-----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, BkAGTh+DUEIUdmuFRyCbXq5Nx9Af/qeN4veE/XaJKIOtcR36p/xYIk+pD7Z6NAsQ 9dP6t8u7yE/YwmRcwggeVw== 0000914317-01-500281.txt : 20020426 0000914317-01-500281.hdr.sgml : 20020426 ACCESSION NUMBER: 0000914317-01-500281 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010810 DATE AS OF CHANGE: 20020426 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TELAXIS COMMUNICATIONS CORP CENTRAL INDEX KEY: 0000712511 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 042751645 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-29053 FILM NUMBER: 01704972 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 form10q39786_8-6.txt 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 JUNE 30, 2001 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 incorporation (I.R.S. Employer 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 July 31, 2001, there were 16,743,198 shares of the registrant's common stock outstanding. INDEX PAGE NO. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements and Supplementary Data....................... 2 Condensed Balance Sheets as of June 30, 2001 and December 31, 2000.............................................3 Condensed Statements of Operations for the three months and six months ended June 30, 2001 and 2000...................4 Condensed Statement of Changes in Stockholders' Equity for the six months ended June 30, 2001............................5 Condensed Statements of Cash Flows for the six months ended June 30, 2001 and 2000..................................6 Notes to Financial Statements..................................7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..........................................11 Item 3. Quantitative and Qualitative Disclosures About Market Risk.........17 PART II. OTHER INFORMATION Item 1. Legal Proceedings..................................................17 Item 2. Changes in Securities and Use of Proceeds..........................17 Item 4. Submission of Matters to a Vote of Security Holders................18 Item 6. Exhibits and Reports on Form 8-K...................................19 SIGNATURES 19 1 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, developments, or achievements to be materially different from any future results, outcomes, levels of activity, performance, developments, 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 --------- Condensed Balance Sheets..................................... 3 Condensed Statements of Operations........................... 4 Condensed Statement of Changes in Stockholders' Equity....... 5 Condensed Statements of Cash Flows........................... 6 Notes to Financial Statements ............................... 7 2 TELAXIS COMMUNICATIONS CORPORATION CONDENSED BALANCE SHEETS (in thousands, except share data)
June 30, December 31, 2001 2000 ----------- -------- (unaudited) Assets Current assets Cash and cash equivalents $ 25,782 $ 27,865 Restricted cash 1,000 -- Marketable securities 3,979 13,158 Trade accounts receivable, less allowance for doubtful accounts ($200 in 2001 and $250 in 2000) 1,011 2,836 Other accounts receivable 90 297 Inventories 7,733 7,838 Other current assets 447 486 -------- -------- Total current assets 40,042 52,480 Property, plant and equipment, net 10,964 12,751 Intangible assets, net of accumulated amortization 176 198 Other assets 80 109 -------- -------- Total assets $ 51,262 $ 65,538 ======== ======== Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 3,428 $ 8,156 Customer prepayments 180 218 Accrued expenses 1,700 1,770 Current maturities of long-term debt 534 507 Current maturities of capital lease obligations 2,030 1,563 -------- -------- Total current liabilities 7,872 12,214 Long-term debt 906 1,180 Capital lease obligations 1,851 2,045 -------- -------- Total liabilities 10,629 15,439 -------- -------- Stockholders' Equity -- -- Preferred stock, $.01 par value; authorized 4,500,000 shares in 2001 and 2000; none issued Common stock, $.01 par value; authorized 100,000,000 shares in 2001 and 2000; issued and outstanding 16,743,198 shares in 2001 (16,734,673 shares in 2000) 167 167 Additional paid-in capital 124,711 124,740 Notes receivable (285) (331) Deferred stock compensation (99) (159) Accumulated comprehensive income 2 -- Accumulated deficit (83,863) (74,318) -------- -------- Total stockholders' equity 40,633 50,099 -------- -------- Total liabilities and stockholders' equity $ 51,262 $ 65,538 ======== ========
The accompanying notes are an integral part of these financial statements. 3 TELAXIS COMMUNICATIONS CORPORATION CONDENSED STATEMENTS OF OPERATIONS (in thousands, except per share data)
Three months ended June 30, Six months ended June 30, ----------------------------- ---------------------------- 2001 2000 2001 2000 -------- --------- -------- -------- (unaudited) (unaudited) (unaudited) (unaudited) Sales $ 968 $ 8,731 $ 1,490 $ 15,047 Cost of sales 2,137 8,543 4,223 15,057 -------- -------- -------- -------- Gross margin (loss) (1,169) 188 (2,733) (10) Operating expenses Research and development, net 1,832 2,799 3,827 4,482 Selling, general and administrative 1,724 2,756 3,716 4,882 -------- -------- -------- -------- Total operating expenses 3,556 5,555 7,543 9,364 -------- -------- -------- -------- Operating loss (4,725) (5,367) (10,276) (9,374) -------- -------- -------- -------- Other income (expense) Interest and other expense (144) (203) (320) (390) Interest and other income 427 1,001 1,051 1,612 -------- -------- -------- -------- Total other income 283 798 731 1,222 -------- -------- -------- -------- Loss from continuing operations before income taxes (4,442) (4,569) (9,545) (8,152) Income taxes -- -- -- -- -------- -------- -------- -------- Loss from continuing operations (4,442) (4,569) (9,545) (8,152) -------- -------- -------- -------- Discontinued operations: Income (loss) on disposition of MMWP segment including stock compensation expense of $2.8 million in 2000 -- 496 -- (2,352) -------- -------- -------- -------- Income (loss) from discontinued operations -- 496 -- (2,352) -------- -------- -------- -------- Net loss $ (4,442) $ (4,073) $ (9,545) $(10,504) ======== ======== ======== ======== Basic and diluted earnings (loss) per share from: Continuing operations $ (0.27) $ (0.28) $ (0.57) $ (0.63) ======== ======== ======== ======== Discontinued operations $ -- $ .03 $ -- $ (0.18) ======== ======== ======== ======== Net loss $ (0.27) $ (0.25) $ (0.57) $ (0.81) ======== ======== ======== ======== Shares used in computing basic and diluted earnings (loss) per share 16,743 16,283 16,741 13,011 ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements. 4 TELAXIS COMMUNICATIONS CORPORATION CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2001 (in thousands, except share data) (unaudited)
Comprehensive Accumulated Common Stock Additional Income Comprehensive --------------------------- Paid-in Notes (Loss) Income Shares Amount Capital Receivable ------------- ------------- --------------------------- ------------ ------------- Balances, January 1, 2001.............. $ -- 16,734,673 $ 167 $ 124,740 $ (331) Exercise of common stock options............................... -- 8,525 -- 8 -- Amortization of deferred stock compensation.................... -- -- -- -- -- Other -- -- -- (37) 46 Net loss............................... $ (9,545) -- -- -- -- -- Other comprehensive income from unrealized gain on investments....................... 2 2 -- -- -- -- ---------- Comprehensive income (loss)................................. $ (9,543) ========== ---------- ---------- ---------- ---------- ---------- Balances, June 30, 2001....... $ 2 16,743,198 $ 167 $ 124,711 $ (285) ========== ========== =========== =========== ===========
Deferred Stock Accumulated Compensation Deficit Total ------------- ------------- ----------- Balances, January 1, 2001.............. $ (159) $ (74,318) $ 50,099 Exercise of common stock options............................... -- -- 8 Amortization of deferred stock compensation.................... 23 -- 23 Other 37 -- 46 Net loss............................... -- (9,545) (9,545) Other comprehensive income from unrealized gain on investments....................... -- -- 2 Comprehensive income (loss)................................. ---------- ---------- ---------- Balances, June 30, 2001....... $ (99) $ (83,863) $ 40,633 =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 5 TELAXIS COMMUNICATIONS CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (in thousands)
Six months ended June 30, ---------------------------- 2001 2000 ---------- ---------- (unaudited) (unaudited) Cash flows from operating activities Net loss ...................................................................... $ (9,545) $(10,504) Adjustments to reconcile net loss to net cash utilized by operating activities: Depreciation and amortization ............................................. 2,258 1,522 Gain on disposition of MMWP segment ....................................... -- (496) Non-cash compensation expense ............................................. 23 3,140 Changes in assets and liabilities Trade accounts receivable ............................................ 1,825 (5,485) Other accounts receivable ............................................ 207 -- Inventories .......................................................... 105 (12,001) Other current assets ................................................. 39 (2,298) Accounts payable and accrued expenses ................................ (4,087) 5,143 Customer prepayments ................................................. (38) 24 -------- -------- Net cash utilized by operating activities ............................ (9,213) (20,955) -------- -------- Cash flows from investing activities Purchase of marketable securities ............................................. (12,650) (20,898) Sale of marketable securities ................................................. 21,831 -- Proceeds from sale of discontinued operations ................................. -- 1,990 Additions to property and equipment ........................................... (343) (3,900) Reduction to other assets ..................................................... 29 8 -------- -------- Net cash provided (utilized) by investing activities ................. 8,867 (22,800) -------- -------- Cash flows from financing activities Repayment of line of credit ................................................... -- (500) Transfer of restricted cash ................................................... (1,000) -- Proceeds from sale/leaseback transaction....................................... 569 -- Repayments of long-term debt and capital lease obligations .................... (1,360) (1,205) Issuance of common stock upon exercise of options and warrants ................ 8 468 Sale of common stock .......................................................... -- 78,200 Stock issuance costs .......................................................... -- (6,330) Repayments of notes receivable ................................................ 46 -- -------- -------- Net cash (utilized) provided by financing activities ................. (1,737) 70,633 -------- -------- Net (decrease) increase in cash and cash equivalents ............................... (2,083) 26,878 Cash and cash equivalents at beginning of period ................................... 27,865 6,603 -------- -------- Cash and cash equivalents at end of period ......................................... $ 25,782 $ 33,481 ======== ======== Supplemental disclosure of cash flow information Non-cash investing and financing activities: Equipment acquired under capital lease agreement .......................... $ 96 $ 3,181 Conversion of redeemable preferred stock .................................. -- 47,793 Notes received for issuance of common stock ............................... -- 67 Unrealized gain on investments ............................................ 2 --
The accompanying notes are an integral part of these financial statements. 6 19 TELAXIS COMMUNICATIONS CORPORATION NOTES TO FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Basis of Presentation The financial information as of June 30, 2001 and for the three months and six months ended June 30, 2001 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, 2000 included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. The December 31, 2000 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 six months ended June 30, 2001 are not necessarily indicative of the results to be expected for any future period. Marketable Securities The Company has invested the proceeds from our initial public offering in accordance with our 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 obligations secured by government agencies. At June 30, 2001, all of the Company's marketable securities, valued at $4.0 million, mature within 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. Reclassification Certain prior year amounts have been reclassified to conform to the current year's presentation. 2. Restricted Cash At June 30, 2001, the Company had $1.0 million of restricted cash classified as a current asset. The cash is held in escrow pending resolution of a supplier claim arising from the ordinary course of business. The claim was resolved in July 2001. (See Note 10) 3. Inventories Inventories are stated at the lower of cost or market and consist of the following (in thousands): June 30, December 31, 2001 2000 -------------- ------------ (unaudited) Finished goods................$ 564 $ 1,405 Parts and subassemblies....... 6,693 4,960 Work-in process............... 476 1,473 -------------- ------------ $ 7,733 $ 7,838 ============== ============ 7 4. Property, Plant and Equipment Property, plant and equipment consist of the following (in thousands):
June 30, December 31, 2001 2000 ---------------- ---------- (unaudited) Machinery and equipment.............................. $ 14,929 $ 15,241 Furniture and fixtures............................... 827 820 Leasehold improvements............................... 2,160 2,117 Equipment under capital leases....................... 8,000 7,335 ------------ ---------- 25,916 25,513 Less accumulated depreciation and amortization....... (14,952) (12,762) ------------- ---------- $ 10,964 $ 12,751 ============= ==========
The net book value of equipment under capital leases was approximately $3,539,000 and $3,728,000 at June 30, 2001 and December 31, 2000, respectively. Depreciation expense for the six months ended June 30, 2001 and 2000 was $2,226,000 and $1,444,000, respectively. 5. 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 future exercise of common stock options and stock warrants, since the effect would be antidilutive for all reporting periods. (amounts in thousands except per share amounts).
