References to the act or default or fault of the Tenant and words
             to similar effect shall include any act default or fault of anyone
             at the Property with the Tenant's authority and under the Tenant's
             control

     2.3.    APPROVAL OF ANY SUPERIOR LANDLORD AND MORTGAGEE

             Any provision in this Lease requiring the consent or approval of
             the Landlord is to be construed as also requiring any necessary
             consent or approval of:

             2.3.1.   any superior landlord and

             2.3.2.   any mortgagee of the Landlord's or any superior landlord's
                      interest in the Property

             where such consent or approval is required



                                      -7-


     2.4.    CONSENT AND APPROVAL OF THE LANDLORD

             References to consent of the Landlord and words to similar effect
             mean a prior consent in writing signed by or for the Landlord and
             references to "approved" and "authorised" and words to similar
             effect mean previously approved or previously authorised in both
             cases in writing

     2.5.    ENGLISH LAW

             This Lease shall be governed by and interpreted in accordance with
             English law

     2.6.    GENDER AND NUMBER

             Words of one gender include all other genders and singular words
             include the plural and vice versa

     2.7.    GENERAL AND PARTICULAR WORDS

             General words are not limited because they are preceded or followed
             by particular words in the same category or covering the same topic

     2.8.    HEADINGS

             Any footnote heading index marginal note table of contents and
             underlining is for guidance only not interpretation

     2.9.    JOINT AND SEPARATE OBLIGATIONS

             If an obligation is owed to or by more than one person that
             obligation is owed to or by those persons separately jointly or in
             any combination

     2.10.   LANDLORD'S LIABILITY

             If the Original Landlord ceases to be the Landlord its liability
             under this Lease ends except in respect of the period before it
             ceases to be the Landlord

     2.11.   LAST YEAR AND END OF THE TENANCY

             References to the last year of the Tenancy or other periods related
             to the end of the Tenancy and words to similar effect include the
             last year of the Tenancy or such other period (as the case may be)
             even if it ends before the end of the Contractual Term and
             references to the end of the Tenancy and words to similar effect
             are to be similarly interpreted

     2.12.   PERPETUITY PERIOD

             The perpetuity period applicable to this Lease is eighty (80) years
             from the start of the Contractual Term and whenever in this Lease
             any party is granted a future interest that interest must vest
             within such perpetuity period and if it has not it will be void for
             remoteness



                                      -8-


        2.13.   PERSON AND PARTY

                2.13.1. Any reference to a person includes a company corporation
                        or other legal entity

                2.13.2. Any reference to "parties" or "party" means the Landlord
                        and the Tenant or either or them but (in the absence of
                        a specific reference to the contrary) does not include
                        any Guarantor

        2.14.   RIGHTS AND OBLIGATIONS

                2.14.1. The Tenant or any undertenant or occupier of the
                        Property will not during the Tenancy acquire any implied
                        or prescriptive right or easement from or over or
                        affecting any neighbouring premises in which the
                        Landlord from time to time has a freehold or leasehold
                        interest

                2.14.2. Rights granted are not exclusive to the Tenant

                2.14.3. Rights and obligations are cumulative

        2.15.   STATUTE

                Any reference to a specific statute includes:

                2.15.1. any statutory extension variation or re-enactment of the
                        statute whether before or after the date of this Lease

                2.15.2. derivative orders regulations and permissions

                2.15.3. directives and regulations adopted by the European Union

                Any general reference to "statute" includes those enacted
                after the date of this Lease and includes all derivative
                orders regulations and permissions

        2.16.   SUPERIOR LANDLORD

                2.16.1. Any reference to a superior landlord includes the
                        Landlord's immediate reversioner and any superior
                        landlord

                2.16.2. Any reference to a superior lease includes the lease
                        under which the Landlord holds the Property and any
                        lease superior to that

                2.16.3. When a superior landlord performs a landlord's
                        obligation it will be deemed to have been performed by
                        the Landlord


                                      -9-


        2.17.   TENANT NOT TO ALLOW ACT

                An obligation by the Tenant not to do an act includes an
                obligation not to knowingly allow that act to be done by another
                person

3.      LETTING

        3.1.    LETTING

                The Landlord lets the Property to the Tenant for the Contractual
                Term the Tenant paying during the Tenancy the following (all of
                which are reserved as rent):

                3.1.1.  from and including the Rent Commencement Date the Rent
                        by equal quarterly payments in advance on the usual
                        quarter days the first payment being due on the First
                        Rent Payment Date

                3.1.2.  from and including the date of this Lease the Insurance
                        Rent within fourteen (14) days after a written demand

                3.1.3.  from and including the date of this Lease the Basic
                        Service Charge by equal quarterly payments in advance on
                        the usual quarter days the first payment being due today

                3.1.4.  any Excess Service Charge in accordance with clause 14
                        and

                3.1.5.  any VAT payable on the above amounts

        3.2.    RIGHTS SUBJECTIONS AND RESERVATIONS

                The letting includes the rights granted by clause 4 but is
                subject to the subjections (if any) exceptions and reservations
                set out in clause 5

4.      TENANT'S RIGHTS

        The Landlord grants to the Tenant the following rights:

        4.1.    CONDUCTING MEDIA AND COMMON PARTS

                The right (subject to reasonable interruption for repair
                maintenance alteration or replacement) to use:

                4.1.1.  the Conducting Media in the Centre which do not form
                        part of the Property but which service the Property and

                4.1.2.  the Common Parts for all proper purposes in connection
                        with the use and enjoyment of the Property


                                      -10-


        4.2.    ENTRY FOR REPAIR

                The right to enter other parts of the Centre with workmen and
                equipment to carry out works of repair maintenance decoration or
                alteration to the Property on the following terms and
                conditions:

                4.2.1.  the Tenant must give reasonable written notice to the
                        Landlord and the occupiers of the relevant premises of
                        its intention to exercise this right


                4.2.2.  the Tenant may only exercise this right in so far as
                        such works cannot be carried out from inside the
                        Property in a commercially practicable manner

                4.2.3.  the Tenant must cause as little inconvenience as
                        reasonably practicable and

                4.2.4.  the Tenant must indemnify the Landlord and the occupiers
                        against the reasonable cost (including reasonable fees)
                        of making good all damage to the premises entered and to
                        the fixtures and contents of such premises caused by
                        such entry

                4.2.5.  the Tenant may only exercise this right to the extent
                        that (if at all) it is reserved out of any other
                        tenancies of the Centre from time to time and subject to
                        any restrictions or conditions or entry contained in
                        such tenancies

        4.3.    SUPPORT AND PROTECTION

                The right of support and protection that is now enjoyed from the
                remainder of the Centre

        4.4.    NAMEBOARD

                The right at the cost of the Tenant to have the Tenant's name
                displayed by the Landlord in a manner approved by the Landlord
                on:

                4.4.1.  any nameboard in the entrance hall of the building
                        forming part of the Centre in which the Property is
                        situate and

                4.4.2.  any external nameboard at the entrance to the Centre

        4.5.    CAR PARKING

                The right to park not more than 30 private motor vehicles in the
                car parking spaces forming part of the Centre shown for
                identification edged red on the plan numbered '2' annexed or
                such other 30 spaces from time to time allocated by the Landlord

5.      SUBJECTIONS AND LANDLORD'S RIGHTS

        THE LETTING IS SUBJECT TO THE FOLLOWING:


                                      -11-


         All covenants conditions restrictions and other matters contained
         mentioned or referred to in the registered title to the Centre to the
         extent that such matters relates to the tenancy hereby granted and are
         still subsisting and capable of taking effect but excluding any entries
         relating to mortgages or charges

         THE FOLLOWING RIGHTS ARE EXCEPTED AND RESERVED TO THE LANDLORD:

         5.1.     ENTRY BY LANDLORD

                  5.1.1.   The right at reasonable times and on reasonable
                           notice (but in case of emergency at any time without
                           notice) to enter the Property with necessary
                           materials and appliances to:

                           5.1.1.1  view and record the condition of the
                                    Property

                           5.1.1.2  repair maintain alter or clean other
                                    premises

                           5.1.1.3  inspect repair maintain alter replace or add
                                    to Conducting Media

                           5.1.1.4  comply with obligations or exercise any
                                    rights under this Lease or a superior lease
                                    or any tenancy of another part of the Centre

                           5.1.1.5  carry out any repairs to or decoration of
                                    the Property which are not the
                                    responsibility of the Tenant

                           5.1.1.6  make good any failure by the Tenant to
                                    repair maintain or decorate the Property in
                                    compliance with clause 6.6.1

                           5.1.1.7  remove anything which has been fixed placed
                                    displayed or left on the Property in breach
                                    of clause 6.11 or clause 6.12

                           5.1.1.8  make good any other breach of covenant by
                                    the Tenant

                           5.1.1.9  show prospective tenants and purchasers over
                                    the Property or

                           5.1.1.10 do any other reasonable thing connected with
                                    the Property other than altering the
                                    Property

                  5.1.2.   In exercising these rights the Landlord will:

                           5.1.2.1  cause as little inconvenience to the Tenant
                                    as is reasonably practicable

                           5.1.2.2  as soon as reasonably practicable make good
                                    any damage to the Property caused by the
                                    entry and

                           5.1.2.3  indemnify the Tenant against any damage to
                                    the tenant's fixtures caused by the entry



                                      -12-


         5.2.     LETTING BOARD ETC

                  The right during the last six (6) months of the Tenancy to
                  display a letting board on the Property and at any time to
                  display a sale board on the Property but not so that any such
                  board unreasonably obstructs the light or air to the Property

         5.3.     GOODS LEFT ON THE PROPERTY

                  5.3.1.   The right to sell as agent for the Tenant any
                           belongings of the Tenant left in the Property for
                           more than fourteen (14) days after the end of the
                           Tenancy unless the Tenant remains in occupation of
                           the Property under a new tenancy and if the Landlord
                           exercises this right the Tenant will indemnify the
                           Landlord against any liability incurred by the
                           Landlord to anyone whose belongings are sold by the
                           Landlord in the mistaken belief held in good faith
                           (which shall be presumed unless the contrary is
                           proved) that such belongings were owned by the Tenant

                  5.3.2.   In the event of a sale the Landlord will account to
                           the Tenant for the proceeds of sale less the
                           reasonable costs of removal storage and sale if the
                           Tenant claims the proceeds of sale within six (6)
                           months after the date on which the Tenant left the
                           Property but if no such claim is made by the Tenant
                           the proceeds of sale will belong to the Landlord

         5.4.     CONDUCTING MEDIA

                  The right to use the Conducting Media forming part of the
                  Property which serve other premises

         5.5.     LIGHT AND SUPPORT ETC

                  The right of light air support and protection and all other
                  easements and rights now or after the date of this Lease
                  belonging to or enjoyed by any other premises

         5.6.     LANDLORD'S RIGHT TO CARRY OUT WORKS ON OTHER PREMISES

                  5.6.1.   The right to alter add to and carry out works on
                           other parts of the Centre including the Common Parts
                           or other premises even though this obscures or
                           obstructs any window in the Property or interferes
                           with any rights easements or amenities enjoyed by the
                           Property (for example: rights of access of light and
                           air)

                  5.6.2.   In carrying out any works under this clause 5.6 the
                           Landlord will:

                           5.6.2.1  entitled (if reasonably necessary) to erect
                                    scaffolding which can be attached to the
                                    Property

                           5.6.2.2  take all reasonable precautions to ensure
                                    that the beneficial use and occupation of
                                    the Property is not



                                      -13-

                                    materially adversely affected and as soon as
                                    reasonably practicable make good any damage
                                    caused to the Property and

                           5.6.2.3  ensure that after completion of the works
                                    the use of the Property for any purpose
                                    permitted by this Lease has not been
                                    materially adversely affected

         5.7.     VARIATION OF IMPLIED RIGHTS

                  The right to terminate or vary any implied right from time to
                  time enjoyed by the Property provided that such termination or
                  variation does not materially adversely affect the use of the
                  Property for any purpose permitted by this Lease

         5.8.     FIRE ESCAPE

                  The right to pass through the Property for the purposes of
                  escape from other parts of the Centre or other premises
                  adjoining the Centre in case of fire or other emergency

6.       TENANT'S COVENANTS

         The Tenant covenants with the Landlord:

         6.1.     RENT

                  6.1.1.   To pay the Rent and other amounts in the manner
                           specified in clause 3.1

                  6.1.2.   Not to claim or exercise any right to set-off or to
                           withhold payment of any amounts due to the Landlord
                           (save as required by statute)

                  6.1.3.   If required by the Landlord to make payments to the
                           Landlord by banker's order or credit transfer to a
                           bank account in the United Kingdom nominated by the
                           Landlord

         6.2.     OUTGOINGS

                  6.2.1.   To pay and to indemnify the Landlord against existing
                           and future rates taxes assessments impositions and
                           outgoings assessed or imposed on or in respect of the
                           Property (including those assessed or imposed on the
                           Landlord and any superior landlord) except any taxes
                           (save for VAT which the Tenant is otherwise obliged
                           to pay) assessed or imposed on the Landlord or any
                           superior landlord in respect of:

                           6.2.1.1  the rents

                           6.2.1.2  the grant of this Lease



                                      -14-


                           6.2.1.3  any dealing or deemed dealing by the
                                    Landlord or a superior landlord with its
                                    interest in the Property

                  6.2.2.   If such an assessment or imposition is:

                           6.2.2.1  made on premises which include the Property
                                    and

                           6.2.2.2  paid by the Landlord

                           to pay a Fair Proportion of it to the Landlord within
                           fourteen (14) days after a written demand except any
                           taxes (save for VAT which the Tenant is otherwise
                           obliged to pay) assessed or imposed on the Landlord
                           or any superior landlord in respect of:

                           6.2.2.3  the rents

                           6.2.2.4  the grant of this Lease

                           6.2.2.5  any dealing or deemed dealing by the
                                    Landlord or a superior landlord with its
                                    interest in the Property

                  6.2.3.   To indemnify the Landlord against any loss of rating
                           relief on the Property after the end of the Tenancy
                           caused by the Property being left empty during the
                           Tenancy

         6.3.     INTEREST

                  6.3.1.   If required by the Landlord to pay interest at a
                           yearly rate of four per cent (4%) above Base Rate on
                           any sum payable under this Lease by the Tenant to the
                           Landlord (whether or not formally demanded) that is
                           not paid on its due date and to pay this interest
                           from the due date to the date of payment (both before
                           and after any court judgment) calculated on a daily
                           basis and compounded with rests on the usual quarter
                           days

                  6.3.2.   If while a breach of any tenant's covenant continues
                           the Landlord refuses to accept payment of any sum in
                           order not to waive the breach the Tenant will be
                           deemed for the purposes of this clause 6.3 to have
                           failed to pay such sum

                  6.3.3.   This clause 6.3 does not prejudice any other right or
                           remedy of the Landlord

         6.4.     REPAIR AND DECORATION

                  6.4.1.   To repair and maintain the Property and to keep it
                           clean and in good repair

                  6.4.2.   To repair maintain and keep clean and when necessary
                           renew:

                           6.4.2.1  the fixtures in the Property and



                                      -15-


                           6.4.2.2  any carpeting provided by the Landlord (or
                                    provided by the Tenant in replacement for
                                    any carpeting provided by the Landlord)
                                    floor tiles and other floorings

                           Any replacement carpeting floor tiles or other
                           floorings must be in the same colour as and of a
                           quality not inferior to that being replaced

                  6.4.3.   To redecorate any exterior parts of the Property
                           included in the demises (if any) every third (3rd)
                           year and in the last three (3) months of the Tenancy
                           and to redecorate the interior of the Property
                           (including the internal parts of the window frames)
                           in every fifth (5th) year and in the last three (3)
                           months of the Tenancy preparing and painting papering
                           or polishing as appropriate having regard to earlier
                           treatment

                  6.4.4.   As often as necessary to clean and treat in an
                           appropriate manner all other external and internal
                           materials surfaces and finishes of the Property

                  6.4.5.   In relation to the work referred to in this clause
                           6.4:

                           6.4.5.1  to carry out the work with appropriate
                                    materials of good quality in a good and
                                    workmanlike manner and to the reasonable
                                    satisfaction of the Landlord's Surveyor

                           6.4.5.2  to carry out the painting papering and
                                    treatment in the last three (3) months of
                                    the Tenancy in a colour or colours approved
                                    in writing by the Landlord and

                           6.4.5.3  to clean any glass in the doors windows and
                                    other lights of the Property at least once a
                                    month

                  6.4.6.   Damage by an Insured Risk is excepted from the
                           Tenant's liability under this clause 6.4 except to
                           the extent that the insurance money is irrecoverable
                           because of an act or default of the Tenant

                  6.4.7.   Damage by an Excluded Risk is (subject to clause 8.7)
                           excepted from the Tenant's liability under this
                           clause 6.4 if the Landlord serves a Non-Reinstatement
                           Notice as a result of such damage

         6.5.     MAINTENANCE

                  6.5.1.   To keep the Conducting Media which form part of the
                           Property clear and unobstructed and not to do
                           anything which causes an obstruction or damage to any
                           other Conducting Media serving the Property

                  6.5.2.   To take all necessary precautions against:

                           6.5.2.1  frost damage to any pipe tank or water
                                    apparatus in the Property and



                                      -16-


                           6.5.2.2  the bursting or overflowing of any pipe tank
                                    or water apparatus in the Property

         6.6.     REPAIR ON NOTICE

                  6.6.1.   To make good with all practicable speed any failure
                           to repair maintain or decorate the Property for which
                           the Tenant is liable and of which the Landlord has
                           given notice in writing and to start the necessary
                           work within two (2) months after the Landlord's
                           notice (or sooner if necessary) and then diligently
                           to continue and complete the work

                  6.6.2.   If the Tenant does not comply with clause 6.6.1 to
                           pay within fourteen (14) days after a written demand
                           the reasonable costs incurred by the Landlord in
                           carrying out the necessary work including reasonable
                           fees and expenses

         6.7.     COMPLIANCE WITH STATUTORY REQUIREMENTS ETC

                  6.7.1.   Subject to clause 6.7.2 to carry out all works and
                           provide and maintain all arrangements in respect of
                           the Property and the use to which the Property is
                           being put that are necessary in order to comply with
                           the requirements of:

                           6.7.1.1  the Offices Shops and Railway Premises Act
                                    1963 the Fire Precautions Act 1971 the
                                    Defective Premises Act 1972 and the Health
                                    and Safety at Work etc. Act 1974

                           6.7.1.2  any other statute

                           6.7.1.3  any government department local authority or
                                    other public or competent authority

                           6.7.1.4  any court of competent jurisdiction and

                           6.7.1.5  any regulation of the European Communities
                                    which applies in the United Kingdom

                  6.7.2.   Not to carry out any works which the Landlord elects
                           to carry out by serving written notice on the Tenant

                  6.7.3.   To pay within fourteen (14) days after a written
                           demand the whole or a Fair Proportion as appropriate
                           of the Landlord's reasonable expenditure (including
                           reasonable fees and expenses) on any works which the
                           Landlord has elected to carry out under this clause
                           6.7

                  6.7.4.   To comply with any other obligations imposed by law
                           relating to the Property or its use

                  6.7.5.   Not to do anything in respect of the Property which
                           imposes on the Landlord a liability under any statute
                           to pay any penalty damages compensation or costs



                                      -17-


         6.8.     RESTRICTIONS ON DEALINGS

                  6.8.1.   Not to assign or mortgage or charge any part (as
                           distinct from the whole) of the Property

                  6.8.2.   Not to mortgage or charge the whole of the Property
                           except:

                           6.8.2.1  by way of floating charge or

                           6.8.2.2  to a bona fide bank or other financial
                                    institution with the consent of the Landlord
                                    (which is not to be unreasonably withheld or
                                    delayed)

                  6.8.3.   Not to execute any declaration of trust with regard
                           to the whole or part of the Property and not to hold
                           or occupy the whole or part of the Property as agent
                           for another or otherwise for the benefit of another

                  6.8.4.   Not to part with possession or share the occupation
                           of the whole or any part of the Property except by an
                           assignment or underletting of the whole of the
                           Property or an underletting of a Permitted Part of
                           the Property except that the Tenant may share
                           occupation of the Property with a Group Company so
                           long as:

                           6.8.4.1  no relationship of lessor and lessee is
                                    created

                           6.8.4.2  details of any such arrangement are given to
                                    the Landlord in advance

                           6.8.4.3  the Landlord is given notice immediately
                                    such an arrangement starts and ends

                  6.8.5.   not to assign the whole of the Property without the
                           consent of the Landlord (which consent is not to be
                           unreasonably withheld or delayed)

                  6.8.6.   For the purposes of Section 19(1)(A) of the Landlord
                           and Tenant Act 1927 it is agreed that the Landlord
                           may withhold its consent in the following
                           circumstances:

                           6.8.6.1  if any of the conditions set out in 6.8.7
                                    below are not satisfied before the date of
                                    the assignment

                           6.8.6.2  if the proposed assignee is a Group Company
                                    of the Tenant whose financial standing is
                                    materially less substantial than the Tenant

                           6.8.6.3  if the proposed assignee enjoys diplomatic
                                    or state immunity (unless the proposed
                                    assignee is the Government of the United
                                    Kingdom of Great Britain and Northern
                                    Ireland or any Department of that
                                    Government)



                                      -18-


                           6.8.6.4  if it is otherwise reasonable for the
                                    Landlord to withhold its consent having
                                    regard amongst other things to the fact that
                                    the outgoing tenant may be entitled to be
                                    released from its liability under the Lease
                                    under the 1995 Act

                  6.8.7.   The Landlord is entitled for the purposes of Section
                           19(1)(A) of the Landlord & Tenant Act 1927 to require
                           the following conditions to be satisfied before this
                           Lease is assigned by the Tenant and to make its
                           consent conditional upon any or all of these
                           conditions being satisfied:

                           6.8.7.1  that the Tenant enters into an authorised
                                    guarantee agreement (as defined in Section
                                    16 of the 1995 Act) in the form set out in
                                    the First Schedule to this Lease with such
                                    variations as the Landlord reasonably
                                    requires and that any surety for the Tenant
                                    guarantees the obligations of the Tenant
                                    under such authorised guarantee agreement

                           6.8.7.2  that the proposed assignee enters into
                                    direct covenants with the Landlord (whose
                                    costs shall be paid by the Tenant) to pay
                                    the rents reserved by this Lease and the
                                    other sums payable under this Lease
                                    including any sums owed or subsequently
                                    arising or accruing in respect of any period
                                    prior to the assignment and to perform and
                                    observe the tenant covenants and the
                                    conditions in this Lease throughout the
                                    Tenancy unless and until it is released by
                                    virtue of the 1995 Act (and if the proposed
                                    assignee is more than one person or company
                                    these covenants shall be entered into
                                    jointly and severally)

                           6.8.7.3  (if it is reasonable for the Landlord to
                                    require this) that one or more sureties the
                                    financial status of which is acceptable to
                                    the Landlord (who shall act reasonably in
                                    judging whether their financial status is
                                    acceptable) give direct covenants to the
                                    Landlord (jointly and severally) that the
                                    proposed assignee will pay the rents
                                    reserved by this Lease and will perform and
                                    observe the tenant covenants and conditions
                                    contained in this Lease in the form set out
                                    in the Second Schedule to this Lease with
                                    such variations as the Landlord reasonably
                                    requires

