-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q/643f6ppq8/4aK7uuIqKsQQ6A3+SuTQRben+gYRUfgJVpHUt/MGbFFDhftNtf35 5bv67V4x18EVGRVIOD2PYg== /in/edgar/work/0000914317-00-000771/0000914317-00-000771.txt : 20001115 0000914317-00-000771.hdr.sgml : 20001115 ACCESSION NUMBER: 0000914317-00-000771 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TELAXIS COMMUNICATIONS CORP CENTRAL INDEX KEY: 0000712511 STANDARD INDUSTRIAL CLASSIFICATION: [3679 ] IRS NUMBER: 042751645 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-29053 FILM NUMBER: 763494 BUSINESS ADDRESS: STREET 1: 20 INDUSTRIAL DRIVE EAST CITY: SOUTH DEERFIELD STATE: MA ZIP: 01373 BUSINESS PHONE: 4136658551 MAIL ADDRESS: STREET 1: 20 INDUSTRIAL DRIVE EAST STREET 2: P O BOX 109 CITY: SOUTH DEERFEILD STATE: MA ZIP: 013730109 FORMER COMPANY: FORMER CONFORMED NAME: MILLITECH CORP DATE OF NAME CHANGE: 19990913 10-Q 1 0001.txt FORM 10-Q - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO ______ Commission File Number 000-29053 TELAXIS COMMUNICATIONS CORPORATION (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-2751645 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 20 INDUSTRIAL DRIVE EAST SOUTH DEERFIELD, MA 01373 (Address of principal executive offices) (413) 665-8551 (Registrant's telephone number, including area code) 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 [ ] As of October 31, 2000, there were 16,670,559 shares of the registrant's common stock outstanding. - -------------------------------------------------------------------------------- INDEX
PAGE NO. ---------------- PART I. FINANCIAL INFORMATION Item 1. Index to Financial Statements............................... 2 Balance Sheets as of September 30, 2000 and December 31, 3 1999...................................................... Statements of Operations and Comprehensive Loss for the 4 three months and nine months ended September 30, 2000 and 1999...................................................... Statement of Changes in Stockholders' (Deficit) Equity for the nine months ended September 30, 2000.................. 5 Statements of Cash Flows for the nine months ended September 30, 2000 and 1999............................... 6 Notes to Financial Statements............................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and 10 Results of Operations........................................... Item 3. Quantitative and Qualitative Disclosures About Market Risk...... 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings............................................... 16 Item 2. Changes in Securities and Use of Proceeds....................... 16 Item 6. Exhibits and Reports on Form 8-K................................ 17 SIGNATURES 17
PART I - FINANCIAL INFORMATION This Quarterly Report on Form 10-Q contains forward-looking statements as defined by federal securities laws. Forward-looking statements are predictions that relate to future events or our future performance and are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause actual results, outcomes, levels of activity, performance or achievements to be materially different from any future results, outcomes, levels of activity, performance or achievements expressed, anticipated or implied by these forward-looking statements. Forward-looking statements should be read in light of the cautionary statements and important factors described in this Form 10-Q, including Part I, Item 2.-- Management's Discussion and Analysis of Financial Condition and Results of Operations, Safe Harbor for Forward-Looking Statements. We undertake no obligation to update or revise any forward-looking statement to reflect events, circumstances or new information after the date of this Form 10-Q or to reflect the occurrence of unanticipated events. Item 1. Financial Statements and Supplementary Data. INDEX TO FINANCIAL STATEMENTS Page -------- Balance Sheets..................................................... 3 Statements of Operations and Comprehensive Loss.................... 4 Statement of Changes in Stockholders' (Deficit) Equity............. 5 Statements of Cash Flows........................................... 6 Notes to Financial Statements ..................................... 7 2 TELAXIS COMMUNICATIONS CORPORATION BALANCE SHEETS (in thousands, except share data)
Pro Forma December 31, December 31, September 30, 1999 1999 2000 -------------------------------------------- (unaudited) (unaudited) Assets Current assets Cash and cash equivalents....................................................... $ 6,603 $ 6,603 $ 24,002 Marketable securities........................................................... -- -- 22,591 Trade accounts receivable, less allowance for doubtful accounts ($57 in 1999 and $100 in 2000)..................................................... 2,900 2,900 6,300 Other accounts receivable....................................................... -- -- 302 Inventories..................................................................... 7,101 7,101 19,757 Net assets to be disposed of.................................................... 1,954 1,954 -- Other current assets............................................................ 170 170 877 -------------------------------------------- Total current assets........................................................ 18,728 18,728 73,829 Property, plant and equipment, net.............................................. 6,444 6,444 12,766 Intangible assets, net of accumulated amortization ............................. -- -- 216 Other assets.................................................................... 125 125 85 -------------------------------------------- Total assets................................................................ $ 25,297 $ 25,297 $ 86,896 ============================================ Liabilities, Redeemable Preferred Stock and Stockholders' (Deficit) Equity Current liabilities Line of credit.................................................................. $ 500 $ 500 $ -- Accounts payable................................................................ 4,305 4,305 5,368 Customer prepayments............................................................ 285 285 429 Accrued expenses................................................................ 2,319 2,319 2,011 Current maturities of long-term debt............................................ 1,149 1,149 648 Current maturities of capital lease obligations................................. 982 982 1,525 -------------------------------------------- Total current liabilities................................................... 9,540 9,540 9,981 Long-term debt....................................................................... 1,578 1,578 1,311 Capital lease obligations............................................................ 807 807 2,336 -------------------------------------------- Total liabilities........................................................... 11,925 11,925 13,628 -------------------------------------------- Redeemable Preferred Stock Redeemable preferred stock, Class A, $.01 par value; $3.25 redemption value; authorized 0 shares (3,090,323 in 1999); issued and outstanding 0 shares 9,899 -- -- (3,045,696 in 1999)........................................................... Redeemable preferred stock, Class B, $.01 par value; $3.25 redemption value; authorized 0 shares (789,677 in 1999); issued and outstanding 0 shares (789,677 2,566 -- -- in 1999)...................................................................... Redeemable preferred stock, Class D, $.01 par value; $1.80 redemption value; authorized 0 shares (7,200,000 in 1999); issued and outstanding 0 shares 12,960 -- -- (7,200,000 in 1999)........................................................... Redeemable preferred stock, Class E, $.01 par value; $2.25 redemption value; authorized 0 shares (11,000,000 in 1999): issued and outstanding 0 shares 22,368 -- -- (9,941,508 in 1999)........................................................... -------------------------------------------- 47,793 -- -- Stockholders' (Deficit) Equity Preferred stock, $.01 par value; authorized 4,500,000 shares in 2000 and 1999; -- -- -- none issued................................................................... Common stock, $.01 par value; authorized 100,000,000 shares in 2000 and 1999; issued and outstanding 16,670,076 shares (843,872 shares in 1999)............. 8 113 167 Additional paid-in capital...................................................... 1,224 48,912 124,674 Notes receivable................................................................ (281) (281) (331) Accumulated deficit............................................................. (35,205) (35,205) (51,072) Deferred stock compensation..................................................... (167) (167) (170) -------------------------------------------- Total stockholders' (deficit) equity........................................ (34,421) 13,372 73,268 -------------------------------------------- Total liabilities, redeemable preferred stock and stockholders' (deficit) equity...................................................................... $ 25,297 $ 25,297 $ 86,896 ============================================
The accompanying notes are an integral part of these financial statements. 3 TELAXIS COMMUNICATIONS CORPORATION STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands, except per share data)
Three months ended September 30, Nine months ended September 30, --------------------------------------------------------------------------- 1999 2000 1999 2000 --------------------------------------------------------------------------- (unaudited) (unaudited) (unaudited) (unaudited) Sales....................................... $ 2,742 $ 8,095 $ 5,504 $ 23,142 Cost of sales............................... 2,291 10,225 5,103 25,282 --------------------------------------------------------------------------- Gross margin (loss)......................... 451 (2,130) 401 (2,140) Operating expenses Research and development, net.......... 1,192 2,425 3,368 6,907 Selling, general and administrative.... 984 1,963 2,474 6,846 --------------------------------------------------------------------------- Total operating expenses............. 2,176 4,388 5,842 13,753 --------------------------------------------------------------------------- Operating loss.............................. (1,725) (6,518) (5,441) (15,893) --------------------------------------------------------------------------- Other income (expense) Interest and other expense............. (384) (207) (561) (597) Interest and other income.............. 30 829 55 2,441 --------------------------------------------------------------------------- Total other income (expense)......... (354) 622 (506) 1,844 --------------------------------------------------------------------------- Loss from continuing operations before income taxes............................. (2,079) (5,896) (5,947) (14,049) Income tax benefit.......................... -- -- -- -- --------------------------------------------------------------------------- Loss from continuing operations............. (2,079) (5,896) (5,947) (14,049) --------------------------------------------------------------------------- Discontinued operations: Income (loss) from operations of MMWP segment, net of taxes.................... (109) -- 258 -- Income (loss) on disposition of MMWP segment.................................. -- 534 (1,900) 1,030 Stock compensation cost on disposition of MMWP segment............................. -- -- -- (2,848) --------------------------------------------------------------------------- Income (loss) from discontinued operations.. (109) 534 (1,642) (1,818) --------------------------------------------------------------------------- Net loss and comprehensive loss............. $ (2,188) $ (5,362) $ (7,589) $ (15,867) =========================================================================== Basic and diluted earnings (loss) per share from: Continuing operations.................. $ (3.44) $ (0.36) $ (11.14) $ (0.99) =========================================================================== Discontinued operations................ $ (0.18) $ .03 $ (3.07) $ (0.13) =========================================================================== Net loss............................... $ (3.62) $ (0.32) $ (14.21) $ (1.12) =========================================================================== Shares used in computing basic and diluted earnings (loss) per share................ 604 16,526 534 14,191 ===========================================================================