Three months ended Six months ended June 30, June 30, (unaudited) (unaudited) ------------------------ -------------------------- 2001 2000 2001 2000 ------------------------ -------------------------- Historical: Loss from continuing operations ...................................... $ (4,442) $ (4,569) $ (9,545) $ (8,152) ========= ======== ======== ======== Weighted average shares of common stock outstanding .................. 16,743 16,283 16,741 13,011 ========= ======== ======== ======== Basic and diluted loss per share from continuing operations .......... $ (0.27) $ (0.28) $ (0.57) $ (0.63) ========= ======== ======== ======== Income (loss) from discontinued operations ........................... $ -- $ 496 $ -- $ (2,352) ========= ======== ======== ======== Weighted average shares of common stock outstanding .................. 16,743 16,283 16,741 13,011 ========= ======== ======== ======== Basic and diluted income (loss) per share from discontinued operations $ -- $ 0.03 $ -- $ (0.18) ========= ======== ======== ======== Net loss ............................................................. $ (4,442) $ (4,073) $ (9,545) $(10,504) ========= ======== ======== ======== Weighted average shares of common stock outstanding .................. 16,743 16,283 16,741 13,011 ========= ======== ======== ======== Basic and diluted net loss per share ................................. $ (0.27) $ (0.25) $ (0.57) $ (0.81) ========= ======== ======== ========
6. 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 8 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. 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, and interest payments commenced on July 1, 2000. The Company has fully reserved this subordinated note. For the six months ended June 30, 2000, the Company recorded 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 $438,000 as a result of reassessing the net realizable value of certain assets and liabilities related to the divestiture. Sales for the MMWP segment were $0 for the three months ended June 30, 2001 and 2000 and $0 and $770,000 for the six months ended June 30, 2001 and 2000, respectively. 7. Accrued Expenses Accrued expenses consist of the following (in thousands):
June 30, December 31, ----------- ----------- 2001 2000 ----------- ----------- (unaudited) Accrued payroll, commissions and related expenses....... $ 805 $ 1,071 Accrued warranty expense................................ 412 412 Accrued contract costs.................................. 279 -- Deferred revenue........................................ -- 94 Other accrued expenses.................................. 204 193 --------- ----------- $ 1,700 $ 1,770 ========= ===========
8. Stockholder Rights Plan. On May 16, 2001, the Board of Directors of the Company (the "Board") approved a stockholder rights plan (the "Plan"). As part of the Plan, on May 16, 2001 the Company declared a dividend of one preferred stock purchase right ("Right") for each outstanding share of Common Stock to stockholders of record as of May 31, 2001. Each Right entitles the holder to buy one one-thousandth (1/1000) of a share of a new series of preferred stock at an exercise price of $10, subject to adjustment. If a person or group acquires 15 percent or more of the Company's outstanding common stock, holders of the Rights (other than the acquiring person or group) will be able to purchase, in exchange for the purchase price, the preferred stock equivalent to shares of the Company's common stock having a market value of twice the purchase price. In the event of a subsequent merger or other acquisition of the Company, holders of Rights (other than the acquiring person or group) may acquire, upon payment of the purchase price, shares of the acquiring entity (or an affiliate) having a value of twice the purchase price. The rights will expire on May 18, 2011 unless earlier redeemed by the Company. Holders who, as of May 18, 2001, hold 15 percent or more of the Company's common stock will not trigger the rights unless they exceed an ownership level equal to the percentage of the Company's common stock beneficially owned by that person on May 18, 2001 plus 1 percent of the Company's common stock outstanding on May 18, 2001. 9. Litigation In June 2001, two purported securities class action lawsuits were filed against the Company in the U.S. District Court for the Southern District of New York. The complaints also name 9 one or more of the Company's underwriters in the Company's initial public offering and certain officers of the Company. The complaints allege violations of the federal securities laws regarding statements in the Company's initial public offering registration statement concerning the underwriters' activities in connection with the underwriting of the offering of the Company's shares to the public. The actions seek rescission of the plaintiff's alleged purchases of Company stock and other damages and costs associated with the litigation. The Company and its officers deny any liability and intend to vigorously defend the allegations against them. No provision for any estimated loss is reflected in the accompanying financial statements. While the Company cannot predict the outcome of these actions, the Company believes that the final result of these actions will have no material effect on its financial condition, results of operations or cash flows. 10. Subsequent Events Litigation On July 11, 2001 an additional purported securities class action lawsuit was filed against the Company in the U.S. District Court for the Southern District of New York. This compliant alleges violations of federal securities laws and seeks remedies similar to the two complaints filed in June 2001 (See Note 9). The complaint also names certain of the Company's underwriters in the Company's initial offering and certain officers and directors of the Company. The Company and its officers and directors deny any liability and intend to vigorously defend the allegations against them. No provision for any estimated loss is reflected in the accompanying financial statements. While the Company cannot predict the outcome of this action, the Company believes that the final result of this action will have no material effect on its financial condition, results of operations or cash flows. On July 26, 2001, the Company filed a lawsuit against a customer asserting that the customer has failed to honor various contractual obligations and commitments made to the Company. The Company is seeking monetary damages and recovery of court costs and expenses. This action is at an early stage, and accordingly the Company cannot predict the outcome of this action. Amendment to Escrow Agreement On July 31, 2001, the Company resolved a supplier claim and amended the corresponding escrow agreement relating to this claim. As of June 30, 2001, pending resolution of this claim, the Company had $1,000,000 in an escrow account that was recorded as restricted cash. The resolution of the claim provided for the disbursement of $338,463 as initial payment to the supplier, the disbursement of $323,073 to the Company, and the remaining $338,464 to be disbursed to the supplier upon completion of certain actions. Exit of ODU Product Line On July 17, 2001, the Company's Board of Directors approved the Company's plan to exit its point-to-multipoint outdoor unit product line. In connection with this decision, the Company is taking actions during the remainder of 2001 to restructure its operations and is currently analyzing alternative exit plans for this product line. The effect of the adopted plan on the Company's financial condition, results of operations or cash flows cannot currently be estimated. 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Overview We develop and supply broadband wireless access products used by network service providers to deliver integrated voice, video and data services to business and residential customers. Our Virtual Fiber RadioTM (VFR) product family is being developed to enable direct fiber optic connection to wireless transceiver units and transparently transmit fiber optic signals over a wireless link without use of conventional modems. Taking advantage of our high-frequency millimeter-wave expertise, the VFR product family is being developed to use large amounts of unallocated spectrum above 40 gigahertz (GHz) to provide data rates of OC-3 (155 megabits per second (Mbps)), OC-12 (622 Mbps), and higher. We commenced operations in 1982 and had derived the significant majority of our sales from our millimeter-wave products business segment prior to 1999. Millimeter waves are electromagnetic waves having wavelengths 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 broadband 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. Our launch customer for our point-to-multipoint outdoor unit (ODU) product line was Newbridge Networks, which has since been acquired by Alcatel. In late 1999 and early 2000, the market for these products was growing rapidly. However, a variety of factors (such as capital market weakness, uncertainty created by the Alcatel acquisition of Newbridge, and equipment cost) caused the demand for these products to decrease for us and generally across the industry. This decrease in demand created difficulties for our point-to-multipoint business model. The success of this model depended on the ability to produce low-cost customer premises equipment (CPEs) designed for automated assembly and testing. In turn, the ability to produce low-cost CPEs is largely a function of high volumes. Without the commitment to high volumes from customers, it became difficult to achieve the cost targets we believe are necessary for a point-to-multipoint ODU business model to succeed. Therefore, we began addressing more attractive market segments. One segment was point-to-point ODUs. The primary difference is that the amount of data transmitted over these products is typically much higher than that transmitted over point-to-multipoint ODUs. We planned to apply our experience in point-to-multipoint ODU production to address the point-to-point ODU market. However, the demand for these point-to-point ODUs also declined. During the same time, we began developing the VFR. This product family has the capability to deliver higher performance than traditional millimeter-wave radios with a simpler design by using the large amounts of unallocated spectrum above 40 GHz. We are developing several versions of the VFR to address different market opportunities. The initial prototype, operating at 60 GHz, has been built and has demonstrated a data rate of 622 Mbps. We are simplifying our initial prototype and incorporating our patented antenna technology. The resulting improved prototype is expected to be available for Beta site trials in the fourth quarter of 2001 and for production in 2002. As part of the decision to focus on the VFR product line, we have decided to exit the point-to-multipoint ODU product line. For the three months and six months ended June 30, 2001, 100% and approximately 99.6% of our sales, respectively, were to a customer located in Canada. For both the three months and six months ended June 30, 2000, approximately 93% of our sales were to a customer located in Canada, and 7% of our sales were to customers located in the United States and Korea. We expect that sales to customers located outside the United States will continue to be significant. 11 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 Six Months Ended June 30, June 30, (unaudited) (unaudited) -------------------- -------------------- 2001 2000 2001 2000 -------- --------- --------- -------- Sales....................................................... 100.0% 100.0% 100.0% 100.0% Cost of sales............................................... 220.8 97.8 283.4 100.1 --------- --------- --------- -------- Gross margin (loss)......................................... (120.8) 2.2 (183.4) (0.1) Operating expenses Research and development, net........................ 189.3 32.1 256.8 29.8 Selling, general and administrative.................. 178.1 31.6 249.4 32.4 --------- --------- --------- -------- Total operating expenses......................... 367.4 63.6 506.2 62.2 --------- --------- --------- -------- Operating loss.............................................. (488.1) (61.5) (689.7) (62.3) Other income (expense)...................................... 29.2 9.1 49.1 8.1 --------- --------- --------- -------- Loss from continuing operations before income taxes......... (458.9) (52.3) (640.6) (54.2) Income taxes................................................ (0.0) (0.0) (0.0) (0.0) --------- --------- --------- -------- Loss from continuing operations............................. (458.9)% (52.3)% (640.6)% (54.2)% ========= ========= ========= ========
Three Months and Six Months Ended June 30, 2001 and 2000 Sales Sales decreased $7.8 million to $968,000 for the three months ended June 30, 2001 from $8.7 million for the three months ended June 30, 2000. Unit shipments decreased to 333 for the three months ended June 30, 2001 from 4,856 for the three months ended June 30, 2000. Sales decreased $13.6 million to $1.5 million for the six months ended June 30, 2001 from $15.0 million for the six months ended June 30, 2000. The decrease in unit shipments and revenue is a result of the weakness in the overall broadband wireless telecommunications market and the decrease in shipments to a major customer. 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 decreased $6.4 million to $2.1 million for the three months ended June 30, 2001 from $8.5 million for the three months ended June 30, 2000. Cost of sales decreased $10.8 million to $4.2 million for the six months ended June 30, 2001 from $15.1 million for the six months ended June 30, 2000. Gross margins were negative 120.8% in the three months ended June 30, 2001 and positive 2.2% in the three months ended June 30, 2000. Gross margins were negative 183.4% for the six months ended June 30, 2001 and negative 0.1% for the six months ended June 30, 2000. The decrease in cost of sales and the decline in gross margin as a percentage of sales for all comparative periods was attributable primarily to decreased shipments of our products and the impact of overhead costs incurred on significantly lower production volumes. The decrease was partially offset by a reduction in year-to-date overhead costs of approximately $2.0 million. 12 Research and Development Expenses Research and development expenses consist primarily of personnel, material and related costs associated with our product development efforts. These include costs for development of products and components, test equipment and related facilities. Gross research and development expenses decreased 32.4% to $2.1 million in the three months ended June 30, 2001 from $3.1 million in the three months ended June 30, 2000. Gross research and development expenses decreased 15.4% to $4.1 million for the six months ended June 30, 2001 from $4.8 million for the six months ended June 30, 2000. Research and development costs were partially offset by customer funding of $229,000 and $252,000 for the three months ended June 30, 2001 and 2000, respectively. Customer funding was $266,000 and $356,000 for the six months ended June 30, 2001 and 2000, respectively. Net of customer reimbursements, our research and development expenses decreased 34.5% to $1.8 million in the three months ended June 30, 2001 from $2.8 million for the three months ended June 30, 2000. Net research and development costs decreased 14.6% to $3.8 million for the six months ended June 30, 2001 from $4.5 million for the six months ended June 30, 2000. The reductions in both comparative periods were attributed to reductions in personnel and material as we significantly scaled back our development efforts for the point-to-multipoint ODU product line. 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 decreased 37.5% to $1.7 million for the three months ended June 30, 2001 from $2.8 million for the three months ended June 30, 2000. Selling, general and administrative expenses decreased 23.9% to $3.7 million for the six months ended June 30, 2001 from $4.9 million for the six months ended June 30, 2000. These decreases were due primarily to decreases in costs related to recruiting and hiring additional personnel, temporary support labor, and payroll and benefits due to reduced staffing. Other Income (Expense) Other income (expense) consists of interest and dividends earned on cash and marketable securities offset by interest expense on debt and capital lease obligations and miscellaneous non-operating expenses. Total other income decreased to $283,000 for the three months ended June 30, 2001 from $798,000 for the three months ended June 30, 2000. Total other income decreased to $731,000 for the six months ended June 30, 2001 from $1.2 million for the six months ended June 30, 2000. Interest expense for the three months ended June 30, 2001 was $142,000 compared to $203,000 for the three months ended June 30, 2000 and $317,000 for the six months ended June 30, 2001 compared to $390,000 for the six months ended June 30, 2000. The decreases in interest expense were due to reductions in long-term debt and capital lease obligations. Interest and dividend income decreased to 427,000 for the three months ended June 30, 2001 from $1.0 million for the three months ended June 30, 2000. Interest and dividend income decreased to $1.0 million for the six months ended June 30, 2001 from $1.6 million for the six months ended June 30, 2000. The decreases in interest income were a result of the decrease in the invested cash and marketable securities balances. Liquidity and Capital Resources Since 1997, we have financed our operations primarily through the sale of redeemable preferred stock, from proceeds of our initial public offering in February 2000 and, to a much lesser extent, from cash generated by our discontinued operations. We have also issued subordinated notes and used equipment lease financing and bank lines of credit to provide cash. 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. 