                           6.8.7.4  (if it is reasonable for the Landlord to
                                    require this) also to procure that there is
                                    deposited with the Landlord a sum equal to
                                    not less than six month's Rent plus VAT
                                    potentially payable thereon This sum and all
                                    interest on it shall be charged to the
                                    Landlord as security for any non-payment of
                                    sums due under this Lease and for any
                                    non-observance or non-performance of the
                                    covenants by the tenant and the conditions
                                    contained in this Lease on



                                      -19-


                                    the basis that it will be repayable to
                                    the proposed assignee following any further
                                    lawful assignment which is carried out in
                                    accordance with the terms of this Lease This
                                    sum and all interest on it shall be held on
                                    and shall be subject to such other terms as
                                    the Landlord may reasonably require

                           6.8.7.5  any other conditions which may be reasonable
                                    in the circumstances

                  6.8.8.   Any dispute between the Landlord and the Tenant about
                           the interpretation of clauses 6.8.6 and 6.8.7 or
                           about matters arising under them shall be referred to
                           Arbitration

                  6.8.9.   Not to underlet the whole of the Property and not to
                           underlet a Permitted Part of the Property:

                           6.8.9.1  unless the undertenant enters into direct
                                    covenants with the Landlord (whose costs
                                    shall be paid by the Tenant) to perform and
                                    observe all the lessee's covenants and the
                                    other provisions contained in this Lease
                                    (other than the payment of the rents) so far
                                    as they apply to the part of the Property
                                    which is to be underlet

                           6.8.9.2  without the previous consent of the Landlord
                                    which consent is not to be unreasonably
                                    withheld or delayed where the other
                                    provisions of this sub-clause 6.8.9 have
                                    been complied with

                  6.8.10.  Not to underlet the whole or a Permitted Part of the
                           Property at a fine or a premium and not to underlet
                           the whole of the Property at a rent less than
                           whichever is the greater of the open market rental
                           value of the Property and the rent payable under this
                           Lease and not to underlet a Permitted Part of the
                           Property at a rent less than the open market value of
                           the part of the Property to be underlet or if greater
                           the appropriate proportion of the rent payable under
                           this Lease

                  6.8.11.  Not to be a party to any agreement or arrangement for
                           the commutation in whole or in part of any rent
                           reserved by and payable under any underletting of the
                           Property

                  6.8.12.  Every permitted underlease must contain:

                           6.8.12.1 covenants by the underlessee (which the
                                    Tenant undertakes to enforce) which prevent
                                    the underlessee from doing or allowing
                                    anything in on or in relation to the
                                    Property which would be a breach of any of
                                    the Tenant's obligations in this Lease



                                      -20-


                           6.8.12.2 provisions for the review of the rent
                                    reserved by the underlease (which the Tenant
                                    hereby undertakes to operate and to enforce)
                                    at least every five years to the open market
                                    rent on such review date and on similar
                                    terms to clause 13 of this Lease

                           6.8.12.3 a condition for re-entry if there is a
                                    breach by the underlessee of any covenant in
                                    the underlease

                           6.8.12.4 a covenant prohibiting sub-letting of the
                                    whole or part of the premises demised

                           6.8.12.5 an agreement sanctioned by an Order of a
                                    Court of competent jurisdiction under the
                                    terms of Section 38 of the Landlord and
                                    Tenant Act 1954 (as amended by Section 5 of
                                    the Law of Property Act 1969) by which the
                                    provisions of Sections 24 to 28 inclusive of
                                    the Landlord and Tenant Act 1954 are
                                    excluded from the tenancy created by that
                                    underletting

                  6.8.13.  The Tenant will not vary the terms of or accept any
                           surrender of any permitted underlease without the
                           consent of the Landlord (which consent shall not be
                           unreasonably withheld or delayed)

                  6.8.14.  The Tenant will not give any bill of sale or other
                           preferential security (other than floating charges)
                           on the stock-in-trade or personal chattels of the
                           Tenant which are in or on the Property from time to
                           time

         6.9.     REGISTRATION OF ASSIGNMENTS ETC

                  6.9.1.   Within one month after its date to produce to the
                           Landlord's solicitors a true copy of every assignment
                           underlease charge or other document evidencing a
                           devolution of the whole or any part of the Property

                  6.9.2.   On production of a document under clause 6.9.1 to pay
                           to the Landlord's solicitors a reasonable
                           registration fee of not less than twenty-five pounds
                           (L25) plus VAT

         6.10.    INFORMATION

                  6.10.1.  To produce to the Landlord on request all plans
                           documents and other evidence which the Landlord may
                           reasonably require in order to be satisfied that the
                           Tenant has complied with its obligations under this
                           Lease

                  6.10.2.  When requested to supply to the Landlord full details
                           of all occupations of the Property and derivative
                           interests in the Property however remote

         6.11.    ALTERATIONS



                                      -21-


                  6.11.1.  Not to alter or add to the structure or exterior of
                           the Property

                  6.11.2.  Not without the Landlord's consent (which shall not
                           be unreasonably withheld or delayed) to alter or
                           extend:

                           6.11.2.1 the electrical installation (including
                                    wiring) in the Property

                           6.11.2.2 any gas installation (including piping) in
                                    the Property or

                           6.11.2.3 any air-conditioning system in the Property

                  6.11.3.  Not to make any other alteration or addition to the
                           Property without the Landlord's consent (which is not
                           to be unreasonably withheld or delayed)

                  6.11.4.  On any application for consent to alter to supply the
                           Landlord with two (2) sets of a specification and
                           detailed drawings identifying the proposed works

                  6.11.5.  Not to fix place or leave anything (for example: any
                           aerial satellite dish telecommunications equipment
                           lighting shade or awning) on the exterior of the
                           Property except with the consent of the Landlord
                           which shall not be unreasonably delayed or withheld

                  6.11.6.  If required by the Landlord to reinstate the Property
                           by the end of the Tenancy under the supervision and
                           to the reasonable satisfaction of the Landlord's
                           Surveyor to the condition it was in before the
                           carrying out of any alterations or additions

                  6.11.7.  To procure that any alterations or additions to the
                           Property which are permitted by the Landlord are
                           carried out only by contractors approved by the
                           Landlord (which approval shall not be unreasonably
                           withheld or delayed)

         6.12.    SIGNS

                  Not without the approval of the Landlord (which approval shall
                  not be unreasonably withheld or delayed) to place or display
                  any Signs on the Property which can be seen from outside the
                  Property except the Tenant's name displayed on any external
                  doors of the Property

         6.13.    COST OF REMOVAL BY LANDLORD OF UNAUTHORISED SIGNS ETC

                  If anything is fixed placed displayed or left on the Property
                  in breach of clause 6.11 or clause 6.12 to pay to the Landlord
                  within fourteen (14) days after a written demand to remove it
                  the reasonable cost of removal incurred by the Landlord

         6.14.    SERVICE INSTALLATIONS



                                      -22-


                  6.14.1.  To pay to the suppliers and to indemnify the Landlord
                           against all charges for electricity gas water
                           telephone and other services consumed or used at or
                           for the Property (including meter rents)

                  6.14.2.  To comply with the requirements and regulations of
                           the suppliers of electricity gas water telephone and
                           other services relating to the installations in the
                           Property

                  6.14.3.  Not to overload the electrical installation in the
                           Property and to ensure that the electrical
                           installation any gas installation and any
                           air-conditioning system are maintained in a safe
                           condition

                  6.14.4.  Not to interfere with or impose an additional load on
                           any system of heating cooling or ventilation of the
                           Property

                  6.14.5.  To keep in good and substantial repair the comfort
                           cooling equipment serving the Property located both
                           within and outside the Property and in particular to
                           enter into and maintain a suitable maintenance
                           contract with a reputable engineer or firm of
                           engineers for the regular maintenance and serving of
                           the equipment

         6.15.    NUISANCE

                  Not to do anything in relation to the Property or the Centre
                  which causes a nuisance damage or annoyance to the Landlord or
                  others

         6.16.    USE

                  6.16.1.  Not to use the Property:

                           6.16.1.1 for any illegal or immoral purpose

                           6.16.1.2 for any offensive noisy or dangerous trade
                                    business or manufacture

                           6.16.1.3 as a betting office a booking office a
                                    theatrical agency an employment agency or a
                                    travel agency

                           6.16.1.4 as a sex establishment (as defined in the
                                    Local Government (Miscellaneous Provisions)
                                    Act 1983) or

                           6.16.1.5 as offices for diplomatic use

                  6.16.2.  To use the Property only for the Permitted Use

         6.17.    OVERLOADING

                  Not to overload the Property

         6.18.    NOTICES



                                      -23-


                  6.18.1.  To supply the Landlord with a copy of any notice
                           order direction or proposal of any competent
                           authority affecting the Property as soon as possible
                           after it has been received by the Tenant

                  6.18.2.  To comply with any such notice order direction or
                           proposal or at the request of the Landlord to make or
                           join with the Landlord in making such objections or
                           representations relating to it as the Landlord may
                           reasonably require

         6.19.    PLANNING

                  6.19.1.  Not to commit any breach of Planning Control

                  6.19.2.  To comply with all provisions and requirements under
                           the Planning Acts which affect the Property

                  6.19.3.  Not without the Landlord's consent (which consent
                           will not be unreasonably withheld or delayed where
                           the Landlord may not otherwise withhold or delay its
                           consent to the subject matter of such application) to
                           apply for planning permission relating to the
                           Property or to implement any planning permission

                  6.19.4.  Unless the Landlord gives written notice to the
                           contrary to carry out before the end of the Tenancy
                           any works required to be carried out to the Property
                           as a condition of any planning permission obtained by
                           or for the Tenant or anyone having an interest in the
                           Property inferior to that of the Tenant and this
                           applies even if the planning permission does not
                           require the works to be carried out until later

         6.20.    ENCROACHMENTS

                  6.20.1.  Not to stop up darken or obstruct any window at the
                           Property

                  6.20.2.  So far as possible to preserve all easements and
                           rights enjoyed by the Property and to help the
                           Landlord prevent anyone acquiring any easement or
                           right over the Property

         6.21.    DEFECTIVE PREMISES

                  6.21.1.  Promptly to give written notice to the Landlord of
                           any defect in the Property which might result in an
                           obligation on the Landlord to do or to stop doing
                           anything (for example in order to comply with the
                           provisions of this Lease or the duty of care imposed
                           by the Defective Premises Act 1972)

                  6.21.2.  To display and maintain all notices relating to the
                           condition of the Property which the Landlord
                           reasonably requires the Tenant to display at the
                           Property



                                      -24-


         6.22.    LANDLORD'S RIGHTS

                  To allow the Landlord to exercise its rights under this Lease
                  free from interference by the Tenant

         6.23.    LANDLORD'S COSTS

                  6.23.1.  To pay on an indemnity basis the proper legal charges
                           surveyor's fees bailiff's charges and other costs and
                           expenses reasonably incurred by the Landlord and any
                           superior landlord in relation to:

                           6.23.1.1 applications by the Tenant for the
                                    Landlord's consent (save where consent is
                                    unlawfully refused but including cases where
                                    the application is withdrawn)

                           6.23.1.2 any steps taken in connection with the
                                    preparation and service of a schedule of
                                    dilapidations or a notice or proceedings
                                    under Sections 146 or 147 of the Law of
                                    Property Act 1925 (even if forfeiture is
                                    avoided)

                           6.23.1.3 the recovery of any sums due to the Landlord
                                    from the Tenant or

                           6.23.1.4 enforcing or requiring the Tenant to remedy
                                    a breach of the provisions of this Lease

                  6.23.2.  Where the Landlord could recover the cost of advice
                           or services under clause 6.23.1 if undertaken by a
                           third party but the Landlord or a Group Company of
                           the Landlord provides the advice or services to pay
                           to the Landlord the amount that would have been
                           payable by the Tenant if that advice or service had
                           been provided by a third party

         6.24.    INDEMNITIES

                  To keep the Landlord indemnified against all liabilities
                  losses and expenses incurred by the Landlord arising out of
                  the negligence or wrongful act of the Tenant or any breach of
                  the Tenant's covenants in this Lease

         6.25.    YIELD UP

                  At the end of the Tenancy to give up the Property:

                  6.25.1.  in such state and condition as shall in all respects
                           be consistent with a full and due performance by the
                           Tenant of the covenants on the Tenant's part
                           contained in this Lease

                  6.25.2.  clear of any goods and refuse and any tenant's
                           fixtures and with all damage caused by such removal
                           made good

                  6.25.3.  with all keys and (where applicable) electronic
                           passes relating to the Property



                                      -25-


                  6.25.4.  with all Signs put up by the Tenant removed and all
                           damage caused by removal made good

                  6.25.5.  with vacant possession

         6.26.    VAT

                  6.26.1.  To pay to the Landlord and to indemnify the Landlord
                           against any VAT chargeable in respect of:

                           6.26.1.1 the rents payments and other consideration
                                    payable or given by the Tenant to the
                                    Landlord or to any person on the Landlord's
                                    behalf and any supply made by the Landlord
                                    to the Tenant under or in connection with
                                    this Lease and

                           6.26.1.2 any payments made by or other liability of
                                    the Landlord or any other person where the
                                    Tenant agrees in this Lease to reimburse or
                                    indemnify the Landlord in respect of any
                                    such payment or liability except to the
                                    extent that the Landlord is entitled to a
                                    credit for such VAT as allowable input tax

                  6.26.2.  For the avoidance of doubt:

                           6.26.2.1 the Landlord is not under any duty to
                                    exercise or not to exercise any option or
                                    right so as to reduce or avoid any liability
                                    to VAT in respect of the Property and

                           6.26.2.2 it is confirmed that the amounts due under
                                    this Lease from the Tenant to the Landlord
                                    are exclusive of VAT

         6.27.    COMMON PARTS AND RETAINED PARTS

                  6.27.1.  To use the Common Parts only for their intended
                           purposes and not to place or leave anything in the
                           Common Parts or obstruct them in any other way nor to
                           damage the Common Parts

                  6.27.2.  To pay to the Landlord within fourteen (14) days
                           after a written demand the cost of repairs (including
                           fees) to the Retained Parts required as a result of
                           damage caused by the act or default of the Tenant

         6.28.    REGULATIONS

                  To comply with the reasonable regulations for the proper
                  management of the Centre or the comfort or convenience of its
                  occupiers made by the Landlord and notified in writing to the
                  Tenant

         6.29.    SECURITY



                                      -26-


                  6.29.1.  To pay for the cost of any keys and electronic passes
                           to the external door or doors of the Building
                           provided by the landlord for the use of the Tenant

                  6.29.2.  Not to make any copies of the keys or electronic
                           passes referred to in Clause 6.29.1 nor allow such
                           keys or electronic passes to pass into the hands of
                           anyone other than responsible employees of the Tenant

                  6.29.3.  To lock the external door or doors of the Building
                           following use by the Tenant outside the Standard
                           Hours

7.       LANDLORD'S COVENANTS

         7.1.     QUIET ENJOYMENT

                  The Landlord covenants with the Tenant that as long as the
                  Tenant pays the rents and complies with the terms of this
                  Lease the Tenant may enjoy the Property peaceably during the
                  Tenancy without any interruption (except as authorised by this
                  Lease) by the Landlord or any person lawfully claiming through
                  under or in trust for the Landlord

         7.2.     PROVISION OF SERVICES

                  7.2.1.   During the Standard Hours:

                           7.2.1.1  To keep the Common Parts adequately
                                    decorated cleaned (including
                                    window-cleaning) and lighted

                           7.2.1.2  In so far as heating equipment exists in the
                                    Common Parts to provide such mechanical
                                    ventilation heating and cooling for the
                                    Common Parts as the Landlord reasonably
                                    considers necessary or desirable

                           7.2.1.3  To provide heat to any space heating system
                                    in the Property at the date of this Lease
                                    (or any system installed by or with the
                                    approval of the Landlord in substitution)
                                    during such hours and times of year as the
                                    Landlord reasonably decides

                           7.2.1.4  To provide sufficient supplies of cold water
                                    to the toilet accommodation and hot water to
                                    the hot water taps installed in the toilet
                                    accommodation in the Common Parts

                           7.2.1.5  To provide an adequate lift service for the
                                    Centre and

                           7.2.1.6  To provide such staff (if any) to service
                                    and manage the Centre as the Landlord
                                    reasonably considers necessary

                  7.2.2.   The Landlord will not be liable for any failure or
                           interruption of any service due to:



                                      -27-


                           7.2.2.1  necessary repair replacement or maintenance
                                    of any apparatus or installation

                           7.2.2.2  unavoidable shortage of fuel materials water
                                    or labour or

                           7.2.2.3  any other cause not due to the act or
                                    default of the Landlord

                  7.2.3.   The Landlord may extend reduce or otherwise vary the
                           services from time to time if it reasonably considers
                           it desirable to do so for the more efficient
                           operation and management of the Centre or for the
                           comfort of the occupiers in the Centre

         7.3.     REPAIR OF MAIN STRUCTURE ETC

                  To carry out within a reasonable time those repairs to:

                  7.3.1.   the main structure of the Property (including the
                           roof)

                  7.3.2.   the Common Parts

                  7.3.3.   any other parts of the Centre which give support
                           shelter or protection to the Property and

                  7.3.4.   the Conducting Media in the Centre which service the
                           Property jointly with other premises

                  that are reasonably necessary for the proper enjoyment of the
                  Property by the Tenant but not so as to make the Landlord
                  liable under this clause 7.3 for any repairs which are the
                  Tenant's responsibility under clause 6

8.       INSURANCE

         8.1.     LANDLORD TO INSURE

                  The Landlord will insure the Centre (other than tenant's
                  fixtures) so far as such insurance is reasonably available:

                  8.1.1.   with a reputable insurance company or with reputable
                           underwriters

                  8.1.2.   for the following sums:

                           8.1.2.1  the full reinstatement value of the Centre
                                    (except usual voluntary excesses) including
                                    the cost of shoring up demolition and site
                                    clearance fees an allowance for inflation
                                    and VAT on all such sums

                           8.1.2.2  loss of the Rent reasonably estimated by the
                                    Landlord's Surveyor to be payable for three
                                    (3) years or such longer period as the
                                    Landlord's Surveyor may



                                      -28-


                                    reasonably consider necessary for planning
                                    and carrying out the reinstatement or
                                    rebuilding of the Centre

                  8.1.3.   against damage or destruction by the Insured Risks
                           and

                  8.1.4.   on terms not imposing unreasonable conditions having
                           regard to general market conditions at the time

                  8.1.5.   but subject to such excesses exclusions and
                           limitations and other terms as the insurers may
                           impose

         8.2.     ADDITIONAL LANDLORD'S FIXTURES

                  If the Tenant installs fixtures which become landlord's
                  fixtures the Tenant will notify the Landlord in writing of the
                  reinstatement value so that the Landlord can arrange adequate
                  insurance cover

         8.3.     LANDLORD TO INFORM TENANT OF INSURANCE COVER

                  8.3.1.   The Landlord will produce to the Tenant once in every
                           insurance year reasonable evidence of the terms of
                           the insurance policy and of payment of the current
                           premium

                  8.3.2.   The Landlord will notify the Tenant in writing of any
                           material changes in the risks covered and material
                           changes in the terms of the policy with which the
                           Tenant must comply

         8.4.     DAMAGE TO CENTRE

                  8.4.1.   If the Centre (other than tenant's fixtures) is
                           damaged or destroyed by an Insured Risk:

                           8.4.1.1  unless payment of any of the insurance money
                                    is refused because of an act or default of
                                    the Tenant

                           8.4.1.2  subject to the Landlord being able to obtain
                                    any necessary consents and

                           8.4.1.3  subject to the necessary labour and
                                    materials being and remaining available

                                    the Landlord will (subject to clause 8.5)
                                    reinstate the damaged part or rebuild the
                                    Centre (but not so as to provide
                                    accommodation identical in layout if it
                                    would not be reasonably practicable to do
                                    so) as quickly as reasonably possible

                  8.4.2.   The Landlord will use reasonable efforts to obtain
                           the necessary consents (short of making appeals)
                           labour and materials

                  8.4.3.   The Tenant will on request vacate the Property and
                           remove its fixtures and effects to allow the Landlord
                           to reinstate the Property



                                      -29-


         8.5.     OPTION TO TERMINATE FOLLOWING DAMAGE BY AN INSURED RISK

                  If the whole or a substantial part of the Property is made
                  unfit for use by damage or destruction caused by an Insured
                  Risk and:

                  8.5.1.   the damage or destruction occurs during the last
                           three (3) years of the Contractual Term or

                  8.5.2.   circumstances beyond the control of the Landlord
                           prevent the reinstatement or rebuilding of the
                           Property being started by the third (3rd) anniversary
                           of the date of such damage or destruction

                  either the Landlord or the Tenant may terminate this Lease by
                  notice in writing to the other The notice may only be given
                  within six (6) months after either the date of such damage or
                  destruction under clause 8.5.1 or the third (3rd) anniversary
                  referred to in clause 8.5.2 (as the case may be) On service of
                  the notice this Lease shall terminate but without prejudice to
                  any claim of the Landlord or the Tenant for an earlier breach
                  of covenant by the other On termination of this Lease the
                  insurance money shall belong to the Landlord

         8.6.     OPTION TO TERMINATE FOLLOWING DAMAGE BY AN EXCLUDED RISK

                  8.6.1.   If the whole or a substantial part of the Centre is
                           made unfit for use by damage or destruction caused by
                           an Excluded Risk the Landlord may elect not to
                           reinstate the Centre

                  8.6.2.   Any such election shall be made by the Landlord
                           serving notice in writing ("Non-Reinstatement
                           Notice") on the Tenant within six (6) months after
                           the date of such damage or destruction

                  8.6.3.   If the Landlord serves a Non-Reinstatement Notice:

                           8.6.3.1  the Landlord (despite any other provisions
                                    of this Lease) will not be under any
                                    obligation to reinstate the Centre and

                           8.6.3.2  either the Landlord or the Tenant may
                                    terminate this Lease by notice in writing to
                                    the other ("Termination Notice")

                  8.6.4.   A Termination Notice may only be given within six (6)
                           months after the date of service of the
                           Non-Reinstatement Notice

                  8.6.5.   On service of a Termination Notice:

                           8.6.5.1  this Lease will terminate but without
                                    prejudice to the claim of either the
                                    Landlord or the Tenant for any earlier
                                    breach of covenant by the other

                           8.6.5.2  the insurance money will belong to the
                                    Landlord

         8.7.     APPLICATION BY THE TENANT FOR NEW LEASE FOLLOWING TERMINATION



                                      -30-


                  8.7.1.   If following:

                           8.7.1.1  termination of this Lease under clause 8.5
                                    or

                           8.7.1.2  service of a Termination Notice under clause
                                    8.6

                           the Tenant makes an application for a new lease of
                           the Property under the Landlord and Tenant Act 1954
                           then clause 8.7.2 will apply