The accompanying notes are an integral part of these financial statements. 4 TELAXIS COMMUNICATIONS CORPORATION STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (in thousands, except share data) (unaudited)
Common Stock Additional ------------------------ Paid-in Notes Deferred Stock Accumulated Shares Amount Capital Receivable Compensation Deficit Total ----------------------------------------------------------------------------------------- Balances, January 1, 2000............. 843,872 $ 8 $ 1,224 $ (281) $ (167) $ (35,205) $ (34,421) Sale of common stock.................. 4,600,000 46 78,154 -- -- -- 78,200 Exercise of common stock options...... 505,004 5 717 (50) -- -- 672 Exercise of common stock warrants..... 232,795 3 68 -- -- -- 71 Amortization of deferred stock compensation....................... -- -- -- -- 42 -- 42 Offering costs........................ -- -- (6,330) -- -- -- (6,330) Stock compensation costs.............. -- -- 305 -- (45) -- 260 Stock compensation cost on discontinued operations............ -- -- 2,848 -- -- -- 2,848 Conversion of preferred stock......... 10,488,405 105 47,688 -- -- -- 47,793 Net loss.............................. -- -- -- -- -- (15,867) (15,867) ----------------------------------------------------------------------------------------- Balances, September 30, 2000.......... 16,670,076 $ 167 $ 124,674 $ (331) $ (170) $ (51,072) $ 73,268 =========================================================================================
The accompanying notes are an integral part of these financial statements. 5 TELAXIS COMMUNICATIONS CORPORATION STATEMENTS OF CASH FLOWS (in thousands)
Nine months ended September 30, --------------------------- 1999 2000 ------------- ------------- (unaudited) (unaudited) Cash flows from operating activities Net loss..................................................................... $ (7,589) $ (15,867) Adjustments to reconcile net loss to net cash utilized by operating activities: Depreciation and amortization.............................................. 2,072 2,518 Loss (gain) on disposition of MMWP segment................................. 1,900 (1,020) Non-cash compensation expense.............................................. 225 3,140 Changes in assets and liabilities Accounts receivable trade................................................ 229 (3,400) Other accounts receivable................................................ -- (302) Contracts in progress.................................................... 23 -- Inventories.............................................................. (3,577) (12,656) Other current assets..................................................... (149) (743) Accounts payable and accrued expenses.................................... 1,802 1,739 Customer prepayments..................................................... (10) 144 ------------- ------------- Net cash utilized by operating activities................................ (5,074) (26,447) ------------- ------------- Cash flows from investing activities Purchase of marketable securities............................................ -- (22,591) Proceeds from sale of discontinued operations................................ -- 1,990 Additions to property and equipment.......................................... (1,487) (5,425) (Increase) to other assets, intangibles...................................... (74) (208) ------------- ------------- Net cash utilized by investing activities................................ (1,561) (26,234) ------------- ------------- Cash flows from financing activities Proceeds from note payable................................................... 2,000 -- Net (repayment) borrowing under line of credit............................... 500 (500) Proceeds from long-term debt................................................. 1,420 -- Repayments of long-term debt and capital lease obligations................... (862) (2,034) Issuance of common stock upon exercise of options and warrants............... 184 744 Issuance of redeemable preferred stock....................................... 12,950 -- Issuance of common stock..................................................... -- 78,200 Stock issuance costs......................................................... (34) (6,330) ------------- ------------- Net cash provided by financing activities............................... 16,158 70,080 ------------- ------------- Net increase in cash and cash equivalents....................................... 9,523 17,399 Cash and cash equivalents at beginning of period................................ 2,635 6,603 ------------- ------------- Cash and cash equivalents at end of period...................................... $ 12,158 $ 24,002 ============= ============= Supplemental disclosure of cash flow information Non-cash investing and financing activities: Equipment acquired under capital lease agreement........................... $ 438 $ 3,323 Conversion of redeemable preferred stock................................... -- 47,793 Issuance of preferred stock for subordinated promissory note............... 2,000 -- Notes received for issuance of common stock................................ 281 67
The accompanying notes are an integral part of these financial statements. 6 TELAXIS COMMUNICATIONS CORPORATION NOTES TO FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Basis of Presentation The financial information as of September 30, 2000 and for the three months and nine months ended September 30, 1999 and 2000 is unaudited. In the opinion of management, such interim financial information includes all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for such interim periods. The financial statements do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. The statements should be read in conjunction with the financial statements and footnotes as of and for the year ended December 31, 1999 included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. The December 31, 1999 balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. The results of operations for the three months and nine months ended September 30, 2000 are not necessarily indicative of the results to be expected for any future period. Unaudited Pro Forma Balance Sheet The outstanding shares of the Company's preferred stock class A, B, D and E automatically convert to common stock upon a public offering resulting in gross proceeds of at least $15,000,000 and with an offering price of at least $4.50 per share. These conversions have been reflected in the unaudited pro forma balance sheet as of December 31, 1999. Marketable Securities The Company has invested the proceeds from its initial public offering in accordance with its corporate cash management policy. Marketable securities are carried at cost plus accrued interest, which approximates fair value. Investments are placed in instruments with institutions that have "Investment Grade" ratings or better. The Company's investments consist of municipal and government bonds, and commercial paper. At September 30, 2000, the Company had $22.6 million invested in securities with maturities from three to twelve months. Intangible Assets Intangible assets are recorded at cost and are amortized using the straight-line method over their expected useful life, which is five years. Comprehensive Income For the three months and nine months ended September 30, 1999 and 2000, comprehensive loss equaled net loss. Recent accounting pronouncements In March 2000, the Financial Accounting Standards Board issued FASB Interpretation No. 44 "Accounting for certain Transactions Involving Stock Compensation-an interpretation of APB Opinion No. 25" ("FIN 44"). The application of FIN 44 did not have a material impact on the Company's financial position or results of operations. 7 Reclassification Certain prior year amounts have been reclassified to conform to current year's presentation. 2. Inventories Inventories are stated at the lower of cost or market and consist of the following (in thousands): December 31, September 30, 1999 2000 ---------------- ----------------- (unaudited) Finished goods.................. $ 95 $ 1,846 Parts and subassemblies......... 3,257 14,311 Work-in process................. 3,749 3,600 ---------------- ----------------- $ 7,101 $ 19,757 ================ ================= The Company has recorded inventory reserves of $1.8 million and $3.4 million at December 31, 1999 and September 30, 2000, respectively, in order to reflect the net realizable value of the inventory. Included in cost of sales for the nine months ended September 30, 2000 was $1.9 million of expense related to inventory reserves. 3. Property, Plant and Equipment Property, plant and equipment consist of the following (in thousands): December 31, September 30, 1999 2000 -------------- ---------------- (unaudited) Machinery and equipment............. $ 9,803 $ 15,233 Furniture and fixtures.............. 679 769 Leasehold improvements.............. 1,970 2,206 Equipment under capital leases...... 3,469 6,472 -------------- ---------------- 15,921 24,680 Less accumulated depreciation and amortization.... ............. (9,477) (11,914) -------------- ---------------- $ 6,444 $ 12,766 ============== ================ The net book value of equipment under capital leases was approximately $1,296,000 and $4,567,000 at December 31, 1999 and September 30, 2000, respectively. Depreciation expense for the nine months ended September 30, 1999 and 2000 was $1,790,000 and $2,437,000, respectively. 4. Earnings Per Share Earnings per share has been computed by dividing the loss from continuing operations, income (loss) from discontinued operations and net loss by the weighted average common shares outstanding. No effect has been given to the exercise of common stock options, stock warrants, and outstanding redeemable preferred stock, since the effect would be antidilutive on continuing operations for all reporting periods. 8
Three months ended Nine months ended September 30, September 30, (unaudited) (unaudited) ---------------------------------- -------------------------------- 1999 2000 1999 2000 ---------------- --------------- --------------- --------------- Historical: (in thousands, except per share amounts) Loss from continuing operations....................... $ (2,079) $ (5,896) $ (5,947) $ (14,049) ================ =============== =============== =============== Weighted average shares of common stock outstanding... 604 16,526 534 14,191 ================ =============== =============== =============== Basic and diluted loss per share from continuing operations............................................ $ (3.44) $ (0.36) $ (11.14) $ (0.99) ================ =============== =============== =============== Income (loss) from discontinued operations............ $ (109) $ 534 $ (1,642) $ (1,818) ================ =============== =============== =============== Weighted average shares of common stock outstanding... 604 16,526 534 14,191 ================ =============== =============== =============== Basic and diluted income (loss) per share from discontinued operations.............................. $ (0.18) $ 0.03 $ (3.07) $ (0.13) ================ =============== =============== =============== Net loss.............................................. $ (2,188) $ (5,362) $ (7,589) $ (15,867) ================ =============== =============== =============== Weighted average shares of common stock outstanding... 604 16,526 534 14,191 ================ =============== =============== =============== Basic and diluted net loss per share.................. $ (3.62) $ (0.32) $ (14.21) $ (1.12) ================ =============== =============== ===============