13 At June 30, 2001, we had cash and cash equivalents of $26.8 million (including restricted cash of $1.0 million-see Note 2 and Note 10 to Financial Statements) and marketable securities of $4.0 million. The cash equivalents balance included recovery of an unrealized loss of $625,000 recorded in our cash equivalents balance as of March 31, 2001, relating to a decline in market value of an investment in commercial paper issued by Pacific Gas & Electric. The decrease in accounts receivable to $1.0 million at June 30, 2001 from $2.8 million at December 31, 2000 reflects the decline in revenue for the three and six months ended June 30, 2001. The decrease in accounts payable to $3.4 million at June 30, 2001 from $8.2 million at December 31, 2000 reflects the reduction of inventory procurement due to the decrease in production and sales of our point-to-multipoint broadband wireless access equipment. At June 30, 2001, we had approximately $1.4 million in long-term debt, of which $200,000 is due through June 2003 with an interest rate of 10% and $1.2 million is due through November 2003 with an interest rate of 12%. At June 30, 2001, we had approximately $3.9 million in capital lease obligations, which are due through January 2005. Cash utilized in operating activities for the six months ended June 30, 2001 was $9.2 million compared to $21.0 million for the six months ended June 30, 2000. For the six months ended June 30, 2001, cash used in operating activities has primarily represented funding of our net losses and payments of outstanding accounts payable and vendor commitments. For the six months ended June 30, 2000, cash used in operating activities primarily represented funding of our net losses and inventory build to meet expected production requirements. Cash provided by investing activities for the six months ended June 30, 2001 was $8.9 million compared to cash utilized of $22.8 million for the six months ended June 30, 2000. For the six months ended June 30, 2001, cash provided by investing activities related primarily to the sale of marketable securities. For the six months ended June 30, 2000, cash utilized by investing activities related primarily to the purchase of marketable securities and the purchase of equipment used in our manufacturing and research and development activities. Cash utilized by financing activities for the six months ended June 30, 2001 was $1.7 million compared to cash provided of $70.6 million for the six months ended June 30, 2000. The financing activities in the six months ended June 30, 2001 consisted primarily of the funding of an escrow arrangement and repayment of capital lease obligations and long term debt. The financing activities in the six months ended June 30, 2000 consisted primarily of receipt of the proceeds from our initial public offering. Our future cash requirements will depend upon a number of factors, including the timing and level of research and development activities, sales and marketing campaigns, and our ability to develop, sell and manufacture our VFR family of products at favorable gross margins. We believe that our cash and marketable securities balances at June 30, 2001 will provide sufficient capital to fund our operations, VFR product development, inventory procurement for anticipating production volumes, and procurement of required capital equipment 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. (See "Safe Harbor for Forward Looking Statements" below.) Disclosures About Market Risk The following discusses our exposure to market risk related to changes in interest rates, equity prices and foreign currency exchange rates. This discussion contains forward-looking statements that are exposed to risks and uncertainties, 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." 14 As of June 30, 2001, we had cash and cash equivalents of $26.8 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 June 30, 2001, we had marketable securities of $4.0 million which consisted of municipal and government bonds with maturities through September 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 June 30, 2001 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 General Overview 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, developments, future events, performance or products, 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," "contemplates," "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 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, developments, or achievements to be materially different from any future results, outcomes, levels of activity, performance, developments, or achievements expressed, anticipated or implied by these forward-looking statements. As a result, we cannot guarantee future results, outcomes, levels of activity, performance, developments, or achievements, and there can be no assurance that our expectations, intentions, anticipations, beliefs or projections will result or be achieved or accomplished. Cautionary Statements of General Applicability In addition to other factors and matters discussed elsewhere in this Form 10-Q, in our other periodic reports and filings made from time to time with the Securities and Exchange Commission, and in our other public statements from time to time (including, without limitation, our press releases), some of the important factors that, in our view, could cause actual results to differ materially from those expressed, anticipated or implied in the forward-looking statements include, without limitation, the possibility that we will no longer meet the requirements for our stock to remain listed on The Nasdaq National Market; developments in this relatively new industry and in the larger economy; our recent focus on our current business; difficulties inherent in entering new markets and business areas and in establishing new product lines; difficulties or delays in developing new or improved products and new business or product lines; difficulties or delays in developing, manufacturing, and supplying products with 15 the contemplated or desired features, performance, cost, and other characteristics; difficulties in estimating costs of developing and supplying products; difficulties in developing, manufacturing, and supplying products in a timely and cost-effective manner; lack of market acceptance and success of broadband wireless systems and products, including our current and contemplated products; difficulties in obtaining customers; dependence on a limited number of customers; our having limited capital; our limited ability to predict our future financial performance; our inability to predict the date of our profitability; the expected fluctuation in our quarterly results; the expected volatility in our stock price; difficulties in attracting and retaining qualified personnel, particularly in light of recent workforce restructurings; our dependence on key personnel; inability to protect our proprietary technology; the potential for intellectual property infringement, warranty, product liability and other claims; failure of our customers to sell broadband wireless access solutions that include our products; difficulties in our customers or ultimate end users of our products obtaining sufficient funding; the impact, availability, pricing, and success of competing technologies and products; general competition in the broadband wireless access industry and in other industries we enter; difficulties in complying with existing governmental regulations and developments or changes in governmental regulation; our dependence on third-party suppliers and manufacturers; difficulties in obtaining satisfactory performance from third-party manufacturers and suppliers; risks associated with foreign sales such as currency and political risk; investment risk resulting in the decrease in value of our investments; difficulties in collecting our accounts receivable; future stock sales by our current stockholders, including our directors and management; the effect of our anti-takeover defenses (including our stockholder rights plan); and risks associated with any acquisitions or investments we may make. Many of 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, 2000 filed with the Securities and Exchange Commission. Specific Cautionary Statements concerning Focus on Virtual Fiber RadioTM Product Line We recently announced that we were going to focus on our Virtual Fiber RadioTM product line. Many of the cautionary statements above are particularly relevant in light of this recent decision. We currently have no customers for Virtual Fiber RadioTM products. We are still in the process of developing our Virtual Fiber RadioTM product line. We do not expect to have a product ready for production deliveries to customers until the first quarter of 2002 at the earliest. There can be no assurance that we will be successful in developing the Virtual Fiber RadioTM product line or obtaining customers for our Virtual Fiber RadioTM products. These issues, together with many of the cautionary statements above, could have an adverse affect on our business, financial condition, results of operations, and viability as a going concern. Specific Cautionary Statements concerning Exit from Point- to-Multipoint ODU Product Line Contemporaneously with our announcement to focus on our Virtual Fiber RadioTM product line, we announced our decision to exit our point-to-multipoint outdoor unit product line. Since February 2000, we have received all of our revenue from that product line. We are currently analyzing alternatives for this product line, including a sale. However, there can be no assurance that we will be able to sell this product line. Exiting this product line will involve addressing current customer relationships and commitments. This process could have adverse impacts on us such as management distraction, adverse publicity, adverse reaction from financial markets, financial costs, liability to current customers, and adverse reaction from our potential customers. These impacts could have an adverse affect on our business, financial condition and results of operations. 16 Specific Cautionary Statements Concerning Alcatel Lawsuit We recently filed a lawsuit against Alcatel. Alcatel has been the largest purchaser of our point-to-multipoint outdoor unit products and our largest customer for the past several years. This action is at an early stage, and accordingly we cannot predict the outcome. Pursuing a lawsuit of this nature can be a lengthy, expensive process, and there can be no assurance that we will prevail or ultimately receive any proceeds from the litigation. Alcatel may assert a variety of defenses and counterclaims in this action, which could have an adverse impact on us. In addition, this lawsuit could have other adverse impacts on us such as management distraction, adverse publicity, adverse reaction from the financial markets, and adverse reaction from our other current and potential customers. These impacts could have an adverse affect on our business, financial condition and results of operations. Possible Implications of Cautionary Statements The items described above, either individually or in some combination, could have a material adverse impact on our reputation, business, need for additional capital, ability to obtain additional debt or equity financing, current and contemplated products gaining market acceptance, development of new products and new areas of business, cash flow, results of operations, financial condition, stock price, viability as an ongoing company, results, outcomes, levels of activity, performance, developments, or achievements. Given these uncertainties, investors are cautioned not to place undue reliance on forward-looking statements. 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. PART II - OTHER INFORMATION Item 1. Legal Proceedings. During the period from June 12 to July 11, 2001, three purported securities class action lawsuits were filed against the Company in the U.S. District Court for the Southern District of New York, Katz v. Telaxis Communications Corporation et al., Kucera v. Telaxis Communications Corporation et al., and Paquette v. Telaxis Communications Corporation et al. The complaints also name one or more of the Company's underwriters in the Company's initial public offering and certain officers and directors of the Company. The complaints allege violations of the federal securities laws regarding statements in the Company's initial public offering registration statement concerning the underwriters' activities in connection with the underwriting of the Company's shares to the public. The actions seek rescission of the plaintiff's alleged purchases of Company stock and other damages and costs associated with the litigation. The Company and its officers and directors deny any liability and intend to vigorously defend the allegations against them. On July 26, 2001, the Company filed a lawsuit in the Superior Court of the Commonwealth of Massachusetts captioned Telaxis Communications Corporation v. Alcatel and Alcatel Networks Corporation. This suit asserts that Alcatel has failed to honor various contractual obligations and commitments made to the Company. This action is at an early stage, and accordingly the Company cannot predict the outcome. We are subject to potential liability under contractual and other matters and various claims and legal actions which are pending or may be asserted. These matters arise in the ordinary course and conduct of our business. While the outcome of all of the pending and potential claims and legal actions against us cannot be forecast with certainty, we believe that such matters should not result in any liability which would have a material adverse effect on our business. Item 2. Changes in Securities and Use of Proceeds. Stockholder Rights Plan In May 2001, the Company adopted a stockholder rights plan. As a part of the plan, the Company has declared a dividend of one right for each outstanding share of common stock to stockholders of record as of May 31, 2001. Each right entitles the holder to purchase one one-thousandth (1/1000) of a share of the Company's class one participating cumulative preferred stock at an initial purchase price of $10.00 per fractional share, subject to adjustment. If a person or group acquires 15 percent or more of the Company's outstanding common stock, holders of the rights (other than the acquiring person or group) will be able to purchase, in exchange for the purchase price, the preferred stock equivalent to shares of the Company's common stock having a market value of twice the purchase price. In the event of a subsequent merger or other acquisition of the Company, holders of rights (other than the acquiring 17 person or group) may acquire, upon payment of the purchase price, shares of the acquiring entity (or an affiliate) having a value of twice the purchase price. The rights will expire on May 18, 2011, unless earlier redeemed by the Company. Holders who, as of May 18, 2001, hold 15 percent or more of the Company's common stock will not trigger the rights unless they exceed an ownership level equal to the percentage of the Company's common stock beneficially owned by that person on May 18, 2001 plus 1 percent of the Company's common stock outstanding on May 18, 2001. The rights plan is described in more detail in the Form 8-K filed by the Company with the Securities and Exchange Commission on May 21, 2001. Recent Sales of Unregistered Securities The Company has not issued or sold any unregistered securities in the three months ended June 30, 2001. 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 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 working capital and for general corporate purposes. Pending such uses, 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 June 30, 2001, the Company has applied $40.3 million of the net proceeds from the offering toward working capital, financing capital expenditures, and funding operating losses. Item 4. Submission of Matters to a Vote of Security Holders. The Company held its annual meeting of stockholders on May 16, 2001. In connection with that meeting, beginning April 12, 2001, the Company distributed a definitive proxy statement to its stockholders of record as of March 19, 2001. At that meeting, the following nominee was elected to serve a three-year term as a Director of the Company: BOARD'S NOMINEE FOR WITHHELD --------------- --- -------- Carol B. Armitage 13,431,468 80,195 The terms of office of each of Albert E. Paladino, David A. Norbury, Allan M. Doyle, Jr., Robert C. Fleming, and John L. Youngblood as a director of the Company continued after the May 16, 2001 annual meeting of stockholders. Mr. Fleming has subsequently resigned as a director of the Company. 18 Item 6. Exhibits and Reports on Form 8-K. (a)...............Exhibits Exhibit Number Description 3.1 Certificate of Vote of Directors Establishing a Class or Series of Stock. 3.2 Amended and Restated By-laws of the Company. 4.1 Rights Agreement, dated as of May 18, 2001, between the Company and Registrar and Transfer Company, as Rights Agent (incorporated by reference to Exhibit 4(a) to the Company's Form 8-K filed with the Securities and Exchange Commission on May 21, 2001). 4.2 Terms of Class One Participating Cumulative Preferred Stock of the Company (incorporated by reference to Exhibit 4(b) to the Company's Form 8-K filed with the Securities and Exchange Commission on May 21, 2001). 4.3 Form of Right Certificate (incorporated by reference to Exhibit 4(c) to the Company's Form 8-K filed with the Securities and Exchange Commission on May 21, 2001). 10.1 2001 Nonqualified Stock Plan of the Company. 10.2 Employment Agreement by and between the Company and Stephen Ward dated as of July 17, 2001. 10.3 Indemnification Agreement by and between the Company and Stephen Ward dated as of July 17, 2001. (b)...............Reports on Form 8-K The Company filed a report on Form 8-K on May 21, 2001 to report that the Company has adopted a stockholder rights plan. See Part II, Item 2 above for more details concerning this stockholder rights plan. 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: August 10, 2001 By: /s/ Dennis C. Stempel, ------------------------------------ Vice President, Chief Financial Officer and Treasurer (principal financial and accounting officer) 19 EX-3.1 3 exhibit31_8-1.txt Exhibit 3.1 FEDERAL IDENTIFICATION NO: 04-2751645 ------------------- The Commonwealth of Massachusetts William Francis Galvin Secretary of the Commonwealth One Ashburton Place, Boston, Massachusetts 02108-1512 CERTIFICAE OF VOTE OF DIRECTORS ESTABLISHING A CLASS OR SERIES OF STOCK (Gerneral Laws, Chapter 156B, Section 26) We, John L. Youngblood , President ----------------------------------------------------------------- and David L. Renauld , Clerk --------------------------------------------------------------------- of Telaxis Communications Corporation ----------------------------------------------------------------------------- (Exact name of corporation) located at: 20 Industrial Drive East, South Deerfield, MA 01373 -------------------------------------------------------------------- (Street Address of corporation in Massachusetts) do hereby certify that at a meeting of the directors of the corporation held on May 16, 2001, the following vote establishing and designating a class or series of stock and determining the relative rights and preferences thereof was duly adopted: SEE CONTINUATION SHEET 2A CONTINUATION SHEET 2A --------------------- TELAXIS COMMUNICATIONS CORPORATION RESOLVED, that, pursuant to the authority vested in the Board of Directors of the Corporation in accordance with the provisions of the Restated Articles of Organization of the Corporation, as amended, the Board of Directors hereby designates and establishes 1,000,000 shares of its authorized but unissued Preferred Stock as its Class One Participating Cumulative Preferred Stock, $.01 par value (the "Class One Preferred Stock"); that such Class One Preferred Stock shall have the terms set forth in their entirety in Exhibit A to the Rights Agreement presented to this meeting, and such terms be, and they hereby are, approved; and that the President or any Vice President and the Clerk or any Assistant Clerk of the Corporation be, and they hereby are, authorized to execute a Certificate of Vote of Directors Establishing a Series of a Class of Stock (the "Certificate of Vote of Directors") setting forth such terms in the name of the Corporation, and to file the Certificate of Vote of Directors with the Secretary of State of The Commonwealth of Massachusetts and such other governmental authorities as may be required by law. Exhibit A to the Rights Agreement EXHIBIT A TERMS OF CLASS ONE PARTICIPATING CUMULATIVE PREFERRED STOCK OF TELAXIS COMMUNICATIONS CORPORATION SECTION 1. Designation and Number of Shares. The shares of such series shall be designated as "Class One Participating Cumulative Preferred Stock" (the "Class One Preferred Stock"), par value $.01 per share. The number of shares initially constituting the Class One Preferred Stock shall be 1,000,000; provided, however, that, if more than a total of 1,000,000 shares of Class One Preferred Stock shall be issuable upon the exercise of Rights (the "Rights") issued pursuant to the Rights Agreement dated as of May 18, 2001, between the