                  8.7.2.   Notwithstanding clauses 6.4.6 6.4.7 and 9 the Tenant:

                           8.7.2.1  will so far as possible make good the
                                    destruction of or damage to the Property
                                    caused by an Insured Risk or an Excluded
                                    Risk which gave rise to the termination of
                                    this Lease under clause 8.5 or the service
                                    of a Termination Notice (as the case may be)
                                    and

                           8.7.2.2  will continue paying the Rent the Insurance
                                    Rent and the Service Charge from the date of
                                    the destruction or damage referred to in
                                    clause 8.7.2.1

         8.8.     TENANT'S OBLIGATIONS IN RESPECT OF LANDLORD'S INSURANCES

                  8.8.1.   The Tenant will not by act or omission do anything
                           which:

                           8.8.1.1  adversely affects any Landlord's insurance
                                    relating to the Centre or

                           8.8.1.2  causes any increase in the insurance premium
                                    payable for any such insurance (unless the
                                    Tenant has obtained the Landlord's approval
                                    and has agreed to pay the additional
                                    premium) or

                           8.8.1.3  otherwise prevents the Landlord from
                                    renewing any such insurance on terms that
                                    would have applied but for the Tenant's act
                                    or omission

                  8.8.2.   The Tenant will comply with the requirements and
                           proper recommendations of the insurers of the Centre
                           and the fire authority and the proper requirements of
                           the Landlord in respect of the Property relating to:

                           8.8.2.1  explosive and specially flammable articles
                                    substances and liquids

                           8.8.2.2  the provision and maintenance of fire
                                    fighting equipment and

                           8.8.2.3  fire and safety precautions



                                      -31-


                  8.8.3.   The Tenant will repay to the Landlord within fourteen
                           (14) days after a written demand all increased
                           premiums paid and all losses and damages suffered by
                           the Landlord as a result of a breach by the Tenant of
                           this clause 8.8

                  8.8.4.   The Tenant will immediately inform the Landlord in
                           writing of any circumstance in respect of the
                           Property which might affect or lead to a claim on any
                           Landlord's insurance relating to the Centre

                  8.8.5.   If as a result of the Tenant's act or default any
                           insurance money under the insurance policy arranged
                           by the Landlord or a superior landlord (other than in
                           respect of the loss of rents) is wholly or partially
                           irrecoverable the Tenant will pay to the Landlord
                           within fourteen (14) days after a written demand the
                           irrecoverable amount and on payment clause 8.4 shall
                           apply as though the insurance money had been
                           recoverable

         8.9.     TENANT'S INSURANCE

                  The Tenant will not arrange any insurance of the Property
                  against any Insured Risks but if the Tenant has the benefit of
                  any such insurance the Tenant will hold all money receivable
                  under such insurance in trust for the Landlord

9.       SUSPENSION OF RENT

         9.1.     APPLICATION

                  This clause 9 applies (subject to clause 8.7.2) if the Centre
                  is damaged or destroyed by an Insured Risk or (unless caused
                  by the act or default of the Tenant) an Excluded Risk so that
                  any part of the Property is unfit for use or inaccessible

         9.2.     SUSPENSION

                  The whole or a Fair Proportion of the Rent according to the
                  extent of the damage will be suspended until the earlier of:

                  9.2.1.   the date that the whole of the Property (with the
                           necessary services and accesses in the Centre) is
                           again fit for use and

                  9.2.2.   the expiration of the period of three (3) years from
                           the date of the damage or if longer the period of the
                           loss of Rent covered by the Landlord's insurance

                  except to the extent that payment of any of the insurance
                  money in respect of the loss of rents is refused because of an
                  act or default of the Tenant

         9.3.     DISPUTES

                  Any dispute about this clause 9 shall be settled by
                  Arbitration but if before an application is made for the
                  appointment of an arbitrator the Landlord so elects


                                      -32-


                  by notice in writing served on the Tenant a dispute will
                  instead be determined by an independent surveyor

10.      FORFEITURE

         If any of the following events occur:

         10.1     any rents are unpaid for twenty-one (21) days after becoming
                  due (whether formally demanded or not)

         10.2     there is a breach by the Tenant or the Guarantor (if any) of
                  any covenant or other term of this Lease

         10.3     the Tenant or the Guarantor (if any) enters into an
                  arrangement or composition for the benefit of creditors

         10.4     the Tenant or the Guarantor (if any) being an individual (or
                  if more than one individual then any one of them):

                  10.4.1   becomes bankrupt

                  10.4.2   makes an application to the Court for an interim
                           order under Part VIII of the Insolvency Act 1986 or

                  10.4.3   is served with a statutory demand under the
                           Insolvency Act 1986

         10.5     the Tenant or the Guarantor (if any) being a body corporate
                  (or if more than one of them is a body corporate then any one
                  of them):

                  10.5.1   is wound up

                  10.5.2   is subject to a resolution by the directors or
                           shareholders to present a petition for an
                           administration order

                  10.5.3   has an administration order made in respect of it

                  10.5.4   passes a winding-up resolution or enters into
                           liquidation (other than a winding up or liquidation
                           for the purpose of reconstruction or amalgamation of
                           a solvent body corporate) or

                  10.5.5   has a receiver or an administrative receiver or a
                           receiver and manager appointed

                                          or


         10.6     execution or distress is levied on the Tenant's goods in the
                  Property

         then the Landlord may by re-entering any part of the Property forfeit
         this Lease and the Tenancy will immediately end but without prejudice
         to any other rights and remedies of the Landlord



                                      -33-


11.      DECLARATIONS WARRANTIES AND MISCELLANEOUS

         11.1.    REPRESENTATIONS AND EXCLUSION OF USE WARRANTY

                  11.1.1.  The Tenant acknowledges that this Lease has not been
                           entered into in reliance on any representation made
                           by or on behalf of the Landlord

                  11.1.2.  Nothing in this Lease or in any consent granted by
                           the Landlord implies a warranty by the Landlord that
                           the Property may be used for any specific purpose
                           under the Planning Acts

         11.2.    ACCIDENTS

                  The Landlord is not liable to the Tenant nor to any other
                  person for:

                  11.2.1.  any damage sustained to or loss of any goods or
                           property in the Centre or

                  11.2.2.  any other damage loss accident happening or injury
                           not caused or contributed to by the negligence of the
                           Landlord or any employee of the Landlord

         11.3.    PAYMENTS RECOVERABLE AS RENT

                  Amounts payable by the Tenant and any guarantor under this
                  Lease not expressly reserved as rent will be recoverable as if
                  they were rent

         11.4.    SERVICE OF NOTICES

                  11.4.1.  The provisions of Section 196 of the Law of Property
                           Act 1925 as amended by the Recorded Delivery Service
                           Act 1962 shall apply to the service of all notices
                           under or in connection with this Lease except that
                           Section 196 shall be deemed to be amended by the
                           deletion of the words "and that service ... be
                           delivered" at the end of Section 196(4) and the
                           substitution of the words "... and that service shall
                           be deemed to be made on the third Working Day after
                           the registered letter has been posted; "Working Day"
                           meaning any day from Monday to Friday (inclusive)
                           other than Christmas Day, Good Friday and any
                           statutory bank or public holiday"

                  11.4.2.  For the purposes of notices on Adaptive Broadband
                           Corporation these shall be deemed properly served if
                           sent by post or delivered by hand to the address
                           specified for Adaptive Broadband Limited in this
                           Lease or such other address in the United Kingdom as
                           from time to time notify to the Landlord in writing

         11.5.    JURISDICTION OF THE ENGLISH COURTS

                  The parties including any Guarantor submit to the exclusive
                  jurisdiction of the English courts on all matters relating to
                  this Lease



                                      -34-


         11.6.    NO PRIOR AGREEMENT

                  It is certified that there is no written agreement for lease
                  to which this Lease gives effect

         11.7.    TENANT'S OPTION TO TERMINATE

                  The Tenant may terminate this Lease on 29th September 2000 on
                  not less than six calendar months' notice in writing or on
                  29th September 2004 on not less than twelve calendar month's
                  notice in writing so long as the Tenant has substantially
                  observed and performed all the provisions of this Lease and on
                  expiry of such notice:

                  11.7.1.  this Lease will come to an end but without prejudice
                           to the rights of either party against the other for
                           any prior breach of covenant

                  11.7.2.  the Tenant will give vacant possession of the whole
                           of the Property and

                  11.7.3.  the Tenant will cancel any notice caution or land
                           charge registered to protect this Lease and will if
                           the title to this Lease is registered at H.M. Land
                           Registry assist the Landlord in cancelling the title

12.      ARBITRATION OR DETERMINATION BY EXPERT

         12.1.    CONTRARY PROVISION

                  Any contrary provision elsewhere in this Lease will override
                  the provisions of this clause 12

         12.2.    ARBITRATION

                  12.2.1.  Where this Lease provides for reference to
                           Arbitration a reference will be made in accordance
                           with the Arbitration Act 1996 to a single arbitrator

                  12.2.2.  The arbitrator may be appointed by the Landlord and
                           the Tenant jointly but otherwise the arbitrator will
                           be nominated by the President of the RICS on the
                           application of either the Landlord or the Tenant

                  12.2.3.  If an appointed or nominated arbitrator dies or
                           declines to act or it becomes clear that he will be
                           unable to complete his duties a replacement will be
                           appointed or nominated by the same process

         12.3.    DETERMINATION BY AN EXPERT

                  12.3.1.  Where this Lease provides for reference to
                           determination by an independent surveyor a reference
                           will be made on the terms of clause 12.4 to the
                           determination of a single independent surveyor



                                      -35-


                  12.3.2.  The surveyor may be appointed by the Landlord and the
                           Tenant jointly or in the absence of agreement on a
                           joint appointment will be nominated by the President
                           of the RICS on the application of either the Landlord
                           or the Tenant

                  12.3.3.  The surveyor will act as an expert (not as an
                           arbitrator) on the terms set out in clause 12.4

         12.4.    EXPERT'S TERMS OF APPOINTMENT

                  12.4.1.  The surveyor will give to the Landlord and the Tenant
                           notice in writing of his appointment and in that
                           notice the surveyor will invite the Landlord and the
                           Tenant to submit within a specified time period (not
                           exceeding four (4) weeks) their respective proposals
                           and representations

                  12.4.2.  The surveyor will:

                           12.4.2.1 consider the proposals and representations
                                    submitted to him (but not be limited or
                                    fettered by them)

                           12.4.2.2 be entitled to rely on his own judgment and
                                    opinion

                           12.4.2.3 state any reasons for his decisions and

                           12.4.2.4 within eight (8) weeks after his appointment
                                    or within such extended period as the
                                    Landlord and the Tenant may agree give the
                                    Landlord and the Tenant written notice of
                                    his decision and his decision shall be final
                                    and binding on the Landlord the Tenant and
                                    the Guarantor (if any)

                  12.4.3.  If the surveyor:

                           12.4.3.1 does not give notice of his decision within
                                    the time and in the manner referred to in
                                    clause 12.4.2

                           12.4.3.2 resigns from his appointment or

                           12.4.3.3 dies

                           or if for any reason it becomes clear that he will be
                           unable to complete his duties the Landlord or the
                           Tenant may appoint or apply for the nomination of a
                           new surveyor in his place and this procedure may be
                           repeated as many times as necessary

                  12.4.4.  In the absence of a direction by the surveyor as to
                           how his fees or charges are to be borne the Landlord
                           and the Tenant will bear them equally

                  12.4.5.  If the provisions for an independent surveyor to
                           determine the issue fail completely the issue will
                           then be referred to Arbitration



                                      -36-


         12.5.    EXPERIENCE OF ARBITRATOR OR EXPERT

                  The arbitrator or independent surveyor will if reasonably
                  practicable be a surveyor experienced in the valuation or
                  letting of premises similar to the Property

         12.6.    NON-PAYMENT OF COSTS OF ARBITRATOR OR EXPERT

                  This clause 12.6 applies if the arbitrator or independent
                  surveyor is ready to make his award but is unwilling to do so
                  due to the failure by one party to pay its share of the costs
                  of the award If one party fails to pay its share of the costs
                  within fourteen (14) days after a written request the other
                  party may pay that share and any amount so paid will be a debt
                  due immediately from the party in default to the other party

13.      RENT REVIEW

         13.1.    DEFINITIONS

                  In this Clause the following definitions apply:

                  "ASSUMPTIONS"           the assumptions (whether or
                                          not they are facts) that on
                                          the Relevant Review Date:



                                          (a)  the Property is fit for
                                               immediate use occupation
                                               and beneficial trading

                                          (b)  the Property may lawfully
                                               be used by any person for
                                               any of the purposes
                                               permitted by this Lease

                                          (c)  no work has been carried
                                               out to the Property by
                                               the Tenant or any
                                               undertenant or their
                                               respective predecessors
                                               in title which has
                                               diminished the rental
                                               value of the Property

                                          (d)  that if the Property has
                                               been wholly or partly
                                               destroyed or damaged it
                                               has been fully rebuilt
                                               and reinstated

                                          (e)  that the Property is in a
                                               good state of repair and
                                               decorative condition

                                          (f)  that the Tenant has
                                               complied with all the
                                               covenants for which it is
                                               liable in this Lease

                  "DETERMINATION DATE"    the date on which the amount
                                          of the reviewed rent is agreed
                                          or is determined by
                                          Arbitration



                                      -37-


                                          or by an independent surveyor

                  "DISREGARDED MATTERS"   (a)  any effect on rent of the
                                               fact that the Tenant any
                                               permitted undertenant or
                                               their respective
                                               predecessors in title
                                               have been in occupation
                                               of the Property or any
                                               part of it

                                          (b)  any goodwill attached to
                                               the Property because of
                                               the business then carried
                                               on at the Property by the
                                               Tenant or any permitted
                                               undertenant

                                          (c)  any increase in the
                                               rental value of the
                                               Property attributable to
                                               the existence of any
                                               improvement (shown to be
                                               an improvement by the
                                               Tenant) to the Property
                                               or any part of it but
                                               only if

                                               (i)     the improvement
                                                       was carried out
                                                       with all
                                                       necessary
                                                       consents (where
                                                       required) and

                                               (ii)    the improvement
                                                       was carried out
                                                       by the Tenant or
                                                       any permitted
                                                       undertenant and

                                               (iii)   the improvement
                                                       was not carried
                                                       out in pursuance
                                                       of an obligation
                                                       to the Landlord
                                                       or its
                                                       predecessors in
                                                       title and

                                               (iv)    the improvement
                                                       was carried out
                                                       after the date of
                                                       this Lease

                                          (d)  any rent free period
                                               and/or concessionary rent
                                               and/or after the giving
                                               of any other inducement
                                               (including but not
                                               limited to a capital
                                               payment) given or granted
                                               to reflect only the
                                               length of time it would
                                               take to carry out the
                                               initial fitting out of
                                               the Property

                  "OPEN MARKET RENT"      the clear yearly rent at which
                                          the Property might reasonably
                                          be expected to be let in the
                                          open market:

                                          (i)    by a willing landlord
                                                 to a willing tenant of
                                                 such length or such



                                      -38-


                                                 amount or on such terms
                                                 as would be negotiated
                                                 in the open market on
                                                 the letting of the
                                                 Property as a whole

                                          (ii)   with vacant possession
                                                 at the Relevant Review
                                                 Date

                                          (iii)  by a willing landlord
                                                 to a willing tenant

                                          (iv)   without any premium or
                                                 other consideration

                                          (v)    for a term commencing
                                                 on the Relevant Review
                                                 Date equal to whichever
                                                 is the greater of the
                                                 residue of the Tenancy
                                                 which then remains
                                                 unexpired and 10 years

                                          (vi)   otherwise on the terms
                                                 and conditions and
                                                 subject to the
                                                 covenants and
                                                 provisions contained in
                                                 this Lease (other than
                                                 the amount of rent
                                                 payable under this
                                                 Lease but including the
                                                 provisions of this
                                                 clause 13 for the
                                                 review of that rent)

                                          (vii)  making the Assumptions
                                                 but disregarding the
                                                 Disregarded Matters

                  "RENT RESTRICTIONS"     the restrictions imposed by
                                          any statute for the control of
                                          rent in force on a Review Date
                                          or on the date on which any
                                          increased rent is calculated
                                          in accordance with this clause
                                          13 and which impose any limit
                                          whether in time or amount on
                                          the collection of an increase
                                          in the rent or any part of it

                  "REVIEW DATE"           each of the Rent Review Dates
                                          specified as such in the
                                          Particulars and the expression
                                          "Relevant Review Date" will be
                                          interpreted accordingly

         13.2.    UPWARDS ONLY RENT REVIEW

                  The rent first reserved by this Lease will be reviewed at each
                  Review Date in accordance with the provisions of this clause
                  13 and after and including each Review Date will be equal to
                  whichever is the higher of



                                      -39-


                  13.2.1.  the rent contractually payable immediately before the
                           Relevant Review Date

                  13.2.2.  the Open Market Rent on the Relevant Review Date as
                           agreed or determined under the provisions of this
                           clause 13

         13.3.    AGREEMENT OR DETERMINATION OF THE REVIEWED RENT

                  The Open Market Rent at any Review Date may be agreed in
                  writing by the Landlord or the Tenant at any time but if (for
                  any reason) they have not agreed it by the relevant Review
                  Date either the Landlord or the Tenant may thereafter give
                  notice in writing to the other requiring the Open Market Rent
                  to be decided by Arbitration or if an application is made for
                  the appointment of an arbitrator and the Landlord so elects by
                  notice in writing served on the Tenant to be decided by an
                  independent surveyor

         13.4.    INTERIM PAYMENTS UNTIL THE OPEN MARKET RENT IS DECIDED

                  If the amount of the reviewed rent has not been agreed or
                  decided by Arbitration or by an independent surveyor before
                  the Relevant Review Date the Tenant will pay the Landlord:

                  13.4.1.  in respect of the period beginning on the Relevant
                           Review Date and ending on the day before the quarter
                           day that follows the Determination Date rent at the
                           yearly rate payable immediately before the Relevant
                           Review Date

                  13.4.2.  on the Determination Date on demand and as arrears of
                           rent the amount by which the reviewed rent exceeds
                           the rent actually paid during the period defined in
                           13.4.1 above (apportioned on a daily basis) together
                           with interest at Base Rate

         13.5.    RENT RESTRICTIONS

                  Whenever Rent Restrictions prevent or prohibit the operation
                  of this clause 13 for the review of the rent or the normal
                  collection or retention by the Landlord of any increase in the
                  rent or any instalment or part of it:

                  13.5.1.  the operation of such provisions for review of the
                           rent will be postponed so that they take effect on
                           the first date or dates thereafter upon which such
                           operation may occur

                  13.5.2.  the collection of any increase or increases in the
                           rent will be postponed to take effect on the first
                           date or dates thereafter on which such increase or
                           increases may be collected and/or retained in whole
                           or in part and this postponement will happen however
                           many times as necessary to ensure the collection of
                           the whole of the increase

                  13.5.3.  until the Rent Restrictions are wholly or partly
                           relaxed the rent first reserved by this Lease will be
                           the maximum sum permitted by the Rent Restrictions at
                           the time



                                      -40-


         13.6.    MEMORANDUM OF REVIEWED RENT

                  As soon as the amount of any reviewed rent has been agreed or
                  decided by Arbitration or by an independent surveyor memoranda
                  stating the amount will be prepared by the Landlord or its
                  solicitors and will be signed by or on behalf of both the
                  Landlord and the Tenant and the parties will each bear their
                  own costs in respect of the memoranda

         13.7.    TIME NOT OF THE ESSENCE

                  For the purposes of this clause 13 time is not of the essence

14.      SERVICE CHARGE

         14.1.    DEFINITIONS

                  In this clause the following definitions apply:

                  "EXCESS SERVICE CHARGE"    the excess calculated in
                                             accordance with clause 14.3

                  "EXPENDITURE"              the sum calculated in
                                             accordance with clauses 14.4
                                             and 14.5 which may include:

                                             (a)  reasonable provision for
                                                  future expenditure on
                                                  such of the items in
                                                  clause 14.4 as call for
                                                  intermittent expenditure
                                                  (whether likely to be
                                                  incurred during or after
                                                  the end of the Tenancy)
                                                  and

                                             (b)  a reasonable sum for
                                                  depreciation on the
                                                  capital costs of
                                                  machinery apparatus and
                                                  equipment

                  "SERVICE CHARGE YEAR"      a year ending on the date
                                             specified in the Particulars
                                             or such other period as the
                                             Landlord may from time to time
                                             decide and notify in writing
                                             to the Tenant

                  "TENANT'S PROPORTION"      the Fair Proportion
                                             attributable to the Property
                                             which may be determined by
                                             applying different proportions
                                             to different items of
                                             Expenditure which different
                                             proportions may depend on
                                             among other things the floor
                                             area rateable value location
                                             and use of the Property
                                             compared with other premises
                                             benefiting from the item of
                                             Expenditure in question


         14.2.    BASIC SERVICE CHARGE



                                      -41-


                  The Basic Service Charge is payable yearly by equal quarterly
                  payments in advance on the usual quarter days and will
                  initially be the amount stated in the Particulars but it may
                  be changed from time to time to an amount which the Landlord's
                  Surveyor reasonably decides and on any increase in the Basic
                  Service Charge the new amount will be due and payable on (but
                  not before) the date fourteen (14) days after the Landlord has
                  given notice in writing of the new amount to the Tenant

         14.3.    ADJUSTMENT

                  14.3.1.  As soon as practicable after the end of each Service
                           Charge Year the Landlord will deliver to the Tenant a
                           statement showing in reasonable detail the
                           Expenditure and the Tenant's Proportion of the
                           Expenditure for that Service Charge Year

                  14.3.2.  In the first statement the Tenant's Proportion of the
                           Expenditure shall be calculated and payable by the
                           Tenant for the period from and including the Service
                           Charge Commencement Date until the end of that
                           Service Charge Year

                  14.3.3.  If the Tenant's Proportion of the Expenditure shown
                           by a statement is more than the Basic Service Charge
                           paid in respect of the Service Charge Year the Tenant
                           must within fourteen (14) days after written demand
                           pay to the Landlord the excess

                  14.3.4.  If less the Landlord will reduce the next payment of
                           Basic Service Charge or Rent by (or if the tenancy
                           has ended will pay to the Tenant within fourteen (14)
                           days) the difference

                  14.3.5.  The provisions of this clause 14 will continue to
                           apply even though the Tenancy has ended but only in
                           respect of the period to the end of the Tenancy

                  14.3.6.  For the purpose of calculating the Tenant's
                           Proportion of the Expenditure in respect of an
                           incomplete Service Charge Year:

                           14.3.6.1 it will not be relevant to ascertain the
                                    precise date in that Service Charge Year on
                                    which each individual item of Expenditure
                                    was incurred

                           14.3.6.2 the Service Charge will be deemed to have
                                    accrued at a uniform daily rate over the
                                    whole of the relevant Service Charge Year
                                    and

                           14.3.6.3 the Service Charge will be apportioned in
                                    respect of time only and will be considered
                                    as accruing from day to day

                           unless in the reasonable opinion of the Landlord's
                           Surveyor it is unfair that any item should be
                           apportioned on that basis in which case the item will
                           be apportioned on the basis reasonably decided by the
                           Landlord's Surveyor