5. Discontinued Operations In August 1999, the Board of Directors voted and authorized management to dispose of the Company's millimeter-wave products (MMWP) business segment. This segment consisted of the development and manufacture of millimeter-wave components and assemblies, including antennas and quasi-optical products, multiplexer products, and passive waveguide products. On February 8, 2000 the Company completed the sale of substantially all of the assets of the MMWP segment to Millitech LLC for approximately $3.6 million. Accordingly, the Company has restated its historical financial statements to present the MMWP segment's operating results as a discontinued operation. The results of the MMWP operations have been segregated from continuing operations and reported as a separate line item in the statement of operations and comprehensive loss. As a result of the sale, the Company received cash proceeds of $2.0 million and a subordinated note for $1.2 million with interest on the principal at 12%. The principal is payable in five equal semi-annual payments of $50,000 beginning on July 1, 2002 through July 1, 2004. On December 31, 2004, the entire remaining principal balance of $960,000 plus accrued interest is due. Interest is payable semi-annually on the first days of January and July of each year during the term of the note, beginning July 1, 2000. The Company has fully reserved this subordinated note. The Company recorded in the Statement of Operations for the nine months ended September 30, 2000, stock compensation expense of $2.8 million as a result of accelerated vesting of incentive stock options for employees who left the Company and were hired by Millitech LLC, and a gain on disposition of approximately $1,030,000 as a result of reassessing the net realizable value of certain assets and liabilities related to the divestiture. The assets and liabilities of the MMWP segment at December 31, 1999, consisting primarily of accounts receivable, inventories, equipment, accounts payable and accrued expenses, have been segregated as net assets to be disposed of in the amount of $1,954,000 in the accompanying balance sheet. The Company has accrued liabilities of approximately $106,000 at September 30, 2000 related to the MMWP segment. Sales for the MMWP segment were $0 for the three months ended September 30, 2000 ($1,828,000 in 1999) and $770,000 for the nine months ended September 30, 2000 ($6,517,000 in 1999). 9 6. Accrued Expenses Accrued expenses consist of the following (in thousands): December 31, September 30, 1999 2000 ------------ ------------- (unaudited) Accrued payroll, commissions and related expenses.. $ 978 $ 1,128 Accrued warranty expense........................... 530 352 Accrued contract costs............................. 168 140 Accrued liabilities on discontinued operations..... 350 106 Other accrued expenses............................. 293 285 ------------ ------------- $ 2,319 $ 2,011 ============ ============= 7. Lines of Credit In August 1999, the Company entered into a revolving line of credit agreement with a bank. The agreement provided for an initial borrowing of up to $1,000,000, which was increased by $500,000 upon the Company's raising an additional $3,000,000 in stockholders' equity and increased by $500,000 upon receipt of a machinery and equipment appraisal, for a total amount available of $2,000,000. On June 9, 2000, the Company revised the agreement with the bank to increase the line of credit to $5,000,000 and extend the expiration of the line from August 19, 2000 to November 30, 2000. Interest is payable on the outstanding balance of the line at prime plus 1%. Prime was 9.5% at September 30, 2000. The line is collateralized by substantially all of the assets of the Company. The agreement requires the Company to comply with certain covenants including minimum working capital, tangible net worth, and revenue. At September 30, 2000, the Company was not in compliance with the minimum revenue covenant and subsequently obtained a waiver from the bank. At December 31, 1999, $500,000 was outstanding under this line of credit. At September 30, 2000, there were no borrowings under this line of credit. The Company is currently negotiating a renewal of the line of credit agreement with the bank. 8. Initial Public Offering On February 7, 2000 the Company made available 4,600,000 shares of common stock to the general public under the terms and conditions contained in an underwriting agreement dated February 1, 2000 with various underwriters. The initial public offering resulted in the Company receiving approximately $71.1 million of net proceeds to be used primarily for general corporate purposes. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Overview We develop and supply broadband point-to-multipoint wireless access equipment used by network service providers to deliver integrated voice, video and data services to business and residential subscribers. We sell our products primarily to network system integrators, which include our products in broadband wireless systems sold to network service providers. We have developed two families of broadband point-to-multipoint wireless access products. Our modular hubs and customer premises equipment can be rapidly tailored for competitive site demonstrations and initial commercial deployments. These modular products address a network service provider's need to offer new services and enter new markets quickly, which is often referred to as "accelerated time-to-market." Our planar hubs and customer premises equipment, based on a printed circuit board design, can be mass-produced using low-cost, highly automated manufacturing techniques. These planar products address a network service provider's need for cost-effective deployment to many subscribers. We commenced operations in 1982 and have derived the significant majority of our sales from our millimeter-wave products business segment. Millimeter waves are electromagnetic waves having wavelengths 10 between one and ten millimeters. In August 1999, we adopted a plan to focus all of our resources on our broadband point-to-multipoint wireless access business segment and to dispose of the millimeter-wave products segment. We decided to dispose of this segment because it would have required us to reallocate financial and management resources from the more attractive broadband point-to-multipoint wireless access business segment. The segment was sold on February 8, 2000. As a result, we have presented the operations of the millimeter-wave products segment as a discontinued operation in our financial statements. The following management's discussion and analysis focuses on our ongoing broadband point-to-multipoint wireless access business. Our first prototype broadband point-to-multipoint wireless access equipment was evaluated in a trial in 1995. Before receiving our first volume order for equipment in June 1999, virtually all of our shipments of products were for site demonstrations and initial commercial deployments. To date, we have assembled the majority of our products in-house. In the quarter ending June 30, 2000, C-MAC Industries began production of some of our products for us. In the future, we intend to continue to use third-party manufacturers to supplement our manufacturing capacity. We intend to increase expenditures in engineering, research and development, and sales and marketing. These increases in operating expenses are not always apparent from our historical financial statements. This spending will support expansion of our customer diversification and product development efforts to address the continuing growth in the market for broadband wireless access equipment. For the three months and nine months ended September 30, 2000, approximately 96% and 94% of our sales, respectively, were to a customer located in Canada, and 4% and 6% of our sales, respectively, were to customers located in the United States and Korea. For the three months and nine months ended September 30, 1999, approximately 96% and 81% of our sales, respectively, were to a customer located in Canada, 2% and 17% of our sales, respectively, were to customers located in the United States, and 2% of our sales were to customers located in England and Korea. We expect that sales to customers located outside the United States will continue to be significant. Result of Operations The following table provides continuing operations data as a percentage of sales for the periods presented. The percentages may not add due to rounding.
Three Months Ended Nine Months Ended September 30, September 30, (unaudited) (unaudited) -------------------------- --------------------------- 1999 2000 1999 2000 ------------ ------------ ------------ ------------ Sales.................................................. 100.0% 100.0% 100.0% 100.0% Cost of sales.......................................... 83.6 126.3 92.7 109.2 ------------ ------------ ------------ ------------ Gross margin (loss).................................... 16.4 (26.3) 7.3 (9.2) Operating expenses Research and development, net...................... 43.5 30.0 61.2 29.8 Selling, general and administrative................ 35.9 24.2 44.9 29.6 Total operating expenses......................... 79.4 54.2 106.1 59.4 ------------ ------------ ------------ ------------ Operating loss......................................... (62.9) (80.5) (98.9) (68.7) Other income (expense)................................. (12.9) 7.7 (9.2) 8.0 ------------ ------------ ------------ ------------ Loss from continuing operations before income taxes.... (75.8) (72.8) (108.0) (60.7) Income tax benefit..................................... (0.0) (0.0) (0.0) (0.0) ------------ ------------ ------------ ------------ Loss from continuing operations........................ (75.8)% (72.8)% (108.0)% (60.7)% ============ ============ ============ ============
11 Three Months and Nine Months Ended September 30, 1999 and 2000 Sales Sales increased 195% to $8.1 million for the three months ended September 30, 2000 from $2.7 million for the same period in 1999. Of this increase, approximately $5.2 million was attributable to an increase in sales of our planar products from $2.6 million to $7.8 million. Sales increased 320% to $23.1 million for the nine months ended September 30, 2000 from $5.5 million for the same period in 1999. Sales of our planar products have increased to $21.6 million for the nine months ended September 30, 2000 compared to $4.2 million for the same period in 1999. Cost of Sales Cost of sales consists of component and material costs, direct labor costs, warranty costs, overhead related to manufacturing our products and customer support costs. Cost of sales increased $7.9 million to $10.2 million for the three months ended September 30, 2000 from $2.3 million for the same period in 1999. Cost of sales increased $20.2 million to $25.3 million for the nine months ended September 30, 2000 from $5.1 million for the same period in 1999. The increase in cost of sales in each comparative period was attributable primarily to increased shipments of our products and an increase to inventory reserves of approximately $1.9 million in the three months ended September 30, 2000 due to changing business requirements. Gross margins were negative 26.3% in the three months ended September 30, 2000 and positive 16.4% in the same period in 1999. Gross margins were negative 9.2% and positive 7.3%, respectively, for the nine months ended September 30, 2000 and 1999. The decline in gross margin as a percentage of sales is primarily due to the increase to inventory reserves and reductions in average selling prices which exceeded the reductions in product cost in the corresponding period. These declines in average selling prices were driven by volume pricing for commercial deployments as we delivered significantly higher volumes to support customer requirements. Research and Development Expenses Research and development expenses consist primarily of personnel and related costs associated with our product development efforts. These include costs for development and extension of products and components, test equipment and related facilities. Gross research and development expenses increased 72% to $2.6 million in the three months ended September 30, 2000 from $1.5 million in the same period in 1999. Gross research and development expenses increased 81% to $7.4 million for the nine months ended September 30, 2000 from $4.1 million for the same period in 1999. The increases reflected significant investments to develop our products for additional frequency ranges and network interfaces. To support the increase in these activities, we substantially increased the size of our research and development staff by 33% to 77 at September 30, 2000 from 58 at September 30, 1999. Research and development costs were partially offset by customer funding of $181,000 and $320,000 for the three months ended September 30, 2000 and 1999, respectively. Customer funding was $536,000 and $746,000 for the nine months ended September 30, 2000 and 1999, respectively. Net of customer reimbursements, our research and development expenses increased 103% to $2.4 million in the three months ended September 30, 2000 from $1.2 million for the same period in 1999. Net research and development costs increased 105% to $6.9 million for the nine months ended September 30, 2000 from $3.4 million for the same period in 1999. Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of employee salaries and associated costs for selling, marketing, customer support, information systems, finance, legal, and administration. Selling, general and administrative expenses increased 99% to $2.0 million for the three months ended September 30, 2000 from $984,000 for the same period in 1999. Selling, general and administrative expenses increased 177% to $6.8 million for the nine months ended September 30, 2000 from $2.5 million for the same period in 1999. These increases were due primarily to an increase in personnel in these functional areas to 42 at September 30, 2000 from 30 at September 30, 1999 to support the Company's growth and operation as a public company. Expenses relating to recruitment of additional technical personnel increased 18% to $431,000 for the nine months ended September 30, 2000 from $367,000 for the same period in 1999. 