Corporation and Registrar and Transfer Company, as Rights Agent (the "Rights Agreement"), the Board of Directors of the Corporation, pursuant to Section 26 of Chapter 156B of the Massachusetts General Laws, shall direct by resolution or resolutions that a certificate be properly executed, acknowledged, filed and recorded, in accordance with the provisions of said Section 26 thereof, providing for the total number of shares of Class One Preferred Stock authorized to be issued to be increased (to the extent that the Articles of Organization then permit) to the largest number of whole shares (rounded up to the nearest whole number) issuable upon exercise of such Rights. SECTION 2. Dividends or Distributions. (a) Subject to the prior and superior rights of the holders of shares of any other series of Preferred Stock or other class of capital stock of the Corporation ranking prior and superior to the shares of Class One Preferred Stock with respect to dividends, the holders of shares of the Class One Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of the assets of the Corporation legally available therefor, (1) quarterly dividends payable in cash on the last day of each fiscal quarter in each year, or such other dates as the Board of Directors of the Corporation shall approve (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or a fraction of a share of Class One Preferred Stock, in the amount of $1.00 per whole share (rounded to the nearest cent) less the amount of all cash dividends declared on the Class One Preferred Stock pursuant to the following clause (2) since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Class One Preferred Stock (the total of which shall not, in any event, be less than zero) and (2) dividends payable in cash on the payment date for each cash dividend declared on the Common Stock in an amount per whole share (rounded to the nearest cent) equal to the Formula Number (as hereinafter defined) then in effect times the cash dividends then to be paid on each share of Common Stock. In addition, if the Corporation shall pay any dividend or make any distribution on the Common Stock payable in assets, securities or other forms of noncash consideration (other than dividends or distributions solely in shares of Common Stock), then, in each such case, the Corporation shall simultaneously pay or make on each outstanding whole share of Class One Preferred Stock a dividend or distribution in like kind equal to the Formula Number then in effect times such dividend or distribution on each share of the Common Stock. As used herein, the "Formula Number" shall be 1000; provided, however, that if at any time after May 18, 2001, the Corporation shall (i) declare or pay any dividend on the Common Stock payable in shares of Common Stock or make any distribution on the Common Stock in shares of Common Stock, (ii) subdivide (by a stock split or otherwise) the outstanding shares of Common Stock into a larger A-1 number of shares of Common Stock or (iii) combine (by a reverse stock split or otherwise) the outstanding shares of Common Stock into a smaller number of shares of Common Stock, then in each such event the Formula Number shall be adjusted to a number determined by multiplying the Formula Number in effect immediately prior to such event by a fraction, the numerator of which is the number of shares of Common Stock that are outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that are outstanding immediately prior to such event (and rounding the result to the nearest whole number); and provided further, that, if at any time after May 18, 2001, the Corporation shall issue any shares of its capital stock in a merger, reclassification, or change of the outstanding shares of Common Stock, then in each such event the Formula Number shall be appropriately adjusted to reflect such merger, reclassification or change so that each share of Class One Preferred Stock continues to be the economic equivalent of a Formula Number of shares of Common Stock prior to such merger, reclassification or change. (b) The Corporation shall declare a dividend or distribution on the Class One Preferred Stock as provided in Section 2(a) immediately prior to or at the same time it declares a dividend or distribution on the Common Stock(other than a dividend or distribution solely in shares of Common Stock); provided, however, that, in the event no dividend or distribution (other than a dividend or distribution in shares of Common Stock) shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Class One Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. The Board of Directors may fix a record date for the determination of holders of shares of Class One Preferred Stock entitled to receive a dividend or distribution declared thereon, which record date shall be the same as the record date for any corresponding dividend or distribution on the Common Stock. (c) Dividends shall begin to accrue and be cumulative on outstanding shares of Class One Preferred Stock from and after the Quarterly Dividend Payment Date next preceding the date of original issue of such shares of Class One Preferred Stock; provided, however, that dividends on such shares which are originally issued after the record date for the determination of holders of shares of Class One Preferred Stock entitled to receive a quarterly dividend and on or prior to the next succeeding Quarterly Dividend Payment Date shall begin to accrue and be cumulative from and after such Quarterly Dividend Payment Date. Notwithstanding the foregoing, dividends on shares of Class One Preferred Stock which are originally issued prior to the record date for the determination of holders of shares of Class One Preferred Stock entitled to receive a quarterly dividend on the first Quarterly Dividend Payment Date shall be calculated as if cumulative from and after the last day of the fiscal quarter next preceding the date of original issuance of such shares. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Class One Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. (d) So long as any shares of the Class One Preferred Stock are outstanding, no dividends or other distributions shall be declared, paid or distributed, or set aside for payment or distribution, on the Common Stock unless, in each case, the dividend required by this Section 2 to be declared on the Class One Preferred Stock shall have been declared. (e) The holders of the shares of Class One Preferred Stock shall not be entitled to receive any dividends or other distributions except as provided herein. A-2 SECTION 3. Voting Rights. The holders of shares of Class One Preferred Stock shall have the following voting rights: (a) Each holder of Class One Preferred Stock shall be entitled to a number of votes equal to the Formula Number then in effect, for each share of Class One Preferred Stock held of record on each matter on which holders of the Common Stock or stockholders generally are entitled to vote, multiplied by the maximum number of votes per share which any holder of the Common Stock or stockholders generally then have with respect to such matter (assuming any holding period or other requirement to vote a greater number of shares is satisfied). (b) Except as otherwise provided herein or by applicable law, the holders of shares of Class One Preferred Stock and the holders of shares of Common Stock shall vote together as one class for the election of directors of the Corporation and on all other matters submitted to a vote of stockholders of the Corporation. (c) If, at the time of any annual meeting of stockholders for the election of directors, the equivalent of six quarterly dividends (whether or not consecutive) payable on any share or shares of Class One Preferred Stock are in default, the number of directors constituting the Board of Directors of the Corporation shall be increased by two. In addition to voting together with the holders of Common Stock for the election of other directors of the Corporation, the holders of record of the Class One Preferred Stock, voting separately as a class to the exclusion of the holders of Common Stock, shall be entitled at said meeting of stockholders (and at each subsequent annual meeting of stockholders), unless all dividends in arrears have been paid or declared and set apart for payment prior thereto, to vote for the election of two directors of the Corporation, the holders of any Class One Preferred Stock being entitled to cast a number of votes per share of Class One Preferred Stock equal to the Formula Number. Until the default in payments of all dividends which permitted the election of said directors shall cease to exist, any director who shall have been so elected pursuant to the next preceding sentence may be removed at any time, either with or without cause, only by the affirmative vote of the holders of the shares of Class One Preferred Stock at the time entitled to cast a majority of the votes entitled to be cast for the election of any such director at a special meeting of such holders called for that purpose, and any vacancy thereby created may be filled by the vote of such holders. If and when such default shall cease to exist, the holders of the Class One Preferred Stock shall be divested of the foregoing special voting rights, subject to revesting in the event of each and every subsequent like default in payments of dividends. Upon the termination of the foregoing special voting rights, the terms of office of all persons who may have been elected directors pursuant to said special voting rights shall forthwith terminate, and the number of directors constituting the Board of Directors shall be reduced by two. The voting rights granted by this Section 3(c) shall be in addition to any other voting rights granted to the holders of the Class One Preferred Stock in this Section 3. (d) Except as provided herein, in Section 11 or by applicable law, holders of Class One Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for authorizing or taking any corporate action. SECTION 4. Certain Restrictions. (a) Whenever quarterly dividends or other dividends or distributions payable on the Class One Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and A-3 unpaid dividends and distributions, whether or not declared, on shares of Class One Preferred Stock outstanding shall have been paid in full, the Corporation shall not (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Class One Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Class One Preferred Stock, except dividends paid ratably on the Class One Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Class One Preferred Stock; provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Class One Preferred Stock; or (iv) purchase or otherwise acquire for consideration any shares of Class One Preferred Stock, or any shares of stock ranking on a parity with the Class One Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (a) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. SECTION 5. Liquidation Rights. Upon the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Class One Preferred Stock unless, prior thereto, the holders of shares of Class One Preferred Stock shall have received an amount equal to the accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, plus an amount equal to the greater of (x) $10.00 per whole share or (y) an aggregate amount per share equal to the Formula Number then in effect times the aggregate amount to be distributed per share to holders of Common Stock or (2) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Class One Preferred Stock, except distributions made ratably on the Class One Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. A-4 SECTION 6. Consolidation, Merger, etc.. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash or any other property, then in any such case the then outstanding shares of Class One Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share equal to the Formula Number then in effect times the aggregate amount of stock, securities, cash or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is exchanged or changed. In the event both this Section 6 and Section 2 appear to apply to a transaction, this Section 6 will control. SECTION 7. No Redemption; No Sinking Fund. (a) The shares of Class One Preferred Stock shall not be subject to redemption by the Corporation or at the option of any holder of Class One Preferred Stock; provided, however, that the Corporation may purchase or otherwise acquire outstanding shares of Class One Preferred Stock in the open market or by offer to any holder or holders of shares of Class One Preferred Stock. (b) The shares of Class One Preferred Stock shall not be subject to or entitled to the operation of a retirement or sinking fund. SECTION 8. Ranking. The Class One Preferred Stock shall rank junior to all other classes and series of Preferred Stock of the Corporation, unless the Board of Directors shall specifically determine otherwise in fixing the powers, preferences and relative, participating, optional and other special rights of the shares of such other class or series and the qualifications, limitations and restrictions thereof. SECTION 9. Fractional Shares. The Class One Preferred Stock shall be issuable upon exercise of the Rights issued pursuant to the Rights Agreement in whole shares or in any fraction of a share that is one one-thousandth (1/1000th) of a share or any integral multiple of such fraction which shall entitle the holder, in proportion to such holder's fractional shares, to receive dividends, exercise voting rights, participate in distributions and to have the benefit of all other rights of holders of Class One Preferred Stock. In lieu of fractional shares, the Corporation, prior to the first issuance of a share or a fraction of a share of Class One Preferred Stock, may elect (1) to make a cash payment as provided in the Rights Agreement for fractions of a share other than one one-thousandth (1/1000th) of a share or any integral multiple thereof or (2) to issue depository receipts evidencing such authorized fraction of a share of Class One Preferred Stock pursuant to an appropriate agreement between the Corporation and a depository selected by the Corporation; provided that such agreement shall provide that the holders of such depository receipts shall have all the rights, privileges and preferences to which they are entitled as holders of the Class One Preferred Stock. SECTION 10. Reacquired Shares. Any shares of Class One Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors pursuant to the provisions of Article IV of the Restated Articles of Organization, as amended. SECTION 11. Amendment. None of the powers, preferences and relative, participating, optional and other special rights of the Class One Preferred Stock as provided herein or in the A-5 Articles of Organization shall be amended in any manner which would alter or change the powers, preferences, rights or privileges of the holders of Class One Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least 66-2/3% of the outstanding shares of Class One Preferred Stock, voting as a separate class; provided, however, that no such amendment approved by the holders of at least 66-2/3% of the outstanding shares of Class One Preferred Stock shall be deemed to apply to the powers, preferences, rights or privileges of any holder of shares of Class One Preferred Stock originally issued upon exercise of the Rights after the time of such approval without the approval of such holder. * * * * A-6 SIGNED UNDER THE PENALTIES OF PERJURY, this 17th day of May , 2001, ---------- ---------- /s/ John L. Youngblood , President - -------------------------------------------------------------------- and /s/ David L. Renauld , Clerk -------------------------------------------------------------------- THE COMMONWEALTH OF MASSACHUSETTS CERTIFICATE OF VOTE OF DIRECTORS ESTABLISHING A SERIES OF A CLASS OF STOCK (General Laws, Chapter 156B, Section 26) ================================================== I hereby approve the within Certificate of Vote of Directors and, the filing fee in the amount of $_________________ having been paid, said Certificate is deemed to have been filed with me this __________ day of_____________________, 20_____. Effective date: ______________________________________________ WILLIAM FRANCIS GALVIN Secretary of the Commonwealth TO BE FILLED IN BY CORPORATION Photocopy of document to be sent to: David L. Renauld ------------------------------------------------ Telaxis Communications Corporation ------------------------------------------------ 20 Industrial Drive East, S. Deerfield, MA 01373 ------------------------------------------------ Telephone: (413) 665-8551 -------------------------------------- EX-3.2 4 exhibit32_7-9.txt Exhibit 3.2 AMENDED AND RESTATED BY-LAWS ----------------------------- TELAXIS COMMUNICATIONS CORPORATION ARTICLE I STOCKHOLDERS ------------ 1. Place of Meetings. All meetings of stockholders shall be held at such date, time and place, either within or outside of Massachusetts, as may be designated by the Directors from time to time. 2. Annual Meetings. The annual meeting of stockholders shall be held on the second Monday in May in each year (or if that be a legal holiday in the place where the meeting is to be held, on the next succeeding full business day) at 10:00 o'clock a.m., unless a different hour and date (which date shall be within six months after the end of the fiscal year of the corporation) is fixed by the Directors or the President and stated in the notice of the meeting. The purposes for which the annual meeting is to be held, in addition to those prescribed by law, by the Articles of Organization or by these By-laws, may be specified by the Directors or the President. If no annual meeting is held in accordance with the foregoing provisions, a special meeting may be held in lieu thereof and any action taken at such meeting shall have the same effect as if taken at the annual meeting. 3. Special Meetings. Special meetings of stockholders may be called by the President or by the Directors. Upon written application of one or more stockholders who hold at least thirty (30%) percent of the capital stock entitled to vote at the meeting, special meetings shall be called by the Clerk, or in the case of the death, absence, incapacity or refusal of the Clerk, by any other officer. The call for the meeting shall state the place, date, hour and purposes of the meeting. Business transacted at any special meeting of the stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting. 4. Notice of Meetings. A written notice of every meeting of stockholders, stating the place, date and hour thereof and the purposes for which the meeting is to be held, shall be given by the Clerk or other person calling the meeting at least seven (7) days before the meeting to each stockholder entitled to vote thereat and to each stockholder who, by law, by the Articles of Organization or by these By-laws, is entitled to such notice, by leaving such notice with him or at his residence or usual place of business, or by mailing it postage prepaid and addressed to him at his address as it appears upon the books of the corporation. Whenever any notice is required to be given to a stockholder by law, by the Articles of Organization or by these By-laws, no such notice need be given if a written waiver of notice, executed before or after the meeting by the stockholder or his attorney thereunto duly authorized, is filed with the records of the meeting. 