                                      -42-


         14.4.    EXPENDITURE

                  14.4.1.  The Expenditure comprises the total cost reasonably
                           and properly incurred by the Landlord (including
                           contributions which the Landlord is liable to make to
                           expenditure incurred by others) in respect of the
                           Centre on the following items (or such of them as are
                           applicable from time to time):

                           14.4.1.1 in performing its obligations under clauses
                                    7.2 and 7.3 including providing outside the
                                    Standard Hours any of the services referred
                                    to in clause 7.2

                           14.4.1.2 in providing other services in the interest
                                    of good estate management for the proper
                                    enjoyment of the Centre by the occupiers

                  14.4.2.  In particular the Expenditure will include (but shall
                           not be limited to) the cost reasonably and properly
                           incurred or where relevant deemed incurred by the
                           Landlord on the following items or such of them as
                           are applicable from time to time including a
                           reasonable fee for the Landlord where the Landlord's
                           employees carry out the work:

                           14.4.2.1 insurances including:

                                    (a)      insurance of the Landlord and any
                                             superior landlord against third
                                             party employers' and public
                                             liability risks in respect of the
                                             Centre

                                    (b)      engineering insurances for lifts
                                             boilers and electrical or
                                             mechanical equipment and apparatus
                                             in the Retained Parts

                                    (c)      any further insurances that the
                                             Landlord may reasonably arrange in
                                             respect of the Centre

                                    (d)      valuations of the whole or any part
                                             of the Centre for insurance
                                             purposes (to the extent that the
                                             cost is not included in the
                                             Insurance Rent) and

                                    (e)      the insurances described in clause
                                             8.1 (to the extent that such cost
                                             has not been demanded as the
                                             Insurance Rent)

                                    (f)      the initial uninsured loss arising
                                             on any claim under any insurance
                                             policy relating to the Centre

                           14.4.2.2 services including:

                                    (a)      supplying hot and cold water

                                    (b)      providing a lift service



                                      -43-


                                    (c)      lighting heating cooling and
                                             ventilating the Retained Parts

                                    (d)      controlling and monitoring the
                                             vehicular traffic using the roads
                                             access ramps and parking areas
                                             serving the Centre and

                                    (e)      providing any additional service
                                             under clause 7.2.3

                           14.4.2.3 repair and maintenance including:

                                    (a)      repairing maintaining renewing (as
                                             reasonably necessary) decorating
                                             cleaning and altering the Retained
                                             Parts any other structural parts of
                                             the Centre anything used for the
                                             Centre in common with other
                                             premises and any accesses to the
                                             Centre and

                                    (b)      providing repairing maintaining
                                             renewing and cleaning tools and
                                             equipment required in connection
                                             with the repair and maintenance of
                                             the Centre

                           14.4.2.4 facilities in the Retained Parts including:

                                    (a)      providing repairing maintaining
                                             renewing decorating cleaning and
                                             altering any furniture furnishings
                                             carpets and other floor coverings
                                             fixtures features and Signs and

                                    (b)      providing maintaining and renewing
                                             plants shrubs trees grassed areas
                                             and grown or cut flowers

                           14.4.2.5 refuse services including:

                                    (a)      providing repairing maintaining
                                             renewing and cleaning dustbins
                                             paladins and other refuse
                                             containers refuse compactors and
                                             other plant and equipment for the
                                             collection treatment packaging and
                                             disposal of refuse and

                                    (b)      collecting storing and disposing of
                                             refuse

                           14.4.2.6 providing repairing maintaining renewing
                                    cleaning and altering the following in the
                                    Retained Parts:

                                    (a)      lighting heating cooling
                                             ventilation and other equipment and
                                             systems

                                    (b)      other electrical equipment and
                                             systems



                                      -44-


                                    (c)      surveillance equipment alarms
                                             closed-circuit television entry
                                             systems and security and emergency
                                             apparatus and systems

                                    (d)      satellite dishes and associated
                                             cabling

                                    (e)      telecommunications equipment and
                                             systems and

                                    (f)      fire alarms and ancillary apparatus
                                             fire prevention and fire fighting
                                             equipment and apparatus

                           14.4.2.7 staff including:

                                    (a)      providing and equipping such staff
                                             for the servicing management and
                                             security of the Centre as the
                                             Landlord reasonably considers
                                             necessary and

                                    (b)      insurance health pension welfare
                                             severance and other payments
                                             contributions and premiums and
                                             other benefits in kind and the
                                             costs of accommodation (including
                                             notional rent reasonably assessed
                                             by the Landlord's Surveyor)
                                             provided for such staff

                           14.4.2.8 statutory obligations including:

                                    (a)      all rates taxes assessments
                                             impositions and outgoings (but not
                                             rents) payable by the Landlord in
                                             respect of the Centre as a whole
                                             the Property together with other
                                             premises in the Centre or the whole
                                             or any part of the Retained Parts
                                             but not the taxes excepted under
                                             clause 6.2.1

                                    (b)      compliance by the Landlord with any
                                             notice regulation or order of any
                                             competent authority any requirement
                                             under any present or future Act of
                                             Parliament order byelaw or
                                             regulation and the proper
                                             requirements of the fire officer in
                                             respect of the whole Centre or a
                                             part of the Centre which includes
                                             the Property or the Retained Parts

                                    (c)      carrying out any works which are
                                             required to obtain a fire
                                             certificate for the whole or any
                                             part of the Centre

                           14.4.2.9 miscellaneous matters:



                                      -45-


                                    (a)      making representations against or
                                             otherwise contesting the provisions
                                             of any legislation order regulation
                                             notice or statutory requirement
                                             relating to or affecting the whole
                                             or any part of the Centre

                                    (b)      the fees and expenses payable to
                                             surveyors and other consultants and
                                             advisers in connection with the
                                             management of the Centre health
                                             security safety and the provision
                                             of services and

                                    (c)      the preparation and audit of any
                                             Service Charge account including
                                             any statement of the Expenditure or
                                             of the Tenant's Proportion

                                    (d)      cleaning and keeping clear the
                                             outside of all windows in the
                                             Centre and the inside of windows in
                                             the Common Parts

                  14.4.3.  The Expenditure will not include:

                           14.4.3.1 any fees and expenses attributable to:

                                    (a)      demanding and collecting rents (and
                                             rents in this context shall not
                                             mean service charge or insurance
                                             rents) from the tenants and other
                                             occupiers of the Centre and

                                    (b)      the grant of leases of other parts
                                             of the Centre

                  but this will not prevent the Landlord recovering from the
                  Tenant any costs in connection with the recovery of arrear of
                  rents and other sums due under this Lease outside the
                  provisions of this clause 14 and

                           14.4.3.2 the cost of repairing or making good any
                                    damage caused by an Insured Risk under the
                                    provisions of clause 8.4 (except that the
                                    uninsured excess may be included)

         14.5.    DEDUCTIONS IN ARRIVING AT EXPENDITURE

                  In calculating the Expenditure the Landlord will deduct all
                  contributions which it receives from any person (other than a
                  tenant or occupier of the Centre) who makes use of any of the
                  facilities of the Centre or benefits from the services

         14.6.    LANDLORD'S CONTRIBUTION TO EXPENDITURE

                  For the avoidance of doubt the Landlord will bear the
                  proportion of the Expenditure which is fairly attributable
                  (according to the degree of benefit received by each part of
                  the Centre actually benefiting from the relevant



                                      -46-


                  service) to the remaining parts of the Centre which are
                  intended for letting (whether or not let)

         14.7.    CERTIFICATE

                  14.7.1.  Each annual statement of Expenditure (including the
                           Tenant's Proportion) may (at the Landlord's option)
                           be certified by the Landlord's Surveyor

                  14.7.2.  Except for manifest error a copy of the certified
                           statement will be conclusive and final and binding on
                           the parties including any Guarantor in respect of the
                           matters covered by the statement other than on
                           questions of law

                  14.7.3.  The Landlord will on request allow the Tenant to
                           inspect at reasonable times in the two (2) months
                           after delivery of a statement the vouchers and
                           receipts for the items included in it

         14.8.    NO IMPLIED OBLIGATION

                  The inclusion of an item in the list contained in clause 14.4
                  does not imply an obligation by the Landlord to provide the
                  service

15.      GUARANTOR'S COVENANT

                  15.1.1.  In consideration of the Landlord granting this Lease
                           to the Original Tenant the Guarantor covenants and
                           guarantees with and to the Landlord as a primary
                           obligation that:

                           15.1.1.1 The Tenant will punctually pay the rents and
                                    perform and observe the covenants and other
                                    terms of the Lease

                           15.1.1.2 If the Tenant does not pay all or part of
                                    the rents or does not perform and observe
                                    any or all of the covenants or other terms
                                    of the Lease the Guarantor will pay the
                                    rents and perform and observe the covenants
                                    or terms in respect of which the Tenant is
                                    in default and the Guarantor will make good
                                    to the Landlord on demand and indemnify the
                                    Landlord against all losses damages costs
                                    and expenses arising or incurred by the
                                    Landlord as a result of such non-payment
                                    non-performance or non-observance

                  15.1.2.  The Guarantor's liability will not be reduced or
                           ended because:

                           15.1.2.1 of any time or indulgence granted by the
                                    Landlord to the Tenant or any neglect or
                                    forbearance of the Landlord in enforcing the
                                    payment of the rents or the observance or
                                    performance of the covenants or other terms
                                    of the Lease



                                      -47-


                           15.1.2.2 the terms of the Lease have been varied by
                                    agreement between the parties (but this is
                                    subject to the provisions of Section 18 of
                                    the 1995 Act)

                           15.1.2.3 the Tenant has surrendered part of the
                                    Property in which case the liability of the
                                    Guarantor will continue in respect of the
                                    part of the Property which has not been
                                    surrendered after making any necessary
                                    apportionments under Section 140 of the Law
                                    of Property Act 1925

                           15.1.2.4 of any other act or thing by which the
                                    Guarantor would have been released if it
                                    were not for this provision

                  15.1.3.  The Guarantor further covenants with the Landlord
                           that if the Lease is disclaimed before any lawful
                           assignment of it by the Tenant:

                           15.1.3.1 the Landlord may within six months after
                                    that disclaimer require the Guarantor to
                                    accept a new lease of the Property for a
                                    term equivalent to the residue which if
                                    there had been no disclaimer would have
                                    remained of the Tenancy at the same rent and
                                    subject to the same covenants and conditions
                                    as were payable under and applicable to the
                                    Tenancy immediately before the date of the
                                    disclaimer

                           15.1.3.2 such new lease and the rights and
                                    liabilities under it will take effect from
                                    the date of the disclaimer

                           15.1.3.3 the Guarantor will pay the Landlord's costs
                                    incurred in connection with the new lease
                                    and the Guarantor will accept the new lease
                                    accordingly and will execute and deliver to
                                    the Landlord a counterpart of it

                  15.1.4.  If the Lease is disclaimed and for any reason the
                           Landlord does not require the Guarantor to accept a
                           new lease of the Property under clause 15.3 the
                           Guarantor will pay to the Landlord on demand an
                           amount equal to the difference between any money
                           received by the Landlord for the use or occupation of
                           the Property (less any expenditure incurred by the
                           Landlord in connection with the Property) and the
                           rents which would have been payable under the Lease
                           had such disclaimer not occurred in both cases for
                           the period beginning on the date of such disclaimer
                           and ending on whichever is the earlier of:

                           15.1.4.1 the date six months after the disclaimer

                           15.1.4.2 the end or sooner determination of the
                                    Tenancy



                                      -48-


                  15.1.5.  The Guarantor further covenants and guarantees the
                           obligations of the Tenant under any authorised
                           guarantee agreement entered into by the Tenant under
                           the terms of this Lease



EXECUTED BY THE PARTIES AS A DEED and delivered on but not before the date
inserted as the date of this Lease

                                 FIRST SCHEDULE
                     FORM OF AUTHORISED GUARANTEE AGREEMENT

1.   In consideration of the Landlord agreeing to the assignment of the Lease
     the Tenant covenants and guarantees with and to the Landlord as a primary
     obligation that with effect from the date of the assignment:

     1.1.    The Assignee will punctually pay the rents and perform and observe
             the covenants and other terms of the Lease

     1.2.    If the Assignee does not pay all or part of the rents or does not
             perform and observe any or all of the covenants or other terms of
             the Lease the Tenant will pay the rents and perform and observe the
             covenants or terms in respect of which the Assignee is in default
             and the Tenant will make good to the Landlord on demand and
             indemnify the Landlord against all losses damages costs and
             expenses arising or incurred by the Landlord as a result of such
             non-payment non-performance or non-observance

2.   The Tenant's liability under this Agreement will not end or be reduced
     because:

     2.1.    of any time or indulgence granted by the Landlord to the Assignee
             or any neglect or forbearance of the Landlord in enforcing the
             payment of the rents or the observance or performance of the
             covenants or other terms of the Lease

     2.2.    the terms of the Lease have been varied by agreement between the
             parties (but this is subject to the provisions of Section 18 of the
             Landlord and Tenant (Covenants) Act 1995)

     2.3.    the Assignee has surrendered part of the Property in which case the
             liability of the Tenant under this agreement will continue in
             respect of the part of the Property which has not been surrendered
             after making any necessary apportionments under Section 140 of the
             Law of Property Act 1925

     2.4.    of any other act or thing by which the Tenant would have been
             released if it were not for this provision

3.   The Tenant further covenants with the Landlord that if the Lease is
     disclaimed before any lawful assignment of it by the Assignee:

     3.1.    the Landlord may within six months after that disclaimer require
             the Tenant to accept a new lease of the Property for a term
             equivalent to the residue which if there had been no disclaimer
             would have remained of the Tenancy at the same



                                      -49-


             rent and subject to the same covenants and conditions as are
             payable under and applicable to the Tenancy immediately before the
             date of the disclaimer

     3.2.    such new lease and the rights and liabilities under it will take
             effect from the date of the disclaimer

     3.3.    3. the new lease and the Tenant will accept the new lease
             accordingly and will execute and deliver to the Landlord a
             counterpart of it

4.   If the Lease is disclaimed and for any reason the Landlord does not require
     the Tenant to accept a new lease of the Property under paragraph 3 the
     Tenant will pay to the Landlord on demand an amount equal to the difference
     between any money received by the Landlord for the use or occupation of the
     Property (less any expenditure incurred by the Landlord in connection with
     the Property) and the rents which would have been payable under the Lease
     had such disclaimer not occurred in both cases for the period beginning on
     the date of such disclaimer and ending on whichever is the earlier of:

     4.1.    the date six months after such disclaimer

     4.2.    the end or sooner determination of the Tenancy

5.   Nothing in this agreement requires the Tenant to guarantee in any way the
     liability for the covenants and other terms of the Lease of any person
     other than the Assignee

6.   Nothing in this agreement will make the Tenant subject to any liability
     restriction or other requirement (of any kind) in relation to any time
     after the Assignee is by law released from the covenants and other terms of
     the Lease

7.   Words and expressions used in this agreement shall have the same meaning as
     in the Lease

                                 SECOND SCHEDULE
                           FORM OF GUARANTEE COVENANT

1.   In consideration of the Landlord agreeing to the assignment of the Lease
     the Guarantor covenants and guarantees with and to the Landlord as a
     primary obligation that with effect from the date of the assignment:

     1.1.    The Tenant will punctually pay the rents and perform and observe
             the covenants and other terms of the Lease

     1.2.    If the Tenant does not pay all or part of the rents or does not
             perform and observe any or all of the covenants or other terms of
             the Lease the Guarantor will pay the rents and perform and observe
             the covenants or terms in respect of which the Tenant is in default
             and the Guarantor will make good to the Landlord on demand and
             indemnify the Landlord against all losses damages costs and
             expenses arising or incurred by the Landlord as a result of such
             non-payment non-performance or non-observance

2.   The Guarantor's liability under this Agreement will not be reduced or ended
     because:



                                      -50-


     2.1.    of any time or indulgence granted by the Landlord to the Tenant or
             any neglect or forbearance of the Landlord in enforcing the payment
             of the rents or the observance or performance of the covenants or
             other terms of the Lease

     2.2.    the terms of the Lease have been varied by agreement between the
             parties (but this is subject to the provisions of Section 18 of the
             Landlord and Tenant (Covenants) Act 1995)

     2.3.    the Tenant has surrendered part of the Property in which case the
             liability of the Guarantor under this agreement will continue in
             respect of the part of the Property which has not been surrendered
             after making any necessary apportionments under Section 140 of the
             Law of Property Act 1925

     2.4.    of any other act or thing by which the Guarantor would have been
             released if it were not for this provision

3.   The Guarantor further covenants with the Landlord that if the Lease is
     disclaimed before any lawful assignment of it by the Tenant:

     3.1.    the Landlord may within six months after that disclaimer require
             the Guarantor to accept a new lease of the Property for a term
             equivalent to the residue which if there had been no disclaimer
             would have remained of the Tenancy at the same rent and subject to
             the same covenants and conditions as were payable under and
             applicable to the Tenancy immediately before the date of the
             disclaimer

     3.2.    such new lease and the rights and liabilities under it will take
             effect from the date of the disclaimer

     3.3.    the Guarantor will pay the Landlord's costs incurred in connection
             with the new lease and the Guarantor will accept the new lease
             accordingly and will execute and deliver to the Landlord a
             counterpart of it

4.   If the Lease is disclaimed and for any reason the Landlord does not require
     the Guarantor to accept a new lease of the Property under paragraph 3 the
     Guarantor will pay to the Landlord on demand an amount equal to the
     difference between any money received by the Landlord for the use or
     occupation of the Property (less any expenditure incurred by the Landlord
     in connection with the Property) and the rents which would have been
     payable under the Lease had such disclaimer not occurred in both cases for
     the period beginning on the date of the disclaimer and ending on whichever
     is the earlier of:

     4.1.    the date six months after the disclaimer

     4.2.    the end or sooner determination of the Tenancy

5.   The Guarantor further covenants and guarantees the obligations of the
     Tenant under any authorised guarantee agreement entered into by the Tenant
     under the terms of the Lease



                                      -51-


6.   For the purpose of these guarantee provisions references to the Tenant are
     to the Tenant in relation to whom the Guarantor's guarantee is given but
     not to any lawful assignee of such Tenant

7.   Words and expressions used in this Agreement have the same meaning as in
     the Lease

THE COMMON SEAL of MILTON             )
PARK INVESTMENTS LIMITED              )
was affixed in the presence of:-      )



                                       Director /s/ Mark Cherry



                                       Secretary /s/ Alan Harris



                                      -52-


Executed as a deed & delivered by     )
ADAPTIVE BROADBAND LIMITED            )
by its authorized officers            )



/s/ Donna S. Birks                    Director



/s/ John Porter                       Director



THE COMMON SEAL of                    )
ADAPTIVE BROADBAND                    )
CORPORATION was affixed in the        )
presence of:-                         )



/s/ Donna S. Birks                    EVP/CFO



/s/ Kenneth J. Wees                   Secretary

EX-13

FINANCIAL INFORMATION
                                                                    
CONSOLIDATED STATEMENTS OF OPERATIONS                                  20
CONSOLIDATED BALANCE SHEETS                                            21
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY                        22
CONSOLIDATED STATEMENTS OF CASH FLOWS                                  23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                             24
REPORT OF INDEPENDENT AUDITORS                                         32
MANAGEMENT'S DISCUSSION AND ANALYSIS                                   33







CONSOLIDATED STATEMENTS OF OPERATIONS
ADAPTIVE BROADBAND CORPORATION




(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED JUNE 30,                                                              1999       1998        1997
- --------------------------------------------------------------------------- ----------- ---------- -----------
                                                                                          
REVENUE                                                                      $ 156,996   $175,300   $ 157,049
Costs of revenue                                                               103,247    112,409     103,086
                                                                            ----------- ---------- -----------
Gross margin                                                                    53,749     62,891      53,963

EXPENSES
Research and development                                                        24,974     17,986      16,444
Sales, marketing and administration                                             44,760     40,115      36,549
Amortization of intangible assets                                                1,960      1,377       1,394
Purchased in-process research and development                                   11,775          -           -
Restructuring and other charges                                                  3,325      4,055           -
                                                                            ----------- ---------- -----------
Total expenses                                                                  86,794     63,533      54,387
                                                                            ----------- ---------- -----------

OPERATING LOSS                                                                 (33,045)      (642)       (424)
Gain on sale of business unit                                                        -          -       2,744
Interest expense                                                                (4,602)    (4,478)     (5,944)
Interest income                                                                    468        819           5
                                                                            ----------- ---------- -----------

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES                            (37,179)    (4,301)     (3,619)
Benefit from income taxes                                                      (10,555)    (4,059)     (1,196)
                                                                            ----------- ---------- -----------
LOSS FROM CONTINUING OPERATIONS                                                (26,624)      (242)     (2,423)

DISCONTINUED OPERATIONS
Income (loss) from discontinued operations, net of
  income taxes                                                                   1,963      3,515     (45,972)
Gain (loss) on disposal, net of income taxes                                    36,281    (11,033)     (8,371)
                                                                            ----------- ---------- -----------
                                                                                38,244     (7,518)    (54,343)
                                                                            ----------- ---------- -----------

NET INCOME (LOSS)                                                           $   11,620  $  (7,760)  $ (56,766)
                                                                            ----------- ---------- -----------
                                                                            ----------- ---------- -----------

BASIC AND DILUTED EARNINGS(LOSS) PER SHARE
Loss from continuing operations                                             $    (1.79)  $  (0.01)  $   (0.15)
Income (loss) from discontinued operations                                  $     2.57   $  (0.46)  $   (3.35)
                                                                            ----------- ---------- -----------
Net income (loss)                                                           $     0.78   $  (0.47)   $  (3.50)
                                                                            ----------- ---------- -----------
                                                                            ----------- ---------- -----------

WEIGHTED AVERAGE SHARES USED IN COMPUTING BASIC AND
DILUTED EARNINGS(LOSS) PER SHARE                                                14,887     16,363      16,226


SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                              20



CONSOLIDATED BALANCE SHEETS
ADAPTIVE BROADBAND CORPORATION



                                                                                         JUNE 30        JUNE 30
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)                                               1999           1998
- ----------------------------------------------------------------------------------  -------------  -------------
                                                                                             
ASSETS
Current Assets:
   Cash and cash equivalents                                                        $     48,887   $     24,630
   Short-term investments                                                                      -          2,636
   Accounts receivable, less allowance for doubtful
     accounts of $1,130 in 1999 and $1,166 in 1998                                        33,980         35,918
   Inventories                                                                            22,339         25,710
   Deferred income taxes                                                                  14,293         15,714
   Prepaid expenses and other current assets                                               4,150            512
   Net current assets of discontinued operations                                               -         11,971
                                                                                    -------------  -------------
     Total current assets                                                                123,649        117,091
                                                                                    -------------  -------------

Property, plant and equipment, net                                                        20,746         19,521
Deferred income taxes                                                                      3,805         16,448
Intangible assets, net                                                                    32,055         27,887
Other assets                                                                               6,221          3,242
Net long-term assets of discontinued operations                                                -          6,323
                                                                                    -------------  -------------
                                                                                    $    186,476   $    190,512
                                                                                    -------------  -------------
                                                                                    -------------  -------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
   Accounts payable                                                                 $     13,089   $     13,142
   Accrued liabilities                                                                    26,546         30,217
   Current portion of long-term debt                                                       1,972            352
                                                                                    -------------  -------------
     Total current liabilities                                                            41,607         43,711
                                                                                    -------------  -------------