12 Other Income (Expense) Other income (expense) consists of interest earned on cash and marketable securities offset by interest expense and miscellaneous non-operating expenses. Total other income (expense) changed to $622,000 in income for the three months ended September 30, 2000 from $354,000 in expense for the same period in 1999. Total other income (expense) changed to $1.8 million in income for the nine months ended September 30, 2000 from $506,000 in expense for the same period in 1999. Interest expense for the three months ended September 30, 2000 was $177,000 lower than the same period in 1999 and $36,000 higher for the nine months ended September 30, 2000 compared to the same period in 1999 due primarily to additional equipment financing. Interest income increased by $799,000 to $829,000 for the three months ended September 30, 2000 from $30,000 for the same period in 1999. Interest income increased $2.4 million to approximately $2.4 million for the nine months ended September 30, 2000 from $55,000 for the same period in 1999. The increases were a result of increases in invested cash and marketable securities subsequent to our initial public offering in February 2000. Liquidity and Capital Resources We have financed our operations primarily through the sale of redeemable preferred stock, from cash generated by our discontinued operations, and from proceeds of our initial public offering in February 2000. We have also issued subordinated notes and used equipment lease financing and bank lines of credit to provide cash. Our line of credit and long term debt agreements in effect at September 30, 2000 contain certain financial covenants including minimum working capital, tangible net worth, and revenue. We raised net proceeds of $12.9 million in 1999 from the issuance of redeemable preferred stock. On February 7, 2000 the Company completed an initial public offering of 4,600,000 shares of its common stock at $17.00 per share under the terms and conditions contained in an underwriting agreement dated February 1, 2000 with various underwriters. We received net proceeds from our initial public offering of $71.1 million, after underwriting discounts and commission and offering costs, to be used primarily for general corporate purposes. At September 30, 2000, we had cash and cash equivalents of $24.0 million and marketable securities of $22.6 million. At September 30, 2000, we had no bank borrowings under our line of credit facility. This line of credit is collateralized by substantially all of our assets and interest is payable on the outstanding balance at a rate of prime plus 1% (prime was 9.50% at September 30, 2000). The increase in accounts receivable from $2.9 million at December 31, 1999 to $6.3 million at September 30, 2000, the increase in inventories from $7.1 million to $19.8 million, and the increase in accounts payable from $4.3 million to $5.4 million over the comparable period reflects the net working capital buildup resulting from the significant increase in production and sales of our broadband wireless access equipment. At September 30, 2000, we had approximately $2.0 million in long-term debt, of which approximately $253,000 is due through September 2001 with an interest rate of 10%, and approximately $1,761,000 is due through June 2003 with interest rates ranging from 10% to 12%. At September 30, 2000, we had approximately $3.9 million in capital lease obligations, which are due through 2003. Cash used in operating activities in the nine months ended September 30, 2000 was $26.5 million compared to $5.1 million for the same period in 1999. For both of these periods, cash used in operating activities has primarily represented funding of our net losses and inventory build to meet expected future production requirements. Cash used in investing activities in the nine months ended September 30, 2000 was $26.2 million compared to $1.6 million for the same period in 1999. In the nine months ended September 30, 2000 these amounts related primarily to purchase of equipment and the purchase of marketable securities. In the nine months ended September 13 30, 1999, these amounts related primarily to the purchase of equipment used in our manufacturing and research and development activities. Cash provided by financing activities in the nine months ended September 30, 2000 was $70.1 million compared to $16.2 million for the same period in 1999. The financing activities for the nine months ended September 30, 2000 consisted primarily of the proceeds from our initial public offering. The financing activities for the nine months ended September 30, 1999 consisted primarily of proceeds from the issuance of redeemable preferred stock. Our future cash requirements will depend upon a number of factors, including the timing and level of research and development activities and sales and marketing campaigns, and our ability to significantly increase our sales orders and manufacturing volumes and improve our gross margin. We believe that our cash and cash equivalent balances will provide sufficient capital to fund our operations for at least 12 months. Thereafter, we may require additional capital to fund our operations. In addition, from time to time we evaluate opportunities to acquire complementary technologies or companies. Should we identify any of these opportunities, we may need to raise additional capital to fund the acquisitions and our operations. There can be no assurance that financing will be available to us on favorable terms or at all. Disclosures About Market Risk The following discusses our exposure to market risk related to changes in interest rates, equity prices and foreign currency exchange rates. This discussion contains forward-looking statements that are subject to risks and uncertainties, many of which are out of our control. Actual results could vary materially as a result of a number of factors, including those discussed above under "Part I - Financial Information" and below under "Safe Harbor for Forward-Looking Statements." As of September 30, 2000, we had cash and cash equivalents of $24.0 million. Substantially all of these amounts consisted of highly liquid investments with remaining maturities at the date of purchase of less than 90 days. As of September 30, 2000, we had marketable securities of $22.6 million which consisted of municipal and government bonds and commercial paper with maturities through June 2001. These investments are exposed to interest rate risk and will decrease in value if market interest rates increase. A hypothetical increase or decrease in market interest rates by 10 percent from the December 31, 1999 rates would cause the fair value of these short-term investments to decline by an insignificant amount. Due to the short duration of these investments, an immediate increase in interest rates would not have a material effect on our financial condition or results of operations. Declines in interest rates over time will, however, reduce our interest income. We do not own any significant equity investments. Therefore, we do not currently have any direct equity price risk. Currently, all sales to international customers are denominated in United States dollars and, accordingly, we are not currently exposed to foreign currency exchange rate risks. Safe Harbor for Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements as defined by federal securities laws which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, expectations, intentions, projections, future events or performance, underlying assumptions and other statements which are other than statements of historical facts. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "projects," "potential," "continue," and other similar terminology or the negative of these terms. From time to time, we may publish or otherwise make available forward-looking statements of this nature. All such forward-looking statements, whether written or oral, and whether made by us or on our behalf, are expressly qualified by the cautionary statements described in this Form 10-Q, including those set forth below, and any other 14 cautionary statements which may accompany the forward-looking statements. In addition, we undertake no obligation to update or revise any forward-looking statement to reflect events, circumstances or new information after the date of this Form 10-Q or to reflect the occurrence of unanticipated events, and we disclaim any such obligation. We believe that the forward-looking statements included in this Form 10-Q have a reasonable basis. However, forward-looking statements are only predictions that relate to future events or our future performance and are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause actual results, outcomes, levels of activity, performance or achievements to be materially different from any future results, outcomes, levels of activity, performance or achievements expressed, anticipated or implied by these forward-looking statements. As a result, we cannot guarantee future results, outcomes, levels of activity, performance or achievements, and there can be no assurance that our expectations, intentions, anticipations, beliefs or projections will result or be achieved or accomplished. In addition to other factors and matters discussed elsewhere in this Form 10-Q, some of the important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include, without limitation, dependence on a limited number of customers; inability to obtain additional customers; the time and costs associated with obtaining additional customers; difficulty in obtaining necessary components and raw materials when, at the cost and in the quantities needed; failure of our customers to sell broadband wireless access solutions that include our products; manufacturing capacity constraints; difficulty in obtaining satisfactory performance from third-party manufacturers; inability to achieve cost reductions and technological improvements; difficulties in managing our expansion; loss of key personnel; inability to protect our proprietary technology; probable variability in our quarterly operating results; dependence on third parties; changes in the market; lack of market acceptance of broadband wireless technology and products; new products and announcements from other companies; changes in technology; and the impact of competitive products and pricing. These and other risks and uncertainties are described in more detail in our annual report on Form 10-K for the year ended December 31, 1999 filed with the Securities and Exchange Commission and in our other periodic reports and filings made from time to time with the Securities and Exchange Commission. The integration of the former Newbridge Networks into Alcatel continues to be a factor that could affect our future results, outcomes, levels of activity, performance or achievements. For the quarter ended September 30, 2000, Alcatel accounted for 96% of our sales. Prior to the acquisition of Newbridge by Alcatel, each company had its own business practices and procedures. We believe the process of integrating the different business practices and procedures is ongoing and the result will be different practices and procedures being applied in some areas of our relationship with Alcatel than applied in our relationship with Newbridge. For example, Alcatel is presently implementing its approval processes relating to product development and production, which are different from those that Newbridge employed. Although we continue to work closely with Alcatel concerning the integration of the different business practices and procedures, we do not know all the changes that may occur or the extent to which we might be affected by these changes. Application of new or different practices and procedures could result in delays in developing, producing and/or shipping our products which could reduce our sales, negatively impact our gross margin, and increase our net loss. Item 3. Quantitative and Qualitative Disclosures about Market Risk. See Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations, Disclosures about Market Risk. 15 PART II - OTHER INFORMATION Item 1. Legal Proceedings. The Company is not currently a party to any material legal proceedings. Item 2. Changes in Securities and Use of Proceeds. Recent Sales of Unregistered Securities The Company