5. Quorum. Unless the Articles of Organization otherwise provide, a majority in interest of all stock issued, outstanding and entitled to vote on any matter shall constitute a quorum with respect to that matter; except that if two or more classes of stock are outstanding and entitled to vote as separate classes, then in the case of each such class a quorum shall consist of a majority in interest of the stock of that class issued, outstanding and entitled to vote. 6. Adjournments. Any meeting of stockholders may be adjourned to any other time and to any other place at which a meeting of stockholders may be held under these By-laws by the vote of the holders of a majority of the stock present or represented at the meeting, although less than a quorum, or by any officer entitled to preside or to act as Clerk of such meeting, if no stockholder is present or represented. It shall not be necessary to notify any stockholder of any adjournment. Any business which could have been transacted at any meeting of the stockholders as originally called may be transacted at any adjournment thereof. 7. Voting and Proxies. Each stockholder shall have one vote for each share of stock entitled to vote held by him of record according to the records of the corporation, and a proportionate vote for a fractional share so held by him, unless otherwise provided by the Articles of Organization. Stockholders may vote either in person or by written proxy dated not more than six (6) months before the meeting named therein; provided, that a proxy coupled with an interest sufficient in law to support an irrevocable power, including, without limitation, an interest in the shares or in the corporation generally, may be made irrevocable if it so provides, need not specify the meeting to which it relates, and shall be valid and enforceable until the interest terminates, or for such shorter period as may be specified in the proxy. Proxies shall be filed with the Clerk of the meeting or of any adjournment thereof before being voted. Except as otherwise stated therein, proxies shall entitle the persons named therein to vote at any adjournment of such meeting but shall not be valid after final adjournment of such meeting. A proxy with respect to stock held in the name of two or more persons shall be valid if executed by one of them unless, at or prior to exercise of the proxy, the corporation receives a specific written notice to the contrary from any one of them. A proxy purported to be executed by or on behalf of a stockholder shall be deemed valid unless challenged at or prior to its exercise. 8. Action at Meeting. When a quorum is present, the holders of a majority of the stock present or represented and voting on a matter (or if there are two or more classes of stock entitled to vote as separate classes, then in the case of each such class, the holders of a majority of the stock of that class present or represented and voting on a matter), except where a larger vote is required by law, by the Articles of Organization or by these By-laws, shall decide any matter to be voted on by the stockholders. Any election by stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote at the election. No ballot shall be required for such election unless requested by a stockholder present or represented at the meeting and entitled to vote in the election. The corporation shall not directly or indirectly vote any shares of its stock other than shares held directly or indirectly by it in a fiduciary capacity. 9. Inspectors of Election. The Board of Directors, in advance of any meeting of stockholders, may appoint one or more inspectors to act at the meeting or any adjournment thereof. If inspectors are not so appointed, the person presiding at the meeting may, and on the request of any stockholder entitled to vote thereat shall, appoint one or more inspectors. If one or more inspectors are not so appointed, then the presiding officer shall act as the inspector of the election. In case any person appointed fails to appear or act, the vacancy may be filled by appointment made by the Board in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. No director or officer of the corporation shall be eligible to act as an inspector of an election of directors of the corporation. The inspectors shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting or any stockholder entitled to vote thereat, the inspectors shall make a report in writing of any challenge, question or matter determined by them and execute a certificate of any fact found by them. 10. Action Without Meeting. Any action to be taken by stockholders may be taken without a meeting if all stockholders entitled to vote on the matter consent to the action by a writing filed with the records of the meetings of stockholders. Such consent shall be treated for all purposes as a vote at a meeting. ARTICLE II DIRECTORS --------- 1. Powers. The business of the corporation shall be managed by a Board of Directors who may exercise all the powers of the corporation except as otherwise provided by law, by the Articles of Organization or by these By-laws. In the event of a vacancy in the Board of Directors, the remaining Directors, except as otherwise provided by law, may exercise the powers of the full Board until the vacancy is filled. 2. Election. A Board of Directors consisting of seven (7) persons shall be elected by the stockholders at the annual meeting or any special meeting in lieu thereof. 3. Vacancies. If the office of any Director becomes vacant by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, including by enlargement of the Board of Directors, the Board of Directors or remaining Directors if less than a quorum may, by majority vote, choose a successor or successors, who shall hold office for the unexpired term in respect of which such vacancy occurred and until his successor be chosen and qualified, or until his earlier death, resignation or removal. 4. Enlargement of the Board. The number of the Board of Directors may be increased at any meeting of the stockholders or by a vote of the Directors then in office. 5. Tenure. The Directors shall be classified with respect to the time for which they shall severally hold office by dividing them into three classes, each consisting of one-third, or as equal in number as possible, of the whole number of the Board of Directors, and all Directors shall hold office until their successors are chosen and qualified, or until their earlier death, resignation, or removal. The Board of Directors has adopted a vote designating, from among its members, Directors to serve as Directors of the first class ("Class I Directors") who will hold office until the annual meeting in 2000 and until their successors are duly elected and qualified, Directors of the second class ("Class II Directors") who will hold office until the annual meeting in 2001 and until their successors are duly elected and qualified, and Directors of the third class ("Class III Directors") who will hold office until the annual meeting in 2002 and until their successors are duly elected and qualified. At each annual meeting beginning in 2000, the successors to the class of Directors whose term expires at that meeting shall be elected to hold office for a term continuing until the annual meeting held in the third year following the year of their election and until their successors are duly elected and qualified. Any Director may resign by delivering his written resignation to the corporation at its principal office or to the President, Clerk or Secretary, except that no Director shall resign by delivering such resignation to himself. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. 6. Removal. A Director may be removed from office for cause by vote of a majority of the stock outstanding and entitled to vote in the election of Directors, provided that the Directors of a class elected by a particular class of stockholders may be removed only by the vote of the holders of a majority of the shares of such class. A Director may be removed for cause only after reasonable notice and opportunity to be heard before the body proposing to remove him. 7. Meetings. Regular meetings of the Directors may be held without call or notice at such places, within or without Massachusetts, and at such times as the Directors may from time to time determine, provided that any Director who is absent when such determination is made shall be given notice of the determination. A regular meeting of the Directors may be held without a call or notice at the same place as the annual meeting of stockholders or the special meeting held in lieu thereof, following such meeting of stockholders. Special meetings of the Directors may be held at any time and place, within or without Massachusetts, designated in a call by the President, Treasurer or two or more Directors. 8. Notice of Special Meetings. Notice of all special meetings of the Directors shall be given to each Director by the Secretary, or if there be no Secretary by the Clerk or Assistant Clerk, or in case of the death, absence, incapacity or refusal of such persons, by the officer or one of the Directors calling the meeting. Notice shall be given to each Director in person or by telephone or by telegram sent to his business or home address at least 4 forty-eight (48) hours in advance of the meeting, or by written notice mailed to his business or home address at least seventy-two (72) hours in advance of the meeting. Notice need not be given to any Director if a written waiver of notice, executed by him before or after the meeting, is filed with the records of the meeting, or to any Director who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him. A notice or waiver of notice of a Directors' meeting need not specify the purposes of the meeting. 9. Quorum. At any meeting of the Directors, a majority of the Directors then in office shall constitute a quorum. In the event that one or more Directors shall be disqualified to vote at any meeting, then the required quorum shall be reduced by one for each such Director so disqualified; provided, however, that in no case shall less than one-third (1/3) of the total number of Directors constitute a quorum. Less than a quorum may adjourn any meeting from time to time without further notice. 10. Action at Meeting. At any meeting of the Directors at which a quorum is present, the vote of a majority of those present, unless a different vote is specified by law, by the Articles of Organization or by these By-laws, shall be sufficient to take any action. 11. Meeting by Conference. Members of the Board or any committee designated thereby may participate in a meeting of such Board or committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time and participation by such means shall constitute presence in person at a meeting. 12. Action by Consent. Any action by the Directors may be taken without a meeting if a written consent thereto is signed by all the Directors and filed with the records of the meetings of Directors. Such consent shall be treated for all purposes as a vote at a meeting. 13. Committees. The Directors may, by vote of a majority of the Directors then in office, elect from their number an executive committee or other committees and may by like vote delegate thereto some or all of their powers except those which by law, the Articles of Organization or these By-laws, they are prohibited from delegating. Each committee is to consist of two or more Directors. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Each such committee shall keep minutes and make such reports as the Board of Directors may from time to time request. Except as the Directors may otherwise determine, any such committee may make rules for the conduct of its business but, unless otherwise provided by the Directors or in such rules, its business shall be conducted as nearly as may be in the same manner as is provided by these By-laws for the Directors. 5 ARTICLE III OFFICERS -------- 1. Enumeration. The officers of the corporation shall consist of a Chief Executive Officer, a President, a Treasurer, a Clerk and such other officers, including a Chairman of the Board, one or more Vice Presidents, Assistant Treasurers, Assistant Clerks and Secretary as the Directors may determine. 2. Election. The Chief Executive Officer, President, Treasurer and Clerk shall be elected annually by the Directors at their first meeting following the annual meeting of stockholders. Other officers may be appointed by the Directors at such meeting or at any other meeting. 3. Qualification. The President shall be a Director. No officer need be a stockholder. Any two or more offices may be held by the same person. The Clerk shall be a resident of Massachusetts unless the corporation has a resident agent appointed for the purpose of service of process. Any officer may be required by the Directors to give bond for the faithful performance of his duties to the corporation in such amount and with such sureties as the Directors may determine. 4. Tenure. Except as otherwise provided by law, by the Articles of Organization or by these By-laws, the President, Treasurer and Clerk shall hold office until the first meeting of the Directors following the annual meeting of stockholders or special meeting in lieu thereof and thereafter until their successors are chosen and qualified; and all other officers shall hold office until the first meeting of the Directors following the annual meeting of stockholders or special meeting in lieu thereof unless a different term is specified in the vote choosing or appointing them. Any officer may resign by delivering his written resignation to the corporation at its principal office or to the President, Clerk or Secretary, except that no officer shall resign by delivering such resignation to himself, and such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. 5. Removal. The Directors may remove any officer with or without cause by a vote of a majority of the entire number of Directors then in office, provided that an officer may be removed for cause only after reasonable notice and opportunity to be heard by the Board of Directors prior to action thereon. Except as the Board of Directors may otherwise determine, no officer who resigns or is removed shall have any right to any compensation as an officer for any period following his resignation or removal, or any right to damages on account of such removal, unless such compensation is expressly provided for in a duly authorized written agreement with the corporation. 6. Vacancies. The Board of Directors may fill any vacancy occurring in any office for any reason and may, in its discretion, leave unfilled for such period as it may determine any offices other than those of President, Treasurer and Clerk. Each such successor shall hold office for the unexpired term of his 6 predecessor and until his successor is elected and qualified, or until his earlier death, resignation or removal. 7. Chairman of the Board. If the Directors appoint a Chairman of the Board, he shall, when present, preside at all meetings of the Directors and shall have such other powers and duties as are usually vested in the office of Chairman of the Board or as may be vested in him by the Board of Directors. 8. Chief Executive Officer. The Chief Executive Officer shall, subject to the direction of the Directors, have general supervision and control of the corporation's business. 9. President. The President, unless designated as the Chief Executive Officer, shall be the Chief Operating Officer of the corporation and shall, subject to the direction of the Directors and the Chief Executive Officer, have general supervision and control of its business. Unless otherwise provided by the Directors, the President shall preside, when present, at all meetings of stockholders and of the Directors (except as provided in Section 7 of this Article III). 10. Vice President. The Vice President or, if there shall be more than one, the Vice Presidents in the order determined by the Directors shall, in the absence or disability of the President, perform the duties and exercise the powers of the President and shall perform such other duties, and shall have such other powers, as the Directors may from time to time prescribe. 11. Treasurer and Assistant Treasurers. The Treasurer shall, subject to the direction of the Directors, have general charge of the financial affairs of the corporation and shall cause to be kept accurate books of account. He shall have custody of all funds, securities and valuable documents of the corporation, except as the Directors may otherwise provide. The Assistant Treasurer or, if there shall be more than one, the Assistant Treasurers in the order determined by the Directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and shall have such other powers as the Directors may from time to time prescribe. 12. Clerk and Assistant Clerks. The Clerk shall keep a record of the meetings of stockholders. Unless a transfer agent is appointed, the Clerk shall keep or cause to be kept in Massachusetts at the principal office of the corporation or at his office the stock and transfer records of the corporation in which are contained the names of all stockholders and the record address and the amount of stock held by each. If there is no Secretary or Assistant Secretary, the Clerk shall keep a record of the meetings of the Directors. The Assistant Clerk, or if there shall be more than one, the Assistant Clerks in the order determined by the Directors shall, in the absence or disability of the Clerk, perform the duties and exercise the powers of the Clerk and shall perform such other duties, and shall have such other powers, as the Directors may from time to time prescribe. 13. Secretary and Assistant Secretaries. If a Secretary is appointed, he shall attend all meetings of the Directors and shall keep a record of the meetings of the Directors. He shall, when required, notify the Directors of 7 their meetings and shall have such other powers, and shall perform such other duties, as the Directors may from time to time prescribe. The Assistant Secretary or, if there shall be more than one, the Assistant Secretaries in the order determined by the Directors shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties, and shall have such other powers, as the Directors may from time to time prescribe. 14. Other Powers and Duties. Each officer shall, subject to these By-laws, have in addition to the duties and powers specifically set forth in these By-laws such duties and powers as are customarily incident to his office and such duties and powers as the Directors may from time to time designate. ARTICLE IV CAPITAL STOCK ------------- 1. Certificates of Stock. Each stockholder shall be entitled to a certificate of the capital stock of the corporation in such form as may be prescribed from time to time by the Directors. The certificate shall be signed by the President or a Vice President, and by the Treasurer or an Assistant Treasurer, but when a certificate is countersigned by a transfer agent or a registrar, other than a Director, officer or employee of the corporation, such signatures may be facsimiles. In case any officer who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the time of its issue. Every certificate for shares of stock which are subject to any restriction on transfer pursuant to the Articles of Organization, the By-laws or any agreement to which the corporation is a party, shall have conspicuously noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restrictions and a statement that the corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge. Every certificate issued when the corporation is authorized to issue more than one class or series of stock shall set forth on its face or back either the full text of the preferences, voting powers, qualifications and special and relative rights of the shares of each class and series authorized to be issued, or a statement of the existence of such preferences, powers, qualifications and rights, and a statement that the corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge. 2. Transfers. Subject to the restrictions, if any, stated or noted on the stock certificates, shares of stock may be transferred on the books of the corporation by the surrender to the corporation or its transfer agent of the certificate therefor, properly endorsed, or accompanied by a written assignment and power of attorney properly executed, with necessary transfer stamps affixed and with such proof of the authenticity of signature as the corporation or its transfer agent may reasonably require. Except as may be otherwise required by law, by the Articles of Organization or by these By-laws, the corporation shall 8 be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect thereto, regardless of any transfer, pledge or other disposition of such stock, until the shares have been transferred on the books of the corporation in accordance with the requirements of these By-laws. It shall be the duty of each stockholder to notify the corporation of his post office address and of his taxpayer identification number. 