Long-term debt                                                                               786          2,748
Convertible subordinated notes                                                            57,500         57,500
Other long-term liabilities                                                                1,590          2,000

Shareholders' Equity:
   Common stock, $0.10 par value, 29,200,000 shares
     authorized; 16,629,031 shares issued                                                  1,663          1,663
   Capital in excess of par value                                                         95,673         95,673
   Treasury stock, 2,034,641 shares held in 1999;
     1,285,080 shares held in 1998                                                       (36,066)       (27,831)
   Retained earnings                                                                      23,723         15,048
                                                                                    -------------  -------------
     Total shareholders' equity                                                           84,993         84,553
                                                                                    -------------  -------------
                                                                                    $    186,476   $    190,512
                                                                                    -------------  -------------
                                                                                    -------------  -------------


SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                         21



CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
ADAPTIVE BROADBAND CORPORATION



                                                                                               UNAMORTIZED    TOTAL
                                                             CAPITAL IN                        RESTRICTED     SHARE-
(DOLLARS IN THOUSANDS)                      COMMON STOCK     EXCESS OF   TREASURY   RETAINED   STOCK PLAN    HOLDERS'
THREE YEARS ENDED JUNE 30, 1999         SHARES      AMOUNT   PAR VALUE     STOCK    EARNINGS     EXPENSE      EQUITY
- ------------------------------------- ----------- ---------- ---------- ---------- ---------- ------------ -----------
                                                                                      
BALANCE AT JUNE 30, 1996              16,031,048  $   1,603  $  88,788  $       -  $  80,343  $      (722)  $ 170,012
Common stock issued under:
   Stock option, restricted stock
     and stock purchase plans            375,425         38      4,461                                279       4,778
Net loss                                                                             (56,766)                 (56,766)
                                      ----------- ---------- ---------- ---------- ---------- ------------ -----------
BALANCE AT JUNE 30, 1997              16,406,473      1,641     93,249          -     23,577         (443)    118,024
                                      ----------- ---------- ---------- ---------- ---------- ------------ -----------
                                      ----------- ---------- ---------- ---------- ---------- ------------ -----------
Common stock issued under:
   Stock option, restricted stock
     and stock purchase plans            222,558         22      2,424                                443       2,889
Treasury stock purchases
   (1,595,500 shares)                                                     (34,104)                            (34,104)
Common stock issued from
   treasury shares (310,420 shares)                                         6,273       (769)                   5,504
Net loss                                                                              (7,760)                  (7,760)
                                      ----------- ---------- ---------- ---------- ---------- ------------ -----------
BALANCE AT JUNE 30, 1998              16,629,031      1,663     95,673    (27,831)    15,048            -      84,553
                                      ----------- ---------- ---------- ---------- ---------- ------------ -----------
                                      ----------- ---------- ---------- ---------- ---------- ------------ -----------
Treasury stock purchases
   (1,077,500 shares)                                                     (15,706)                            (15,706)
Common stock issued from
   treasury shares (326,876 shares)                                         7,471     (2,945)                   4,526
Net income                                                                            11,620                   11,620
                                      ----------- ---------- ---------- ---------- ---------- ------------ -----------
BALANCE AT JUNE 30, 1999              16,629,031  $   1,663  $  95,673  $ (36,066) $  23,723  $        -   $   84,993
                                      ----------- ---------- ---------- ---------- ---------- ------------ -----------
                                      ----------- ---------- ---------- ---------- ---------- ------------ -----------



SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                                   22





CONSOLIDATED STATEMENTS OF CASH FLOWS
ADAPTIVE BROADBAND CORPORATION



(DOLLARS IN THOUSANDS)
YEARS ENDED JUNE 30,                                                                   1999         1998         1997
- ---------------------------------------------------------------------------  ---------------  -----------  -----------
                                                                                                  
OPERATING ACTIVITIES
Loss from continuing operations                                              $      (26,624)   $    (242)    $ (2,423)
Adjustments to reconcile to
   net cash provided by (used in) operating activities:
     Gain on sale of business unit                                                        -            -       (2,744)
     Purchased in-process research and development                                   11,775            -            -
     Depreciation and amortization                                                    7,258        7,751        6,892
     Amortization of intangible assets                                                1,960        1,377        1,394
     Deferred income taxes                                                          (11,358)      (1,988)      (7,936)
Net effect of change in:
     Income tax refunds                                                                   -       10,085            -
     Accounts receivable                                                              2,272      (10,558)         218
     Inventories                                                                      3,678        8,082        1,219
     Prepaid expenses and other current assets                                       (2,791)        (232)        (129)
     Accounts payable                                                                  (223)      (4,265)      10,014
     Other assets and accrued liabilities                                            (6,413)       7,334        1,840
                                                                             ---------------  -----------  -----------
Net cash provided by (used in) operating activities                                 (20,466)      17,344        8,345
                                                                             ---------------  -----------  -----------

INVESTING ACTIVITIES
Capital expenditures                                                                 (8,057)      (6,507)      (5,631)
Acquisitions and investments in businesses                                          (18,761)           -            -
Proceeds from sale of discontinued operations, net                                   80,619       66,726            -
Proceeds from sale of business units and assets                                           -            -        3,551
Other                                                                                 2,636       (1,472)        (766)
                                                                             ---------------  -----------  -----------
Net cash provided by (used in) cont. operations investing activities                 56,437       58,747       (2,846)
Net cash provided by (used in) discontinued operations activities                       642      (18,574)      (5,155)
                                                                             ---------------  -----------  -----------
Net cash provided by (used in) investing activities                                  57,079       40,173       (8,001)
                                                                             ---------------  -----------  -----------

FINANCING ACTIVITIES
Payments on long-term debt                                                             (342)        (334)        (325)
Proceeds from issuance of common stock                                                3,692        7,546        4,483
Payments on bank credit facilities                                                        -       (6,000)      (4,500)
Purchase of treasury stock                                                          (15,706)     (34,104)           -
Repayment of convertible subordinated notes                                               -       (5,700)           -
                                                                             ---------------  -----------  -----------
Net cash used in financing activities                                               (12,356)     (38,592)        (342)
                                                                             ---------------  -----------  -----------

Net increase in cash and cash equivalents                                            24,257       18,925            2
Cash and cash equivalents at beginning of year                                       24,630        5,705        5,703
                                                                             ---------------  -----------  -----------
Cash and cash equivalents at end of year                                     $       48,887   $   24,630     $  5,705
                                                                             ---------------  -----------  -----------
                                                                             ---------------  -----------  -----------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
   Interest                                                                  $        4,485   $    3,868     $  5,874
   Income taxes                                                              $            5   $        -     $      -


SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                               23


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ADAPTIVE BROADBAND CORPORATION


     1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS AND CORPORATE NAME CHANGE
Adaptive Broadband Corporation (the Company) is a wireless data networking
solutions company--a leading supplier of terrestrial wireless and
satellite-based systems to support ultra-high speed Internet access,
worldwide Internet backbones and broadcast digital TV transport. The company
also provides industry-leading solutions for satellite-based data
communications and terrestrial wireless telemetry networks.

Effective April 29, 1999, the Company changed its corporate name from California
Microwave, Inc. to Adaptive Broadband Corporation. During the past two years,
the Company has targeted its market and product focus to concentrate on wireless
broadband solutions. The Company bears little resemblance to the California
supplier of defense electronics and microwave components that was founded in
1968. The California Microwave name has a traditionally strong presence in the
intelligence community, and the Company included the name as part of the sale of
the Company's Government Division to Northrop Grumman Corporation. The Company's
stock symbol of ADAP was listed on the Nasdaq national market trading system on
April 29, 1999.

BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Adaptive Broadband
Corporation and its subsidiaries. All significant intercompany balances and
transactions have been eliminated. Certain prior year amounts have been
reclassified to conform to the current year presentation.

COMPREHENSIVE INCOME
The Company has adopted Statement of Financial Accounting Standards No. 130
(SFAS 130), "Reporting Comprehensive Income." SFAS 130 establishes standards for
the reporting and display of comprehensive income and its components and
requires restatement of all previously reported information for comparative
purposes. For fiscal years 1999, 1998 and 1997, the Company's comprehensive loss
was the same as its net loss.

USE OF ESTIMATES; RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Significant estimates are used in determining amounts reported in the financial
statements and accompanying notes such as the collectibility of accounts
receivable, warranty costs, inventory realization, accounting for income taxes,
restructuring reserves, recoverability of property, plant and equipment,
recoverability of purchased intangibles, amounts to be realized on a sale of
discontinued operations and contingencies. Actual results could differ from
estimates.

FISCAL YEAR
During fiscal year 1998, the Company changed its fiscal year end to June 30 from
a 52 - 53 week fiscal year ending on the Saturday closest to June 30. For
clarity, all fiscal periods are reported on a calendar month end. This change
did not have a significant impact on the Company's consolidated financial
statements.

REVENUE RECOGNITION, RECEIVABLES AND CREDIT RISK
Product revenue is generally recognized upon shipment to a credit-worthy
customer. The Company generally requires no collateral prior to shipment, but
does require letters of credit denominated in U.S. dollars from certain of
its international customers. The Company also maintains a credit insurance
program to insure international receivables where a confirmed letter of
credit may be neither cost effective nor available. Additionally, from time
to time the Company sells certain insured international, long-term, interest
bearing receivables, without recourse, at prevailing discount rates.

INVENTORIES AND COST OF PRODUCTS SOLD
Inventories are stated at the lower of cost (first-in, first-out) method or
market.

AS OF JUNE 30, INVENTORY CONSISTED OF THE FOLLOWING:


(DOLLARS IN THOUSANDS)                         1999         1998
- -----------------------------------------------------------------
                                               
Raw materials                              $ 14,640  $    16,944
Work-in-process and finished goods            7,699        8,766
                                           --------- ------------
Total inventory                            $ 22,339  $    25,710
                                           --------- ------------
                                           --------- ------------

CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash equivalents are carried at fair value which is not significantly different
from cost, and consist of highly liquid investments, primarily commercial paper
and money market funds, with original maturities of 90 days or less. Short-term
investments consist of money market instruments, mutual funds and commercial
paper with carrying values which approximate their market values. The Company
has not experienced losses from these investments.

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation and amortization charges are computed under the
straight-line method based on the estimated useful lives of the related assets.


                                        24


AS OF JUNE 30, PROPERTY, PLANT AND EQUIPMENT CONSISTED OF THE FOLLOWING:


(DOLLARS IN THOUSANDS)        LIFE (IN YEARS)   1999       1998
- -----------------------------------------------------------------
                                             
Land                                           $ 449       $ 449
Buildings and improvements              40     3,303       3,135
Machinery and equipment               3-10    33,294      31,068
Office and computer equipment          3-7    10,270      10,468
Software                                 7     3,433           -
Leasehold improvements          Lease term     1,697       1,344
Vehicles                                 5        83         169
                               ------------ --------- -----------
                                              52,529      46,633
Less: accumulated
  depreciation
  and amortization                           (31,783)    (27,112)
                               ------------ --------- -----------
                                            $ 20,746    $ 19,521
                               ------------ --------- -----------
                               ------------ --------- -----------


Depreciation and amortization expense on property, plant and equipment was $7.0
million, $7.3 million and $6.6 million for the fiscal years 1999, 1998 and 1997.

INTANGIBLE ASSETS OF BUSINESSES ACQUIRED
For acquisitions accounted for under the purchase method, the excess purchase
price over the fair value of net tangible assets acquired is allocated to
intangible assets based on fair value. The carrying value of the intangible
assets is reviewed if the facts and circumstances suggest that the assets may be
impaired. If this review indicates that the intangible assets are not
recoverable, the carrying value is reduced appropriately.

THE FOLLOWING TABLE SUMMARIZES NET INTANGIBLE ASSETS OF BUSINESSES ACQUIRED AS
OF JUNE 30:


(DOLLARS IN THOUSANDS)     AMORTIZATION PERIOD       1999        1998
- -----------------------------------------------------------------------
                                                   
Goodwill                       10 - 30 years      $ 40,222  $   37,033
Developed technology                 8 years         2,074           -
Assembled workforce              3 - 4 years           865           -
                           --------------------------------------------
                                                    43,161      37,033
Accumulated amortization                           (11,106)     (9,146)
                           --------------------------------------------
                                                  $ 32,055  $   27,887
                           --------------------------------------------
                           --------------------------------------------

EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share are calculated using the weighted average number
of common shares outstanding during the period. Diluted earnings (loss) per
common share are calculated using the weighted average number of common shares
outstanding during the period and the dilutive effect of stock options
calculated using the treasury stock method. Options to purchase 2,886,970 shares
of common stock and shares issuable upon the conversion of the Company's
convertible subordinated notes were excluded from the calculation of diluted
earnings (loss) per share as their effect is antidilutive with respect to
continuing operations.

NEW ACCOUNTING PRONOUNCEMENTS
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants (AICPA) issued Statement of Position
(SOP) 98-1, Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use. The SOP, which has been adopted prospectively as of July 1,
1998, requires the capitalization of certain costs incurred in connection with
developing or obtaining internal use software. The adoption of SOP 98-1 has had
an immaterial impact on the Company's financial statements.

In June 1998, Financial Accounting Standard Board (FASB) issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities," which will be effective for the Company's
fiscal year 2001. The Company does not currently use derivatives, thus
management does not anticipate that the adoption of SFAS 133 will have a
material impact on the Company's financial statements.

     2. SEGMENT INFORMATION

During the third quarter of fiscal year 1999, the Company completed the
reorganization of its continuing operations from a holding company operating in
two business segments to an integrated organization operating in a single
business segment. The Company provides wireless data networking solutions and
supplies terrestrial wireless and satellite-based systems to support ultra-high
speed Internet access, broadcast digital TV transport and worldwide Internet
backbones. The Company also provides industry-leading solutions for
satellite-based data communications and terrestrial wireless telemetry networks.
The Company's operations are treated as one operating segment as it reports
operating results on an aggregate basis to the chief operating decision maker.
Prior to the reorganization, the Company reported its continuing operations
through the Satellite Communications Division and the Terrestrial Wireless
Division.

INFORMATION REGARDING THE COMPANY'S REVENUE BY GEOGRAPHIC AREA IS AS FOLLOWS (IN
MILLIONS):


FISCAL YEAR ENDED JUNE 30,                    1999     1998      1997
- ----------------------------------------------------------------------
                                                    
United States                               $ 93.4   $ 87.7    $ 85.7
Latin America                                 22.3     37.0      30.0
Asia                                          18.2     24.5      23.8
Europe, Africa, Middle East                   15.0     20.3      13.5
Canada                                         8.1      5.8       4.0
                                           ---------------------------
                                           $ 157.0  $ 175.3   $ 157.0
                                           ---------------------------
                                           ---------------------------

INFORMATION REGARDING THE COMPANY'S REVENUE BY PRODUCT GROUP IS AS FOLLOWS (IN
MILLIONS):


FISCAL YEAR ENDED JUNE 30,                    1999     1998      1997
- ----------------------------------------------------------------------
                                                    
Satellite Communications                    $ 82.3   $ 90.5    $ 82.9
Terrestrial Wireless                          74.7     84.8      74.1
                                           ---------------------------
                                           $ 157.0  $ 175.3    $157.0
                                           ---------------------------
                                           ---------------------------


The Satellite Communications Products Group provides satellite modems and
transceiver products and services primarily to telecommunications carriers and
Internet service providers. It also develops and supplies products and software
for the network delivery of Internet Protocol (IP) data and multimedia services.
These products and services enable customers to provide voice, video and data
services via satellite.

The Terrestrial Wireless Products Group provides products and services, based
upon microwave radio technology, primarily to the television broadcast, oil, gas
and utility, and transaction processing markets. The Group is also developing
high-speed, dynamic bandwidth management, wireless Internet connectivity
technology and products.

SEE "RESULTS OF OPERATIONS" IN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.


                                       25


     3. DISCONTINUED OPERATIONS AND DIVESTITURES

In October 1998, the Company's Board of Directors adopted a formal plan to sell
its Government Division, which consisted of the Government Electronics Division
(GED) and Airborne Systems Division (ASID). Historically, the Government
Division included the Company's Services Division (SD), which was sold in the
fourth quarter of fiscal year 1998 to Telscape International, Inc. (Telscape)
for $8.2 million in cash with a gain of $6.3 million before income taxes. These
operations contracted principally with the United States Department of Defense
and provided products and services principally in the areas of communication,
reconnaissance and surveillance systems. In April 1999, the Company completed
the sale of its Government Division to Northrop Grumman Corporation (Northrop
Grumman) for $93 million in cash, for a gain of approximately $36 million (net
of income taxes). The Company used a portion of the proceeds to pay down the
entire outstanding balance of its credit facility and to resume its share
repurchase program. The Government Division sale price includes up to an
additional $5 million cash payment, contingent upon the future performance of
the divested business. The Company has not recognized any benefit from this
contingent future payment.

The operating results, gain on disposal and financial position of the Government
Division have been classified as discontinued operations in the Company's
financial statements through the divestiture date. Revenue from the Government
Division discontinued operations was $67.7 million for fiscal year 1999 for the
period prior to disposal, and $85.7 million and $95.2 million for fiscal years
1998 and 1997. Income from the Government Division discontinued operations (net
of income taxes) was $2.0 million for fiscal year 1999 for the period prior to
disposal, and $3.5 million and $5.0 million for fiscal years 1998 and 1997.

In June 1997, the Company's Board of Directors adopted a formal plan to sell its
Microwave Networks (MN) and Satellite Transmission Systems (STS) divisions. The
Company recorded a loss from operations of the discontinued businesses of $51.0
million (net of income taxes) and provided $8.4 million (net of income taxes)
for anticipated operating losses prior to disposal and for expected losses on
their eventual sale.

In February 1998, STS was sold to L-3 Communications Corporation (L-3) for $27
million in cash, and in April 1998, MN was sold to Tadiran Ltd. (Tadiran) for
$31.5 million in cash. During the second half of fiscal year 1998, the Company
recorded additional provisions of $15.1 million (net of income taxes) for
additional losses on disposal of these divisions. These provisions were
primarily for adjustments to the combined losses on sale and for higher than
anticipated operating losses prior to disposal of both divisions. The operating
results, loss on disposal and financial position of these divisions have been
classified as discontinued operations in the Company's financial statements
through the divestiture dates. Revenue from the MN and STS discontinued
operations was $83.2 million in fiscal year 1998 for the period prior to
disposal and $170.3 million for fiscal year 1997. The loss from discontinued
operations (net of income taxes) for MN and STS was accrued as part of the net
loss on disposal.

Final accounting for the Government Division and MN divestitures are subject to
completion of the post-closing procedures provided for in the Northrop and
Tadiran agreements. The Company has accrued for transaction costs related to the
Government Division sale and future price adjustments that may occur in the
post-closing procedures for the Government Division and MN divestitures. At June
30, 1999, the discontinued operations reserves for the Government Division and
MN divestitures were $6.9 million and $2.5 million, respectively. The Company
believes that the completion of these procedures and the outstanding litigation
discussed below will not have a material impact on the Company's financial
position, results of operations or cash flows.

In July 1999, Northrop Grumman filed a lawsuit against the Company alleging that
the Company failed to disclose certain events and information as required by the
terms of the agreement pursuant to which Northrop Grumman acquired the
Government Division of the Company in April 1999. No damages have been
specified. The Company believes that it has strong defenses and plans to
vigorously defend the lawsuit filed by Northrop Grumman. No provisions have been
made for expenses that may be incurred to resolve the lawsuit, and the Company
believes final resolution of the Northrop Grumman allegations will not have a
material impact on the Company's financial position, results of operations or
cash flows.

In May 1995, the Company's MN division entered into certain agreements with
Nokia Telecommunications Oy (Nokia) pursuant to which MN was to provide to Nokia
certain microwave radios and related software and services, and was to carry out
certain development programs. In September 1997, Nokia informed MN of a
purported failure of certain of the products sold to Nokia to meet certain
contractual specifications. MN was sold to Tadiran in April 1998 and under the
terms of the sale agreement, Tadiran assumed and indemnified the Company with
respect to the Nokia claims. Tadiran has now taken the position that the Company
is responsible for the Nokia claims, based upon allegations that the Company
failed to provide adequate disclosures and financial reserves with respect to
such claims. In September 1998, the Company received notice from Nokia that
Nokia has decided to terminate the May 1995 agreements. Also in September 1998,
Nokia began arbitration proceedings to recover damages, which are claimed to be
$40.6 million, and which include loss of profits and goodwill, and damage to
trade and manufacturing secrets. The Company believes that it has strong
defenses and will vigorously defend the Nokia claims. In May 1999, the Company
began arbitration proceedings against Tadiran, primarily to determine that
Tadiran


                                      26


is responsible for the Nokia claims. The Company believes that it has strong
claims against Tadiran. No accruals have been recorded for expenses that may be
incurred to resolve the dispute, and the Company believes final resolution of
this matter will not have a material impact on the Company's financial position,
results of operations or cash flows.

    4. RESTRUCTURING AND OTHER CHARGES

During the third quarter of fiscal year 1999, the Company completed the
reorganization of its continuing operations from a holding company to a single
integrated organization and recorded pre-tax charges of $3.3 million. The
charges included $2.5 million for severance and $0.8 million for write-offs of
property and equipment. The severance was associated with workforce reductions
of approximately 130 employees in manufacturing operations and product
management. The workforce reductions and write-offs of property and equipment
were primarily driven by the reduction of manufacturing capacity at the
Company's satellite communications operations in Tempe, Arizona. The Company has
utilized $1.0 million of the $2.5 million of severance reserve through cash
payment for termination benefits. The Company expects to utilize the remainder
of the severance accrual through additional cash payments for termination
benefits by June 30, 2000.

During the fourth quarter of fiscal year 1998, the Company reviewed and
refocused its operations and business processes in connection with its strategic
and operational initiatives and recorded $4.1 million for restructuring and
other charges, primarily for severance and excess facilities. The severance
charge was $2.4 million associated with workforce reductions of approximately
160 employees. The workforce reductions were primarily driven by the elimination
of manufacturing capacity in the Company's satellite communication operations
and factory consolidation in the Company's terrestrial wireless operations, as
well as the elimination of the Company's historical holding company structure,
impacting employees in all functional areas of the Company. During fiscal year
1999, the Company terminated all of the 160 employees and has utilized $1.8
million of the $2.4 million reserve recorded at June 30, 1998 through cash
payments for termination benefits. During fiscal year 1999, there have been no
adjustments to the reserve, and the Company expects to utilize the remainder of
the severance accrual through additional cash payments for termination benefits
by September 30, 1999.