has issued or sold the following unregistered securities in the three months ended September 30, 2000: o An aggregate of 135,000 shares of common stock at $1.00 per share in July 2000 to an option holder upon the exercise of options held by that individual and issued in connection with the divestiture of a line of business by the Company in 1996. o An aggregate of 18,824 shares of common stock at $1.00 per share in July 2000 to a warrant holder upon the exercise of warrants on a cashless basis (3,398.5 shares of common stock were withheld by the Company as payment for the aggregate exercise price of the warrants). o An aggregate of 68,535 shares of common stock at $1.00 per share in July 2000 to a warrant holder upon the exercise of warrants on a cashless basis (3,465 shares of common stock were withheld by the Company as payment for the aggregate exercise price of the warrants). o An aggregate of 18,437 shares of common stock at $1.00 per share in August 2000 to a warrant holder upon the exercise of warrants on a cashless basis (3,785.5 shares of common stock were withheld by the Company as payment for the aggregate exercise price of the warrants). o An aggregate of 27,847 shares of common stock at $1.00 per share in August 2000 to a warrant holder upon the exercise of warrants on a cashless basis (2,153 shares of common stock were withheld by the Company as payment for the aggregate exercise price of the warrants). The foregoing numbers relating to the Company's common stock have been adjusted to reflect the one for two reverse stock split which became effective on December 16, 1999. As a result of the reverse stock split, every two shares of outstanding preferred stock were automatically converted into one share of common stock upon the closing of the initial public offering of common stock on February 7, 2000. Each of the sales described above were completed without registration under the Securities Act in reliance upon the exemptions contained in Section 4(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act for transactions not involving a public offering. None of the sales of the securities issued by the Company described above have involved the use of an underwriter, and no commissions were paid in connection with the sale of any of the securities issued by the Company described above. Use of Proceeds from Registered Offerings On February 1, 2000, the Securities and Exchange Commission declared effective a Form S-1 Registration Statement (File No. 333-87885) filed by the Company in connection with an initial public offering of 4,600,000 shares of its Common Stock, par value $.01 per share. The offering of Common Stock commenced on February 2, 2000 and closed on February 7, 2000 with all of the 4,600,000 shares sold at a price of $17.00 per share for an 16 aggregate price of $78.2 million. All shares were sold by the Company; there were no selling stockholders. Credit Suisse First Boston was the lead managing underwriter of the offering and Banc of America Securities LLC and CIBC World Markets Corp. were co-managers of the offering. The gross proceeds of the offering were approximately $78.2 million. The Company incurred approximately $7.1 million of expenses in connection with the offering, of which approximately $5.5 million represented underwriting discounts and commission, and $1.6 million represented offering costs, including legal fees, accounting fees, underwriters' out-of-pocket expenses and printing expenses. The Company received approximately $71.1 million of net proceeds from the offering. Those net proceeds will be used for general corporate purposes. Pending such use, the net proceeds have been invested in short-term, interest-bearing, investment grade securities or direct or guaranteed obligations of the U.S. government. From the time of receipt through September 30, 2000, the Company has applied its net proceeds from the offering toward working capital, financing capital expenditures, and funding operating losses. Net cash used from the offering through September 30, 2000 for operating activities totaled $24.5 million. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit Number Description - ------- ----------- 10.1 Agreement and License between the Company and California Amplifier, Inc. dated as of August 25, 2000 10.2 Supplemental Agreement between the Company and Alcatel Networks Corporation dated September 14, 2000* 10.3 Form of Indemnification Agreement dated as of September 18, 2000, a substantially similar version of which was entered between the Company and each of Mssrs. Doyle, Fleming, Paladino, Norbury, Youngblood, Renauld, Reynolds, and Stempel 27.1 Financial Data Schedule - ---------------------- * Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. (b) Reports on Form 8-K The Company filed no reports on Form 8-K during the quarter ended September 30, 2000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Telaxis Communications Corporation Date: November 14, 2000 By: /s/ Dennis C. Stempel -------------------------------------------- Dennis C. Stempel, Chief Financial Officer, Principal Financial Officer, Principal Accounting Officer and Duly Authorized Officer EX-10.1 2 0002.txt AGREEMENT AND LICENSE AGREEMENT AND LICENSE THIS AGREEMENT AND LICENSE (this "Agreement") is made and entered into as of August 25, 2000 between California Amplifier, Inc. ("Supplier"), and Telaxis Communications Corporation ("Telaxis"). RECITALS A. Supplier and Telaxis previously entered into a Supply Agreement, dated October 14, 1999 (the "Supply Agreement"), pursuant to which Supplier was going to manufacture Telaxis' existing broadband wireless transceiver and design a lower-cost broadband wireless transceiver for Telaxis. B. Supplier and Telaxis desire to terminate the Supply Agreement on the terms and conditions set forth herein and provide for Telaxis receiving rights to certain Supplier property. NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration and in reliance upon the covenants, limitations and agreements hereinafter set forth, the parties hereto do hereby agree as follows. 1. Termination of Supply Agreement. ------------------------------- (a) The Supply Agreement is hereby terminated. (b) Each of Telaxis and Supplier hereby releases and discharges the other, and their respective affiliates, directors, officers, employees, agents, successors and assigns (collectively, "Related Persons"), from any and all claims, demands, causes of action, obligations, agreements, and liabilities whatsoever, both at law and in equity, which one party now has, has ever had or may hereafter have against the other party or the other party's Related Persons on account of or arising out of the Supply Agreement. Each of Telaxis and Supplier hereby irrevocably covenants to refrain from, directly or indirectly, asserting any claim or demand, or commencing, instituting or causing to be commenced, any proceeding of any kind against any released party based upon any matter purported to be released by this Section 1(b). 2. Grant of License; Intellectual Property Issues. ---------------------------------------------- (a) Supplier hereby grants Telaxis (i) a non-exclusive, irrevocable, perpetual, worldwide, nontransferable, royalty-free license, without right to sublicense, to use and copy the Work Product (as defined in Section 3(a) below) solely for the purpose of designing, developing, manufacturing and testing millimeter-wave transceivers and any other products or devices developed using, based on or incorporating any of the Work Product that transmit and/or receive at a frequency in excess of twelve gigahertz and (ii) a non-exclusive, irrevocable, perpetual, worldwide, transferable, royalty-free license, with right to sublicense, to develop, design, make, use, import, copy, modify, license, offer to sell, sell, lease and otherwise distribute the Product (as defined in Section 3(a) below) and any other products or devices developed using, based on or incorporating the Work Product that transmit and/or receive at a frequency in excess of twelve gigahertz. Supplier agrees and acknowledges that the foregoing license includes a license to any and all of Supplier's patents, know-how, trade secrets, and other technical information and intellectual property (in whatever form) contained or incorporated into, reflected in or necessary to develop, manufacture, test and sell the Product, along with any goodwill associated with any Licensed Property (as defined in the immediately following sentence). All the Work Product, intellectual property and other items to which Telaxis is granted a license pursuant to the foregoing provisions of this Section 2(a) are referred to collectively as the "Licensed Property". Supplier acknowledges and agrees that, without limiting the generality of the foregoing, any and all patents, know-how, trade secrets, and other technical information or intellectual property discovered, developed or designed by or under the direction of Supplier in connection with the transactions contemplated by the Supply Agreement, including, without limitation, the design and development of the Product, are included in the scope of the foregoing license and are part of the Licensed Property. As part of the license, Supplier grants Telaxis the right to commence proceedings to protect the Licensed Property, to enjoin infringements of the Licensed Property, and to sue for damages resulting from infringement of the Licensed Property and, if required by law, Supplier agrees, at Telaxis' expense, to be joined in and to participate in such proceedings. Telaxis shall retain any damages awarded or settlement amount obtained in connection with litigation paid for by Telaxis. (b) Subject to Section 2(a) above, (i) all intellectual property (in whatever form) of Telaxis (including, without limitation, any intellectual property of Telaxis contained or incorporated into the Product or Work Product) shall remain the exclusive property of Telaxis and (ii) all intellectual property (in whatever form) of Supplier shall remain the exclusive property of Supplier. Subject to Section 2(a) above, neither Telaxis nor Supplier shall use or distribute in any manner, directly or indirectly, any intellectual property of the other. Any intellectual property created by Telaxis in the course of exercise of its rights under Section 2(a) above shall be and remain the exclusive property of Telaxis, including, without limitation, derivative works based on the Licensed Property. 3. Obligations of Supplier. ----------------------- (a) Supplier has made substantial progress on designing, developing, and testing a lower-cost broadband wireless transceiver to Telaxis' specifications, called the "Phase 2 Product" in the Supply Agreement (referred to as the "Product" in this Agreement). Within twenty (20) business days after the date of this Agreement, Supplier shall deliver to Telaxis all work in process on the Product (including all prototypes) and one paper copy and, to the extent it exists, one electronic copy of all documentation, work product, diagrams, designs, schematics, drawings, software, firmware, specifications, test results, in whatever state of completion (including, without limitation, any Confidential Information (as defined in Section 3(b) below) of Supplier) in Supplier's possession, custody or control reasonably necessary for Telaxis to complete the development of the Product and to manufacture and test the Product (collectively, the "Work Product"). (b) Within twenty (20) business days after the date of this Agreement, Supplier shall return to Telaxis all documents and other materials (and all copies) containing Confidential Information of Telaxis and certify in writing to Telaxis that Supplier has complied with the requirements of this clause. As used in this Agreement, "Confidential Information" 2 means information of a party deemed confidential to that party relating to the design, development and supply of its products that was previously disclosed to the other party. (c) Within twenty (20) business days after the date of this Agreement, Supplier shall ship to Telaxis all material, capital equipment and tooling which has been paid for or rented by Telaxis, including, without limitation, approximately $10,000 of inventory and a chiller worth approximately $18,000 (the payment for which is included in the sum described in Section 4(a) below). Supplier shall ship these materials, freight collect, using the method reasonably designated by Telaxis. 