3. Record Date. The Directors may fix in advance a time not more than sixty (60) days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the making of any distribution to stockholders, or the last day on which the consent or dissent of stockholders may be effectively expressed for any purpose, as the record date for determining the stockholders having the right to notice of and to vote at such meeting, and any adjournment thereof, or the right to receive such dividend or distribution, or the right to give such consent or dissent. In such case only stockholders of record on such record date shall have such right, notwithstanding any transfer of stock on the books of the corporation after the record date. Without fixing such record date, the Directors may for any of such purposes close the transfer books for all or any part of such period. If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day before the day on which notice is given, or, if notice is waived, at the close of business on the day before the day on which the meeting is held. The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating to such purpose. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. 4. Replacement of Certificates. In case of the alleged loss or destruction or the mutilation of a certificate of stock, a duplicate certificate may be issued in place thereof upon such terms as the Directors may prescribe, including the presentation of reasonable evidence of such loss, destruction or mutilation, and the giving of such indemnity as the Directors may require, for the protection of the corporation or any transfer agent or registrar. 5. Issue of Capital Stock. Unless otherwise voted by the stockholders, the whole or any part of any unissued balance of the authorized capital stock of the corporation, or the whole or any part of the capital stock of the corporation held in its treasury, may be issued or disposed of by vote of the Directors in such manner, for such consideration, and on such terms as the Directors may determine. 9 ARTICLE V MISCELLANEOUS PROVISIONS ------------------------ 1. Fiscal Year. Except as from time to time otherwise determined by the Directors, the fiscal year of the corporation shall end on December 31. 2. Seal. The seal of the corporation shall, subject to alteration by the Directors, bear its name, the word "Massachusetts" and the year of its incorporation. 3. Execution of Instruments. All deeds, leases, transfers, contracts, bonds, notes and other obligations authorized to be executed by an officer of the corporation in its behalf shall be signed by the President or the Treasurer, except as the Directors may generally or in particular cases otherwise determine. 4. Voting of Securities. Except as the Directors may otherwise designate, the President or Treasurer may waive notice of and act as, or appoint any person or persons to act as, proxy or attorney-in-fact for this corporation (with or without power of substitution) at any meeting of stockholders or shareholders of any corporation or organization, the securities of which may be held by the corporation (including securities of the corporation held directly or indirectly by it in a fiduciary capacity). 5. Corporate Records. The original or attested copies of the Articles of Organization, By-laws and records of all meetings of the incorporators and stockholders, and the stock and transfer records which shall contain the names of all stockholders and the record address and the amount of stock held by each shall be kept in Massachusetts at the principal office of the corporation or at an office of its transfer agent or of the Clerk. Said copies and records need not all be kept in the same office. They shall be available at all reasonable times to the inspection of any stockholder for any proper purpose, but not to secure a list of stockholders for the purpose of selling said list or copies thereof, or of using the same for a purpose other than in the interest of the applicant, as a stockholder, relative to the affairs of the corporation. 6. Evidence of Authority. A certificate by the Clerk or Secretary or Assistant Clerk or Assistant Secretary, or a temporary Clerk or temporary Secretary, as to any action taken by the stockholders, Directors, Executive Committee or any officer or representative of the corporation shall, as to all persons who rely thereon in good faith, be conclusive evidence of such action. 7. Articles of Organization. All references in these By-laws to the Articles of Organization shall be deemed to refer to the Articles of Organization of the corporation as amended and in effect from time to time. 8. Transactions With Interested Parties. In the absence of fraud, no contract or other transaction between this corporation and any other corporation or any firm, association, partnership or person shall be affected or invalidated by the fact that any Director or officer of this corporation is pecuniarily or otherwise interested in, or is a Director, member or officer of, such other 10 corporation or of such firm, association or partnership, or is a party to or is pecuniarily or otherwise interested in such contract or other transaction, or is in any way connected with any person or persons, firm, association, partnership or corporation pecuniarily or otherwise interested therein; provided that the fact that he individually or as a Director, member or officer of such corporation, firm, association or partnership is such a party or is so interested shall be disclosed to or shall have been known by the Board of Directors or a majority of such members thereof as shall be present at a meeting of the Board of Directors at which action upon any such contract or transaction shall be taken. Any Director may be counted in determining the existence of a quorum and may vote at any meeting of the Board of Directors of this corporation for the purpose of authorizing any such contract or transaction with like force and effect as if he were not so interested, or were not a Director, member or officer of such other corporation, firm, association or partnership; provided that any vote with respect to such contract or transaction must be adopted by a majority of the Directors then in office who have no interest in such contract or transaction. 9. Indemnification. Each person at any time a Director, officer, employee or agent of the corporation and any person who serves at its request as a director, officer, employee or other agent of another organization, or who serves at its request in any capacity with respect to any employee benefit plan, including each former Director, officer, employee or agent who was before, on or after the date of the adoption of this By-law shall, to the extent permitted by law and without prejudice to any other rights he might have, be entitled to be reimbursed by the corporation for, and indemnified by the corporation against, all judgments, fines, penalties, costs and expenses reasonably incurred by him in connection with or arising out of any claims made, or any action, suit or proceeding threatened or brought against him or in which he may be involved as a party or otherwise to which he may be or become subject by reason of any action alleged to have been taken or omitted by him as a Director, officer, employee or agent, or in any capacity with respect to any employee benefit plan, whether or not he continues to be a Director, officer, employee, or agent, or to serve in any capacity with respect to any employee benefit plan, at the time of incurring such costs and expenses, including amounts paid or incurred by him in connection with reasonable settlements (other than amounts paid to the corporation itself) of any claim, action, suit or proceeding. Any rights to reimbursement and indemnification granted under this section to any such Director, officer, employee or agent shall extend to his heirs, executors, and administrators. No such reimbursement or indemnification shall be provided for any person with respect to any matter as to which he shall have been adjudicated in any proceeding not to have acted in good faith in the reasonable belief that his action was in the best interests of the corporation, or to the extent that such matter relates to service with respect to an employee benefit plan, in the best interests of the participants or beneficiaries of such employee benefit plan. Reimbursement or indemnification hereunder may, in the discretion of the Board of Directors, include payments by the corporation of costs and expenses incurred in defending a civil or criminal action or proceeding in advance of the final disposition of such action or proceeding upon receipt of an undertaking by the person indemnified to repay such payment if he shall be adjudicated to be not entitled to indemnification hereunder, which undertaking may be accepted without reference to the financial ability of such person to make repayment. Nothing herein contained is intended to, or shall, prevent a settlement by the corporation prior to final adjudication of any claim, including claims for reimbursement or indemnification under this By-law, 11 against the corporation when such settlement appears to be in the interest of the corporation. Each such person shall, by reason of his continuing such service or accepting such election or employment, have the right to be reimbursed and indemnified by the corporation, as above set forth with the same force and effect as if the corporation, to induce him to continue so to serve or to accept such election or employment, specifically agreed in writing to reimburse and indemnify him in accordance with the foregoing provisions of this section. No Director or officer of the corporation shall be liable to anyone for making any determination as to the existence or absence of liability of the corporation hereunder or for making or refusing to make any payment hereunder in reliance upon advice of counsel. 10. Amendments. These By-laws may be amended or repealed and new by-laws adopted either (a) by the stockholders at any regular or special meeting of the stockholders by the affirmative vote of the holders of at least seventy-five percent (75%) in interest of the capital stock then outstanding and then entitled to vote, provided that notice of the proposed amendment or repeal and adoption stating the change or the substance thereof shall have been given in the notice of such meeting or in the waiver of notice with respect to such meeting, or (b) by vote of a majority of the Board of Directors then in office, provided that (i) the Board of Directors may not amend or repeal any provision of these By-laws which by law, by the Articles of Organization or by these By-laws requires action by the stockholders, (ii) not later than the time of giving notice of the meeting of stockholders next following the amendment or repeal of these By-laws and adoption of new by-laws by the Board of Directors, notice thereof stating the change or the substance of such change shall be given to all stockholders entitled to vote on amending these By-laws, and (iii) any amendment or repeal of these By-laws by the Board of Directors and any by-law adopted by the Board of Directors may be amended or repealed by the stockholders. 11. Severability. Any determination that any provision of these By-laws is for any reason inapplicable, illegal or ineffective shall not affect or invalidate any other provision of these By-laws. 12. Pronouns. All pronouns used in these By-laws shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identify of the person or persons may require. 12 EX-10.1 5 exhibit101_8-3.txt Exhibit 10.1 As approved by the Board on July 17, 2001 TELAXIS COMMUNICATIONS CORPORATION 2001 NONQUALIFIED STOCK PLAN SECTION 1. General Purpose of the Plan; Definitions The name of the plan is the Telaxis Communications Corporation 2001 Nonqualified Stock Plan (the "Plan"). The purpose of the Plan is to encourage and enable directors, officers and employees of Telaxis Communications Corporation, a Massachusetts corporation (the "Company"), and its Subsidiaries to acquire a proprietary interest in the Company. It is anticipated that providing such persons with a direct stake in the Company's welfare will assure a closer identification of their interests with those of the Company and its stockholders, thereby stimulating their efforts on the Company's behalf and strengthening their desire to remain with the Company. The Company intends that this purpose will be effected by the granting of Awards (as defined below) under the Plan. The following terms shall be defined as set forth below: "Affiliate" means any company in an "affiliated group," as such term is defined in Section 1504(a) of the Code, which includes the Company. "Award" or "Awards," except where referring to a particular category of grant under the Plan, shall include Non-Statutory Stock Options, Restricted Stock Awards, Unrestricted Stock Awards and Performance Share Awards. "Board" means the Board of Directors of the Company. "Code" means the Internal Revenue Code of 1986, as amended, and any successor code, and related rules, regulations and interpretations. "Committee" shall mean the Board or, if appointed by the Board, a committee of not less than two (2) directors. It is the intention of the Company that the Plan shall be administered by "non-employee directors" within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, but the authority and validity of any act taken or not taken by the Committee shall not be affected if any director administering the Plan is not a non-employee director. "Disability" means disability as set forth in Section 22(e)(3) of the Code. "Effective Date" means July 17, 2001. "Eligible Person" shall have the meaning set forth in Section 4. "Fair Market Value" on any given date means the closing price per share of the Stock on such date as reported by a nationally recognized stock exchange, or, if the Stock is not listed on such an exchange, as reported by the Nasdaq Stock Market, or, if the Stock is not quoted by the Nasdaq Stock Market, the fair market value of the Stock as determined by the Committee. "Non-Statutory Stock Option" means any stock option that is not an incentive stock option as defined in Section 422 of the Code. "Normal Retirement" means retirement from active employment with the Company and its Subsidiaries in accordance with the retirement policies of the Company and its Subsidiaries then in effect. "Officer" means an officer as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended. "Performance Share Award" means an Award granted pursuant to Section 8. "Restricted Stock" shall have the meaning set forth in Section 6. "Restricted Stock Award" means an Award granted pursuant to Section 6. "Stock" means the common stock, $0.01 par value per share, of the Company, subject to adjustments pursuant to Section 3. "Stock Option" means any option to purchase shares of Stock granted pursuant to Section 5. "Subsidiary" means a subsidiary as defined in Section 424 of the Code. "Unrestricted Stock Award" means an award granted pursuant to Section 7. SECTION 2. Administration of Plan; Committee Authority to Select Participants and Determine Awards (a) Committee. The Plan shall be administered by the Committee. The Committee shall select one of its members as its chairman and shall hold its meetings at such times and places as it shall deem advisable. A majority of its members shall constitute a quorum, and all actions of the Committee shall require the affirmative vote of a majority of its members. Any action may be taken by a written instrument signed by all of the members, and any action so taken shall be as fully effective as if it had been taken by a vote of a majority of the members at a meeting duly called and held. Except as specifically reserved to the Board under the terms of the Plan, the Committee shall have full and final authority to operate, manage and administer the Plan on behalf of the Company. Action by the Committee shall require the affirmative vote of a majority of all members thereof. (b) Powers of Committee. The Committee shall have the power and authority to grant and modify Awards consistent with the terms of the Plan, including the power and authority: (i) to select the persons to whom Awards may from time to time be granted; (ii) to determine the time or times of grant, and the extent, if any, of Non-Statutory Stock Options, Restricted Stock, Unrestricted Stock and Performance Shares, or any combination of the foregoing, granted to any one or more participants; -2- (iii) to determine the number of shares to be covered by any Award; (iv) to determine and modify the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of any Award, which terms and conditions may differ among individual Awards and participants, and to approve the form of written instruments evidencing the Awards; provided, however, that no such action shall adversely affect rights under any outstanding Award without the participant's consent; (v) to accelerate the exercisability or vesting of all or any portion of any Award; (vi) subject to the provisions of Section 5(b), to extend the period in which any outstanding Stock Option may be exercised; (vii) to determine whether, to what extent, and under what circumstances Stock and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the participant and whether and to what extent the Company shall pay or credit amounts equal to interest (at rates determined by the Committee) or dividends or deemed dividends on such deferrals; (viii) to delegate to other persons the responsibility for performing ministerial actions in furtherance of the Plan's purpose; and (ix) to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments); to make all determinations it deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the Plan. All decisions and interpretations of the Committee shall be binding on all persons, including the Company and Plan participants. SECTION 3. Shares Issuable under the Plan; Mergers; Substitution (a) Shares Issuable. The maximum number of shares of Stock with respect to which Awards may be granted under the Plan, subject to adjustment upon changes in capitalization of the Company as provided in this Section 3, shall be one million five hundred thousand (1,500,000) shares of Stock. For purposes of this limitation, if any shares of Stock covered by an Award granted under the Plan, or to which such an Award relates, are repurchased or forfeited, or if an Award has expired, terminated or been canceled for any reason whatsoever (other than by reason