THE FOLLOWING TABLE SUMMARIZES THE 1999 AND 1998 RESTRUCTURING AND OTHER
CHARGES:


                                                           ASSET
                                                 WRITE-DOWNS AND
                               1999      1998   PAYMENTS THROUGH        FUTURE
  (DOLLARS IN THOUSANDS)  PROVISION PROVISION      JUNE 30, 1999   CASH OUTLAY
- -------------------------------------------------------------------------------
                                                      
RESTRUCTURING AND OTHER:

Excess facilities and
equipment write-downs       $  800     $  800             $  950        $  650
  Severance costs            2,525      2,395              2,767         2,153
  Other                          -        860                860             -
                          -----------------------------------------------------
                            $3,325     $4,055             $4,577        $2,803
                          -----------------------------------------------------
                          -----------------------------------------------------


    5. ACCRUED AND OTHER LIABILITIES

AS OF JUNE 30, ACCRUED LIABILITIES CONSISTED OF THE FOLLOWING:


(DOLLARS IN THOUSANDS)                         1999        1998
- ----------------------------------------------------------------
                                               
Accrued payroll and payroll related        $  9,514    $ 13,291
Discontinued operations reserves             11,088       6,748
Restructuring reserves                        2,803       3,319
Warranties                                    2,459       2,098
Other                                           682       4,761
                                           ---------------------
                                           $ 26,546    $ 30,217
                                           ---------------------
                                           ---------------------


In addition, accrued expenses applicable to non-utilized facilities from
discontinued operations of $1.1 million and $2.0 million at June 30, 1999 and
1998 are included in other long-term liabilities.

    6. BORROWING ARRANGEMENTS

AS OF JUNE 30, LONG-TERM DEBT CONSISTED OF THE FOLLOWING:


(DOLLARS IN THOUSANDS)                         1999        1998
- ----------------------------------------------------------------
                                               
Industrial development bonds               $  1,610    $  1,810
Mortgage and loans                            1,148       1,290
                                          ----------------------
                                              2,758       3,100
Less: Current portion                        (1,972)       (352)
                                          ----------------------
                                           $    786    $  2,748
Convertible subordinated notes:
5.25% notes due 2003                         57,500      57,500
                                          ----------------------
                                           $ 58,286    $ 60,248
                                          ----------------------
                                          ----------------------


Debt maturing in each of the next five years and thereafter is as follows: 2000
- - $1,972,000; 2001 - $178,000; 2002 -$187,000; 2003 - $57,697,000; 2004 -
$56,000, and thereafter - $168,000.

The industrial development bonds are payable in annual installments through June
2013, may be prepaid at any time without penalty, and bear interest at a
floating rate (3.85% at June 30, 1999), based upon prevailing market conditions,
which is redetermined every seven days. The other long-term debt represents
notes which are payable through 2005. The industrial development bonds and the
other long-term debt are secured by mortgages on certain equipment and
properties. The carrying value of the industrial development bonds and other
long-term debt approximates their fair value based on discounted contractual
cash flows using rates currently offered for debt with similar terms and
maturities.

At June 30, 1999, the Company was not in compliance with certain covenants of
its industrial development bonds agreement. The Company has classified the
industrial development bonds as current and plans to use a portion of the
proceeds from the sale of its Government Division to pay down the balance of
the industrial development bonds.

On December 15, 1993, the Company issued $57.5 million of 5.25%, convertible
subordinated notes due December 15, 2003. These notes are convertible at any
time prior to maturity, at the option of the holder, into shares of the
Company's


                                     27


common stock at a price of $28.4375 per share. These notes are redeemable at any
time, at the option of the Company. Interest is payable semi-annually. The notes
are subordinated to all existing and future senior indebtedness of the Company.
These notes are quoted on the Nasdaq National Market. At June 30, 1999, the fair
value of the outstanding notes was $51.8 million, which approximates the average
fair value during the fiscal year 1999, based on the quoted market prices (which
reflect the market value of the underlying securities into which the notes are
convertible, as well as current prevailing interest rates).

During fiscal year 1998, the Company repaid a $5.7 million, five-year, 5%
convertible subordinated note. The note was issued for cash to Motorola, Inc.
concurrent with the close of a 1993 acquisition.

    7. COMMON STOCK

STOCK REPURCHASE PROGRAM
On February 5, 1998, the Company announced that its Board of Directors
authorized the repurchase of up to three million shares of its common stock on
the open market. On October 6, 1998, the Company announced that its Board of
Directors had increased the number of shares authorized for repurchase to six
million. As of June 30, 1999, the Company has repurchased approximately 2.7
million shares since the commencement of the repurchase program. Repurchased
shares are available for use under the Company's stock options and stock plans
and for other corporate purposes.

STOCKHOLDER RIGHTS
In July 1999, upon the expiration of the Company's previous stockholder rights
plan, the Board of Directors approved the adoption of a new three-year
Stockholder Rights Plan under which all stockholders of record as of July 26,
1999, received rights to purchase shares of Common Stock. The rights were
distributed as a non-taxable dividend and will expire on June 30, 2002. The
rights are exercisable only if a person or a group acquires 20% or more of the
Company's Common Stock or announces a tender offer for 50% or more of the Common
Stock. The Company intends to propose an amendment to its certificate of
incorporation that would add a stockholder-friendly "chewable" feature for the
Rights Plan, for approval by a vote of its stockholders at its regularly
scheduled stockholder meeting in October 1999. This chewable feature would
require the Company to redeem or otherwise make the Rights Plan inapplicable if
the Company receives certain types of acquisition proposals and the stockholders
vote to require it to do so. The Company also intends to seek stockholder
approval of the use of Preferred Stock in connection with the Rights Plan
instead of Common Stock.

OPTIONS AND OTHER STOCK PLANS
Stock options have been granted to officers, directors and key employees under
the Company's stock option plans with exercise prices equal to the fair market
value of the Company's common stock on the date of grant. The majority of
options outstanding vest upon attainment of specified increases in the stock
price or after five years. Options granted prior to September 1997 become
exercisable in annual installments of 25% beginning one year after the date of
grant. Options granted to the Company's directors become 100% exercisable upon
grant. Options granted under the 1986 and 1992 stock option plans expire ten
years from the date of the grant.

In May 1997, the Board of Directors approved an increase of 1,500,000 shares to
the 1992 Stock Option Plan which was approved by the shareholders in July 1997.

A SUMMARY OF ACTIVITY FOR 1999, 1998 AND 1997 IS PRESENTED BELOW:



                                OUTSTANDING SHARES UNDER OPTION
YEARS ENDED JUNE 30                  1999       1998       1997
- ----------------------------------------------------------------
                                             
Beginning of year               2,360,575  1,692,418  1,902,123
Granted                         1,393,750  1,487,800    614,500
Exercised                        (197,123)  (399,454)  (181,234)
Canceled                         (670,232)  (420,189)  (642,971)
                                --------------------------------
End of year                     2,886,970  2,360,575  1,692,418
                                --------------------------------
                                --------------------------------
Weighted average fair
value on date of grant             $12.86      $7.95      $4.56
Exercisable                       616,091    749,536    753,428
Available for grant                91,983    835,977    169,583



                                   WEIGHTED AVERAGE EXERCISE
                                        PRICE PER SHARE
                                     1999       1998       1997
- ----------------------------------------------------------------
                                                
Beginning of year                  $17.88     $17.65     $18.40
Granted                            $15.47     $17.65     $14.92
Exercised                          $14.24     $14.49     $10.84
Canceled                           $19.19     $19.52     $19.26
End of year                        $16.66     $17.88     $17.65

THE FOLLOWING TABLE SUMMARIZES INFORMATION ABOUT THE COMPANY'S STOCK OPTIONS
OUTSTANDING AT JUNE 30, 1999.


                            OPTIONS OUTSTANDING         OPTIONS EXERCISABLE
- ----------------------------------------------------------------------------
                                  WEIGHTED
                                   AVERAGE  WEIGHTED               WEIGHTED
                                 REMAINING   AVERAGE                AVERAGE
RANGE OF               NUMBER  CONTRACTUAL  EXERCISE      NUMBER   EXERCISE
EXERCISE PRICE    OUTSTANDING         LIFE     PRICE  EXERCISABLE     PRICE
- ----------------------------------------------------------------------------
                                                   
$ 0.64-$16.00         854,029         8.57    $14.24     167,704     $12.58
$16.25-$16.50         970,000         8.97    $16.37     126,647     $16.25
$16.88-$17.75         608,550         8.39    $17.49      99,375     $17.57
$18.00-$26.00         452,391         6.88    $20.70     220,365     $21.15
$29.50-$29.50           2,000         5.82    $29.50       2,000     $29.50
                 -----------------------------------------------------------
$0.64-$29.50        2,886,970         8.40    $16.66     616,091     $17.26
                 -----------------------------------------------------------
                 -----------------------------------------------------------


The Company has an employee stock purchase plan under which employees may
purchase shares, subject to certain limitations, at 85% of the lower of the fair
market value of the shares at the beginning or end of a six-month purchase
period. During 1999, 129,753 shares were issued for $1,360,000. During 1998,
156,401 shares were issued for $1,924,000, and during 1997, 200,551 shares were
issued for $2,503,000. Shares available for future issuances at June 30, 1999
were 347,000.


                                         28


The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standard No. 123 (SFAS 123) "Accounting for Stock Based
Compensation." Accordingly, no compensation expense has been recognized for
the stock option plans. Had compensation expense for the Company's stock
option and purchase plans been determined based on the fair value at the
grant date for all options granted after June 30, 1995 under SFAS No. 123,
the Company's net loss and net loss per share would have been increased and
net income and net income per share decreased to the pro forma amounts below:




(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)                      1999        1998        1997
- ---------------------------------------   ---------   ---------   ---------
                                                         
Net income (loss)
 --as reported                            $  11,620   $ (7,760)   $(56,766)
Net income (loss)
 --pro forma                              $   5,833   $(10,837)   $(59,712)
Diluted net income (loss)
 per share - as reported                  $    0.78   $  (0.47)   $  (3.50)
Diluted net income (loss)
 per share--pro forma                     $    0.39   $  (0.65)   $  (3.68)


The assumptions used to estimate the fair value of these options and the 15%
discount on the employee stock purchase plan using the Black-Scholes option
pricing model were:



                                               1999        1998        1997
- ---------------------------------------   ---------   ---------   ---------
                                                         
Risk free interest rate                        5.8%       5.75%        5.8%
Expected volatility                            0.91        0.51        0.51
Expected life for options
 in years                                      4.12        4.15         4.2
Expected life for stock
 purchase plan in years                         0.5         0.5         0.5


Through fiscal year 1998, stock grants were made to officers and other key
employees under the 1988 restricted stock plan at no charge to the employees.
These grants generally vested 20% per year, beginning one year after the date
of issue. The fair market value of the shares, at the date of grant, was
charged to compensation expense over the five-year period. Compensation
expense relating to this plan was: 1998--$79,000, 1997--$178,000. The Plan
expired in fiscal year 1998.

A SUMMARY OF ACTIVITY IN THE RESTRICTED STOCK PLAN WAS AS FOLLOWS:



OUTSTANDING RESTRICTED SHARES                              1998        1997
- ---------------------------------------               ---------   ---------
                                                            
Beginning of year                                        28,580      52,320
Granted                                                       -         800
Canceled                                                (20,020)     (7,160)
Vested                                                   (8,560)    (17,380)
                                                      ---------   ---------
End of year                                                   -      28,580
                                                      ---------   ---------
                                                      ---------   ---------
Available for grant                                           -       9,310
Weighted average fair value on date of grant                  -   $   12.50


8. EMPLOYEE BENEFIT PLANS

DEFINED CONTRIBUTION RETIREMENT PLAN

The Company has a defined contribution retirement plan covering substantially
all employees. One part of the plan is a 401(k) savings plan which allows
employees to contribute pre-tax compensation up to the lesser of 20% of total
annual compensation or the statutory calendar year limit, currently $10,000.
The Company contributes up to $1,600 to each employee based on employee
contributions up to $2,700. The second part of the plan arises out of the
conversion by the Company of its previous cash profit sharing plan to a
defined contribution plan. Contributions are allocated based on each
employee's salary and length of employment.  No profit sharing amounts were
authorized for fiscal year 1999 or 1998. All of the above employer
contributions are determined by and subject to the approval of the Company's
Board of Directors. Contributions to these plans for employees of the
continuing operations were $750,000 in 1999, $825,000 in 1998, and $628,000
in 1997.

SUPPLEMENTAL EXECUTIVE DEFERRED COMPENSATION PLAN

The Company offers an executive deferred compensation plan, which permits
participating executives to defer up to 70% of their salary and 80% of their
bonus until termination from the Company, thereafter receiving a payout over
a period of up to ten years. Such deferrals are not deemed to be protected by
Employee Retirement Income Security Act of 1974 (ERISA) fiduciary regulations
and are thereby at risk, being assets of the Company. Plan participants may
direct the investment of such monies into various investment vehicles. In
1999, the Company added a phantom stock alternative which allows investment
in phantom shares of the Company's common stock. The shares are valued at
100% of the closing price of the stock at the end of each month of directed
contribution. The Company will match contributions at the rate of 100 shares
for the first 400 employee shares and 200 shares for the next 400 employee
shares purchased in a given calendar year. All Company matching contributions
are vested over a period of two years. Purchase of phantom stock in this plan
is credited toward attainment of executive stock ownership requirements but
confers no rights of ownership, including voting rights, for the underlying
phantom shares.

9. INCOME TAXES

THE BENEFIT FROM INCOME TAXES FOR CONTINUING OPERATIONS CONSISTED OF THE
FOLLOWING:



(DOLLARS IN THOUSANDS)                         1999        1998        1997
- ---------------------------------------   ---------   ---------   ---------
                                                         
CURRENT
Federal                                   $     803   $  (2,099)  $   5,959
State                                             -          28         781
                                          ---------   ---------   ---------
Subtotal                                        803      (2,071)      6,740
                                          ---------   ---------   ---------
                                          ---------   ---------   ---------
DEFERRED
Federal                                   $  (9,848)  $  (1,672)  $  (7,025)
State                                        (1,510)       (316)       (911)
                                          ---------   ---------   ---------
Subtotal                                    (11,358)     (1,988)     (7,936)
                                          ---------   ---------   ---------
Total                                     $ (10,555)  $  (4,059)  $  (1,196)
                                          ---------   ---------   ---------
                                          ---------   ---------   ---------


                                       29


THE DIFFERENCES BETWEEN THE U.S. FEDERAL STATUTORY INCOME TAX RATE AND THE
COMPANY'S EFFECTIVE RATE FOR CONTINUING OPERATIONS WERE AS FOLLOWS:



                                               1999        1998        1997
- ---------------------------------------   ---------   ---------   ---------
                                                         
U.S. federal statutory
   income tax rate                            35.0%       35.0%       35.0%
State income taxes,
   net of federal benefit                      3.6%        3.0%        2.0%
Intangible assets                             (1.5)%     (12.2)%      (9.1)%
Foreign Sales Corporation
   tax benefits                                  -           -         7.4%
Research and development
   tax credits                                 1.4%        9.3%        4.3%
In-process research and
   development reserve                        (7.4)%         -           -
Benefit from previously
   reserved deductions                            -       58.1%          -
Allocation to income from
   discontinued operations                        -       (0.7)%      (6.1)%
Alternative minimum tax                       (2.2)%         -           -
Other                                         (0.5)%       1.9%       (0.5)%
                                          ---------   ---------   --------
Total                                         28.4%       94.4%       33.0%
                                          ---------   ---------   --------
                                          ---------   ---------   --------


Deferred taxes reflect the net effects of temporary differences between the
carrying amounts of assets and liabilities used for financial reporting
purposes and the amounts used for income tax purposes.

THE COMPONENTS OF NET DEFERRED TAX ASSETS ARE AS FOLLOWS:



                                                           1999        1998
- ---------------------------------------               ---------   ---------
                                                            
DEFERRED TAX ASSETS
Net operating loss carryforward                       $   7,280   $  20,409
In-process research and
  development reserve                                     4,544           -
Discontinued operations                                   4,279       2,699
Tax credits                                               2,348       1,051
Compensation related                                      2,263       2,322
Restructuring reserves                                    1,082       1,328
Inventory                                                 1,714       2,068
Warranty                                                    926         796
Allowance for doubtful accounts                             427         435
Contracts in progress                                         -       1,165
Other                                                       580       1,468
                                                      ---------   ---------
  Deferred tax assets                                 $  25,443   $  33,741
  Valuation allowance                                    (5,687)          -
                                                      ---------   ---------
  Deferred tax assets                                 $  19,756   $  33,741

DEFERRED TAX LIABILITIES
Depreciation                                          $  (1,457)  $  (1,421)
Other                                                      (201)       (158)
                                                      ---------   ---------
Deferred tax liabilities                                 (1,658)     (1,579)
                                                      ---------   ---------
Net deferred tax assets                               $  18,098   $  32,162
                                                      ---------   ---------
                                                      ---------   ---------


At June 30, 1999, the Company had gross deferred tax assets arising from
deductible temporary differences, tax losses and tax credits of $25.4
million. The gross deferred tax assets are offset by a valuation allowance of
$5.7 million and deferred tax liabilities of $1.7 million. Realization of the
majority of the net deferred tax assets is dependent on the Company's ability
to generate approximately $4.5 million of future taxable income. Management
believes that it is more likely than not that the assets will be realized
based on forecasted income. However, there can be no assurance that the
Company will meet its expectations of future income. Management will evaluate
the realizability of the deferred tax assets quarterly and assess the need
for additional valuation allowance.

At June 30, 1999, the Company had federal net operating loss carryforwards of
approximately $16.5 million to offset future taxable income. These net
operating loss carryforwards begin to expire in the year 2012 through 2013.
The Company has various tax credit carryforwards of approximately $2.3
million. The majority of the tax credits consist of alternative minimum tax
credits which can be carried forward indefinitely.

10. COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

Substantially all of the buildings occupied by the Company are occupied under
operating leases which expire in one to ten years. Certain of these leases
contain escalation clauses. Total rent expense for the three years ended June
30, 1999, 1998 and 1997 was $1,966,000, $1,520,000 and $2,037,000. Lease
commitments which are payable by the Company, exclusive of property taxes,
will be due as follows: 2000--$2,426,000; 2001--$2,235,000; 2002--$2,246,000;
2003--$1,932,000; 2004--$1,688,000, 2005 and thereafter--$3,140,000.

The Company has lease commitments associated with non-utilized facilities
from discontinued operations, payable as follows: 2000--$1,975,000;
2001--$162,000, and 2002--$9,000. All such amounts have been reserved.

CONTINGENT LIABILITIES

The Company is subject to legal proceedings and claims that arise in the
normal course of its business. The Company believes these proceedings will
not have a material adverse effect on the financial position or results of
operations of the Company.

11. LITIGATION SETTLEMENT

The Company announced in November 1995 that a shareholders' class action
lawsuit had been filed in the United States District Court for the northern
District of California against it and certain of its former officers on
behalf of persons who purchased shares of the Company's common stock between
September 6, 1994 and June 29, 1995. The complaint filed in the lawsuit
alleged certain violations of the federal securities laws by the Company and
certain of its former officers and sought damages of an unspecified amount.
Although the Company did not believe that it or its former officers committed
any securities law violations and considered the allegations made in the
class action suit to be without merit, in order to avoid the expense and
distraction of

                                       30


protracted litigation, the Company reached an agreement to settle the lawsuit
in its fiscal 1998 second quarter. During its fiscal 1998 second quarter, the
Company recorded an expense for the settlement (including defense costs), in
the amount of $1.9 million, before income taxes, or approximately $.07 per
share. The court approved the settlement on March 23, 1998.

12. RECEIVABLES FROM OFFICERS

In July 1997, the Company's Chief Executive Officer, Frederick D. Lawrence,
received two loans totaling $466,667. The interest rates on both loans are
equal to the Company's incremental borrowing rate on the loan origination
date (9.0%). For both loans, one-half of accrued interest has been forgiven
on each of the first two anniversary dates of Mr. Lawrence's employment with
the Company. In addition, one-half of the principal amount of the $316,667
loan was forgiven at each of Mr. Lawrence's first two anniversary dates of
employment. The principal amount of the $150,000 loan was due in a balloon
payment in July 1999; upon approval by the Board of Directors, the due date
was extended to July 2001.

In January 1998, the Company's Executive Vice President and Chief Financial
Officer, Donna S. Birks, received an interest-free loan of $500,000 subject
to various employment criteria. The principal amount is due in a balloon
payment on the fifth anniversary of Ms. Birks' employment. The imputed annual
interest rate is 6.0%.

13. ACQUISITIONS

On August 20, 1998, the Company acquired Adaptive Broadband Limited (ABL) a
United Kingdom-based company developing high-speed wireless Internet
connectivity technology. The acquisition was accounted for under the purchase
method. The initial purchase price was approximately $10.9 million including
cash payments, direct costs and the assumption of ABL's net liabilities. The
purchase price will include additional future payments of up to $7 million,
contingent on ABL's performance exceeding certain targets. The assets and
liabilities assumed by the Company were recorded based on their fair values
at the date of acquisition. The purchase price was allocated $8.2 million to
in-process research and development $0.4 million to net tangible assets, $0.4
million to identified intangible assets, and $1.9 million to goodwill. The
amount allocated to in-process research and development was expensed at the
time of acquisition. The Company's results of operations for fiscal year 1999
include ABL's results from August 20, 1998.

On November 19, 1998, the Company acquired Crown Satellite (Crown), which
develops and supplies products and software for the network delivery of
Internet Protocol (IP) data and multimedia services, from Crown
International, Inc. The acquisition was accounted for under the purchase
method. The initial purchase price was approximately $7.7 million including
cash payments, direct costs and the assumption of Crown's net liabilities.
The purchase price will include additional future payments based on Crown's
operating gross margin performance. The assets and liabilities assumed by the
Company were recorded based on their fair values at the date of acquisition.
The purchase price was allocated $3.6 million to in-process research and
development, $0.3 million to net tangible assets, $2.5 million to identified
intangible assets, and $1.3 million to goodwill. The amount allocated to
in-process research and development was expensed at the time of acquisition.
The Company's results of operations for fiscal year 1999 include Crown's
results from November 19, 1998.

In connection with the acquisitions of ABL and Crown, the Company allocated a
significant portion of the purchase price to purchased in-process research
and development. The Company estimated the fair value of the in-process
research and development using an income approach. This involved estimating
the fair value of the in-process research and development using the present
value of the estimated after-tax cash flows expected to be generated by the
purchased in-process research and development, using risk adjusted discount
rates and revenue forecasts as appropriate. The selection of the discount
rate was based on consideration of the Company's weighted average cost of
capital as well as other factors including the useful life of each
technology, profitability levels of each technology, the uncertainty of
technological advances that were known at the time and the stage of
completion of each technology. The Company believes that the estimated
in-process research and development amounts so determined represent fair
value and do not exceed the amount a third party would pay for the projects.

At the date of the acquisition, the in-process research and development
projects had not yet reached technological feasibility and had no alternative
future uses. Accordingly, the value allocated to these projects was expensed
at acquisition. If the projects are not successful or completed in a timely
fashion, management's product pricing and growth rates may not be achieved
and the Company may not realize the financial benefits expected from the
projects.

The proforma results for fiscal years 1999 and 1998, assuming the
acquisitions had been made at the beginning of the fiscal year, would not be
materially different from the reported results.