4. Obligations of Telaxis. ---------------------- (a) Within twenty (20) business days after the date of this Agreement, Telaxis shall pay Supplier the sum of Two Hundred Fifty Thousand Dollars ($250,000.00). (b) Within twenty (20) business days after the date of this Agreement, Telaxis shall return to Supplier all documents and other materials (and all copies) containing Confidential Information of Supplier (except to the extent such materials contain Confidential Information of Supplier to which Telaxis is granted rights under Section 2(a) above) and certify in writing to Supplier that Telaxis has complied with the requirements of this clause. (c) Within a reasonable time (not to exceed thirty (30) days) after presentation of an invoice by Supplier, Telaxis shall pay all shipping, handling and insurance costs incurred by Supplier in performing under Section 3(c) above. 5. Confidentiality. --------------- (a) The Nondisclosure Agreement, dated as of June 1, 1998, and all obligations and restrictions under that agreement are hereby terminated. (b) Supplier agrees to keep confidential and not disclose to third parties (i) all technical specifications for the Product, whether such specifications were provided to Supplier by Telaxis or were established by Supplier in connection with development of the Product, (ii) all of the Licensed Property created or provided, in whole or in part, by Telaxis, and (ii) all of the Licensed Property created or provided by Supplier (except to the extent that Supplier is required to disclose a portion of such Licensed Property during the normal course of its business). 6. Miscellaneous. ------------- (a) Notices. All notices and instructions to be given by any party to any other party shall be given by the parties hereto in writing and by hand delivery, with a receipt being obtained therefor, by registered mail, return receipt requested, or by reputable overnight courier at the following addresses and to the following persons, or at such other addresses and persons as to which the parties hereto may be notified in accordance herewith from time to time. If mailed, any such notice shall be deemed to have been given seven (7) business days after mailing in a post office or branch post office regularly maintained by the United States Government. If 3 delivered by personal delivery, any such notice shall be deemed to have been given on the date personal delivery is effected. If sent by overnight courier, any such notice shall be deemed to have been given three (3) business days after delivery to the courier. (i) If to Supplier: California Amplifier, Inc. 460 Calle San Pablo Camarillo, California 93012 Attn: Mr. Kris Kelkar (ii) If to Telaxis: Telaxis Communications Corporation 20 Industrial Drive East South Deerfield, MA 01373 Attn: Mr. David Renauld (b) Entire Agreement and Modification. This Agreement is intended by the parties hereto as a final expression of their agreement with respect to the subject matter hereof, and is intended as a complete and exclusive statement of the terms and conditions of that agreement. This Agreement supersedes any and all prior and contemporaneous agreements and understandings, oral or written, among the parties with respect to the subject matter hereof. (c) Amendments. This Agreement may not be amended, modified, rescinded, terminated or waived orally, and no amendment, modification, rescission, termination or waiver of any of the terms, provisions or conditions thereof (including this subsection) shall be valid unless in writing and signed by all parties. (d) Assigns and Successors. This Agreement shall apply to, shall be binding in all respects upon, and shall inure to the benefit of, the respective successors, assigns and legal representatives of the parties hereto. (e) Section Headings, Etc. Section headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. (f) Governing Law; Arbitration. This Agreement shall be construed in accordance with and governed by the internal laws of the State of Delaware. Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity thereof, shall be settled by final and binding arbitration conducted pursuant to the Rules of Conciliation and Arbitration of the American Arbitration Association (AAA); provided, however, that nothing herein shall be deemed to prohibit any party from seeking from relevant courts of law immediate injunctive relief to prevent or restrain infringement of valid intellectual property rights. Such arbitration shall be conducted in Boston, Massachusetts if commenced by the Supplier and in Los Angeles, California if commenced by Telaxis. The number of arbitrators shall be three (3) with each party appointing one arbitrator and those two arbitrators choosing the 4 third arbitrator. If a party hereto fails to appoint an arbitrator, such arbitrator shall be appointed by the AAA. If the arbitrators chosen by the parties (or by the AAA as the case may be) are unable to agree upon a third arbitrator, such third arbitrator shall be appointed by the AAA. A judgement upon any award rendered in such arbitration may be entered in any court having jurisdiction over the party against whom the award is made. Prior to commencing any arbitration proceeding, both Supplier and Telaxis shall use good faith efforts to resolve the dispute, including at least one physical meeting attended by personnel from each party with decision-making authority. (g) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original copy of this Agreement and all of which, when taken together, shall be deemed to be but one and the same Agreement. (h) Severability. Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. (i) Waiver. No failure to exercise and no delay in exercising on the part of either party of any right, power or privilege shall preclude the enforcement of that right, power or privilege or any other right, power or privilege, nor shall the waiver of any breach of any such provision herein be taken or held to be a waiver of any subsequent breach of any such provision or be a waiver of the provision itself, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. Any waiver to be effective must be in writing. (j) Press Release; Filing. Supplier and Telaxis shall jointly prepare and release a press release announcing this Agreement and the termination of the Supply Agreement, which shall be acceptable to both parties, which acceptance will not be unreasonably withheld. Supplier acknowledges that Telaxis will file a copy of this Agreement with the Securities and Exchange Commission. IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, have duly executed this Agreement as of the day and year first written above. TELAXIS COMMUNICATIONS CALIFORNIA AMPLIFIER, INC. CORPORATION By: By: --------------------------- ------------------------------- Name: David L. Renauld Name: Kris Kelkar Title: Vice President Title: Vice President 5 EX-10.2 3 0003.txt SUPPLEMENTAL AGREEMENT SUPPLEMENTAL AGREEMENT This SUPPLEMENTAL AGREEMENT is made and entered into on September 14th, 2000. BETWEEN: ALCATEL NETWORKS CORPORATION, a corporation incorporated under the laws of Canada, and having its main offices at 600 March Road, P.O. Box 13600, Kanata, Ontario, Canada K2K 2E6 ("Alcatel") AND: TELAXIS, a corporation incorporated under the laws of Massachusetts, having its main offices at 20 Industrial Drive East, South Deerfield, Massachusetts, U.S.A. 01373 ("Telaxis") Collectively known as the "Parties" WHEREAS: A. Alcatel (formerly known as "Newbridge Networks Corporation") and Telaxis (formerly known as "Millitech Corporation") entered into a Reseller Agreement dated the 7th day of August, 1998 (the "Reseller Agreement"); and B. The Parties wish to expand and amend their existing relationship to encompass Telaxis participation in Alcatel's Cross Polarized and Co-Polarized product lines, including product development, product improvements, and manufacturing. NOW THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged) the parties hereto agree as follows: 1. Cross Polarized Product Line Development and Deliveries - ------------------------------------------------------------ 1.1 Telaxis shall deliver, at its discretion, approximately [****] units of Vendor Product from the remaining backlog in Alcatel Fiscal Q3 and Fiscal Q4, 2000 Q3/Q4-2000. The Vendor Product mix is set out in Table A below. [****] Confidential Treatment Requested Table A
- ------------------------------------------------------- Bandplan OTRU OTU ORU - ------------------------------------------------------- [****] [****] [****] [****] - ------------------------------------------------------- [****] [****] [****] [****] - ------------------------------------------------------ [****] [****] [****] [****] - ------------------------------------------------------- [****] [****] [****] [****] - ------------------------------------------------------- [****] [****] [****] [****] - ------------------------------------------------------- [****] [****] [****] [****] - ------------------------------------------------------- TOTAL [****] [****] [****] - -------------------------------------------------------
1.2 Delivery of the remaining approximately [****] units of Vendor Product in backlog will be deferred to Alcatel fiscal Q1 and fiscal Q2 - 2001, with the schedule of deliveries to be dispersed equally over the period of January 1, 2001 through to June 30, 2001, unless otherwise agreed to by the Parties. 1.3 Additional units of Vendor Product for delivery in 2000 and 2001 may be added as mutually agreed to by the Parties. 1.4 Pricing of the approximately [****] units of product as noted above shall be as follows: OTRU US$[***] OTU US$[***] ORU US$[***] 1.5 Alcatel shall pay to Telaxis the sum of US$[****] (US$[***]) over and above the unit pricing as noted in Section 1.4 above. The Parties agree that the additional sum reflects the increased costs of the amended production volume. 1.6 Alcatel shall pay the sum of US$[***] as stated in Section 1.4 as follows: a) The sum of $[***] shall be paid to Telaxis in Alcatel fiscal Q3 - 2000 upon shipment of the last unit of Vendor Product from Telaxis to Alcatel in Alcatel fiscal Q3 2000; b) The sum of $[***] shall be paid to Telaxis in Alcatel fiscal Q4 - 2000 upon successful completion by Telaxis of mutually agreeable Product Improvement Milestones as set out in Appendix A attached hereto: c) The sum of $[***] shall be paid to Telaxis in each of Alcatel fiscal Q4 - 2000 and Alcatel fiscal Q1 - 2001 upon accomplishment of mutually agreeable Product Compatibility Milestones establishing compatibility between the Telaxis Cross Polarized ODUs and the Alcatel NIU and as more particularly described in Appendix B attached hereto; and [****] Confidential Treatment Requested 2. Co-Polarized Product Line - ------------------------------ 2.1 Alcatel shall purchase the following minimum quantities of co-polarized products for delivery on or before December 31, 2000 as set out in Table B below. Table B
- ---------------------------------------------------------- Sept Oct Nov Dec Total 2000 - ---------------------------------------------------------- [****] [****] [****] [****] [****] - ----------------------------------------------------------
2.2 In addition to the units set out in Table B, Alcatel shall purchase a minimum of [****] units of Vendor Product to be delivered on or before December 31, 2001. The [****] units of Vendor Product may be a combination of [****] and [****] products. Vendor Products delivered during the Alcatel fiscal year 2001 shall be at a nominal rate of [****] per month. 2.3 Purchases made pursuant to Section 2.1 and 2.2 above shall be conditional upon the Parties agreeing to mutually acceptable terms including, but not limited to, pricing, performance and quality. 3. Product Improvement Concepts - --------------------------------- 3.1 Telaxis agrees to arrange and conduct engineering discussions with Alcatel of potential product improvement and cost reduction concepts at quarterly intervals. 4. New Product Development - ---------------------------- 4.1 The sum of $[****] shall be paid to Telaxis upon accomplishment of a successful Preliminary Design Review (PDR), and a further sum of $[****] will be paid to Telaxis upon accomplishment of a successful Critical Design Review (CDR) on a future BTS or CPE product to be determined by Alcatel. The PDR and CDR are more particularly described in Appendix B attached hereto. 5. Terms - ---------- 5.1 Section 6.3 of the Reseller Agreement shall not apply to this Supplemental Agreement. In all other respects the terms and conditions contained in the Reseller Agreement shall be deemed to be incorporated into this Supplemental Agreement. In the event of conflict between the terms of the Reseller Agreement and this Agreement, the terms of this Agreement shall prevail. [****] Confidential Treatment Requested IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives. Alcatel Networks Corporation Telaxis By: /c/ Hubert de Pasquidoux By: /c/ Ransom Reynolds ------------------------ ------------------------ Name: Hubert de Pasquidoux Name: Ransom Reynolds Title: Chief Executive Officer Title: Sr. Vice President