of exercise or vesting), then such shares of Stock or the shares of Stock covered by such Award, as the case may be, shall be added back to the shares of Stock with respect to which Awards may be granted under the Plan. Subject to such overall limitation, any type or types of Award may be granted with respect to shares of Stock. Shares of Stock issued under the Plan may be authorized but unissued shares or shares reacquired by the Company. -3- (b) Limitation on Awards. Notwithstanding anything to the contrary set forth herein, to the extent necessary for the Plan to qualify as a "broadly based plan" under the applicable Marketplace Rules of the Nasdaq Stock Market, Inc. ("Nasdaq"), no more than forty-nine percent (49%) of the Awards granted hereunder shall be granted to directors and Officers of the Company as measured on the earlier of the date of the Plan's expiration or the third anniversary of the Effective Date, and on each anniversary thereafter, unless otherwise approved by Nasdaq. In addition, to the extent necessary for the Plan to qualify as a "broadly based plan" under the applicable Marketplace Rules of Nasdaq, after the third anniversary of the Effective Date, no more than forty-nine percent (49%) of the Awards granted hereunder during any plan year (each of which shall commence on an anniversary of the Effective Date) shall be granted to directors and Officers of the Company, unless otherwise approved by Nasdaq. (c) Stock Dividends, Mergers, etc. In the event that the Company effects a stock dividend, stock split or similar change in capitalization affecting the Stock, the Committee shall make appropriate adjustments in (i) the number and kind of shares of stock or securities with respect to which Awards may thereafter be granted (including without limitation the limitations set forth in Sections 3(a) and (b) above), (ii) the number and kind of shares remaining subject to outstanding Awards, and (iii) the option or purchase price in respect of such shares. In the event of the merger, consolidation, dissolution or liquidation of the Company, the Committee in its sole discretion may, as to any outstanding Awards, make such substitution or adjustment in the aggregate number of shares reserved for issuance under the Plan and in the number and purchase price (if any) of shares subject to such Awards as it may determine and as may be permitted by the terms of such transaction, or accelerate, amend or terminate such Awards upon such terms and conditions as it shall provide (which, in the case of the termination of the vested portion of any Award, shall require payment or other consideration which the Committee deems equitable in the circumstances). (d) Substitute Awards. The Committee may grant Awards under the Plan by assumption of or in substitution for stock and stock-based awards granted or issued by another company to its directors, officers, employees, consultants and other service providers if such persons become Eligible Persons in connection with an acquisition of that company or any division thereof by the Company, whether by merger, consolidation, purchase of stock, purchase of assets or otherwise. The Committee may direct that the substitute awards be granted on such terms and conditions as the Committee considers appropriate in the circumstances. Shares which may be delivered under such substitute awards may be in addition to the maximum number of shares provided for in Section 3(a). SECTION 4. Eligibility Subject to the limitations set forth in Section 3(b), Awards may be granted to directors, officers and employees of the Company and its Subsidiaries ("Eligible Persons"). SECTION 5. Stock Options The Committee may grant Stock Options to Eligible Persons pursuant to the Plan. Any Stock Option granted under the Plan shall be in writing and in such form as the Committee may -4- from time to time approve. Stock Options granted under the Plan shall be Non-Statutory Stock Options. The Committee in its discretion may determine the effective date of Stock Options. Stock Options granted pursuant to this Section 5 shall be subject to the following terms and conditions and the terms and conditions of Section 9 and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable: (a) Exercise Price. The exercise price per share for the Stock covered by a Stock Option granted pursuant to this Section 5 shall be determined by the Committee at the time of grant; provided, however, that the exercise price shall not be less than Fair Market Value on the date of grant. (b) Option Term. The term of each Stock Option shall be fixed by the Committee, but no Stock Option shall be exercisable more than ten (10) years after the date the Stock Option is granted. (c) Exercisability; Rights of a Stockholder. Stock Options shall become vested and exercisable at such time or times, whether or not in installments, and upon such conditions, as shall be determined by the Committee at or after the grant date. The Committee may at any time accelerate the exercisability of all or any portion of any Stock Option. An optionee shall have the rights of a stockholder only as to shares acquired upon the exercise of a Stock Option and not as to unexercised Stock Options. (d) Method of Exercise. Stock Options may be exercised in whole or in part, by delivering written notice of exercise to the Company, specifying the number of shares to be purchased. Payment of the purchase price may be made by one or more of the following methods: (i) in cash, by certified or bank check or other instrument acceptable to the Committee; (ii) with the consent of the Committee, in the form of shares of Stock owned by the optionee for a period of at least six (6) months and not then subject to restrictions. Such surrendered shares shall be valued at Fair Market Value on the exercise date; (iii) with the consent of the Committee, by the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the purchase price; provided that in the event the optionee chooses to pay the purchase price as so provided, the optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Committee shall prescribe as a condition of such payment procedure. The Company need not act upon such exercise notice until the Company receives full payment of the exercise price; or (iv) by any other means (including, without limitation, by delivery of a promissory note of the optionee payable on such terms as are specified by the Committee; -5- provided, however, that the interest rate borne by such note shall not be less than the lowest applicable federal rate, as defined in Section 1247(d) of the Code) which the Committee determines are consistent with the purpose of the Plan and with applicable laws and regulations. The delivery of certificates representing shares of Stock to be purchased pursuant to the exercise of a Stock Option will be contingent upon receipt from the optionee (or a purchaser acting in his stead in accordance with the provisions of the Stock Option) by the Company of the full purchase price for such shares and the fulfillment of any other requirements contained in the Stock Option or imposed by applicable laws and regulations, as determined by the Committee in its sole discretion. (e) Non-transferability of Stock Options. Except as the Committee may otherwise provide, no Stock Option shall be transferable other than by will or by the laws of descent and distribution and all Stock Options shall be exercisable, during the optionee's lifetime, only by the optionee. (f) Form of Settlement. Shares of Stock issued upon exercise of a Stock Option shall be free of all restrictions under the Plan, except as otherwise provided in this Plan or in the terms of such Stock Option. SECTION 6. Restricted Stock Awards (a) Nature of Restricted Stock Award. The Committee in its discretion may grant Restricted Stock Awards to any Eligible Person, entitling the recipient to acquire, for a purchase price determined by the Committee (but not less than Fair Market Value on the date of grant), shares of Stock subject to such restrictions and conditions as the Committee may determine at the time of grant ("Restricted Stock"), including continued employment and/or achievement of pre-established performance goals and objectives. (b) Acceptance of Award. A participant who is granted a Restricted Stock Award shall have no rights with respect to such Award unless the participant shall have accepted the Award within ten (10) days (or such shorter date as the Committee may specify) following the delivery of written notice to the participant of the Award by making payment to the Company of the specified purchase price of the shares covered by the Award and by executing and delivering to the Company a written instrument that sets forth the terms and conditions applicable to the Restricted Stock in such form as the Committee shall determine. (c) Rights as a Stockholder. Upon complying with Section 6(b) above, a participant shall have all the rights of a stockholder with respect to the Restricted Stock, including voting and dividend rights, subject to non-transferability restrictions and Company repurchase rights described in this Section 6 and subject to such other conditions contained in the written instrument evidencing the Restricted Stock Award. Unless the Committee shall otherwise determine, certificates evidencing shares of Restricted Stock shall remain in the possession of the Company until such shares are vested as provided in Section 6(e) below. (d) Restrictions. Shares of Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided herein. In the -6- event of termination of employment with the Company and its Subsidiaries for any reason (including death, Disability, Normal Retirement, and voluntary termination by the participant), the Company shall have the right, at the discretion of the Committee, to repurchase shares of Restricted Stock with respect to which conditions have not lapsed at their purchase price from the participant or the participant's legal representative. The Company must exercise such right of repurchase within sixty (60) days following such termination of employment (unless otherwise specified in the written instrument evidencing the Restricted Stock Award). (e) Vesting of Restricted Stock. The Committee at the time of grant shall specify the date or dates and/or the attainment of pre-established performance goals, objectives and other conditions on which the non-transferability of the Restricted Stock and the Company's right of repurchase shall lapse. Subsequent to such date or dates and/or the attainment of such pre-established performance goals, objectives and other conditions, the shares on which all restrictions have lapsed shall no longer be Restricted Stock and shall be deemed "vested." Subject to Section 12, the Committee at any time may accelerate such date or dates and otherwise waive or amend any conditions of the Award. (f) Waiver, Deferral and Reinvestment of Dividends. The written instrument evidencing the Restricted Stock Award may require or permit the immediate payment, waiver, deferral or investment of dividends paid on the Restricted Stock. SECTION 7. Unrestricted Stock Awards (a) Grant or Sale of Unrestricted Stock. The Committee in its discretion may grant or sell to any Eligible Person shares of Stock free of any restrictions under the Plan ("Unrestricted Stock") at a purchase price determined by the Committee. Shares of Unrestricted Stock may be granted or sold as described in the preceding sentence in respect of past services or other valid consideration. (b) Restrictions on Transfers. The right to receive Unrestricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution. SECTION 8. Performance Share Awards A Performance Share Award is an award entitling the recipient to acquire shares of Stock upon the attainment of specified performance goals. The Committee may make Performance Share Awards independent of or in connection with the granting of any other Award under the Plan. Performance Share Awards may be granted under the Plan to any Eligible Person. The Committee in its discretion shall determine whether and to whom Performance Share Awards shall be made, the performance goals applicable under each such Award, the periods during which performance is to be measured, the conditions under which such Award shall terminate, and all other limitations and conditions applicable to the awarded Performance Shares. SECTION 9. Termination of Stock Options (a) Standard Termination Provisions: -7- (i) Termination by Death. If any participant's employment by or services to the Company and its Subsidiaries terminates by reason of death, any Stock Option owned by such participant may thereafter be exercised to the extent exercisable at the date of death, by the legal representative or legatee of the participant, for a period of one (1) year (or such longer period as the Committee shall specify at any time) from the date of death, or until the expiration of the stated term of the Stock Option, if earlier. (ii) Termination by Reason of Disability or Normal Retirement. (A) Any Stock Option held by a participant whose employment by or service to the Company and its Subsidiaries has terminated by reason of Disability may thereafter be exercised, to the extent it was exercisable at the time of such termination, for a period of one (1) year (or such longer period as the Committee shall specify at any time) from the date of such termination, or until the expiration of the stated term of the Stock Option, if earlier. (B) Any Stock Option held by a participant whose employment by or service to the Company and its Subsidiaries has terminated by reason of Normal Retirement may thereafter be exercised, to the extent it was exercisable at the time of such termination, for a period of one (1) year from the date of such termination, or until the expiration of the stated term of the Stock Option, if earlier. (C) The Committee shall have sole authority and discretion to determine whether a participant's employment or services have been terminated by reason of Disability or Normal Retirement. (iii) Other Termination. Unless otherwise determined by the Committee, if a participant's employment by or services to the Company and its Subsidiaries terminates for any reason other than death, Disability, or Normal Retirement, any Stock Option held by such participant may thereafter be exercised, to the extent it was exercisable on the date of such termination, for one (1) year from the date of termination, or until the expiration of the stated term of the Stock Option, if earlier. (b) Committee Discretion. Notwithstanding the foregoing, the Committee may grant Stock Options under the Plan which contain such terms and conditions with respect to termination as the Committee, in its discretion, may from time to time determine. SECTION 10. Tax Withholding (a) Payment by Participant. Each participant shall, no later than the date as of which the value of an Award or of any Stock or other amounts received thereunder first becomes includable in the gross income of the participant for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Committee regarding the payment of, any Federal, state, local or other taxes of any kind required by law to be withheld with respect to such income. The Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the participant. -8- (b) Payment in Shares. A participant may elect, with the consent of the Committee, to have such tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from shares of Stock to be issued pursuant to an Award a number of shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the minimum withholding amount due with respect to such Award, or (ii) transferring to the Company shares of Stock owned by the participant for a period of at least six (6) months and with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the minimum withholding amount due with respect to such Award. SECTION 11. Transfer, Leave of Absence, Etc. For purposes of the Plan, a transfer to the employment of the Company from a Subsidiary or from the Company to a Subsidiary, or from one Subsidiary to another, shall not be deemed a termination of employment. Whether authorized leave of absence, or absence on military or government service, shall constitute termination of the employment relationship between the Company and the participant shall be determined by the Committee at the time thereof. SECTION 12. Amendments and Termination The Board may at any time amend or discontinue the Plan in any manner allowed by law and the Committee may at any time, subject to Section 2, amend or cancel any outstanding Award (or provide substitute Awards) for the purpose of satisfying changes in law or for any other lawful purpose, but no such action shall adversely affect rights under any outstanding Award without the holder's consent. SECTION 13. Status of Plan With respect to the portion of any Award that has not been exercised, a participant shall have no rights greater than those of a general creditor of the Company unless the Committee shall otherwise expressly determine in connection with any Award or Awards. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the Company's obligations to deliver Stock or make payments with respect to Awards hereunder, provided that the existence of such trusts or other arrangements is consistent with the provision of the foregoing sentence. SECTION 14. Lockup Agreement The acceptance of any Award under this Plan by the participant or any subsequent holder shall constitute the agreement of such person that, upon the request of the Company or the underwriters managing any underwritten offering of the Company's securities, such person will not, for a period of time (not to exceed one hundred eighty (180) days) following the effective date of any registration statement filed by the Company under the Securities Act of 1933, as amended, sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any shares of Stock received pursuant to such Award, without the prior written consent of the Company or such underwriters, as the case may be, and that such person will execute and deliver to the Company or such underwriters a written agreement to that effect, in such form as the Company or such underwriters shall designate. -9- SECTION 15. General Provisions (a) No Distribution; Compliance with Legal Requirements. The Committee may require each person acquiring shares pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the shares without a view to distribution thereof, in such form as the Committee shall in its sole discretion deem advisable. No shares of Stock shall be issued pursuant to an Award until, in the opinion of the Committee, all applicable securities laws and other legal and stock exchange requirements have been satisfied. The Committee may require the placing of such stop orders and restrictive legends on certificates for Stock and Awards as it deems appropriate. (b) Delivery of Stock Certificates. Delivery of stock certificates to participants under this Plan shall be deemed effected for all purposes when the Company or a stock transfer agent of the Company shall have delivered such certificates in the United States mail, addressed to the participant, at the participant's last known address on file with the Company. (c) Other Compensation Arrangements; No Employment Rights. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, including trusts, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of the Plan or any Award under the Plan does not confer upon any employee any right to continued employment with the Company or any Subsidiary. SECTION 16. Effective Date of Plan The Plan shall become effective upon its adoption by the Board. SECTION 17. Governing Law This Plan and each Award under the Plan shall be governed by, and construed and enforced in accordance with, the substantive laws of the Commonwealth of Massachusetts without regard to its principles of conflicts of laws. -10- EX-10.2 6 exhibit102_8-3.txt Exhibit 10.2 EMPLOYMENT AGREEMENT PARTIES This Employment Agreement (this "Agreement") dated as of July 17, 2001 is entered into by and between Telaxis Communications Corporation, a Massachusetts corporation having its principal place of business at 20 Industrial Drive East, South Deerfield, Massachusetts 01373 (the "Company") and Stephen Ward, an individual with an address at 115 West 3rd Street, Frederick, Maryland 21701 (hereinafter called "Employee"). TERMS OF AGREEMENT In consideration of this Agreement and the continued employment of the Employee by the Company, the parties agree as follows: 1. Employment. The Company hereby employs Employee, on a full-time basis, to act as Executive Vice President, Sales and Marketing of the Company at the principal place of business of the Company shown above during the Employment Period and to perform such acts and duties and furnish such services to the Company in connection with and related to that position as is customary for persons with similar positions in like companies, as the Company's Board of Directors shall from time to time reasonably direct. Employee hereby accepts said employment. Employee shall use his best and most diligent efforts to promote the interests of the Company; shall discharge his duties to the best of his ability; and shall devote his full business time and his best business judgment, skill and knowledge to the performance of his duties and responsibilities hereunder. Employee shall report to the Chief Executive Officer/President of the Company. 2. Employment Period. The period of Employee's employment under this Agreement shall commence on the date of this Agreement and shall continue for a period of twenty-four (24) months thereafter. At the end of the initial twenty-four (24) month period and any extension period thereafter, the period of Employee's employment under this Agreement, in the absence of any other express agreement between the parties, shall automatically be extended for an additional period of three (3) months. The employment period described above is subject to earlier termination pursuant to Section 3.6, 4 or 5. The period of Employee's employment under this Agreement (including all quarterly extension periods) is referred to as the "Employment Period." 3. Compensation and Benefits; Disability. 3.1 Salary. During the Employment Period, the Company shall pay Employee a salary at an annualized rate equal to $225,004.00 payable in equal installments pursuant to the Company's customary payroll policies in force at the time of payment (but in no event less frequently than monthly), less required payroll deductions. The Employee's salary may be adjusted upward from time to time in the sole discretion of the Board of Directors of the Company, except that the Employee, if a Director, shall not be entitled to vote thereon. 3.2 Discretionary Bonus. During the Employment Period, the Employee may participate in such bonus plan or plans of the Company as the Board of Directors, acting through its Compensation Committee, may approve for the Employee. Nothing contained in this Section 3.2 shall be construed to require the Board of Directors to approve a bonus plan or in any way grant to Employee the right to receive bonuses not otherwise approved. 3.3 Company Automobile Allowance. During the Employment Period, the Company shall provide Employee with an automobile allowance at an annualized rate not less than $7,800 payable in equal installments pursuant to the Company's customary payroll policies in force at the time of payment (but in no event less frequently than monthly), less required payroll deductions. 3.4 Insurance Benefits. During the Employment Period, the Employee shall receive such health insurance, disability insurance, life insurance and other benefits as customarily provided to other officers and management employees of the Company. 3.5 Vacation. Employee may take four (4) weeks of paid vacation during each year at such times as shall be consistent with the Company's vacation policies and (in the Company's judgment) with the Company's vacation schedule for officers and other management employees. Employee shall also be entitled to paid legal and religious holidays, sick days, and personal days in accordance with the Company's normal policies in effect from time to time. 3.6 Disability. If during the Employment Period, Employee shall become ill, disabled or otherwise incapacitated so as to be unable to perform his usual duties (a) for a period in excess of one hundred twenty (120) consecutive days or (b) for more than one hundred eighty (180) days in any consecutive twelve (12) month period, then the Company shall have the right to terminate Employee's employment under this Agreement, subject only to applicable laws, on thirty (30) days' written notice to Employee. Termination pursuant to this Section 3.6 shall not affect any rights Employee may otherwise have under any disability insurance policies in effect at the time of such termination. 3.7 Severance Pay. 3.7.1 Termination By Company. In the event the Company terminates Employee's employment under this Agreement pursuant to Section 5, the Company shall provide to Employee, in exchange for a release as to any and all claims Employee may have against the Company, the Severance Benefits for (a) a twelve (12) month period after termination if termination shall occur (i) at any time prior to any Change in Control, (ii) after any Approved Change in Control, or (iii) more than one (1) year after an Unapproved Change in Control, or (b) a twenty-four (24) month period after termination if termination shall occur within one (1) year after an Unapproved Change in Control. 3.7.2 Termination by Employee For Good Reason. After a Change in Control and provided Employee has Good Reason, Employee may terminate his employment under this Agreement upon fifteen (15) days written notice to the Company and the Company shall provide to Employee, in exchange for a release as to any and all claims Employee may have against the 2 Company, the Severance Benefits for (a) a twelve (12) month period after termination if termination shall occur within one (1) year after an Unapproved Change in Control or (b) an initial six (6) month period, and thereafter until the earlier to occur of the end of one (1) additional six (6) month period or Employee obtaining regular employment or consulting work, if termination shall occur (i) after any Approved Change of Control or (ii) more than one (1) year after an Unapproved Change in Control. 3.7.3 Definitions. For purposes of this Section 3.7, (a) a "Change in Control" shall mean: (i) The completion of a merger or consolidation of the Company with any other entity (other than a merger or consolidation in which the Company is the surviving entity and is owned at least 50% collectively by persons who were stockholders of the Company before the transaction), the sale of substantially all of the Company's assets to another entity, the sale of more than 50% of the outstanding capital stock of the Company to an unrelated person or group of persons acting collectively in one or a series of transactions, or any change in "control" [as defined in Rule 12b-2 adopted under the Securities Exchange Act of 1934, as amended (the "Exchange Act")] of the Company which would be required to be reported under either Section 13 or 14 of the Exchange Act whether or not the Company is then subject to said Act, including a change whereby (A) any "person" [as such term is used in Sections 13(d) and 14(d) of the Exchange Act] becomes a "beneficial owner" (as defined in Rule 13d-adopted under the Exchange Act) of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities; or (B) there ceases to be a majority of the Board of Directors comprised of individuals described in subsection (iv) below. (ii) An "Approved Change in Control" of the Company shall mean a Change in Control that is approved by at least a majority of the Company's Board of Directors. (iii) An "Unapproved Change in Control" of the Company shall mean any Change in Control that is not an Approved Change of Control. (iv) For the purposes of Sections 3.7.3(a)(i) and (ii), "Board of Directors" shall mean: (i) individuals who, on the date hereof, constituted the Board of the Company, and (ii) any successors to those directors whose nomination for election or election was approved by a majority of the directors in office at the time of such nomination or election. (b) "Good Reason" shall mean the occurrence after a Change in Control of any of the following circumstances without the Employee's written consent unless, in the case of paragraphs (A), (B), (C) or (H), such circumstances constitute an isolated, insubstantial and inadvertent action not taken in bad faith and which are fully remedied by the Company prior to the Employee's last day of employment: 3 (A) the assignment to the Employee of any duties inconsistent with the highest position in the Company that the Employee held at any time during the 90-day period immediately preceding the Change in Control of the Company, or a significant adverse alteration in the nature or status of the Employee's responsibilities or the conditions of the Employee's employment from those in effect at any time during the 90-day period immediately preceding such Change in Control; (B) any violation of Section 1 or Section 3.1 through 3.5 of this Agreement; (C) the failure by the Company to provide the Employee with the greatest number of vacation days to which the Employee is entitled in accordance with the Company's normal vacation policy in effect at any time during the 90-day period immediately preceding the Change in Control; (D) any requirement by the Company or of any person in control of the Company that the location at which the Employee perform the Employee's principal duties for the Company be (1) outside a radius of 50 miles from the location at which the Employee performed such duties immediately prior to the Change in Control, or (2) more than 25 miles in commuting distance further than the Employee's commuting distance to the location at which the Employee performed such duties immediately prior to the Change in Control; (E) the failure by the Company to pay to the Employee any portion of the Employee's current compensation within seven (7) days after such compensation is due; (F) any requirement by the Company or any person in control of the Company that the Employee travel on an overnight basis to an extent not substantially consistent with the Employee's business travel obligations immediately prior to the Change in Control; (G) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform the Agreement, as contemplated in Section 9.3; or (H) any purported termination of the Employee's employment which is not effected pursuant to the requirements of Section 5 and 8, which purported termination shall not be effective for purposes of this Agreement. The Employee's continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder. For purposes of this Section 3.7.3(b), any good faith determination of "Good Reason" made by the Employee shall be conclusive. 4 (c) "Severance Benefits" shall mean (i) Employee's base salary at the highest level in effect during the 90-day period immediately preceding the date of termination, payable in equal installments pursuant to the Company's customary payroll policies in force at the time of payment (but in no event less frequently than monthly), less required payroll deductions and (ii) the continuation of all health, welfare and other fringe benefits (other than the Company automobile allowance) which are provided to Employee pursuant to this Agreement on the date of termination except to the extent the continuation of any such benefits is not permitted by applicable law or the terms of any benefit documentation (provided, however, if the continuation of medical/health insurance, dental insurance, disability insurance, and/or life insurance is not permitted, the Company shall pay Employee, at the beginning of the period during which he is entitled to receive Severance Benefits, an amount equal to the amount the Company would have had to pay to provide those insurances to Employee if Employee had remained an employee of the Company for the period during which he is entitled to receive Severance Benefits under this Agreement). Notwithstanding the foregoing, if Employee begins regular employment or consulting work prior to the end of the period during which he is entitled to receive Severance Benefits from the Company under this Agreement, the amount Employee shall be entitled to receive pursuant to clause (i) of this definition of "Severance Benefits" shall be reduced to the amount, if any, by which Employee's base salary described in clause (i) above exceeds Employee's base salary from his new regular employment or consulting work. Employee agrees to notify the Company if he begins regular employment or consulting work prior to the end of the period during which he is entitled to receive Severance Benefits from the Company under this Agreement. 4. Discharge for Cause. The Company may discharge Employee and terminate his employment under this Agreement for cause without further liability to the Company by a majority vote of the Board of Directors of the Company except that the Employee, if a Director, shall not be entitled to vote thereon. As used in this Section 4, "cause" shall mean any or all of the following: (a) gross or willful misconduct of Employee during the course of his employment; (b) conviction of a fraud or felony or any criminal offense involving dishonesty, breach of trust or moral turpitude during the Employment Period; or (c) Employee's breach of any of the material terms of this Agreement which, if curable, is not cured within thirty (30) days of written notice to the Employee. 5. Termination Without Cause. Upon thirty (30) days prior written notice, the Company may terminate Employee's employment under this Agreement without cause without further liability to the Company (except as set forth in Section 3.7 above) by a majority vote of the Board of Directors of the Company except that the Employee, if a Director, shall not be entitled to vote thereon. 5 6. Expenses. Pursuant to the Company's customary policies in force at the time of payment, Employee shall be promptly reimbursed, against presentation of vouchers or receipts therefor, for all authorized expenses properly incurred by him on the Company's behalf in the performance of his duties hereunder. 7. Additional Agreements. Upon execution of this Agreement, the Employee shall execute and deliver to the Company, unless previously delivered, a Confidential and Proprietary Information Agreement (the "Proprietary Agreement") and an Agreement Not to Compete (the "Noncompetition Agreement") in the standard forms signed by other management employees of the Company. 8. Notices. Any notice or communication given by any party hereto to the other party or parties shall be in writing and personally delivered or mailed by certified mail, return receipt requested, postage prepaid, to the addresses provided above. All notices shall be deemed given when actually received. Any person entitled to receive notice (or a copy thereof) may designate in writing, by notice to the other, such other address to which notices to such person shall thereafter be sent. 9. Miscellaneous. 9.1 Entire Agreement. This Agreement contains the entire understanding of the parties in respect of its subject matter and supersedes all prior agreements and understandings between the parties with respect to such subject matter; provided, however that nothing in this Agreement shall affect the Employee's obligations under the Proprietary Agreement and Noncompetition Agreement. 9.2 Amendment; Waiver. This Agreement may not be amended, supplemented, cancelled or discharged, except by written instrument executed by the party affected thereby. No failure to exercise, and no delay in exercising, any right, power or privilege hereunder shall operate as a waiver thereof. No waiver of any breach of any provision of this Agreement shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision. 9.3 Binding Effect, Assignment. Employee's rights or obligations under this Agreement may not be assigned by Employee; except that Employee's right to compensation to the earlier of date of death or termination of actual employment shall pass to Employee's executor or administrator. The rights and obligations of this Agreement shall bind and inure to the benefit of the Company and its successors and assigns. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such successor had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 6 9.4 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 9.5 Governing Law; Interpretation. This Agreement shall be construed in accordance with and governed for all purposes by the laws and public policy of the Commonwealth of Massachusetts applicable to contracts executed and to be wholly performed within such Commonwealth. Service of process in any dispute shall be effective (a) upon the Company, if service is made on any officer of the Company other than the Employee; or (b) upon the Employee, if served at Employee's residence last known to the Company with an information copy to the Employee at any other residence, or care of a subsequent employer, of which the Company may be aware. 9.6 Further Assurances. Each of the parties agrees to execute, acknowledge, deliver and perform, or cause to be executed, acknowledged, delivered and performed, at any time, or from time to time, as the case may be, all such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may be necessary or proper to carry out the provisions or intent of this Agreement. 9.7 Severability. If any one or more of the terms, provisions, covenants or restrictions of this Agreement shall be determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. If, moreover, any one or more of the provisions contained in this Agreement shall for any reason be determined by a court of competent jurisdiction to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed, by limiting or reducing it, so as to be enforceable to the extent compatible with then applicable law. EXECUTION The parties executed this Agreement as a sealed instrument as of the date first above written, whereupon it became binding in accordance with its terms. TELAXIS COMMUNICATIONS CORPORATION By: --------------------------------------- Name: John L. Youngblood Title: President and CEO --------------------------------------- Name: Stephen Ward 7 EX-10.3 7 exhibit103_8-1.txt Exhibit 10.3 INDEMNIFICATION AGREEMENT This Indemnification Agreement (this "Agreement") is made as of July 17, 2001 by and between Telaxis Communications Corporation, a Massachusetts corporation (the "Corporation"), and Stephen Ward ("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 -2- indemnification shall be made under 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 -3- notified, the 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 -4- shall be on 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 -5- permitted by 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: Stephen Ward 115 West 3rd Street Frederick, Maryland 21701 (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. 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: John L. Youngblood Title: President & CEO INDEMNITEE: --------------------------------------------- Name: Stephen Ward -7- -----END PRIVACY-ENHANCED MESSAGE-----