                                       31


REPORT OF ERNST & YOUNG, LLP, INDEPENDENT AUDITORS

THE BOARD OF DIRECTORS AND SHAREHOLDERS
ADAPTIVE BROADBAND CORPORATION

We have audited the accompanying consolidated balance sheets of Adaptive
Broadband Corporation (formerly California Microwave, Inc.) at June 30, 1999
and 1998, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended June 30, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Adaptive
Broadband Corporation at June 30, 1999 and 1998, and the consolidated results
of its operations and its cash flows for each of the three years in the
period ended June 30, 1999, in conformity with generally accepted accounting
principles.



/s/ Ernst & Young LLP


Palo Alto, California
July 23, 1999



                                       32




MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
ADAPTIVE BROADBAND CORPORATION

The following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto of Adaptive Broadband Corporation (the
Company) which are included in this 1999 Annual Report.

During fiscal year 1999, the Company sold its Government Division. During
fiscal year 1998, the Company sold its Microwave Networks (MN), Satellite
Transmission Systems (STS) and Services divisions. The operating results,
loss on disposal and financial position of these divisions have been
classified separately as discontinued operations for all periods presented in
the accompanying Consolidated Financial Statements.

CONSOLIDATED RESULTS OF OPERATIONS

OVERVIEW

Adaptive Broadband Corporation reported a loss from continuing operations of
$26.6 million, or $1.79 per share, for fiscal year 1999, compared to $0.2
million, or $0.01 per share for fiscal year 1998 and $2.4 million, or $0.15
per share for fiscal year 1997. Operating results for fiscal year 1999
include charges of $11.8 million for purchased in-process research and
development related to the Company's acquisitions of Adaptive Broadband
Limited (ABL) and Crown Satellite (Crown); restructuring and other charges of
$3.3 million; and excess manufacturing costs of $3.0 million related directly
to factory floor reductions, inventory reductions and manufacturing process
changes. Excluding these items, the net loss from continuing operations for
fiscal year 1999 would have been $12.2 million, or $0.82 per share. Operating
results for fiscal year 1998 include: inventory write-downs of $7.3 million;
restructuring and other charges of $4.1 million and a litigation settlement
charge of $1.9 million. Excluding these items, net income from continuing
operations for fiscal year 1998 would have been $5.7 million, or $0.35 per
share.

The Company generally records bookings for new orders received if the product
will be shipped to the customer within twelve months. New orders booked from
continuing operations were $171.1 million, $179.0 million and $159.4 million
for fiscal years 1999, 1998 and 1997, representing a decrease of 4% for 1999
and an increase of 12% for 1998. Revenue from continuing operations was
$157.0 million, $175.3 million and $157.0 million for fiscal years 1999, 1998
and 1997, representing a decrease of 10% for 1999 and an increase of 12% for
1998. The decreases in 1999 were primarily a result of weakness in the
Company's international markets, principally in Latin America, for both
satellite and terrestrial products, and weakness in satellite product sales
to domestic integrators who ship internationally. The decreases in the
international markets were partially offset by an increase in domestic
revenue during fiscal year 1999. The Company realized a record level of
bookings for its fiscal year 1999 fourth quarter, with the bookings mix
shifting more to domestic business. This change in mix of orders indicates
some reduction in the Company's dependency on certain more volatile
international markets. However, certain domestic customers purchased products
as part of large international system integration projects, and therefore,
the Company does continue to have an indirect international market risk for
such business. The 1999 fourth quarter bookings also included initial
bookings activity for a number of new products developed in fiscal 1999 from
the Company's core technologies.

International revenue was $63.6 million, $87.6 million and $71.3 million for
fiscal years 1999, 1998 and 1997, representing 41%, 50% and 45% of total
revenues, respectively. The following table sets forth the geographic
components of international revenue expressed as a percentage of the total.



                                               1999        1998        1997
- ---------------------------------------   ---------   ---------   ---------
                                                         
Latin America                                   35%         42%         42%
Asia                                            29%         28%         33%
Europe, Africa, Middle East                     23%         23%         19%
Canada                                          13%          7%          6%
                                          ---------   ---------   ---------
                                               100%        100%        100%
                                          ---------   ---------   ---------
                                          ---------   ---------   ---------

During fiscal year 1999, the Company completed its transition from a holding
company operating in two business segments to an integrated organization
operating in one business segment. The Company derives its revenue from two
major product groups: the Satellite Communications Products Group (Satellite)
and the Terrestrial Wireless Products Group (Terrestrial).

                                       33




THE SUPPLEMENTAL INFORMATION FOR THESE TWO PRODUCT GROUPS ARE AS FOLLOWS:



(DOLLARS IN MILLIONS)          1999              1998              1997
- -----------------------------------------------------------------------------
                                                    
BOOKINGS
Satellite
   Domestic                 $43.4     49%   $ 39.4       42%  $ 38.0     44%
   International             45.5     51%     54.0       58%    47.7     56%
                          -------- ------- -------- --------- ------- -------
Satellite Total              88.9    100%     93.4      100%    85.7    100%
Terrestrial
   Domestic                  63.8     78%     54.9       64%    48.4     66%
   International             18.4     22%     30.7       36%    25.3     34%
                          -------- ------- -------- --------- ------- -------
Terrestrial Total            82.2    100%     85.6      100%    73.7    100%
Total Domestic              107.2     63%     94.3       53%    86.4     54%
Total International          63.9     37%     84.7       47%    73.0     46%
                          -------- ------- -------- --------- ------- -------
                          -------- ------- -------- --------- ------- -------
Total Bookings             $171.1    100%   $179.0      100%  $159.4    100%
                          -------- ------- -------- --------- ------- -------
                          -------- ------- -------- --------- ------- -------

REVENUE
Satellite
   Domestic                $ 39.4     48%    $36.6       40%   $35.5     43%
   International             42.9     52%     53.9       60%    47.4     57%
                          -------- ------- -------- --------- ------- -------
Satellite Total              82.3    100%     90.5      100%    82.9    100%
Terrestrial
   Domestic                  54.0     72%     51.1       60%    50.2     68%
   International             20.7     28%     33.7       40%    23.9     32%
                          -------- ------- -------- --------- ------- -------
Terrestrial Total            74.7    100%     84.8      100%    74.1    100%

Total Domestic               93.4     59%     87.7       50%    85.7     55%
Total International          63.6     41%     87.6       50%    71.3     45%
                          -------- ------- -------- --------- ------- -------
                          -------- ------- -------- --------- ------- -------
Total Revenue              $157.0    100%   $175.3      100%  $157.0    100%
                          -------- ------- -------- --------- ------- -------
                          -------- ------- -------- --------- ------- -------

GROSS MARGIN
   Satellite                $24.4     30%   $ 31.3       35%  $ 25.0     30%
   Terrestrial               29.3     39%     31.6       37%    29.0     39%
                          --------         --------           -------
Total                        53.7     34%    $62.9       36%   $54.0     34%



GROSS MARGIN - EXCLUDING 1999 EXCESS MANUFACTURING COSTS AND
1998 AND 1997 INVENTORY WRITE-DOWNS

                                                       
Satellite                   $26.6     33%    $33.8       37%  $ 28.7     35%
Terrestrial                  30.2     40%     36.4       43%   30.0%     40%
                          --------         --------           -------
Total                       $56.8     36%    $70.2       40%   $58.7     37%





SATELLITE COMMUNICATIONS PRODUCT GROUP
The Satellite Communications Products Group provides satellite modems and
transceiver products and services primarily to telecommunications carriers and
Internet Service Providers. It also develops and supplies products and software
for the network delivery of Internet Protocol (IP) data and multimedia services.
These products and services enable customers to provide voice, video and data
services via satellite.

Satellite revenue was $82.3 million, $90.5 million and $82.9 million for fiscal
years 1999, 1998 and 1997, representing a decrease of $8.2 million or 9% in 1999
and an increase of $7.6 million or 9% in 1998. International Satellite revenue
decreased $11.0 million or 20% in 1999 compared to 1998. International revenue
increased $6.5 million or 14% in 1998 over 1997. The decrease in 1999 was due to
economic conditions in developing countries, a delay in the privatization of the
public telecommunications company in Brazil, weakened demand in the European
markets, and lower demand from systems integrators whose ultimate customers are
in international markets. The increase in 1998 was due to overall market
conditions, the increased acceptance of satellite wireless data communications
technology as a viable alternative to wireline technologies, and to increased
volume from a reduction in satellite wireless technology price points. The
Satellite book to bill ratio was 108%, 103% and 103% for 1999, 1998 and 1997.

Satellite gross margins were $24.4 million, $31.3 million and $25.0 million, or
as a percentage of Satellite revenue, 30%, 35% and 30% for fiscal years 1999,
1998 and 1997. The 1999 gross margin includes excess manufacturing costs
directly related to factory floor reductions, inventory reductions and
manufacturing process changes of $2.1 million. The 1998 gross margin includes
charges primarily for inventory write-downs of $2.5 million. The 1997 gross
margin includes inventory write-downs of $3.7 million. Excluding these charges,
1999 gross margin was $26.6 million or 33% of Satellite revenue, 1998 gross
margin was $33.8 million or 37% of Satellite revenue and 1997 gross margin was
$28.7 million or 35% of Satellite revenue. The decrease in gross margin for 1999
was due to lower revenue and a change in the revenue mix to lower margin
products. The 1998 increase was due to the introduction of new, lower cost
satellite products.

TERRESTRIAL WIRELESS PRODUCT GROUP The Terrestrial Wireless Products Group
provides products and services, based upon microwave radio technology,
primarily to the television broadcast, oil, gas and utility, and transaction
processing markets. The Group is also developing high-speed, dynamic
bandwidth management, wireless Internet connectivity technology and products.
One key product, AB Access-TM-, was introduced in fiscal year 1999 and is
expected to begin contributions to revenue in fiscal year 2000. The Company
is investing considerable resources into this new area.

Terrestrial revenue was $74.7 million, $84.8 million and $74.1 million for
fiscal years 1999, 1998 and 1997, representing a decrease of $10.1 million or
12% in 1999 and an increase of $10. 7 million or 14% in 1998. International
Terrestrial revenue decreased $13 million or 39% in 1999 compared to 1998.
International Terrestrial revenue increased $9.8 million or 41% in 1998 over
1997. The decrease in 1999 was due to economic conditions in developing
countries, declines in oil and gas prices in Latin America, which tends to
reduce demand for data telemetry radios to monitor oil and gas production, and
the 1998 completion of the Brazil Lottery infrastructure build-out. The growth
in 1998 was attributable to a more focused international sales and marketing
strategy and to the 1998 build-out of the Brazil Lottery infrastructure. The
terrestrial book to bill ratio was 110%, 101% and 99% for 1999, 1998 and 1997.

Terrestrial gross margin was $29.3 million, $31.6 million and $29.0 million,
or as a percentage of Terrestrial revenue, 39%, 37% and 39% for fiscal years
1999, 1998 and 1997. The 1999 gross margin includes excess manufacturing costs
from inventory reductions of $0.9 million. The 1998 gross


                                    34



margin includes charges for inventory write-downs of $4.8 million. The 1997
gross margin includes inventory write-downs of $1.0 million. Excluding these
charges, 1999 gross margin was $30.2 million or 40% of Terrestrial revenue, 1998
gross margin was $36.4 million or 43% of Terrestrial revenue and 1997 gross
margin was $30.0 million or 40% of Terrestrial revenue. The decrease in gross
margin in 1999 compared to 1998 was due to lower revenue and a change in the
revenue mix to lower margin products. The increase in gross margin percentage in
1998 over 1997 resulted from volume increases.

RESTRUCTURING AND OTHER CHARGES
During the third quarter of fiscal year 1999, the Company completed the
reorganization of its continuing operations from a holding company to a single
integrated organization and recorded pre-tax charges of $3.3 million. The
charges included $2.5 million for severance and $0.8 million for write-offs of
property and equipment. The severance was associated with workforce reductions
of approximately 130 employees in manufacturing operations and product
management. The workforce reductions and write-offs of property and equipment
were primarily driven by the reduction of manufacturing capacity at the
Company's satellite communications operations in Tempe, Arizona.

The completion of the reorganization included the consolidation of all Company
manufacturing operations under new leadership and the installation of a new
management team in its Tempe, Arizona, satellite communications operations. The
new team has begun outsourcing the manufacturing of certain new products,
reduced the Tempe factory floor space by 20%, consolidated its manufacturing
operations into one building, and reduced the manufacturing operations
head-count in Tempe by 32%. By transitioning to a build-to-order process,
inventory in Tempe has been reduced by 14%, and through improvements in bills of
materials and supply chain management, inventory in the Company's Chelmsford,
Massachusetts operation has been reduced by 17%.

During the fourth quarter of fiscal year 1998, the Company reviewed and
refocused its operations and business processes in connection with its strategic
and operational initiatives, and recorded pre-tax charges of $11.9 million.
These charges consist of $7.3 million primarily for inventory write-downs and
$4.1 million for restructuring and other charges, primarily severance and excess
facilities. The inventory charges include excess inventory on older, slow-moving
product configurations. As part of the review, the Company also examined its
income tax accrual requirements and recorded a benefit for previously reserved
tax deductions of $2.5 million. Additionally, during the fiscal year 1998 second
quarter, the Company recorded a $1.9 million pre-tax charge for a court approved
class action litigation settlement.

SEE NOTE 4, RESTRUCTURING AND OTHER CHARGES, OF NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS, FOR FURTHER DETAILS.

OPERATING EXPENSES
Research and development expenses for continuing operations were $25.0 million,
$18.0 million and $16.4 million for fiscal years 1999, 1998 and 1997, or as a
percentage of revenue 16%, 10% and 10% for fiscal years 1999, 1998 and 1997. The
increase in research and development spending in 1999 was mainly attributable to
the Company's investment in research and development for AB-Access-TM- products.
Additionally, the Company has invested significantly in the development of its
SpectraCast-R- satellite Internet protocol multicasting products, its on-line
transaction processing data radios (TransIt-TM-), and its new digital broadcast
products such as TwinStream-TM- and CodeRunner-TM-. The Company believes that
the continual and rapid introduction of new products and technologies is
critical to sustaining growth within its current and future target markets, and
expects to continue to commit substantial resources to product development and
engineering in future periods. As a result, the Company anticipates that
research and development expenses will increase in future periods as it
continues to focus its efforts on developing wireless broadband products. In
addition, management may consider strategic acquisition of additional
technologies complementary to the Company's business.

Sales, marketing and administration expenses for continuing operations were
$44.8 million, $40.1 million and $36.5 million, or as a percentage of revenue
29%, 23% and 23% for fiscal years 1999, 1998 and 1997. Sales, marketing and
administrative expenses include a $1.9 million charge for a court approved class
action litigation settlement for 1998, and a $1.3 million severance charge for
the Company's former chief executive officer for 1997. Excluding these charges,
sales, marketing and administrative expenses were $38.2 million or 22% of
revenue for 1998 and $35.2 million or 22% of revenue for 1997. The increase in
sales, marketing and administrative spending in 1999 was primarily attributable
to expansion of the Company's sales force and an increase in marketing efforts
to support the growing level of bid and proposal activity for the new
AB-Access-TM- products. The Company expects to continue to focus its sales,
marketing and administrative investments in its high-growth wireless broadband
data network markets.

On August 20, 1998, the Company acquired Adaptive Broadband Limited (ABL) a
United Kingdom-based company developing high-speed wireless Internet
connectivity technology. The acquisition was accounted for under the purchase
method. The initial purchase price was approximately $10.9 million including
cash payments, direct costs and the assumption of ABL's net liabilities. The
purchase price will include additional future payments of up to $7 million,
contingent on ABL's performance exceeding certain targets. The assets and
liabilities assumed by the Company were recorded based on their fair values at
the date of acquisition. The purchase price was allocated $8.2 million to
in-process research and development, $0.4 million to net tangible assets, $0.4


                                   35



million to identified intangible assets and $1.9 million to goodwill. The amount
allocated to in-process research and development was expensed at the time of
acquisition. A significant portion of the purchase price will accrue in the
future if a certain level of market acceptance is achieved and the goodwill
recorded as a result will substantially increase. The Company's results of
operations for fiscal year 1999 include ABL's results from August 20, 1998.

On November 19, 1998, the Company acquired Crown Satellite (Crown), which
develops and supplies products and software for the network delivery of Internet
Protocol (IP) data and multimedia services, from Crown International, Inc. The
acquisition was accounted for under the purchase method. The initial purchase
price was approximately $7.7 million including cash payments, direct costs and
the assumption of Crown's net liabilities. The purchase price will include
additional future payments based on Crown's operating gross margin performance.
The assets and liabilities assumed by the Company were recorded based on their
fair values at the date of acquisition. The purchase price was allocated $3.6
million to in-process research and development, $0.3 million to net tangible
assets, $2.5 million to identified intangible assets and $1.3 million to
goodwill. The amount allocated to in-process research and development was
expensed at the time of acquisition. The Company's results of operations for
fiscal year 1999 include Crown's results from November 19, 1998.

In connection with the acquisitions of ABL and Crown, the Company allocated a
significant portion of the purchase price to purchased in-process research and
development. The Company estimated the fair value of the in-process research and
development using an income approach. This involved estimating the fair value of
the in-process research and development using the present value of the estimated
after-tax cash flows expected to be generated by the purchased in-process
research and development, using risk adjusted discount rates and revenue
forecasts as appropriate. The selection of the discount rate was based on
consideration of the Company's weighted average cost of capital as well as other
factors, including the useful life of each technology, profitability levels of
each technology, the uncertainty of technological advances that were known at
the time and the stage of completion of each technology. The Company believes
that the estimated in-process research and development amounts so determined
represent fair value and do not exceed the amount a third party would pay for
the projects.

The Company estimated that based on the complexity, time and cost associated
with the ABL and Crown research and development efforts approximately seventy
five percent of both projects were complete at the acquisition dates. The ABL
technology had been in development for approximately five years prior to the
acquisition and approximately one year of development remained to complete the
project. Approximately, fifty engineering person years of the total estimated
seventy five engineering person years had been completed at the acquisition
date. The items remaining to be addressed at the date of acquisition included
the following: implement the Network Manager; provide radio control elements for
frequency change, access point handoff and subscriber prioritization; implement
higher-order modulation schemes in the modem for higher bandwidth efficiency;
implement Asynchronous Transfer Mode quality of service to support Constant Bit
Rate and Variable Bit Rate traffic. The Crown technology had been in development
for approximately one and one half years and the final product version required
an additional six months of development. The items remaining to be addressed at
the date of acquisition included the following: full Transponder IP
Encapsulator/Multiplexer; implement Digital Video Broadcast (DVB) compliance;
implement IP networking functionality including routing, Dynamic Host
Configuration Protocol (DHCP) and Network Address Translator (NAT). The costs to
complete the ABL and Crown projects as of the acquisition dates were $4.0
million and $1.2 million.

At the date of the acquisition, the in-process research and development projects
had not yet reached technological feasibility and had no alternative future
uses. Accordingly, the value allocated to these projects was expensed at
acquisition. If the projects are not successful or completed in a timely
fashion, management's product pricing and growth rates may not be achieved and
the Company may not realize the financial benefits expected from the projects.

Amortization expense associated with intangible assets in the continuing
businesses was $2.0 million, $1.4 million and $1.4 million for fiscal years
1999, 1998 and 1997. The increase in fiscal year 1999 was due to an increase in
intangible assets from the ABL and Crown acquisitions.

INTEREST EXPENSES
Net interest expense was $4.1 million, $3.6 million and $5.9 million for fiscal
years 1999, 1998 and 1997. The increase in net interest expense for 1999
compared to 1998 was due to lower interest income, as well as higher average
borrowings from the utilization of the Company's revolving credit facility
during the first three quarters of fiscal year 1999. Subsequent to the
Government Division sale in April 1999, the Company used a portion of the
proceeds from the sale to pay down the entire outstanding balance of the credit
facility. The significant decrease in net interest expense in 1998 compared to
1997 was due to $66.7 million of cash generated from the sales of MN, STS and a
portion of the Government Division, which allowed for the reduction of debt and
increased interest income from investing the excess cash. Interest expense has
not been allocated to the discontinued operations.

GAIN ON SALE OF BUSINESS UNITS
The Company recognized a $2.7 million gain from the sale of its Digital Radio
Technology subsidiary during fiscal year 1997.


                                         36



PROVISION FOR INCOME TAXES
The Company's income tax benefit from continuing operations was $10.6 million,
$4.l million, and $1.2 million for fiscal years 1999, 1998 and 1997. Excluding
the impact of the partial valuation allowance recorded against future deductions
from the amortization of intangible assets acquired in the ABL and Crown
acquisitions, the effective income tax rate for 1999 was 36%. Excluding the
impact of the benefit for previously reserved income tax deductions of $2.5
million, the effective income tax rate for 1998 was 36%, as compared to 33% for
1997. The lower effective income tax rate recorded in 1997 was due principally
to larger research and development tax credits.

At June 30, 1999, the Company had a cumulative net deferred income tax asset of
$18.1 million that will be available to reduce payments on future federal and
state income tax liabilities. At June 30, 1999, the Company had gross deferred
tax assets arising from deductible temporary differences, tax losses and tax
credits of $25.4 million. The gross deferred tax assets are offset by a
valuation allowance of $5.7 million and deferred tax liabilities of $1.7
million. Realization of the majority of the net deferred tax assets is dependent
on the Company's ability to generate approximately $45 million of future taxable
income. Management believes that it is more likely than not that the assets will
be realized based on forecasted income. However, there can be no assurance that
the Company will meet its expectations of future income. Management will
evaluate the realizability of the deferred tax assets quarterly and assess the
need for additional valuation allowance.

DISCONTINUED OPERATIONS
In October 1998, the Company's Board of Directors adopted a formal plan to sell
its Government Division, which consisted of the Government Electronics Division
(GED), and Airborne Systems Division (ASID). Historically, the Government
Division included the Company's Services Division (SD), which was sold in the
fourth quarter of fiscal year 1998 to Telscape International, Inc. (Telscape)
for $8.2 million in cash with a gain of $6.3 million before income taxes. These
operations contracted principally with the United States Department of Defense
and provided products and services principally in the areas of communication,
reconnaissance, and surveillance systems. In April 1999, the Company completed
the sale of its Government Division to Northrop Grumman Corporation (Northrop
Grumman) for $93 million in cash, for a net gain of approximately $36 million
(net of income taxes). The Company used a portion of the proceeds to pay down
the entire outstanding balance of its credit facility and to resume its share
repurchase program. The Company plans to use the remaining proceeds to support
working capital requirements as it expands, continue its share repurchase
program and continue to invest in the development and marketing of its new
wireless broadband products. The Government Division sale price includes up to
an additional $5 million cash payment, contingent upon the future performance of
the divested business. The Company has not recognized any benefit from this
contingent future payment.

The operating results, gain on disposal and financial position of the Government
Division have been classified as discontinued operations in the Company's
financial statements through the divestiture date. Revenue from the Government
Division discontinued operations was $67.7 million for fiscal year 1999 for the
period prior to disposal, and $85.7 million and $95.2 million for fiscal years
1998 and 1997. Income from the Government Division discontinued operations (net
of income taxes) was $2.0 million for fiscal year 1999 for the period prior to
disposal, and $3.5 million and $5.0 million for fiscal years 1998 and 1997.