- ----------------------------------------------------------------------------------------------------------------------------- Payment OTU [****] [****] [****] [****] [****] [****] [****] - ----------------------------------------------------------------------------------------------------------------------------- [****] Eng Analysis & Test 3Q2000 1Q2001 2Q2001 2Q2001 3Q2001 3Q2001 3Q2001 Upon Develop [****] Tone Test Set Completion Develop [****] Tone Simulation Software of ---------------------------------------------------------------------------------------------------------------- [****] Release specs 4Q2000 1Q2001 2Q2001 2Q2001 3Q2001 3Q2001 3Q2001 Activity [****] power [****] evaluation Linearizer test Test set manifold match improvement ---------------------------------------------------------------------------------------------------------------- 1st Board Spin into production [some risk to 4Q2000 1Q2001 2Q2001 2Q2001 3Q2001 3Q2001 3Q2001 MS l level Gain Flatness - get as much as possible] DAC IF Amp Temp Sensor location Improved IF match to 2GHz - -----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------- Payment ORU [****] [****] [****] [****] [****] [****] [****] - ----------------------------------------------------------------------------------------------------------------------------- [****] Eng Analysis & Test 3Q2000 1Q2001 2Q2001 2Q2001 3Q2001 3Q2001 3Q2001 Upon Completion LNA evaluation and others of ---------------------------------------------------------------------------------------------------------------- [****] Release specs 4Q2000 1Q2001 2Q2001 2Q2001 3Q2001 3Q2001 3Q2001 Activity 1st Board Spin into production Move gain stages New LNA [on [****] + existing bands that use new MMIC] IF output VSWR improvement - -----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------- Payment OTRU [****] [****] [****] [****] [****] [****] [****] - ----------------------------------------------------------------------------------------------------------------------------- [****] Xmtr [****] fix implemented for [****] 3Q2000 1Q2001 2Q2001 2Q2001 3Q2001 3Q2001 3Q2001 Upon Max IF input power [****] Completion Inrush fix (all but [****]) of ---------------------------------------------------------------------------------------------------------------- [****] Release specs 4Q2000 1Q2001 2Q2001 2Q2001 3Q2001 3Q2001 3Q2001 Activity IF VSWR fix (all below for [****]) Rx RF image rejection - para 3.1.29([****] at greater than / equal to 200mhz - improved filter) Tx/Rx gain [****] fix (target [****])- validate approach Tx noise figure [****] improvement - confirm no issues with [****] degredation Rx noise figure [****] improvement Rx out of band [****] implementation ([****] first) Crossover fix (validate approach) - -----------------------------------------------------------------------------------------------------------------------------
[****] Confidential Treatment Requested APPENDIX B PRODUCT COMPATIBILITY MILESTONES To Be agreed to PRELIMIMARY DESIGN REVIEW PDR (Preliminary Design Review): Held at the point in the development at which the first theoretical concept design is available. This review usually consists of a "paper" design augmented with simulations and sometimes a limited amount of measured results. CRITICAL DESIGN REVIEW CDR (Critical Design Review) Held at the point in development at which most if not all of the sub-components have been built and tested for module level compliance with the specifications. Measured results are available on most parameters. Last point in the design cycle where the design may be revised before fully functional prototypes are fabricated. EX-10.3 4 0004.txt INDEMNIFICATION AGREEMENT INDEMNIFICATION AGREEMENT This Indemnification Agreement (this "Agreement") is made as of September 18, 2000 by and between Telaxis Communications Corporation, a Massachusetts corporation (the "Corporation"), and _______________ ("Indemnitee"), a director or officer of the Corporation. WHEREAS, it is essential to the Corporation to retain and attract as directors and officers the most capable persons available, and WHEREAS, the substantial increase in corporate litigation subjects directors and officers to expensive litigation risks, and WHEREAS, the Restated Articles of Organization and the Amended and Restated By-laws of the Corporation permit the Corporation to indemnify its officers and directors to the fullest extent permitted by law and Indemnitee has been serving and continues to serve as a director or officer of the Corporation in part on reliance on such Articles and such By-laws, and WHEREAS, in recognition of Indemnitee's need for substantial protection against personal liability in order to enhance Indemnitee's continued service to the Corporation in an effective manner and Indemnitee's reliance on the aforesaid Articles and By-laws, and in part to provide Indemnitee with specific contractual assurance that the protection promised by such Articles and such By-laws will be available to Indemnitee (regardless of, among other things, any amendment to or revocation of such Articles or such By-laws or any change in the composition of the Corporation's Board of Directors or any acquisition transaction relating to the Corporation), the Corporation wishes to provide in this Agreement for indemnification of and the advancing expenses to Indemnitee to the fullest extent (whether partial or complete) permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained, for the continued coverage of Indemnitee under the Corporation's directors' and officers' liability insurance policies; NOW THEREFORE, the Corporation and Indemnitee do hereby agree as follows: 1. Agreement to Serve. Indemnitee agrees to serve or continue to serve as a director or officer of the Corporation for so long as he is duly elected or appointed or until such time as he tenders his resignation in writing. 2. Definitions. As used in this Agreement: (a) The term "Proceeding" shall include any threatened, pending or completed action, suit, or proceeding, whether brought by or in the right of the Corporation or otherwise and whether of a civil, criminal, administrative or investigative nature, and any appeal therefrom. (b) The term "Corporate Status" shall mean the status of a person who is or was a director, officer, agent or consultant of or to the Corporation, or is or was serving or has agreed to serve, at the request of the Corporation, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. (c) The term "Expenses" shall include, without limitation, all reasonably incurred attorneys' fees, retainers, court costs, transcript costs, fees of experts, travel expenses, duplicating costs, printing and binding costs, telephone and facsimile charges, postage and overnight delivery service fees and other disbursements or expenses of the types customarily incurred in connection with investigations, judicial or administrative proceedings or appeals, but shall not include the amount of judgments, fines or penalties against Indemnitee or amounts paid in settlement in connection with such matters. (d) References to "other enterprise" shall include employee benefit plans; references to "fines" shall include any excise tax assessed with respect to any employee benefit plan; references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent in any capacity with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith in the reasonable belief that his action was in the best interest of the participant or beneficiaries of an employee benefit plan shall be deemed to have acted in good faith in the reasonable belief that his action was in the best interest of the "Corporation" as referred to in this Agreement. (e) The term "Indemnified Costs" shall mean all Expenses and any and all costs, liabilities, obligations, losses, damages, claims, actions, judgments, fines, penalties, and amounts paid in settlement. 3. Indemnification In Third-Party Proceedings. The Corporation shall indemnify Indemnitee, and hold Indemnitee harmless, in accordance with the provisions of this Paragraph 3 from and against any and all Indemnified Costs which may be imposed on, incurred by or asserted against Indemnitee at any time as a result of or in connection with Indemnitee being a party to or threatened to be made a party to or otherwise involved in any Proceeding (other than a Proceeding by or in the right of the Corporation to procure a judgment in its favor) by reason of his Corporate Status or by reason of any action alleged to have been taken or omitted by Indemnitee or any other person or entity in connection therewith; except that no indemnification shall be made under this Paragraph 3 with respect to any matter as to which Indemnitee shall have been adjudicated in any Proceeding not to have acted in good faith in the reasonable belief that his action was in the best interest of the Corporation. The termination of any Proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith in the reasonable belief that his action was in the best interest of the Corporation. 4. Indemnification in Proceedings by or in the Right of the Corporation. The Corporation shall indemnify Indemnitee, and hold Indemnitee harmless, in accordance with the provisions of this Paragraph 4 from and against any and all Indemnified Costs which may be imposed on, incurred by or asserted against Indemnitee at any time as a result of or in connection with Indemnitee being a party to or threatened to be made a party to or otherwise involved in any Proceeding by or in the right of the Corporation to procure a judgment in its favor by reason of his Corporate Status or by reason of any action alleged to have been taken or omitted by Indemnitee or any other person or entity in connection therewith, except that (a) no indemnification shall be made under -2- this Paragraph 4 with respect to any matter as to which Indemnitee shall have been adjudicated in any Proceeding not to have acted in good faith in the reasonable belief that his action was in the best interest of the Corporation and (b) no indemnification shall be made under this Paragraph 4 in respect of any claim, issue, or matter as to which Indemnitee shall have been adjudged to be liable to the Corporation, unless and only to the extent that a court of Massachusetts shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such Indemnified Costs as the court shall deem proper. The termination of any Proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith in the reasonable belief that his action was in the best interest of the Corporation. 5. Exceptions to Right of Indemnification. Notwithstanding anything to the contrary in this Agreement, except as set forth in Paragraph 10, the Corporation shall not indemnify Indemnitee under this Agreement in connection with a Proceeding (or part thereof) initiated by Indemnitee unless the initiation thereof was approved by the Board of Directors of the Corporation. Notwithstanding anything to the contrary in this Agreement, the Corporation shall not indemnify Indemnitee to the extent Indemnitee has actually been reimbursed from the proceeds of insurance maintained by the Corporation, and in the event the Corporation makes any indemnification payments to Indemnitee and Indemnitee is subsequently reimbursed from such proceeds of insurance, Indemnitee shall promptly refund such indemnification payments to the Corporation to the extent of such insurance reimbursement. 6. Indemnification of Expenses of Successful Party. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful, on the merits or otherwise, in defense of any Proceeding in which he is involved by reason of his Corporate Status or by reason of any action alleged to have been taken or omitted by Indemnitee or any other person or entity in connection therewith, Indemnitee shall be indemnified, to the maximum extent permitted by applicable law, against all Indemnified Costs incurred by him or on his behalf in connection therewith. Without limiting the foregoing, if any such Proceeding or any claim, issue or matter therein is disposed of, on the merits or otherwise (including a disposition without prejudice), without (i) an adjudication that Indemnitee was liable to the Corporation, or (ii) an adjudication that Indemnitee did not act in good faith in the reasonable belief that his action was in the best interest of the Corporation, Indemnitee shall be considered for the purposes hereof to have been wholly successful with respect thereto. 