In June 1997, the Company's Board of Directors adopted a formal plan to sell the
MN and STS divisions, and the Company recorded a loss from operations of the
discontinued businesses of $51.0 million (net of income taxes). In addition, the
Company provided for anticipated operating losses prior to disposal and for
expected losses on their eventual sale of $8.4 million (net of income taxes).


During fiscal year 1998, STS was sold to L-3 Communications Corporation (L-3)
for $27 million in cash, and MN was sold to Tadiran, Ltd. (Tadiran) for $31.5
million in cash. The Company recorded an additional provision of $15.1 million
(net of income taxes) for additional losses on disposal of these divisions. The
provision was primarily for adjustments to the combined losses on sale and to
higher than anticipated operating losses prior to disposal of both divisions.
The operating results, loss on disposal, and financial position of these
divisions have been classified as discontinued operations in the Company's
financial statements through the divestiture dates. Revenue from the MN and STS
discontinued operations was $83.2 million in 1998 for the period prior to
disposal and $170.3 million for fiscal year 1997.

Final accounting for the Government Division and MN divestitures are subject to
completion of the post-closing procedures provided for in the Northrop and
Tadiran agreements. The Company has accrued for transaction costs related to the
Government Division sale and future price adjustments that may occur in the
post-closing procedures for the Government Division and MN divestitures. At June
30, 1999, the discontinued operations reserves for the Government Division and
MN divestitures were $6.9 million and $2.5 million, respectively. The Company
believes that the completion of these procedures and the outstanding litigation
discussed below will not have a material impact on the Company's financial
position, results of operations or cash flows.

In July 1999, Northrop Grumman filed a lawsuit against the Company alleging that
the Company failed to disclose certain events and information as required by the
terms of the agreement pursuant to which Northrop Grumman acquired the
Government Division in April 1999. No damages have been specified. The Company
believes that it has strong defenses and plans to vigorously defend the lawsuit
filed by Northrop Grumman. No provisions have been made for expenses that may be
incurred to resolve the lawsuit, and the Company believes final resolution of
the Northrop Grumman allega-


                                      37



tions will not have a material impact on the Company's financial position,
results of operations, or cash flows.

In May 1995, the Company's MN division entered into certain agreements with
Nokia Telecommunications Oy (Nokia) pursuant to which MN was to provide to
Nokia certain microwave radios and related software and services, and was to
carry out certain development programs. In September 1997, Nokia informed MN
of a purported failure of certain of the products sold to Nokia to meet
certain contractual specifications. MN was sold to Tadiran in April 1998 and
under the terms of the sale agreement, Tadiran assumed and indemnified the
Company with respect to the Nokia claims. Tadiran has now taken the position
that the Company is responsible for the Nokia claims, based upon allegations
that the Company failed to provide adequate disclosures and financial
reserves with respect to such claims. In September 1998, the Company received
notice from Nokia that Nokia has decided to terminate the May 1995
agreements. Also in September 1998, Nokia began arbitration proceedings to
recover damages, which are claimed to be $40.6 million, and which include
loss of profits and goodwill, and damage to trade and manufacturing secrets.
The Company believes that it has strong defenses and will vigorously defend
the Nokia claims. In May 1999, the Company began arbitration proceedings
against Tadiran, primarily to determine that Tadiran is responsible for the
Nokia claims. The Company believes that it has strong claims against Tadiran.
No accruals have been recorded for expenses that may be incurred to resolve
the dispute, and the Company believes final resolution of this matter will
not have a material impact on the Company's financial position, results of
operations or cash flows.

LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, the Company had net working capital of $82.0 million,
including cash and cash equivalents of $48.9 million, compared to net working
capital of $73.4 million, including cash, cash equivalents and short-term
investments of $27.2 million, at June 30, 1998. The increase in cash, cash
equivalents and short-term investments was primarily due to proceeds from the
sale of the Government Division, offset by cash used in operations, the
acquisitions of ABL and Crown, and the stock repurchase plan.

Cash used in continuing operating activities was $20.5 million in fiscal year
1999, compared with net cash provided by continuing operating activities of
$17.3 million, and $8.3 million in fiscal year 1998 and 1997. Cash used in
fiscal year 1999 was primarily due to a loss from operations, partially offset
by a reduction in accounts receivable and inventory.

Cash generated from investing activities for fiscal year 1999 was $57.1 million,
primarily from the $80.6 million proceeds (net of transaction costs) from the
sale of the Company's Government Division, offset by cash used for the
acquisition of ABL and Crown totaling $18.3 million and capital expenditures of
$8.1 million. Cash generated from investing activities for fiscal year 1998 was
$40.2 million, primarily from the sale of MN, STS and the Services Division for
approximately $66.7 million, offset by $6.5 million for capital expenditures, as
well $18.6 million cash used in the discontinued operations. Cash used in
investing activities in fiscal year 1997 of $8.0 million was primarily due to
$5.2 million used in discontinued operations and $5.6 million for capital
expenditures.

The Company sells certain insured, interest bearing, long-term international
accounts receivable, without recourse, to a bank. At June 30, 1999, the
outstanding balance of sold and uncollected receivables was approximately $9.9
million.

On October 6, 1998, the Company announced that its Board of Directors had
increased the number of shares authorized for repurchase on the open market to
six million. The Company acquired approximately 1.1 million shares of common
stock for $15.7 million in fiscal year 1999 and 1.6 million shares of common
stock for $34.1 million in fiscal year 1998, bringing the total shares
repurchased to 2.7 million as of June 30, 1999. In addition to the common stock
repurchased, the Company's fiscal year 1999 financing activities included the
receipt of $3.7 million from the sale of the Company's common stock under
ongoing stock option and stock purchase plans and payments on long-term debt of
$0.3 million.

At June 30, 1999, the Company was not in compliance with certain covenants of
its industrial development bond agreement. The Company has classified the
industrial development bonds as current and plans to use a portion of the
proceeds from the sale of its Government Division to pay down the balance.

The Company believes that its current cash position and funds generated from
operations will be adequate to meet the Company's requirements for working
capital, capital expenditures and debt service for the foreseeable future.

YEAR 2000
As discussed below, the Company presently believes that it will not be
materially affected by Year 2000 problems.

STATE OF READINESS
The Company established a formal Year 2000 readiness program in fiscal 1998 with
two principal objectives: (1) to assess the readiness of its internal
information technology infrastructure and of its critical component and service
providers, and (2) to analyze the readiness status of the telecommunications
equipment manufactured by the Company and to communicate the readiness status to
customers.

In July 1999, the Company engaged an independent consulting firm to perform a
risk analysis of the Company's Year 2000 program. Based upon the findings, a
remediation plan was implemented, and the Company intends to complete the
necessary actions by the end of calendar year 1999.

The Company is currently completing the assessment of its internal systems, and
where remedial steps are required to


                                      38




make those systems Year 2000 ready, it is prioritizing the steps to be taken.
The Company expects to complete this assessment by September 1999. The Company
is also identifying its critical component and service providers and is
contacting each such vendor to assess that vendor's Year 2000 readiness. The
Company expects to complete a review of all of its critical vendors by no later
than October 1999. Because the Company is relying on information provided to it
by its vendors to assess their Year 2000 readiness, the Company cannot provide
assurances that all of its critical vendors are or will be Year 2000 ready.
Therefore, the Company cannot provide assurances that the Company will not be
adversely affected by the Year 2000 date change.

The Company will complete the assessment of the impact of Year 2000 on its
products by September 1999. The Company is completing efforts to make its new
commercially available products Year 2000 ready. The Company has also developed
evolution strategies for customers who have existing products. The Company
believes that is has sufficient resources to provide timely support to its
customers that require product migration and upgrades to be Year 2000 ready.

COSTS
The Company currently does not expect that the total costs of its Year 2000
readiness program will be material to its financial condition, results of
operation or cash flows. All costs are charged to expense as incurred, and do
not include potential costs related to any customers or other claims or the cost
of internal software and hardware replaced in the normal course of business.

RISKS / CONTINGENCY PLANS
The Company believes that its most likely worst case scenarios would involve the
interruption of crucial suppliers as a result of infrastructure failures or
third-party vendor failures. As a result, the Company is developing contingency
plans that will address each of the most likely worst case scenarios. Such
contingency plans are expected to be completed by November 1999. The Company
believes that it is taking appropriate steps to assess and address its Year 2000
issues and currently does not expect that its business will be adversely
affected by the Year 2000 issue in any material respect. Nevertheless, achieving
Year 2000 readiness is dependent on many factors, some of which are not
completely within the Company's control. Should either the Company's internal
systems or the internal systems of one or more critical vendors or key customers
fail to achieve Year 2000 readiness, the Company's business and its results of
operations could be materially adversely affected.

NEW ACCOUNTING PRONOUNCEMENTS
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants (AICPA) issued Statement of Position
(SOP) 98-1, Accounting for the Costs of the Computer Software Developed or
Obtained for Internal Use. The SOP, which has been adopted prospectively as of
July 1, 1998, requires the capitalization of certain costs incurred in
connection with developing or obtaining internal use software. The adoption of
SOP 98-1 has had an immaterial impact on the Company's financial statements.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities," which will be effective for the Company's
fiscal year 2001. The Company does not currently use derivatives; thus
management does not anticipate that the adoption of the new Statement will have
a material impact on the Company's financial statements.

INQUIRY FROM SECURITIES AND EXCHANGE COMMISSION
The Company received an inquiry from the Securities and Exchange Commission
(SEC) dated December 31, 1998, related to the Company's 1998 Form l0-K and Form
10-Q for the quarter ended September 30, 1998. A primary focus of the inquiry
was to request additional information regarding the Company's in-process
research and development costs from the purchase of Adaptive Broadband Limited
in August 1998. In addition, the inquiry requested information about the
Company's fiscal 1998 restructuring charge, intangible asset impairment charge,
and accounting for discontinued operations, as well as certain other accounting
and disclosure clarifications. The Company responded on February 3, 1999. No
additional communication nor inquiry from the SEC has been received. However,
the ultimate resolution of these matters will not be known until the SEC
formally concludes its review process. The Company believes that it has properly
valued and accounted for the in-process research and development from the
purchase of Adaptive Broadband Limited, consistent with the October 9, 1998 SEC
"Audit Risk Alert." The Company also believes that the accounting and disclosure
related to the other inquires by the SEC letter are appropriate.


                                    39


SELECTED FINANCIAL DATA (UNAUDITED)



FIVE YEARS ENDED JUNE 30, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)  1999[A]       1998[B]        1997         1996         1995
- ------------------------------------------------------------------------------------------------------------
                                                                                     
OPERATIONS
Revenue                                       $156,996      $175,300     $157,049      $155,165     $145,506
Operating income (loss)                        (33,045)         (642)        (424)       16,868       17,122
Income from continuing operations              (26,624)         (242)      (2,423)        8,028        9,281
Net income (loss)                               11,620        (7,760)     (56,766)       11,623       (7,895)
Diluted income from continuing
  operations per share                        $  (1.79)     $  (0.01)    $  (0.15)     $   0.50     $   0.57
Diluted net income (loss) per share           $   0.78      $  (0.47)    $  (3.50)     $   0.72     $  (0.49)
Weighted average shares and dilutive
  equivalents                                   14,887        16,363       16,226        16,200       16,231

FINANCIAL POSITION
Total assets                                  $186,476      $190,512     $252,778      $280,622     $268,677
Net debt [C]                                    12,961        37,970       70,919        71,755       71,254
Net debt to capitalization [D]                    0.13          0.31         0.36          0.30         0.29
Shareholders' equity per share                $   5.71      $   5.17     $   7.27      $  10.49     $   9.47

OTHER (CONTINUING OPERATIONS ONLY)
Year-end backlog [E]                          $ 37,441      $ 26,041     $ 22,323      $ 19,964     $ 30,350
Year-end employees                                 846         1,021          933           936          769
Year-end facilities (thousands of square           350           256          260           267          212
  feet)


[A]  In fiscal year 1999, the Company recorded an $11.8 million charge for
     in-process research and development, $3.3 million for restructuring and
     other charges, and $3.0 million for excess manufacturing costs. Excluding
     these items, the fiscal year 1999 loss from continuing operations was $12.2
     million, or $0.82 per share on a diluted basis.

[B]  In fiscal year 1998, the Company recorded $7.3 million for inventory
     write-downs, $4.1 million for restructuring and other charges, and $1.9
     million for a litigation settlement. Excluding these items, fiscal year
     1998 income from continuing operations was $5.7 million, or $0.35 per share
     on a diluted basis.

[C]  Net debt is total long-term liabilities, including current portion of
     long-term debt, less cash and cash equivalents.

[D]  Net debt to capitalization is year-end net debt divided by year-end net
     debt plus shareholders' equity.

[E]  In 1999, cancelled orders related to prior years of $2.6 million were
     removed from year-end backlog.


                                          40


FINANCIAL RESULTS BY FISCAL QUARTERS (UNAUDITED)



(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)        BASIC AND DILUTED EARNINGS PER SHARE
- -----------------------------------------------------------------------------------------------------------------------------------
                                                          INCOME       INCOME
                                                          (LOSS)       (LOSS)
                                                           FROM         FROM           NET                                     NET
FISCAL                                        GROSS     CONTINUING   DISCONTINUED    INCOME    CONTINUING    DISCONTINUED   INCOME
QUARTER                        REVENUE        MARGIN    OPERATIONS    OPERATIONS     (LOSS)    OPERATIONS     OPERATIONS     (LOSS)
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                
1999[A]
Q1                            $ 34,731       $11,645    $(10,926)      $ 1,075      $(9,851)      $(0.72)       $0.07      $(0.65)
Q2                              43,174        16,225      (4,524)          888       (3,636)       (0.30)        0.06       (0.24)
Q3                              38,553        11,111      (7,510)            0       (7,510)       (0.51)           0       (0.51)
Q4                              40,538        14,768      (3,664)       36,281       32,617        (0.25)        2.47        2.22
                            -------------------------------------------------------------------------------------------------------
                              $156,996       $53,749    $(26,624)      $38,244      $11,620       $(1.79)       $2.57      $ 0.78

1998[B]
Q1                             $39,258       $15,398       $ 923       $ 1,389      $ 2,312       $ 0.06       $ 0.08      $ 0.14
Q2                              45,955        19,007         938           934        1,872         0.06         0.06        0.11
Q3                              44,340        17,303       1,653       (11,048)      (9,395)        0.10        (0.67)      (0.57)
Q4                              45,747        11,183      (3,756)        1,207       (2,549)       (0.24)        0.08       (0.16
                            ------------ ------------- ------------ ------------ ------------- ------------ ----------- ------------
                              $175,300       $62,891       $(242)      $(7,518)     $(7,760)      $(0.0l)      $(0.46)     $(0.47)


[A]  Fiscal year 1999 first-quarter loss from continuing operations includes
     pre-tax charges of $8.2 million for write off of in-process research and
     development costs.

     Fiscal year 1999 second-quarter loss from continuing operations includes
     pre-tax charges of $3.6 million for the write off of in-process research
     and development costs.

     Fiscal year 1999 third-quarter gross margin includes pre-tax charges of
     $3.0 million excess manufacturing costs. Fiscal year 1999 third-quarter
     loss from continuing operations includes pre-tax charges of $3.3 million
     restructuring and other charges.

[B]  Fiscal year 1998 second-quarter income from continuing operations includes
     pre-tax charges of $1.9 million for a court-approved class action
     litigation settlement.

     Fiscal year 1998 fourth-quarter gross margin includes pre-tax charges of
     $7.3 million for inventory write-downs. Fiscal year 1998 fourth-quarter
     loss from continuing operations includes pre-tax charges of $4.1 million
     for restructuring and other charges.



STOCK AND QUARTERLY DATA (UNAUDITED)

Adaptive Broadband Corporation has one series of $10 par value common
stock. Holders of common stock have full voting rights and have the right
to cumulate votes for the election of directors. Adaptive Broadband
reinvests earnings to finance expansion of its business, has paid no cash
dividends, and does not anticipate changing its dividend policy in the
foreseeable future. At June 30, 1999, the number of Adaptive Broadband
Corporation shareholders totaled approximately 11,500, of which
approximately 1,500 were holders of record. Adaptive Broadband Corporation
stock is traded in the Nasdaq National Market under the trading symbol
ADAP.

THE FOLLOWING TABLE SETS FORTH, FOR THE FISCAL PERIODS INDICATED, THE HIGH
AND LOW STOCK PRICES.



STOCK PRICES BY QUARTER FISCAL YEARS
1999 AND 1998                     1999                                            1998
- ----------------------------------------------------------------------------------------------------------
                Q1          Q2          Q3          Q4         Q1          Q2          Q3         Q4
- ----------------------------------------------------------------------------------------------------------
                                                                        
High          17 1/4        14          14        21 7/8     21 1/8      21 3/4      22 1/4     24 1/4
Low            7             6 3/4       8 3/8     9 9/16    14          16 1/16     16 l/2     14 1/4



                                      41


FORWARD LOOKING STATEMENTS
ADAPTIVE BROADBAND CORPORATION



This Annual Report contains forward-looking statements that involve risks and
uncertainties, including statements regarding the Company's markets, the
Company's ability to be a leader in its markets and to achieve its growth
objectives, the future of network computing, telecommunications and broadcasting
and other matters, as well as statements about the results of litigation or
disputes, the results of post-closing procedures in connection with sales
agreements, product mix and international operations, the effect of new
accounting pronouncements, the realization of certain tax assets, adequacy of
funds for the foreseeable future, and expectations for fiscal year 2000 and
beyond. Words such as "believes," "anticipates," "expects," "intends," and
similar expressions are intended to identify forward-looking statements, but are
not the exclusive means of identifying such statements. Readers are cautioned
that forward-looking statements reflect management's analysis only as of the
date of this Report, and the Company assumes no obligation to update these
statements. Actual events or results may differ materially from the events or
results discussed in the forward-looking statement. Factors that could cause the
Company's actual results to differ materially from management's projections,
estimates and expectations include, but are not limited to, the level of demand
for products, competition, new product introductions by competitors, market
acceptance of the Company's new products, the ability of the Company to
anticipate and respond to rapid technological change, availability of qualified
personnel, risks related to international sales, delays in the receipt of orders
or in the shipment of products, changes in demand for products, price
competition, new product introductions by competitors or the Company, cost
overruns, foreign currency exchange rate fluctuations, timely availability of
supply of components, dependence on major orders from a small number of
customers, limitations on the Company's ability to reduce inventory and expenses
if forecasts and expected demand are not realized, general economic conditions,
the impact of Year 2000 and whether the Company's claims and defenses in
litigation and disputes are viewed as meritorious. For a more detailed
discussion of these and other factors, see "Information Regarding
Forward-Looking Statements" in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1999.


                                    42

EX-21

                                   EXHIBIT 21

                              List of Subsidiaries


Name of Subsidiary                                  Place of Incorporation
- ------------------                                  ----------------------

California Microwave Foreign                          Barbados,
Sales Corporation                                     West Indies

Adaptive Broadband Limited                            England and Wales

Adaptive Broadband Company Limited                    Ireland

EX-23

                                                           EXHIBIT 23

         CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in this Annual Report
(Form 10-K) of Adaptive Broadband Corporation (formerly California Microwave,
Inc.) of our report dated July 23, 1999 included in the 1999 Annual Report to
Shareholders of Adaptive Broadband Corporation.

Our audits also included the financial statement schedule of Adaptive
Broadband Corporation listed in Item 14(a)(ii). This schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, the financial statement
schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.

We also consent to the incorporation by reference in the Registration
Statements (Form S-8 No.'s 33-09117, 33-24517, 33-44397, 33-58108, 33-73584,
33-86968, 333-19015, 333-35025, 333-68753 and 333-69993) pertaining to the
1992 Stock Option Plan, 1992 Restricted Stock Plan, Employee Stock Purchase
Plan, 1986 Stock Option Plan of California Microwave, Inc., and the Adaptive
Broadband Tax-deferred Savings and Deferred Profit Sharing Plan;  and the
Non-Qualified Stock Option Agreement between California Microwave, Inc. and
Frederick Lawrence dated effective as of July 16, 1997, of our report dated
July 23, 1999, with respect to the consolidated financial statements
incorporated by reference, and the financial statement schedules included in
the Annual Report (Form 10-K) for the year ended June 30, 1999.


                                                 /s/ Ernst & Young LLP


Palo Alto, California
September 27, 1999

EX-24

                                POWER OF ATTORNEY


         KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below, being a member of the Board of Directors of Adaptive Broadband
Corporation (the "Company"), hereby constitutes and appoints Donna S. Birks and
Kenneth J. Wees, and each of them, as his true and lawful attorney-in-fact and
agent, each with full power of substitution and resubstitution, for and in his
name, place and stead, in any and all capacities, to sign on his behalf the
Company's Annual Report on Form 10-K for its fiscal year ended June 30, 1999,
and to execute any amendments thereto, and to file the same, with all exhibits
thereto, and all other documents in connection therewith, with the Securities
and Exchange Commission, with the full power and authority to do and perform
each and every act and thing necessary or advisable to be done in connection
therewith, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.

DATED:      August 18, 1999


       /s/ Frederick D. Lawrence                /s/ William B. Marx, Jr.
- ---------------------------------        ------------------------------------
Frederick D. Lawrence                    William B. Marx, Jr.



       /s/ Leslie G. Denend                     /s/ Terry W. Ward
- ---------------------------------        ------------------------------------
Leslie G. Denend                         Terry W. Ward



       /s/ George A. Joulwan                    /s/ Frederick W. Whitridge, Jr.
- ---------------------------------        ------------------------------------
George A. Joulwan                        Frederick W. Whitridge, Jr.

EX-27

 


<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIS FORM
10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.


                             
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          JUN-30-1999
<PERIOD-START>                             JUL-01-1998
<PERIOD-END>                               JUN-30-1999
<CASH>                                          48,887
<SECURITIES>                                         0
<RECEIVABLES>                                   35,110
<ALLOWANCES>                                     1,130
<INVENTORY>                                     22,339
<CURRENT-ASSETS>                               123,649
<PP&E>                                          52,529
<DEPRECIATION>                                  31,783
<TOTAL-ASSETS>                                 186,476
<CURRENT-LIABILITIES>                           41,607
<BONDS>                                         59,876
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                         1,663
<OTHER-SE>                                      83,330
<TOTAL-LIABILITY-AND-EQUITY>                   186,476
<SALES>                                        156,996
<TOTAL-REVENUES>                               156,996
<CGS>                                          103,247
<TOTAL-COSTS>                                        0
<OTHER-EXPENSES>                               190,041
<LOSS-PROVISION>                                   566
<INTEREST-EXPENSE>                               4,602
<INCOME-PRETAX>                               (37,179)
<INCOME-TAX>                                  (10,555)
<INCOME-CONTINUING>                           (26,624)
<DISCONTINUED>                                   1,963
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                  (11,620)
<EPS-BASIC>                                       0.78
<EPS-DILUTED>                                     0.78

<F1>FOR THE PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
<F2>AMOUNTS HAVE BEEN RESTATED TO COMPLY WITH THE PROVISIONS OF THE STATEMENTS OF
FINANCIAL ACCOUNTING STANARDS NO. 128, "EARNING PER SHARE."