7. Notification and Defense of Claim. As a condition precedent to his right to be indemnified under this Agreement, Indemnitee must notify the Corporation in writing as soon as practicable of any Proceeding for which Indemnitee will seek indemnification or for which indemnification could be sought by him and provide the Corporation with a copy of any summons, citation, subpoena, complaint, indictment, information or other document relating to such Proceeding with which he is served; provided that any failure to so notify the Corporation shall not relieve the Corporation from any liability under this Agreement, except to the extent any delay or failure by Indemnitee to provide notice to the Corporation shall increase the Corporation's liability hereunder. With respect to any Proceeding of which the Corporation is so notified, the -3- Corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to Indemnitee. After written notice from the Corporation to Indemnitee of its election so to assume such defense, the Corporation shall not be liable to Indemnitee for any fees or expenses of counsel subsequently incurred by Indemnitee in connection with such Proceeding, other than as provided below in this Paragraph 7. Indemnitee shall have the right to employ his own counsel in connection with such Proceeding, but any fees and expenses of such counsel incurred after written notice from the Corporation of its assumption of the defense thereof shall be at the expense of Indemnitee unless (i) the employment of counsel by Indemnitee has been authorized by the Corporation, (ii) counsel to Indemnitee shall have reasonably concluded that there may be a conflict of interest or position in any significant issue between the Corporation and Indemnitee or between Indemnitee and any other jointly represented party in the conduct of defense of such Proceeding, or (iii) the Corporation shall not in fact have employed counsel to assume the defense of such Proceeding, in each of which cases the reasonable fees and expenses of counsel for Indemnitee shall be at the expense of the Corporation except as otherwise expressly provided by this Agreement. Indemnitee may not settle any Proceeding for which he seeks indemnification hereunder without first obtaining the prior written consent of the Corporation, which shall not be unreasonably withheld, conditioned or delayed. 8. Advancement of Expenses. Subject to the provisions of Paragraph 9 below, any Indemnified Costs incurred by Indemnitee in connection with or arising out of any Proceeding with respect to which Indemnitee is or may be entitled to indemnification under this Agreement shall be paid or reimbursed to Indemnitee by the Corporation in advance of the final disposition of such matter; provided, however, that the payment or reimbursement of such Indemnified Costs in advance of the final disposition of such matter shall be made only upon receipt of an undertaking by or on behalf of Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Corporation as authorized in this Agreement or otherwise; and that no such advancement of expenses shall be made with respect to any matter as to which it shall have been adjudicated in any Proceeding that Indemnitee did not act in good faith in the reasonable belief that his action was in the best interest of the Corporation. Such undertaking shall be accepted without bond or other security or reference to the financial ability of Indemnitee to make repayment. 9. Procedure for Indemnification. In order to obtain indemnification or advancement of Indemnified Costs pursuant to this Agreement, Indemnitee shall submit to the Corporation a written request, including in such request such documentation and information as is reasonably available to Indemnitee describing the amount of indemnification or advancement requested. Upon Indemnitee's verification to the reasonable satisfaction of the Corporation of the amount of any Indemnified Costs incurred by Indemnitee, the Corporation shall either, at Indemnitee's direction, reimburse Indemnitee or pay as and when due to the person or other entity entitled thereto the Indemnified Costs covered by this Agreement. 10. Remedies. The right to indemnification or advancement of Expenses as provided by this Agreement shall be enforceable by Indemnitee in any court of competent jurisdiction if the Corporation denies such request, in whole or in part, or if no disposition thereof is made within twenty (20) days of submitting a request under Paragraph 9 above. Unless otherwise required by law, the burden of proving that indemnification or advancement is not appropriate shall be on -4- the Corporation. Indemnitee's expenses (of the type described in the definition of "Indemnified Costs" in Paragraph 2(e)) incurred in connection with successfully establishing his right to indemnification or advancement, in whole or in part, in any such Proceeding shall also be indemnified and advanced by the Corporation. 11. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Corporation for some or a portion of the Indemnified Costs incurred by him or on his behalf in connection with any Proceeding but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify Indemnitee for the portion of such Indemnified Costs to which Indemnitee is entitled. 12. Subrogation. In the event of any payment under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who, at the Corporation's expense, shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Corporation to bring suit to enforce such rights. 13. Term of Agreement. This Agreement shall continue until and terminate upon the later of (a) six years after the date that Indemnitee shall have ceased to serve as a director or officer of the Corporation or, at the request of the Corporation, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or (b) the final termination (and expiration of all appeal periods) of all Proceedings pending on the date set forth in clause (a) in respect of which Indemnitee is granted rights of indemnification or advancement of Indemnified Costs hereunder and of any proceeding commenced by Indemnitee pursuant to Paragraph 10 of this Agreement relating thereto. 14. Indemnification Hereunder Not Exclusive. The indemnification and advancement of Indemnified Costs provided by this Agreement shall be independent of, in addition to and not be deemed exclusive or in derogation of any other rights to which Indemnitee may be entitled under the Restated Articles of Organization, the Amended and Restated By-Laws, any other agreement, any vote of stockholders or disinterested directors, the Business Corporation Law of Massachusetts, any other law (common or statutory), or otherwise, both as to action in his official capacity and as to action in another capacity while holding office for the Corporation. Nothing contained in this Agreement shall be deemed to prohibit the Corporation from purchasing and maintaining insurance, at its expense, to protect itself or Indemnitee against any expense, liability or loss incurred by it or him in any such capacity, or arising out of his status as such, whether or not Indemnitee would be indemnified against such expense, liability or loss under this Agreement. 15. No Special Rights. Nothing herein shall confer upon Indemnitee any right to continue to serve as an officer or director of the Corporation for any period of time or at any particular rate of compensation. 16. Savings Clause. If this Agreement or any portion thereof shall be held invalid, unenforceable or void in whole or in part on any ground by any court of competent jurisdiction, then (a) the parties shall promptly negotiate a replacement provision effecting the parties' intent to provide indemnification and advancement rights to Indemnitee to the maximum extent permitted by -5- applicable law, (b) the Corporation shall nevertheless indemnify Indemnitee as to Indemnified Costs to the maximum extent permitted by any applicable portion of this Agreement that shall not have been invalidated and, in any event, to the maximum extent permitted by applicable law, and (c) the remaining provisions of this Agreement shall remain in full force and effect. 17. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute the original. 18. Successors and Assigns. This Agreement shall be binding upon the Corporation and its successors and assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Corporation, and shall inure to the benefit of the estate, heirs, executors, administrators and personal representative of Indemnitee. 19. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. 20. Modification and Waiver. This Agreement may be amended from time to time to reflect changes in Massachusetts law or for other reasons. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof nor shall any such waiver constitute a continuing waiver. 21. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been given (i) when delivered by hand or (ii) if mailed by certified or registered mail with postage prepaid, on the third day after the date on which it is so mailed. (a) if to Indemnitee, to: ---------------------- ---------------------- ---------------------- (b) if to the Corporation, to: Telaxis Communications Corporation 20 Industrial Drive East P.O. Box 109 South Deerfield, MA 01373-0109 Attention: President or to such other addresses as may have been furnished to Indemnitee by the Corporation or to the Corporation by Indemnitee, as the case may be. -6- 22. Applicable Law. This Agreement shall be governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts. 23. Attorneys' Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement or to protect the rights obtained hereunder, the prevailing party shall be entitled to its reasonable attorneys' fees, costs and disbursements in addition to any other relief to which it may be entitled. ************************************************* Following section is just in Mr. Stempel's agreement. 24. Specific Coverage. Indemnitee currently is the Chief Financial Officer, Treasurer and Vice President of the Corporation. As such, Indemnitee signs securities filings of the Corporation as its principal financial officer and principal accounting officer. In addition, Indemnitee has been appointed as alternate Securities Coordinator with respect to the Corporation's Policy Statement on Securities Trades by Company Personnel. For the avoidance of ambiguity, and without limiting the generality of any of the foregoing provisions of this Agreement, the Corporation confirms and agrees that Indemnitee is entitled to the indemnification, advancement and other rights and benefits provided by this Agreement with respect to and arising out of Indemnitee's roles and activities described above in this Paragraph 24. ************************************************* ************************************************* Following section is just in Mr. Renauld's agreement. 24. Specific Coverage. Indemnitee currently is the Vice President, Legal and Corporate Affairs of the Corporation. The Corporation acknowledges that, due to such position and Indemnitee's background, Indemnitee renders legal opinion letters from time to time. In addition, Indemnitee has been appointed as Securities Coordinator with respect to the Corporation's Policy Statement on Securities Trades by Company Personnel. For the avoidance of ambiguity, and without limiting the generality of any of the foregoing provisions of this Agreement, the Corporation confirms and agrees that Indemnitee is entitled to the indemnification, advancement and other rights and benefits provided by this Agreement with respect to and arising out of Indemnitee's roles and activities described above in this Paragraph 24. ************************************************* IN WITNESS WHEREOF, the parties to this Agreement have caused this Agreement to be duly executed as of the day and year first written above. TELAXIS COMMUNICATIONS CORPORATION By: -------------------- Name: Title: INDEMNITEE: ----------------------- Name: -7- EX-27 5 0005.txt FINANCIAL DATA SCHEDULE
5 1,000 3-MOS 9-MOS 3-MOS 9-MOS DEC-31-1999 DEC-31-1999 DEC-31-2000 DEC-31-2000 SEP-30-1999 SEP-30-1999 SEP-30-2000 SEP-30-2000 6,603 6,603 24,002 24,002 0 0 22,591 22,591 2,957 2,957 6,702 6,702 (57) (57) (100) (100) 7,101 7,101 19,757 19,757 2,124 2,124 877 877 15,921 15,291 24,680 24,680 (9,477) (9,477) (11,914) (11,914) 25,297 25,297 86,896 86,896 9,540 9,540 9,981 9,981 0 0 0 0 0 0 0 0 0 0 0 0 113 113 167 167 13,259 13,259 73,101 73,101 25,297 25,297 86,896 86,896 2,742 5,504 8,095 23,142 2,742 5,504 8,095 23,142 2,291 5,103 10,225 25,282 2,291 5,103 10,225 25,282 2,176 5,842 4,388 13,753 0 0 0 0 384 561 207 597 (2,079) (5,947) (5,896) (14,049) 0 0 0 0 (2,079) (5,947) (5,896) (14,049) (109) (1,642) 534 (1,818) 0 0 0 0 0 0 0 0 (2,188) (7,589) (5,362) (15,867) (3.62) (14.21) (0.32) (1.12) (3.62) (14.21) (0.32) (1.12)
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